Kiltacular

You might look through this thread / page linked below. In addition to others' comments, I did a post on this thread below that discusses and links to a lot of Buffett's comments on the subject you're asking about. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/cyprus-savers-take-10-hit/msg108990/#msg108990

That's the way to go. Or, just do a little back and forth and then say: "Cancel it" -- they'll give you their best offer. If it isn't that good, you can just call back and re-subscribe. I recently cancelled a magazine subscription after a "misunderstanding". They went from demanding $50 to offering me the sub. for $5. This is a very well known publication. One thing that seems to be happening is that these guys are really willing to deal because the number of subscribers is so valuable when they sell their advertising and in the digital age, they just don't know from where, or whether, they're going to get additional print subscribers. We're "dying" off.

It does make your point for you -- and it is a well articulated and well thought out point. I might add that, since interest rates "can" spike, it makes sense that Buffett and Munger use a floor discount rate of 7% no matter how low rates go (others have quoted 6% -- I recall from old transcripts 7% but it seems close enough not to matter). But, if one was certain that risk free rates would stay low for a long time, then it makes sense to pay up -- to pay waaaaaay up -- for a basket of stocks with decent to good ROE's. However, in order to maintain a balance between opportunity costs (of low risk free rates for a long time -- see Japan) and the possibility that rates spike during your holding period of an asset with a cash flow (stocks, apartment building, etc. as opposed to gold or other collectibles), I can see why Buffett and Munger use a floor discount rate as a margin of safety. Nevertheless, in support of your point, multiples are not so high right now that they're not already pricing in substantially higher risk free rates (whether or not, as you point out, stocks "drop" in response to an increase in rates). That is, if, like Buffett, you have the option to commit your capital to an asset whose cash flows you can control, it does seem to make sense to pay even 20x earnings for a high ROE company (with just a modicum of reinvestment opportunity at a high ROE) even if risk free rates on 20 year treasuries were, say, 4.5% right now. Moreover, as Buffett has noted over and over (indirectly but clearly), he's willing to pay a high multiple for a high ROE company (at least 20x for a company with an ROE over 20%...not a utility) even if 20 year treasuries were yielding 6 or 7%.

I thought the same thing -- well, both things -- too. Can anyone name a large position that didn't work out well that Berkowitz pounded the table on? I can only think of CNQ -- though he probably made a lot of money there too. He sold others before they worked out -- Pfizer and the health insurers. But, you made good money, I think, if you held. Anything else that someone can name where he made a large investment and it didn't work well? I guess we could argue AIG and SHLD haven't hit yet. I'm not sure of his average price on either. Perhaps it makes sense to wait a few months, or more, given his self-described propensity for "premature accumulation" -- great phrase. But, his ideas are pretty solid from what I've seen.

Class (in session, too)

Great thread. Great posts. Excellent summary from clapshands. I like the point about the counter-factual from alwaysinvert.

+10,000%...and one might even be able to drop the opening clause.

Things look good again on my tablet -- I think twacowfca gave the best description of why this particular ad was bad. I hate to think others without tablets or who weren't experiencing this thought we were just bitching. It was making the site virtually unusable. That said, I don't want my complaints to discourage Sanj from trying other ads in the future or raising the funds necessary to keep this board so excellent. Thanks for responding to our pleas on this one, Sanjeev. I am joining in and making a $50 donation today. Perhaps we should run a fundraising drive near the end of each year or at some point. I believe someone was may already be doing this.

The last ad on the bottom of the page is no problem...it's the new scrolling text ad -- just on my Ipad (not happening at all on the PC) that ericd describes that is maddening. I would give half the profits of ericopoly's next trade to stop this. I'm a diplomat. :D EDIT: BTW, in keeping the recent theme, the ad seems to be saying -- to me at least: "You talkin' to me!"

I'm glad you posted on this. It is driving me insane and ruining my experience on the Ipad with this site but, like you, is not happening on my PC. Someone, anyone...stop the madness. :P

Tri-Tip...mmmmmm Most under-rated cut of beef on cost per pound. I don't think there's much of it per head of cattle. It is becoming more popular. Great after good marinade and then grilled.

Racemize and wrister -- Thanks to both of you!

Bloomberg (the website, not the subscription terminal) used to allow me as recently as last month to enter the symbol: "SPTR" and get the S&P 500 total return (the 500 with dividends). Bloomberg's website no longer has such a ticker as far as I can tell. Does anyone know where I can get a daily or month end return for this? I didn't find it on Standard and Poor's website but I might have overlooked it. I do NOT need a bunch of historical data. Thanks in advance.

