bmichaud

http://www.ft.com/intl/cms/s/0/517d6668-2a4b-11e1-b7f2-00144feabdc0.html?ftcamp=rss#axzz1gynNUsMw Parsad - are you one of the funds with a team over there? ;D Looks like you were right on queue with your alarm bells going off about China. Also see: http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html

Thank you Hester and alwaysinvert. I appreciate it!!

WTF are you talking about? Seriously guy. I'll post a nice long passage from the book tomorrow night that details his actions post liquidation and how he had to start from ZERO with his non-BRK net worth. He drew down a $50,000 salary and some directors fees, but other than that he was cash poor. Get over yourself.

I agree I think that's probably more impressive than his record at brk. It's astounding actually. Didn't he have his money in UST and start investing in stocks again in 2008? I think he stated that in his NYT article. Ya he was 100pc USTs before October 2008: http://www.nytimes.com/2008/10/17/opinion/17buffett.html my reading of Buffett is that he will go against his best instincts at market extremes, like he apparently did in late 60s and again in 1999 with is bet against the index. If he did do any pair trades it seems he was quite picky about the set up, that they had to be "apples to apples". I wonder if something like a long oracle short salesforce would quaulify? Ya it would be interesting to know. You could get killed on the CRM part of that trade. I'd say more like long HPQ short IBM, or long PEP short KO, but even that is dangerous. I think using a sector ETF works a lot better for hedging out market risk. I read somewhere HFs have been buying Citi and shorting BAC against it - I'd rather buy either or and short the XLF in order to avoid issue specific events such as the WEB preferred announcement. C did decouple a bit recently so I can see that. I would think a long jpm short bac trade might be better pair. I am sure there are people shorting bac and going long usb or wfc. BAC is definitely the crappier company out of all of those, but at these levels I would not feel comfortable shorting against a higher quality name such as JPM or WFC since it could easily double before one of the latter two do.

This is the first I hear that Buffett invested his post BPL cash in buying more BRK shares, Please enlighten us with this quote from the book... My understanding was that he always maintained a significant personal portfolio , his initial BRK stake was roughly $7 million or so and that is the same stake that has grown to $40 billion now, his other $17 million or so is what is now worth $1 Billion or $500 million outside of BRK. I believe you are mistaken but would appreciate being shown otherwise... I will stand corrected if Alice Schroder is lying in the Snowball. I don't have the book with me at the moment, but will post the section tomorrow night. He essentially went on a buying spree after the liquidation, buying BRK, Diversisifed Retailing, Blue Chip stamps etc...Then all of it was eventually rolled into BRK. There's a neat chart in the book that shows the massive web of companies he owned through BRK, Diversified and Blue Chip among others. The SEC dudes that were investigating him and Munger regarding a transaction involving a financial company in california (can't remember the exact details at the moment) couldn't believe the complex web Buffett had created. Pretty cool actually.

While other data on Thursday showed that industrial output shrank for the first time in seven months in November, much of the decline came from auto production, which analysts said had been held back by temporary supply disruptions. ... The decline was led by a 0.4 percent drop in factory output, which reflected a 3.4 percent slump in motor vehicle production. Economists, however, blamed a scarcity of auto parts from flood-ravaged Thailand for the weakness. They said it also most likely weighed on production of high-technology goods, which were down sharply for a third consecutive month. ... “Inventories are lean and firms will likely need to restock after a decent holiday season. Automakers also plan healthy production increases in the first quarter,” she said. FedEx on Thursday provided a further signal the economy was gaining momentum, saying demand for residential delivery services was rising with “healthy growth” in online shopping. http://www.nytimes.com/2011/12/16/business/economy/claims-for-jobless-benefits-fall.html?partner=yahoofinance Fair point on the IP drop. Didn't see that article.

