Kiltacular

Aside from the fact that Munger's ownership was through a partnership in which he invested, the big difference is that Berkshire didn't make an offer to buy all of BYD. This is not even remotely similar. Now, if it comes to light that Munger, for example, bought a big stake in Burlington Northern just before Berkshire made their offer to buy the entire railroad, then that would be comparable. On a related note, no one has mentioned whether Sokol's actions before that buyout have been looked into. If Sokol knew of the impending offer to buyout BNSF, it should be checked out whether he bought any shares. Or, whether any Berkshire insider did. Aside from BNSF, I can't think of many other recent buyouts of public companies Berkshire has done...was Clayton Homes the last one before BNSF?

ericd1, It WAS you that posted the amazing spreadseet during the meltdown with all the preferreds. I made a 7 bagger with two of the RBS preferreds and more than a double on the Wells L prefferreds (which I still hold). I've lost track of many of the others. Since the Wells one still yields over 7%, I'm hoping you'd be willing to share what your basket currently looks like as I have a client that asked me about this issue today. Thanks for your thoughts kiltacular

This is a fair point...a huge insurance business is always going to have some black boxness (to coin a phrase). I'd like to hear more about the next level of people at the BHRG that Ajit runs -- though I get the feeling it is a small team. But, most of the float that Jain has built up there in recent years comes from the finite deals. These produce relatively steady underwriting losses and the deals run on for a long time. Meanwhile, the big underwriting gains come from deals that are short-term in nature -- hurricane insurance only runs for a season. Still, I agree that Berkshire will always have to be "watched" and can't truly be idiot-proofed. But, I think Parsad's general vision of a post Buffett era is likely correct and it will likely work out pretty well. I am very encouraged that with the Lubrizol deal, it looks like the BNSF deal wasn't a one off for a public company. If Buffett can continue to close deals to buy out public companies, this is getting interesting. Perhaps there are more CEO's of public companies that find the idea of no longer dealing with Wall Street and having access to a huge pool of capital to grow their business and compete against other players than I thought. I mean, before BNSF and Lubrizol, the only big deal for a public company was Gen Re. There was GEICO 16 years ago -- but Buffett owned half of it already.

This caught me off guard and truly made me laugh out loud! Classic

Thanks to Sanjeev and the board as well. I go back to the MF days with Parsad where he offered to buy me a beer for some minor achievement - a classy gesture. Though a tremendous achievement, it's actually not a big surprise to me that he's built the best investment board around and runs it in a classy manner. Thanks to the board members as well. I go back to the days of Marvel -- that was a homerun from someone I can't recall (lotsofcoke or locutusoftexas??) up through the recent post of a spreadsheet of the bank preferreds that had been crushed during the meltdown (ericd or eric50...hope i'm close) -- that was another huge hit for me. Congrats again Sanjeev on your well deserved success.

Here are couple of articles that I thought were interesting explanations of what may be going on at Google and help explain the shakeup. The UK paper, "The Guardian", has some good coverage of this. You'll see some links in the first article to other coverage in the past. http://www.guardian.co.uk/technology/2011/jan/21/google-eric-schmidt-larry-page http://www.guardian.co.uk/technology/blog/2011/jan/04/google-spam

Eric, You're right...my response was poorly worded and, upon a second reading, I think I misunderstood your comments. My apologies. I thought you were suggesting that the "dark ages" ended 200 years ago -- I think you were just commenting with respect to the video. Also, upon a closer reading, I think you are arguing that the abuse of certain aspects of religion (and gov't) allowed (allows) the few to take advantage of the many. I tend to think that on the whole (over 2000 years), the basic precepts of Judeo-Christian religion have been a great civilizing influence. That said, the abuse of some good, basic ideas did lead to some terrible stagnation as well as corruption. I think the same can be said of the U.S. gov't since about the time you highlight -- 1948. I actually think we're on the same page. I hope I haven't misrepresented your thoughts and I apologize again for my flippant comments.