I've only got three sauces in the fridge...Heinz, Tobasco and Sriracha There's a pretty good history channel episode on Tobasco...not sure if you can get it on Netflix. EDIT: Oops...I forgot Cholula (HP sauce from the U.K. is also pretty good but I didn't use it enough)

Some absolutely terrific posts in this thread. The info. / outlook from our friends giofranchi and txitxo in Italy and Spain, respectively, is (for me) as good [read: better] than I've gotten anywhere. In particular, txitxo's read on how the Euro must play out for Germany / Spain / Italy has been terrific. Of course, Packer has smartly asked for some names from txitxo and he'll be the one that makes money from this thread. :D My approach is more like gio's. Nevertheless, I very much enjoy these international outlooks...please keep them coming (wherever you live).

Ericopoly, Your comments about the taxation of an IRA at death reminded me that long ago I remembered reading something about a guy that worked on this issue. I haven't looked into it in detail and haven't read his book, but I remembered this guy's name -- Ed Slott. Here's his book. Not sure if it still applies or if it works with Roth's but might be something to look into. http://www.amazon.com/Parlay-Your-into-Family-Fortune/dp/B000FZDKZ2

+1 She seems like a wonderful person that WEB has cultivated a great friendship with over the years...similar to Kay Graham. Congrats on your 3 hour tour.

Yes, they can't write an insurance policy that excludes certain pre-conditions because that would be discriminatory. So, the completely exclude you -- law of unintended consequences. What you have described is similar to the whole issue with someone just wanting "catastrophe" health insurance. I've researched this issue. It doesn't exist. A "high" deductible policy starts with a few grand out of pocket. But, I want something that covers me for something that costs $100,000+...a serious bout of cancer or the like. It isn't allowed to be sold. I am in New York (city). I am not quite 40...have always been healthy with no pre-existing conditions. I pay almost $800 PER MONTH just for myself. So, that's almost $10,000 per year for ONE PERSON. These high rates exist in New York because they can't exclude anyone. Get ready rest of the United States -- this is what's coming. It's a "right" -- right?! My wife is covered by her job -- a small business. With a couple of kids, we will (if it happens) be paying about $30,000 per year to cover the family. In addition, we paid about $15,000 in Medicare taxes. That's before the 3.8% Obamacare tax that is now put into place. Now, as a nod to my post on the other thread, suppose I have 4 or 5 children? Yet, lots of people with no wages and assets are fully covered. Who's the sucker? lol Fair share? lol

I have next to no doubt that what you talk about is exactly what the appeal was here. If you pull up what was happening to personal tax rates between the late 60's and early to mid 70's with personal tax rates, it fits. Moreover, Buffett has acknowledged that he was a big beneficiary of the carried interest rule while running partnership. The rule only has a big benefit if the spread between cap. gains taxes and personal income taxes is large. I wonder, did the tax law changes in the late '60's or '70's change in such a way that rates on personal income were converging or did converge with personal income tax rates. Interesting subject. Edit (adding info.): Take a look at the rates for capital gains at this link. Buffett closed the partnership in the late 60's. Just after that, rates on capital gains went way, way up. This turned out to be just the time to move from the carried interest structure of his partnership to the "own my investments inside an insurance company" structure he then pursued. Perhaps just a coincidence ;D http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=161