I agree I think that's probably more impressive than his record at brk. It's astounding actually. Didn't he have his money in UST and start investing in stocks again in 2008? I think he stated that in his NYT article. Ya he was 100pc USTs before October 2008: http://www.nytimes.com/2008/10/17/opinion/17buffett.html my reading of Buffett is that he will go against his best instincts at market extremes, like he apparently did in late 60s and again in 1999 with is bet against the index. If he did do any pair trades it seems he was quite picky about the set up, that they had to be "apples to apples". I wonder if something like a long oracle short salesforce would quaulify? Ya it would be interesting to know. You could get killed on the CRM part of that trade. I'd say more like long HPQ short IBM, or long PEP short KO, but even that is dangerous. I think using a sector ETF works a lot better for hedging out market risk. I read somewhere HFs have been buying Citi and shorting BAC against it - I'd rather buy either or and short the XLF in order to avoid issue specific events such as the WEB preferred announcement.

I agree I think that's probably more impressive than his record at brk. It's astounding actually. Didn't he have his money in UST and start investing in stocks again in 2008? I think he stated that in his NYT article. Ya he was 100pc USTs before October 2008: http://www.nytimes.com/2008/10/17/opinion/17buffett.html

It's extremely impressive. It's one of the most overlooked aspects of his overall career, IMO. He's probably at almost $1B now since the financial crisis since he had what $500mm then?

He took his BPL cash and bought more BRK. Everything he had went into BRK post BPL liquidation. He then had to start his non-BRK net worth from scratch. The circularity of this entire debate would be broken if we all read Schroder's WEB bio, the Snowball. All of this stuff - the shorting, the cash poorness - is in there. I guess I made the faulty assumption that the so called WEB experts on here have read it.

Moore that proves you don't actually read what I say. This was my exact quote: "He was cash poor after liquidating BPL and pouring everything into BRK." Not that difficult.

As I said above - read the Snowball....

you're projecting. He never was a pairs trader in BP. And you are saying the only reason he is buying now is because he always has money coming in? He has always had money coming in but there are years when he is a net Seller of stocks? How do you explain that? He is not a market timer. And even if he was, you are FADING him right now and I can't think of one person who got rich fading Buffett. I attempt to operate by facts. Everything I have said about WEB is backed up by stuff that was actually written. He wrote himself about pairs trading - I provided the link above. You obviously like to operate on conjecture, as evidenced by your 100% rejection of what he wrote based on how you would like to interpret WEB. I did not say the only reason he is buying now is b/c he has cash coming in - I said he does not care about the market b/c: Yet again, another productive debate with you. I am already looking forward to the next.

You guys are nit picking quotes from him. He says that nobody should ever borrow money, yet he borrowed up to twenty five percent of his fund's net worth back running BPL. He was cash poor after liquidating BPL and pouring everything into BRK. Guess how he built up half a billion non BRK net worth? Borrowing money. He says to not make macro calls, yet he took a very explicit position against the USD. He made millions on a zero coupon treasury bet back in the 90s. He doesn't care about what the market does because he is running a corporation that is diversified, has a substantial cash position, generates steady cash flow from utility businesses, and stocks are a small part of smaller part of BRKs net worth than they used to be.

Read any of his descriptions on "generals - relatively undervalued" - it's frickin pairs trading. How can you implement a pairs trade without shorting something? Take a run through his letters and let me know why he invested in workouts and private companies when he could find net-nets. So you are making it up? where does it say he hedged his portfolio by selling stocks short? where does it say he did pairs trading? is that your proof? that one passage you quoted? if so you are doing nothing but projecting and wishful thinking that Buffett is some kind of market timer. Where does he say he shorted stocks as a hedge against his longs? I've read his letters. Selling short is not the same as investing in workouts. If you can't produce the quote then I suggest you quit spreading useless mis information as if it were fact. Aye aye captain Burke. waiting for the link, quote, or reference. Again, read the description of the category and answer me why he is worried about "reducing the risk from an overall change in valuation standards". http://pragcap.com/wp-content/uploads/2010/02/BP14.pdf If he liked a company, why would he be worried about an overall change in valuation standards? Read the Snowball - talks about him shorting Caterpillar, Alcoa and Deere to protect against a market decline.

Read any of his descriptions on "generals - relatively undervalued" - it's frickin pairs trading. How can you implement a pairs trade without shorting something? Take a run through his letters and let me know why he invested in workouts and private companies when he could find net-nets. So you are making it up? where does it say he hedged his portfolio by selling stocks short? where does it say he did pairs trading? is that your proof? that one passage you quoted? if so you are doing nothing but projecting and wishful thinking that Buffett is some kind of market timer. Where does he say he shorted stocks as a hedge against his longs? I've read his letters. Selling short is not the same as investing in workouts. If you can't produce the quote then I suggest you quit spreading useless mis information as if it were fact. Aye aye captain Burke.

