Kiltacular
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Posts posted by Kiltacular
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I first got the investing itch when I had to read Marx / Engels in college. My reaction, I guess, similar to the people that read Liar's Poker and made a bee line to Wall Street. Marx told "me" that I wanted to own the means of production or else I was a worker and that the value of my work would exceed my pay. I only fully appreciated what capitalism was when he told me what it shouldn't be. Now, there was no way I thought the system would change so where was I going to be in our capitalist system...that's all I could think about during that reading.
The next question was how to get in the owner of capital position and stay there with the least amount of risk (of having being locked into the non-owner position). My Grandpa clued me into the market. Then, I read Lowenstein's book and straight after that, all the Berkshire Letters....I was obsessed not with getting really rich but with getting in the position that my capital could support me and that I could feel safe I could grow it with inflation+ and not lose it, etc.
Is any of this "good" for society. Sure or maybe not. It's great for me. My wife is a physician and loves what she does and the help she provides her patients seems more valuable than what I do. But even though I have a front row seat watching a physician's life, I still feel what investors do isn't a waste. I supported her while she got her degrees, passed the boards and whatnot by making money investing...this idea can be analogized to all kinds of things. We're doing good with what we have and we're able, hopefully, to provide something for those we love who may go on to do something "good".
We're not making money running drugs and then using the money and power to destroy lives and corrupt society. No Cali cartel or Organized crime.
We're doing our best and the very best among us do make obscene amount of money. But, the vast fortunes made in the U.S. in the last 100 years plus have done an overall admirable job of giving back to society in major way. There are a few wealthy political families in the U.S. but we don't really have oligarchs.
Overall, I like our system and think we should be proud we went green instead of red.
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Offhand, from recall, here are the CEO's of Berkshire subsidiaries that I can think of that are 'new' within the last 10 years:
BNSF; MidAmerican; Gen Re; Borsheims; Feckheimer; See's; Buffalo News; Benjamin Moore; Shaw Carpet; Johns Manville; Larson Juhl; NetJets; CORT; ...the list goes on.
My guess is that the majority of CEO's for Berkshire's subsidiaries are new within the last decade. Even if not correct, the CEO's of 3 of the major subsidiaries are new pretty recently. MidAmerican hasn't missed a beat without Sokol and I doubt BNSF will either.
Like everything else, we'll have to watch Berkshire to see what it actually does and how it performs. It is not on auto-pilot but, as well, it is not going to see the mass exodus of CEO's that were only there "because they wanted to impress Buffett".
A truly successful culture outlasts even the most charismatic leader. Has Buffett built a successful culture.
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Love it!
He is the best. Thanks for posting.
He manages to get a quote in of "Dr. Strangelove" in a business press release.
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transcript: http://www.cnbc.com/id/101495338
GILBERT: WARREN ARE YOU SURPRISED THAT WITH THE AMOUNT OF CAPITAL THAT IS ON THE BALANCE SHEETS OF MOST BIG COMPANIES AND THE INTEREST RATES BEING SO LOW THE LACK OF CAPITAL INVESTMENT THAT PEOPLE EXPECTED -- IF YOU WOULD HAVE TOLD PEOPLE THERE WOULD BE SO MUCH CASH ON BALANCE SHEETS, THEY CAN'T GET A RETURN IN INTEREST RATES, WHY AREN'T COMPANIES AND EVEN INDIVIDUALS TAKING BIG CAPITAL INVESTMENTS? THAT'S THE PART I'VE NOTICED. IT SEEMS PEOPLE ARE WAY MORE RISK AVERSE THAN THEY HAVE BEEN.
BUFFETT: WELL WE HAVE INVESTED RECORD AMOUNTS BUT THE INTERESTING THING IS THE BIGGEST AMOUNT OF CASH IS ON THE BALANCE SHEETS OF COMPANIES THAT DON'T NEED CASH. IF YOU HAVE AN EXTRAORDINARILY PROFITABLE BUSINESS, YOU KNOW, WHETHER IT'S APPLE OR WHETHER IT'S MICROSOFT OR WHATEVER, THE CASH JUST ROLLS IN. YOU DON'T HAVE THINGS TO PUT IT IN. YOU PUT A LOT IN R & D BUT THAT GETS EXPENSED. THE RETAINED EARNINGS REALLY DON'T HAVE A PLACE TO GO IN MOST OF THOSE COMPANIES. THAT'S THE REASON THEY'RE WONDERFUL BUSINESSES. GOOGLE IS TRYING TO USE IT IN A FEW OTHER WAYS A REALLY HIGHLY PROFITABLE BUSINESS GENERATES CASH AND THEY DON'T USE IT.