If I'm in Obama's shoes, I'm not worried about getting extremely wealthy or about retirement at all. It's funny (in that perverse way that it can be), I see people in the last 10 or 20 years talking about people like Romney or the Bush family and their wealth and how they got it. But, no one talks about how the Clinton (and his family) or Al Gore went into politics with very little wealth and, since Clinton's presidency, both have become extraordinarily wealthy. I mean, HUGE numbers. Now, would you rather have someone enter the presidency with extreme wealth or would you rather have the trend be that AFTER you become president you become extremely wealthy? If those are the two options, the answer seems self-evident. I think Ericopoly has realized that he -- like many others here I'm sure -- are in that dead zone of wealth... there is no one that "feels" for your predicament and no one lobbying on your behalf. There is no one protecting your interests or even working for them. Packer mentioned during the election that he was surprised there wasn't more protest from people making $250,000 per year that were being called "rich" when instead they were just the ones being soaked (or something to that effect -- he's more eloquent about how he put). You ain't even close if you've got wife and couple kids and are actually also trying to build wealth. You've got to live like you make $80k if you actually want to build wealth and aren't expecting to do 50%+ per year on your investments. These people -- and I'm one of them (high 7 figures net worth), "rich" person's salary -- are in the sweet spot to be taxed to the extreme. There are enough of us that we can be soaked for some serious cash that can help with "austerity" but there aren't enough of us that we have any power and we don't have enough wealth to hire lobbyists and to play the big boys' game -- like the big hedge fund and PE guys do with getting carried interest protected or having our business protected with subsidies or trade quotas, etc., etc. Meanwhile, our taxes are enormous and not just in dollar terms but in PERCENTAGE terms. We pay full freight for everything -- education costs for kids (no loans for you), deductions taken away (you're rich) -- see the AMT, etc., etc., etc., etc. Many people talk about how those in places like Sweden or Denmark pay higher taxes (though I don't think they do if you're making good money in states like New York or California or New Jersey) -- but humor me. My understanding is that people in those countries don't need to pay $40 to 60,000 per year for each child's college education -- it takes half a million in pre-tax earnings to cover each kid. There are no loans or scholarships (for academic achievement, as there once was) for people in these groups. PAY UP (and subsidize everyone else -- "you're rich"). If you're trying to get into Ericopoly's zone, be forewarned, you've got to add another zero to the net worth before you're safe. Everything is stacked against preventing you getting to where Ericopoly is now and, when you get there, you'll find you're still not safe. They're coming for your money -- unless you never want to use it. But then, what's the point of trying to get somewhere that you can never enjoy? This, I think, is what Cardboard is getting at. When enough people realize that even hitting it big isn't big enough, the idea trickles down to future generations: "Even if you 'make it' you're still not even close." I tend to agree that this eventually has a perverse impact on society. But, long ago I realized that no one cares. No one sympathizes with your "plight". No one (aside from a few vocal people on this board apparently) sees the problem this scenario creates. I long ago realized this -- people just think you're bitching and start talking about 'bad karma' [lol] and I long ago realized there is little to do. Keep your head down -- aside from the occasional post on an anonymous message board -- and carry on. But, to listen to the folks that talk about "fair share" with some kind of moral authority -- ugh...they're killing the golden goose (or geese, as the case may be)...and future generations will realize it. Why try really hard when you need to hit 10 home-runs in a row to get anywhere but, if you do nothing [no matter your skills], you can have as many children as you like and have a "good" life in the U.S. Really, who are the 'losers' in this scenario? People don't need to be really bright for these ideas to take hold. Why try hard when just getting in the right herd is good enough? The answer, of course, is don't. And, once that's the answer, we're on our way to implosion. I pretty much guarantee people in Greece and Cyprus, etc., aren't talking about the "gender" rights and "the environment". Those concerns become laughable once the rich stop paying taxes. I hope to see this change because I care about those issues and don't like the impact that these policies I'm seeing are likely to have on peoples' concern about important social issues. Perhaps I'm overly concerned about the trend. I'm not particularly concerned about myself but I just don't like the trend. The pendulum does tend to swing back the other way just when it seems to have gone hopelessly too far. Then again, there are many places, societies and times where it never does swing back -- it just tears off from its mooring. /rant off

Nice! Touché!!

+2 --- jasonfx, Thanks for the link to a nice way to bookend my memories of Ebert. I'm old enough to remember "Siskel and Ebert" ( http://en.wikipedia.org/wiki/Gene_Siskel ). I have fond memories of their show. Both these guys passed too soon. Two intelligent, witty guys.

Early on, I sold my wife on this concept. :D

EdWatchesBoxing, I tend to side with Ericopoly on the specific notion that recourse mortgages won't prevent disaster (though I have no idea about Canada's housing situation). What happens when the public gets crushed with housing (as opposed to, say, owners of commercial real-estate) is that they scream bloody murder. And that means politicians will get voted out unless the previously existing conditions are waived. Most people don't have enough other assets against which recourse achieves anything anyway. If they did, the average person would just pay cash for their home (you know, the stock market is risky and all that...). And, of course, a guy who makes his living selling securitized mortgages "has" to believe what he said. Munger's incentive caused bias or the much more poetic Upton Sinclair's comments: "It is difficult to get a man to understand something, when his salary depends on his not understanding it."

Thanks Boiler!