original mungerville

I don't know who his successor is going to be but 1.1x book value is just north of $80 on the Bs as of 31 March 2012! (At least by my very rough calculations!)

In general, I would say play poker, invest, socialize, exercise, contribute to your community, learn something new every year, and of course, when in doubt, f*ck. I agree with Sanjeev's comments. I would definitely not base my decision on what a girl would think or her family that's for sure anybody - do what you want to do. Decisions should be mainly internal not externally based. (By the way, a girl would think making 1.5 million playing poker and then investing it pretty cool if you ask me.) Also, you can get involved in school part-time, but live full-time in residence and invest/play poker while others do their homework. That way you get some of the education and all of the socializing. But only sign up for courses of great interest. There are of course other ways to socialize other than school - eg, hang out in a ski/climbing resort and/or travel and invest your money. Also if the idea is to get a formal education, a couple of years of business/economics courses part-time over a couple years in residence partying and then the CFA route and then complete the biz degree part-time at the same time as when you complete the CFA. You don't get the benefit of additional social interaction FOR the last half but its an important external qualification that can also fundamentally help a bit with investing.

Redskin, You are right, I may have rounded. I still see book of 109K on the As and 73 on the Bs. Of course this could all prove fleeting if (when!) markets reverse. The way I look at it though (if markets only tank 10-15% this year) we will see 73 or so in book on the Bs starting with Q1 2012 and moving through Q4 operating earnings should make up for the investment losses from the market tanking 10-15% over the course of the year. If the market tanks 30-40%, book value will go below 68, maybe low 60s putting the buy back price on the Bs at 66 or so and 100K on the As. No use getting too precise with these trading-type short-term numbers. The better place to spend time is determining the long-term earning power of Berkshire.

Redskin, I think you are low because I did not even count the GE and Goldman warrant gains and am already at a book value of $109,000 per Class A (buy-back price of $120,000). GE is negligible but the Goldman warrant gains may add another 1 Billion or so to my calculations of both book value and earnings. So another 50 cents on the Bs per share, and just under another 1,000 on the As. Again, taking this into account I am at book value of at least 73 on the Bs (a buy-back price of 80 on the Bs) and at least 109,000 on the As (a buy-back price of 120). AT earnings may be closer to 6 billion (+/- 0.5 Billion) instead of $5-6 billion; book value gain of closer to $14 billion (instead of $13 billion).

To be clear, the conclusion still holds: When you multiply the new Q1 2012 book value per share by 1.1 (the buy-back indicator) you get $120K for Class A and $80 for Class B shares. ie book value per Class B share will be $73 (73 X 1.1 = $80 as noted originally)

Yes, you are right: with the gains from equities not going through the income statement, my calculation of $13B would be the increase in book value and not the after tax earnings. After-tax earnings should instead be in the $5 to $6 billion range. ($3B or so AT in derivatives gains including the BAC warrants plus $2-3B AT in operating earnings including interest and dividends)

Berkshire Q1 2012 earnings to equal Apple's Q4 2011 of $13 Billion (+/- 1B): By my calculations, I have the following: 1. $8B pre-tax gain for the Big 4 common invt's plus BAC warrants 2. $2.6B pre-tax gain for other stock investments 3. 1.6 pre-tax gain on derivatives Taking 1,2,3 applying a 20% effective capital gains tax rate (instead of 15% for conservatism) gives me 10B after tax. To this I add $2-3 billion after-tax in other operating-type earnings totaling $13 Billion after tax for Q1 2012 which is equal to Apple's Q4 2012 according to: http://finance.yahoo.com/q/is?s=AAPL. A very big number. When you multiply the new Q1 2012 book value per share by 1.1 (the buy-back indicator) you get $120K for Class A and $80 for Class B shares. Word of caution: all of these gains (and consequently the buy-back level) and then some can reverse if the markets tank.

Is This Reclusive Fund Manager the Best in the World? Odds are that he isn't. There are a lot of people in this World.

Txlaw, What nat gas stocks have you been buying and why those particular ones / ie what was your filter.

Just to be clear: I am in complete agreement with Parsad. I am just trying to emphasise the point because its so important conceptually to understand this.

Parsad, On the historical underwriting record, that is a key point almost nobody gets. If you buy businesses at 70% of book instead of 150% of book, however you have additional underwriting losses in the low double digits for 3 years while you turn around the underwriting, you have effectively acquired for around 100% of book. You are still better off than paying 150% of book for an acquisition, however those low double digit additions to the combined ratio really hurt your long-run combined ratio record. So you look like shit but you are actually very astute. You have to make some assumptions and back those turn-around year losses out and capitalise them into an adjusted purchase price. I mean this is a very fundamental point to get to the starting line of an apples-to-apples comparison. This is critical to understand. The path is not a conventional one, the analysts, the rating agencies, investors, they all hate it - but it is not crazy when you back this stuff out and capitalise it and re-work the numbers.