With all due respect, this is the kind of nonsense that could only be learned in the humanities at one of the leading universities. It is just hogwash and someone needs to say as much. It is not entirely dissimilar to the nonsense spewed by some who, on the one hand talk about how quickly they want to get enough money to stop working but on the other hand go on and on about how people need to pay "their fair share in taxes." Only someone not making much money would not realize that the two are effectively mutually exclusive.

Ericopoly, This is the best description of why they are doing what they are doing that I have seen. Concise and likely quite accurate. Nicely done. As you say, whether it works is another discussion. But, so far, I'm in the camp that thinks on whole, the gov't has handled this better than I would have predicted.

Is this directed at me?

Well, I just want to be clear on this without boring everyone to tears. The difference between then and now is the price you are paying. MSFT (along with a slew of other large companies -- in tech and everywhere else) was highly priced a decade ago. If MSFT's business performs in the next decade as it has in the past decade (but the stock goes nowhere) it will be at a PE of 3 in 10 or 12 years. That's possible...I concede. But, it is a lot different than going from a PE of 30 to 10. I like the fact that they're buying back stock -- and in recent years -- not just enough to mop up options. I like that they're steadily increasing the dividend. I prefer it to trying too hard to pick the next hot tech area. We all know them as a consumer business but they're huge in the business arena. I'm not carrying a torch for them. They look cheap and they're hated. My last comments on the subject. I'll let others carry it from here.

I don't agree that I can be 100% right in my thesis and that MSFT could be dead money for the next 10 to 15 years. I'll either be wrong in my thesis, or Microsoft will not be a $25 stock in 2025. They are shrinking the sharecount in a big way and they are steadily raising the dividend. If my thesis is wrong and their profits start shrinking rather than tripling each decade, then they won't be able to shrink the share count and keep raising the dividend. But, in that case, my thesis would be wrong. And, there's no doubt it could be -- which is why this dominant monopoly has only piqued my interest now that it is trading at less than 10x earnings (if you back out net cash).

This is exactly what I'm talking about -- you're talking about what's "cool". If everyone gets an Apple, it won't be cool anymore. Some subset of people are willing to pay more money for something "cool" -- that ends the moment it isn't cool anymore. Then, they want something cheap. I'm not arguing that Microsoft is cool -- I guess I'm arguing the opposite. I'm arguing that it doesn't have to be to be a good to excellent investment at these prices. I mean, by definition, that average consumer isn't "cool", right? Microsoft serves the "un-cool" (it's a big market) and I think they appear to still do it well enough that at these prices, the stock is a winner.

Microsoft appears really cheap to me. They are still fabulously profitable in the core businesses. They are growing in search. I use Bing now. Try finding out a way to turn off Google search history and keep it off...it takes work. Bing makes it easy. Microsoft is moving to the forefront of privacy protection as compared to the negative stuff we're seeing from Google and Facebook. I realize others will disagree but we're talking about the mass market here. Microsoft was crippled by the anti-trust stuff for the last decade. Now, the focus is off of them. That took a long time. Microsoft is hated and reviled and it shows in the current share price. That's what I'm looking for. An incredibly highly profitable company that's been written off for a long time that is finally cheap. Read this article from Information Week -- it sums things up pretty well: http://www.informationweek.com/news/global-cio/interviews/showArticle.jhtml?articleID=228200263&pgno=1&queryText=dupont&isPrev= Read the presentations and discussions on their Investor Relations website on the cloud, on privacy, etc. According to Fred Hickey, they have recently signed a bunch of deals which involve the "cloud". $100 million deal for NYC -- 120 departments and 100,000 seats (PCs). A 200,000 employee deal with state of California and a deal with the state of Minnesota for 33,000 employees. He also says they recently signed an Saas deal with Dupont for 60,000 seats which swaps out an IBM, lotus notes arrangement. Hickey goes on about how Microsoft is crushing Google in this area so far. Meanwhile, Google is suing its potential customers. Another "Information Week" article: http://www.informationweek.com/news/software/enterpriseapps/showArticle.jhtml?articleID=228100060&itc=ref-true Look, I'm no tech guy. I haven't previously owned tech stocks. But, this stock is just too cheap and I think I can understand enough about market dynamics to know that it isn't going to be as easy to just dislodge Microsoft as many people seem to think. A lot of people post about using all sorts of other platforms but I just don't think that is what the average computer user is looking for. I mean, I could build my own computer for cheaper than I can buy one -- I'd rather get a root canal and I think that almost no "average" consumer wants to build their own computer. Again, I don't think a discussion makes sense here without a focus on what the average person wants. They want something they're familiar with, that's fairly cheap, that they don't think will force them to learn something new, that works most of the time, etc. There seems to be this vitriol still directed at Microsoft -- they're even attacked for not doing bad deals? They're attacked for not squandering their cash, they're attacked for buying back their stock...I keep hearing all this stuff but then I look at the numbers, at the market share and profitability of the core businesses, etc. and what I see is a company with simply massive returns on tangible invested capital that is CHEAP. That's what I'm looking for in an investment -- a dominant company that is hated and cheap enough that a lot of mistakes are priced in. Good thread.

