wabuffo

In reality Buffett has made more than 40% since in addition to the intrinsic value of GS warrants (market price of common = $165 in excess of strike price of warrants = $115), the warrants also contain a time value component of value (even when the underlying common stock trades below the strike). The interesting thing is that Wesco Financial also owns $205 million of these convertible preferreds and this investment is big enough that Charlie breaks out the fair value of it with each 10-Q/10-K (though you have to back out the value of other non-listed equity investments like AXP, JNJ) that WSC owns. At year end 2008, the fair value of the GS preferreds was listed at $209,510. This means the warrants were given a value of $4.510 million while the underlying GS common was trading at $84.39. Since WSC owns 1.78 million warrants, this means they were given a value of $2.53 per warrant. At 3/31/2009, using the same methodology the warrants were valued at $32.577 million ($18.30 per warrant) while the underlying GS common was at $106.02. So it looks like time value which decays over time are probably worth around $20 per warrant now if I just swag it. Add in $50.84 of intrinsic value per warrant as I write this -- and I get an approx. total value per warrant of over $70.80 per warrant. BRK owns a total of 43.478 million GS warrants for a total market value of around $ 3 billion+. That's more like a 60% return (not including the straight 10% annual dividend return on the preferreds). Not bad for the old man who supposedly lost it when he bought the GS preferreds, eh? wabuffo

Well one reason could be that in WFC's case, BRK and its affilates are approaching ownership of 8% of the Company. At a 10% ownership level, BRK would have to register with the Federal Reserve as a bank holding company -- something Buffett definitely does not want to do. Once WFC pays back TARP and resumes share buybacks, it would put BRK in a position of having to sell WFC shares to avoid the 10% threshold if BRK was already close to 10%. Charlie Munger's WSC falls into BRK's share limits since its 80% owned by BRK's subsidiary Blue Chip Stamps -- so Charlie can't buy WFC for WSC either probably for the same reason. Still, Charlie also is Chairman of DJCO, which most definitely is not owned by BRK, and I believe its recent purchases of common stock in the March Q and registering a quick intra-quarter 60% gain means that Charlie probably bought both WFC and USB during their early March lows since the math works to a 60% gain for both of them. Of course, we can't know for sure until DJCO discloses what it purchased and now owns. wabuffo

I agree with this estimate. wabuffo

I think they will. The Company and its transfer agent can't keep the market-makers on the OTC markets from accepting trades in the stock. The changes in ownership may not be tracked by the transfer agent, but the OTC market makers will redirect any further distributions to the correct owners based on subsequent trades. I'm seeing this with another similar situation -- MAIR.PK. They closed their shareholder rolls last summer after shareholders approved their plan for liquidation/dissolution and made an initial $3 per share distribution. Even though I purchased more shares after the close date, I've received both of the two subsequent distributions. At some point, MAIR just stopped trading. Same thing will happen with FTAR -- but until then I think any new owners you mention will be fine. wabuffo

How is that possible. Inflation/deflation is a strictly monetary phenomenon and is all about the value of the US dollar as medium of exchange. You can't have both -- just like one can't be fat and skinny at the same time. wabuffo

well - one point of view would be that the 10-year and 30-year yields on 12/31/08 were outliers and we are now moving back to a more normal (in terms of recent history) yield on the long-end of the Tsy yield curve. A 2% 10-year and 2.5% 30-year might have been fear of holding any debt other than US Treasury debt in the Oct 2008-Feb 2009 credit freeze. I think we are just seeing the effects of the credit freeze now thawing -- a positive sign for the US economy. In addition, a hugely positively sloping yield curve (as measured by the 2yr vs 10yr yield) is very positive for the US banking sector. wabuffo

USB was pretty big too - they had negligible holdings prior to this Q and it looks like Watsa bought 15.8m shares (vs 16.5m shares of WFC). If he was buying during the quarter lows in early March (which Buffett also referenced as a great time to buy these two banks), he would have put about equal amounts in both US banks (probably a bit more in WFC but pretty close). wabuffo

USB (like WFC) has a business model that emphasizes non-interest income (WFC through cross-selling to their bank customers stuff like insurance and USB through its payments business which generates transaction income - eg trusts, debit cards, etc). So, in addition to strong deposit gathering and conservative credit underwriting, USB generates a significant amount of non-lending related income. In USB's case, they are growing this business rapidly and it creates a positive cycle as they can afford to be more choosy on their lending (which further reduces loan losses and gives them better lending returns as seen in the recent TARP results). This business model tends to give USB a higher ROA and ROE in comparison to other banks and makes them a bit less reliant on pure lending. There's only a few non-investment-bank banks that do this. I would recommend you examine and compare a few of the big regional "pure" banks' income statements and try to see the difference (eg compare USB vs MTB, BBT, or PNC). Hope this helps. wabuffo

the author clearly hasn't even done any research on BRK's equity put sales. He is very confused because: 1) he doesn't apparently understand that these are European-style put options (exercisable only on the day of expiry) vs. American-style put options (exercisable anytime they are in the money). Since the expiry of these equity-index puts is more than a decade away -- short-term movements in the indices shouldn't be a cause for concern. 2) he keeps insinuating that BRK/Buffett is facing margin calls when Buffett has been explicit on these particular put options. The 10-Qs explicitly state that BRK does not have to post collateral against these puts even if Berkshire Hathaway is downgraded and loses its AAA rating. The article and author can be ignored. wabuffo

I would echo Ben's assertion that the Morningstar "burn-down" analysis was plagarized from another public board. Its shameful that the Morningstar "analyst" didn't acknowledge his source. Very un-cool. wabuffo