Read any of his descriptions on "generals - relatively undervalued" - it's frickin pairs trading. How can you implement a pairs trade without shorting something? Take a run through his letters and let me know why he invested in workouts and private companies when he could find net-nets.

http://pragcap.com/inflation-predictions-and-broken-models#comments Mr. Roche over at pragcap does a tremendous job summing up the MMT viewpoint and denouncing Austrian economics in this post.

I'm assuming you're talking about me.... As I've stated ad nauseum, back when WEB ran BPL, while he was buying 50-cent dollars he was hedging a portion of his portfolio against general market declines by investing in workouts and private businesses. When he was buying American Express, categorized under "Generals - Relatively Undervalued", he was also hedging out MARKET RISK by shorting a like business selling for a higher multiple. Why would he hedge out market risk if he's just buying a good business. Why? Why? Why? Here is a quote from him in his 1962 letter: Buffett is buying hand over fist, yet he is continually generating cash from sources outside of his investments. He has a continual natural hedge. Buffett buying securities behind a corporate veil is not as relevant to managing a fixed amount of capital as is his management style during his hedge fund days. Yes, yes, you will say that he never intentionally hedged his portfolio, he just continued to buy securities until he couldn't find any then he moved on to workouts. Obviously you have some keen insight into Buffett's thinking back then....anyway you could share how you know that considering he wrote the EXACT opposite in his letters? I'd love to know.

Also, industrial output sees first drop in seven months: http://www.cnbc.com/id/45682580

http://www.ft.com/intl/cms/s/0/43c76028-2645-11e1-9ed3-00144feabdc0.html#axzz1gcTA5O1Z JP proposes the ECB implement a temporary SD guarantee program that allows the sovereigns to refinance at reasonable rates and takes the stress off the banking system, similar to the FDIC guarantee program for financial company debt. Appears to be a reasonable solution in the near-term, but does not address the long-term problem of a lack of a central treasury to balance out trade deficits across the eurozone.

Increasing the length of depreciation will boost earnings but lower cash flow b/c the tax shield is lower (assuming the D&A on the income statement is same as the company's tax returns - i.e using double-declining D&A for tax purposes versus straight line on the income statement). EBITDA = $1,000 D&A = $100 (initial base of $1,000 depreciated over 10 years) EBIT = $900 Taxes = $360 @ 40% Net Income = $540 Cash flow = $540 + $100 = $640 EBITDA = $1,000 D&A = $83 (initial base of $1,000 depreciated over 12 years as oppose to 10) EBIT = $917 Taxes = $367 @ 40% Net Income = $550 Cash flow = $550 + $83= $633

Right, so how many people bought those stocks 40 years ago and held? Even Buffett, the best of all time, wasn't able to hold on to GEICO and Disney for all that time, so why would we posit that an individual part-time investor could find some of the most outstanding companies of the century, deploy all their networth in them and be able to hold for 40 years? If that isn't hindsight bias, nothing is. This is what I said: To borrow a commonly-used phrase lately, you're missing the forest from the trees. I was merely demonstrating the folly of owning a useless pile of gold versus buying a good company. So let's say Moore wants to pass along his still useless stash of gold to his kids right now - 40 years from now I would guarantee you his kids will be better off if they sell the gold and buy an obviously durable business such as KO, PEP, MCD, XOM, DE, or CAT. So going back to your comment: I'm not positing this at all. Moore didn't posit it either. Very simply, if an investor has a current position in gold, they will be better off over time swapping that gold for a high quality business. At the very least, a "part-time investor" should be buying a market index versus gold - a part-time investor has no business attempting to make a call on the long-run value of gold because there is no reliable method for determining an appropriate starting point. My original example gave Moore the benefit of the doubt, comparing MCD at $1 to gold at $35. If he inherited the gold when it was at $500 an ounce, my point is even more emphatic.