Good Lacy Hunt interview: http://www.johnmauldin.com/images/uploads/pdf/mwo021312.pdf

This guy may have been irresponsible however modern portfolio theory, biz school and the CFA program are just as irresponsible with over-diversification, focus on betas (short-term movement is an indicator of risk), etc which lead to 99% odds of mediocracy with too many investments focused on the short-term. The trick is to take elements from both the former and the latter to derive and optimal approach. There are kernels of truth in each, however each on its own is more than a little crazy.

Many investors on this board seem to have invested in BAC LEAPS. This is one form of levering up along the lines I would suggest provides downside protection with big upside potential. Again, having said that, you don't want a portfolio entirely invested in 2-year LEAPs because if the entire market drops 50% and stays there for two years, you are toast.

F*ck*rs. It is unreal the crime they got away with.

I seem to usually have most of my portfolio in 1, 2 or 3 stocks at a time. I won't leverage up in the manner described however. I think if you want major leverage with some downside protection, for one good idea buying long-term LEAPs say 10% in the money and exposing 30% of your portfolio to this would provide 3x leverage on your portfolio's value. If the underlying doubles in 4 years, your portfolio goes up 5x. That's not bad, and you can't lose more than 30% of your portfolio. If you did a similar thing with another uncorrelated position or two, that could make some sense...but all of these things have to be almost sure bets, and if you do three exposing your whole portfolio, they better be uncorrelated. So if it were 3 stocks, you would need to pick different industries and I would want to hedge general market correlation. You have to be at least 80-90% sure this things going to double in four years. You need to have experience with a 1, 2, and 3 stock portfolio leveraged 2x before you start trying to leverage up 3x, 6x, etc because you just won't be able to handle it. There are merits to this because no-brainers come along often: Amazon.com bonds after Internet bubble, Overstock.com bonds in 2008, Fairfax, Berkshire, Odyssee Re common, preferred. These have been clear no brainers in my mind at certain times in the last 10 years where I could see exposing 30% of my portfolio to them in a levered way however I still would not expose 100% of the portfolio leverage up 5x on any of these. You just don't know how long the market can keep your positions undervalued. You need to figure 3, 5, even 7 years of staying power worst case. In summary, there are elements of this strategy that make sense but we aren't talking any old investment here.

Moore, let us just be clear: the market is up because the European Central Bank and Federal reserve are printing money. This is definitely not an indication that the world is not going to Hell in a hand basket. It is, its just going to be a different basket relative to the one it would have taken to Hell had they not printed.

Was up 55% or so last year at the peak, lost most of that in December to finish up only 10% last year. So far this year, am up 2% in January it seems. But if we are doing a 2 month tally, I am down something like 20% over the last two months. (If the market goes down from here, I do not think I can lose much. If the market continues onward here, even a bit, looks like I'll start making some real money. If the market drops a lot, I should also make real money. Looking forward to what the next two months bring) Unless things backfire, longs should be helped by Bernanke who seemed to indicate pretty clearly he was going to print - should begin in the April to June timeframe. I still have big bets on silver, related equities and Berkshire and remain short the Russell 2000. Good luck to everyone.

Sharper, My feeling is Cardboard is right. Also I am not sure what structure you are using as a preferred share is usually associated with a corporation whereas you are talking about a LP.

This is a distant memory but doesn't he tend to donate the shares when they are well below FV to reduce taxes paid by him?

Sharper, I think I see what you are saying but am not sure. Have you done this yourself? Has anyone else done this in Canada? Sounds like Parsad did something similar in BC? ...with legal advice

Sharper or others, I already understand how to, and have set-up, a LP and GP with the GP incorporated as you describe for other business purposes. This is not the nut that is difficult to crack. What I am talking about is in terms of securities law, where is the exemption found allowing the general partner to get payed for providing investment management services to the limited partnership without having to comply to federal or provincial laws for investment management?

I am very interested to understand if there are similarly simple Canadian versions of limited partnerships or other forms for managing people's money that do not run into securities law issues. For example, is it easier to set-up in Ontario, Quebec or British Columbia? and is there a similar legality that if you have fewer than a certain number of investors, you do not have to register under securities regulation. Any Canadians who have done this recently and can share some details on how best to set something small up - say for less than a dozen Ontario investors?

Ucc, Congrats, that's a great 7 year return after tax. I am not surprised. As a Canadian investor in US equities, I use the S&P 500 returns in $CND as a benchmark which, due to the rise of the $CND over the last decade, has done worse than the S&P 500 as normally measured in $US. So I figure your relative returns are even better than you suggest. (My main account is a registered tax-free one where my 11 year returns are around 24 to 25% - but this is before f/x fees where I have gotten killed except in the last year or so as they have just introduced a $US settlement option.) In any case, congratulations.

After being up about 60% at the peak this year and averaging being up 35% for most of the year, I lost about 1 to 1.5% for every trading day in December to finish up only 10%. Biggest gainers: - Gold bullion - Options on Silver and selling 30 to 40 percent at the peak in April/May Small gains: - After holding for a couple years, sold KO near peak (to acquire Berkshire Hathaway shares near book value) Options on silver miners and silver and generally churning my hedges on the market cost me a lot this year without great payoff.