GILBERT: SHOULD THEY BE RETURNING IT TO THE SHAREHOLDERS?
BUFFETT: PROBABLY.
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I think brain games are cool in general...people have been doing crossword puzzles for a long time and soduku and other brain games as well. Luminosity is another version of this type of thing.
I feel that one good way to challenge your brain (especially as an investor) is to force yourself to approach an idea that you disagree with and "see" the other side no matter how frustrating it may at first be.
Here's an example for me. My "gut" reaction to the idea that soda (Coke) is causing diabetes was: "This is ridiculous". (I know even that statement will set off some people -- well, try to see my side). Therefore, I concluded, without much thought, that it posed no threat to Coke's long-term moat and ignored it. I dismissed it out of hand.
Many years have passed. I do not encounter many people -- no matter the walk of life...25 year-old hip girl in New York City or 70 year old living in Montana -- that agree with me and in fact most people appear to be staunchly against "soda". The numbers are growing and growing strongly and Coke CSD sales in N. America bear this trend out.
Instead of pressing my ideas of why this doesn't make sense to me -- sugar comes into our bodies in many forms, HFCS can be replaced by regular sugar: "Then is soda ok? - NO! they say. Or, don't you see, this is just another way to slap a tax on something which, when done, will ensure that soda continues to be consumed because the "soda bonds" will be paid off the same way the tobacco bonds were -- I spent a lot of time thinking about why it does make sense to those to whom it does.
Diabetes is a growing disease problem, the HFCS you get from Soda comes along with no other beneficial ingredients, there is social pressure of simple social happiness which goes along with not opposing this. If your wife, (potential) girlfriend, sister, mother, other relatives think it is important, it is easier to agree and maybe they're right, anyway. Who cares is we slap a tax on them?!, etc. Hey, it just another excuse for a beer, etc.
When thinking through how this particular issue is evolving and forcing myself to see the other side, I can see how there is now a possibly serious threat to Coke and therefore, to Coke as an investment.
So, my brain games involve subjects like this. What do I think is obvious that most others disagree with and what can I learn something by thinking their way. It doesn't always work but it can help you learn something new, unlearn an old idea, see others in a more positive light and help your investments.
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I would prefer Schloss to Klarman. But, they are hard to compare because of the difference in the amount they managed. Though, one could argue that Schloss limited what he managed because he knew it would be more difficult to scale his approach to very large sums. Perhaps Klarman has just gotten too big.
Scaling to large AUM is very difficult and it appears to me that it can lead to situations where the manager needs to choose one of (or a combination of) the following: leverage, market timing, complaining.
If I wanted to invest with a Schloss like investor (Kraven, from what he writes), I'd want to do it with an IRA or the like so that the manager felt no thought to buying and selling all the time.
If I wanted a manager for a taxable account, I think I would prefer a very good private equity type of manager or a Markel or Berkshire (or the old Leucadia).
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Found this on Netflix and it's pretty decent. Basically Hank Paulson sitting in a chair and being interviewed, mostly about his time as Treasury Secretary during the crisis, for an hour and a half.
Not the best thing ever, but I know some people here would enjoy hearing straight from a primary source like this.
I saw this and thought it was worth having on in the background while working towards my daily page limit.
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How are they going to keep track of this for people who hold tax-preferred retirement accounts at multiple brokers? What about ROTH vs traditional IRAs?
Are they going to have similar limits on the absolutely terrible myRA plans they are rolling out?
They've already thought of that in the states for the 401k / self employed 401k. See:http://www.dol.gov/ebsa/5500main.html
For plain language, see the "administrative responsibilities" at this link: https://www.fidelity.com/retirement-ira/small-business/compare-plans
I guess they'll just add the form 5500 for other IRAs, SEPs, Roths, etc.
Would be easy for them to do.
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While it's impact isn't large, Berkshire's "Other Primary" Insurance is pretty impressive.
2013 float = @ $7.5 billion
Last three years loss ratios: 2013 = 60%; 2012 = 58%; 2011 = 52%
A pretty good insurance sidelight.
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Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%.On IBM...