Picking MCD is merely representative of a great company. Pick XOM, Geico, KO, PG, DE, CAT - any one of those would outperform. No hindsight bias, simply common sense about what companies will be around forever.

This post was not on your standard at all, you are mixing and matching rhetoric, to form your argument. Lets start with your avg. salary calculation, even in your calculation the average salary has grown at a rate of .3% less than the loaf of bread compounded, but again what you forget to account for is taxes, and the cost of living. The individual earning $1,033, or 43,000 is earning those dollars PRE TAX, post tax he is left with say 75% of that money, which then has to be used to pay for goods and services each and every year. You are making the terrible, or naive mistake of not accounting for the cost of living, each and ever year. Back to that little .3% discrepancy, it amounts to roughly 13% of additional wealth lost, over the same period, so even if we don't adjust for taxes, and cost of living, the loaf of bread compounds way better than an arbitrary metric like "avg. salary", what happens if you are in between jobs? what happens if you get sick ? What happens if you decide to take a year off? Is it fair that your loaf of bread keeps costing more while your money is worth less? Next, lets analyze your Mcdonalds analysis, you choose one of the best performing stocks over the last 40 years, and compare it to what is essentially the money in between all transactions? That is completely unfair as it would mean that an investor would have had to at all times be invested in Mcdonalds common stock from 1971, and pile in any additional income (immediately when receiving it) into Mconalds to achieve the same rate of return as just using gold as a basis for money, (which it historically was). That is a pie in the sky proposition. An average investor would have kept some money in cash some money in bonds and some in equities, of which Mcdonalds may have been one position and Kodak may have been another (how has Kodak done?) and what about real estate? And what about those loafs of bread that he would have purchased every day or week to feed his family? Well those loaves have been digested and the funds used to buy them gone. I haven't done anything, have just kept my gold bullion sitting exactly where it is, and it has done a better job than all the hindsight investing you claim to have done. And that is what it is supposed to do. Not getting back on the gold standard - NO DOUBT about that, as there are way too many academics in government, who believe that it is ok to subsidize the lack of fiscal discipline, but that doesn't mean I cannot be my own central banker? And work as hard as I can to retain the purchasing power of my assets. Finally, the rhetoric about America and the quality of living, that is just a complete load of bullshit as who are you to say we are any better off in terms of quality of living due to being on a fiat money standard than being on a gold standard. I would argue that there are more people today living the rat race than ever before, having a significant amount of money run through their hands, daily and monthly but not able to save it due to the increasing costs of living and maintaining that ever so incredible "standard of living" you so love. I have posted before the cost of Sears Homes from 1906 to 1971, that was when a house was a home, not an ATM machine or a stimulus tool used by central bankers. Assuming a constant tax rate, the after-tax coverage of the cost of bread stays the same. So if the cost of bread is $100 and you after-tax salary is $1,000, then your bread cost coverage is 10x - if your nominal salary doubles along with the nominal price of bread, then you after-tax salary still covers the cost of bread 2x. Very basic math. My example used 4% inflation for the cost of bread - it's pretty well documented that the long-run historical rate of inflation is around 3%..... RE using MCD as an example...you know exactly what i'm talking about - i'm saying you would have been better off putting your gold hoard into MCD versus gold at that time (nothing to do with putting money into MCD versus gold every year thenceforth). I could have used any great company - MCD, DE, CAT, XOM. I don't have the time or patience to look up the actual CAGRs for those companies, but I'd put money on it you would have been better off rather than keeping the gold. Even people "running the rat race" right now are running that race while enjoying iPads, iPhones, super fast broadband, fuel-efficient cars, higher quality food, etc... etc.... NOBODY should be complaining about what we have here in North America. I'm not better than anyone else, and I've had the opportunity to double my earning power in less than two years just by working my butt off. What do I care about what the cost of bread is doing? I know with reasonable certainty my nominal earning power is going to keep up with the nominal growth of my cost of living (as WEB says, your best hedge against inflation is your own earning power!!) and most importantly I have all the opportunity in the world to not only achieve the American dream but go above and beyond that based on the skill set I develop and how hard I work. What does the gold standard or arguing over 1.5% inflation versus the historical 3% inflation have to do with that or anything?