Here's my take: 1) Agree with broxburn...people already aren't paying their mortgages...might as well leave them in there to maintain the properties. Banks don't want to take possession. 2) Recall a few months ago this issue about Fannie / Freddie 'threatening' to do massive mortgage putbacks to the banks...that was laying the groundwork for the moratorium now being discusssed. If there's no foreclosure, is there any reason to find the 'fraud'. The banks are probably in favor of this...if they're not, there's still obvious political benefit for congress running for reelection. Also, as noted by Bronco, why shouldn't any of us just do the same thing (assuming we don't have a lot of equity). In order to prevent those of us who play by the rules from crying foul, there has to be a "reason" for banks to stop foreclosing. 3) This is yet another sign...do we need another one...that the goal is massive, massive inflation to eat away this debt...either for the borrowers or the lenders...doesn't matter...just inflate, inflate and inflate some more.

Here's a link to the video: http://rossmedia.bus.umich.edu/rossmedia/Viewer/?peid=4d215177cbe44b1e8e94d0dd68f5058f

This is great! Thanks for posting.

There's an additional sweetener, as I read it, which is that to the extent that the annual dividend exceeds $1.36 in a given year, the strike price is reduced by that amount. Given that the annual dividend is currently 20 cents, this might seem irrelevant. But, the previous dividend was $1.36 so, say, WFC goes back to that in 2011 or 2012 and raises the dividend by 10% per year after that, you would see the strike reduced by $2 to $4 (random choice) over the life of the warrant. I believe that if Wells pays a special dividend (in excess of the amount noted above) the strike is also reduced. I can't guarantee this is correct but if anyone has an alternative understanding, please post.

thanks jegenolf

I had to reload my computer and can't find it. With the very large moves in Q1 for Kraft (over 13%), Wells Fargo (over 17%) and US Bancorp (over 17%), it seems like we could see a nice increase in BV from these positions, which, IIRC, are pretty significant for FFH.

Hello Vinod, Note that Berkshire's 10K is different (more exhaustive) than the info. presented in Berkshire's annual report. Page 7 of the 10K actually has the loss triangle for Berkshire as a consolidated entity (with all insurance subs. presented as one). I think you just have to get the actual 10K and you'll see it right there at the beginning.

I found the warrants on Yahoo! with jpm-wt but I can't find them on google with JPM+ or any other guess...anyone advise on what I'm missing with the symbol. Nice idea, btw.

Classic :D

I think Ackman and Buffett can both be right...it just a question of timing. Buffett paid, IIRC, about $34 a few years ago for Kraft...he's being diluted and watching Kraft pay a relatively high price. It's not like he can really "double down" now that the stock has dropped. Those buying now are paying a lot less than Buffett and many years after his purchase -- adjusted price might be 30% less if you figure opportunity cost for Buffett -- and they're not having to pay for the dilution...that's now baked into the Kraft price. Ackman does a good presentation and I suspect Kraft is a steal here for such a good company in a great industry. Then again, maybe there is a further, business related reason, that Buffett hates this deal and doesn't think it will work out going forward...but he was more than happy to let P&G pay 30x earnings for Gillette and more than happy to help finance the Mars buyout of Wrigley at 30x.

mark4, Nice, succinct analysis.