Val,
I've enjoyed your previous posts about MSFT. Can you expand on this sentence I've quoted? Literally, I don't know what it means. IBM has very little in the way of cloud business?...is that all you're saying?
I meant that it's not a big % of the business that they write, so the impact of deferred revenues due to cloud is negligible.
Where the impact is measurable is probably in lost business because not all of IBM's software offerings support a cloud deployment model. There will be a period of transition as IBM converts its on premise offerings to cloud applications.
Thank you Val, as always, for your interesting insights conveyed with class.
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On IBM...
Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%.Val,
I've enjoyed your previous posts about MSFT. Can you expand on this sentence I've quoted? Literally, I don't know what it means. IBM has very little in the way of cloud business?...is that all you're saying?
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I find it interesting that he's cash in the estate - 90% will go buy SPY and 10% short term bonds - so he has no faith in buying BRK? Is Warren suggesting SPY will do better than BRK over the long term? Gary
Buffett wouldn't be the one doing the buying; his wife would be, after his death. Presumably Buffett thinks she shouldn't invest in Berkshire unless she is willing and able to make a rough estimate of Berkshire's future earnings. After all, this is what he recommends for valuing any asset in the article. Buffett suggests that investors buy an S&P index fund if they cannot value assets; he's just putting this advice into practice for this wife, I think.
Good question...good answer
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are you self employed? do the SEP or individual 401. You don't have the same income limits then.
If not, I wouldn't bother contributing until you know what your income is. It wouldnt be worth the hassle of trying to reverse.
If your income is very low or negative in a year, thats when you should convert your IRA's to roth!
Yes, if you are self-employed this is the route to go. Based on your comments, I would choose the self-employed 401k over the SEP IRA because you can contribute the salary deferral ($17,500 for 2014) as soon as you earn that much in a year. The remainder of the contribution is dependent on your earnings from 2014 and is up to an additional $34,500.
I highly recommend Fidelity. They have outstanding customer service for this. Call and ask to speak to a retirement specialist. You can find a lot of detail on their website to see the differences.
https://www.fidelity.com/retirement-ira/small-business/self-employed-401k/overview
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Default within two years, no. I think they have too many options with selling off assets, privatizing Japan Post and other assets, taxation changes, legislating corporate reform, or even god forbid for them, immigration policy reform. As a last resort, Abe could always resort to nationalism. The guy uses Yasukuni deliberately as a way to distract his critics and to make his right wingers link economic reform to national strength.
Thanks for your thoughts and the link to the interesting blog earlier in this thread.
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I think PJM points the main problem. It's not so much the Japanese household sector that is saving (I think the latest 2012-2013 numbers show the household sector is reducing savings as the aging population has increased and the working population has decreased), but that the Japanese corporate sector has an extreme overabundance of saving. In this case the cash just sits on the balance sheet.
Structural issues and governance problems in the corporate sector are the reason the transmission mechanism is broken. They aren't investing and they aren't sending it to shareholders.
Roger,
It is difficult to disagree with idea that Japan has some problems and perhaps even very serious problems. Going back to the original question on this thread about Bass betting on a default within two years -- do you believe that will happen?
It seems to me that if a country like Japan (or U.K.) were to default, there would be disastrous worldwide repercussions.
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I wasn't aware of the recent 2012 designation of accredited vs qualified investors, but overall it just seems to make it unlikely for anyone to want to start a fund from scratch, especially something more eclectic.
It seems like some of the rule changes reduce competition. This seems to often happen, in many industries, when regulations are increased. They are often increased after a crisis. The large, entrenched players welcome the new regulations. We saw what the Sarb./Oxley regs. did for smaller public companies, we saw what the new banking regulations did for the smaller banks.
This isn't to suggest things should go unregulated. It is just something I've become aware of over the years. The big players (who survive the crisis that is the impetus for the new regulations) often appear to have a much stronger position going forward.
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I'm in as well. :)
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The last three posts on this matter are an important reason why I think this board is good.
Together, the three posts cover the gamut of what the story for Japan on this matter actually amounts to. In shorthand: 1) It doesn't make sense / (2) It doesn't make sense for this additional reason and / (3) here is a reason that someone who should understand #'s 1 & 2 might still say what Bass is saying.
I'd add a minor corollary on the "why would Japan default on itself?/It wouldn't" idea. This idea seems so obviously correct on its face but others seem not so sure).
In any case, if true, the corollary is that: it is unwise to loan money in your own currency directly to countries that can print their own to pay you off unless the reason for doing so is entirely political. It is easier to come up with more reasons why a business might want to lend to another business across currencies where the debtor resides a in country that can print.
However, the list is short and all the good reasons find borrowers with similar qualities in economically similar countries.
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The only thing in that article that is really "true" is that this is old news. The guy's analysis is so wrong as to be laughable.
From the article:
But when that happens, the bank will pay for protection. It is buying a service, and the service costs it money. And that's not what happened here. Berkshire's services did not cost Lehman money. Lehman made a $16.5 million profit the day it did this trade.Lehman paid for this (in more ways than one). To book a immediate profit on the trade has been a common, if dodgy practice that both Warren and Charlie have critiqued. The trading desk booked the profit which counted on the that quarter's PL. From the trader's perspective what's not to like?
The real deal BK gets relatively cheap float for years. From a BK perspective, i.e. long term and corporate, what's not to like?
+1
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Packer or others who have looked into it, can you tell me what the current dividend is on the Hyundai preferred 005385 and, if possible, how you found it?
TIA
https://www.google.com/finance?q=005385&ei=BOf7Uqj1GofpqAGeiQE
Is that correct? The yield is 1.54%?
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Packer or others who have looked into it, can you tell me what the current dividend is on the Hyundai preferred 005385 and, if possible, how you found it?
TIA
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look at the sequx holdings at the time...I believe they would do things somewhat differently now. I think they are much more a great business at a fair price type of shop now than they were then. but I imagine some of those industrials were incredibly cheap in early 1974. And they were about fully invested, which is exceedingly rare for them. they never got close to being fully invested in the 2008 denouement, which in hindsight was a mistake. this leads me to believe that Sequoia expected a kind of elongated 1973/1974 style malaise which of course never happened.
I remember reading -- a long time ago now -- Bill Ruane saying that they waited ever after that period for another big correction and it never came. I always remember that. It is very difficult to get the timing right and it is human nature to fight the last war.
It's interesting to pull up an annual letter for Berkshire -- the most recent one will do -- to see just how incredibly the S&P 500 performed after 1974. From the beginning of 1975 to the end of 1999, the S&P 500 (with divies) had just three down years. -7.4% in 1977; -5% in 1981 and -3% in 1990. All the other years were positive and many of them were simply huge up years (13 years where S&P did over 20%). If you were a manager and vowed never to get caught in a '73-'74 episode again, your entire career passed you by while you waited for the big crash to happen again. One can see where the advice from some of the greats is to buy good investments when they come along and not worry about volatility...I suspect convincing your investors of same is a more difficult task!
Good thread
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Of coz, he is one of the few who can time it right. I am one of the many who can't.
:) I'm in your camp...I just selfishly want to make sure he keeps us updated!
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Bought OTM puts on IWM early today to add to the pile of SPY puts we own. Nice pop with the IWM puts up about 65% at the close. Have been rolling some of the ITM SPY puts into longer duration OTM puts.
It's definitely nice to have an increasing store of potential dry powder in this decline. It remains to be seen if, in the immortal words of George W. Bush, "This sucker's going down." :)
+1. Let the discussion continue on whether it makes sense to hedge or not but it sure feels nice to have no impact on your portfolio when the markets go down 2%+, especially when you are at that time trekking in northern thailand's jungle! :d
It sure feels good when you timed it right... the thing is how often you timed it right. If one has the ability on timing (some do), there is much better way to make money than doing "hedges"
I give him credit. He timed it perfectly and he had a reason...WSBASE...he called it on the way up too.
Chou Funds 13-F
in General Discussion
Posted
Nicely done! Posts like this remind me that these discrepancies are often as real as they look.
In a similar vein -- though not the same as an exchange arbitrage -- these Korean preferreds discussed in another thread appear to just be "sitting" there. Yes, many of them have already exploded higher but that doesn't mean they aren't cheap.
As an example, Hyundai motors common stock trades for about an 8 PE...the preferreds for about a 4 PE.
It is just sitting there -- you can buy Hyundai for a 4x earnings via these preferreds and the only reason for a discount is lack of voting rights...the Berkshire B shares don't trade at half the A's.
I mean, it is weird enough that it has taken me a while to accept it -- "what" am I missing. It is just too simple. But, I don't think I'm missing anything.