Mephistopheles

The write-up of $15 billion would be reduced by a tax liability equal to the percentage tax rate multiplied by $15 billion. So call that around a $12 billion increase in book value (rather than $15 billion). Oh yes of course, thanks for the correction! :)

So doing some back of the envelope math here: Berkshire owns 55.36% of Heinz for $4.25 billion + $5.536 billion for the special dividend. Now it's 55.36% of 51% of the new company, so 28.23% of 1.217 billion KHC shares, or 343,559,100 shares. At $72.40 that's roughly $25 billion, or a $15 billion write up from the original investment. Add $15 billion to $241 billion book value to get $256 billion. At $335 billion market cap that's 1.3x book value. So, BRK is a buy right now.

"I turned my computer into an ATM"

As a former research analyst, I'd like to reinforce that research reports should be ignored except to learn cold facts such as numbers in a financial statement. Analysts are very smart, hard working, decent people. But there is a major restraint to the quality of their work and that is the short term bias that is pervasive in the industry for a multitude of reasons. I'm sure everyone is aware of this, but just wanted it to be heard from someone who's been in the industry.

Look at page 21 of the URL you supplied: http://assuredguaranty.com/uploads/PDFs/AGM_1Q15_Supplement.pdf The table at the bottom of page 21 says the net par exposure of $4.0 Gross is only $2.2B. Unfortunately, the table at the top gives a calculation of "Gross Debt Service Outstanding". They do NOT define this term in their glossary. Nor do they supply a calculation based on net exposure. Really very frustrating. What is AGO's Net Exposure (who cares about gross?) including costs to service interest payments? There has to be a present value calculation for that 20 year stream of interest rate payments, otherwise how do you estimate an impairment of book value? I agree there are reasons to believe that there will not be a 60% wipeout of par value. But even if there is, AGO appears to be able to survive that. I just want to know where a safe number would be to draw a line in the sand, and I want that number to absorb a 60% wipeout for par, and added to that the present value of the net interest payment exposure. Pg. 23 of that same url provides an amortization schedule showing $3.7 billion total net debt service. However, that link is only for Assured Guaranty Municipal. $4.94 billion is the consolidated net par of all the subs & parent. The total net debt service exposure is $8.3 billion. This is presented on pg 127-128 of the 10q. http://www.sec.gov/Archives/edgar/data/1273813/000127381315000019/gaapago-03x31x2015x10q.htm#s70292AA5063AA576264DCBEE3D8605D3

I see double posted questions and links from time to time. I can see why it could be annoying, but why not just ignore it? That's what I do. It takes a microsecond to scroll past a repeat question/link. And imo it doesn't happen that often. Same with starting topics expecting to have others do the work. Just ignore them and move on. Ignoring is much easier and a lot less stressful than getting worked up and trying to change behavior. Especially since a vast majority of the posts on this forum are unlike the type we don't like.

Merkhet, I read that. Thanks for sharing. By the way, GSELinks.com will be posting the Lampert shareholder letter to their site tonight. I read it too, thanks Merkhet.

U2 - The Playboy Mansion

He just means those who earned their own wealth vs. those who inherited it.

SMAs are cheaper to operate since it avoids the legal costs of an offering document. You still have to register as a RIA, create an advisory agreement and Form ADVs to file, etc. With SMAs you do lose out on carried interest. You also have more paperwork. For example every trade must be recorded for each account. So a hedge fund is one account and you record everything for it. For SMA's you are going to have a spreadsheet for each account. Billing each account is a pain. Interactive Brokers is nice because you don't have to have a certain level of AUM in order to do auto billing, but there statements and interface are horrible. And my experience is that a high number of clients will watch, some will copy trades in another account, and they will question mistakes much more strongly than crediting successes. My experience has been that the hedge fund client retention rate is far higher than the SMA rate. By focusing on SMA's you may have much higher office costs - rent, utilities and staff versus possible working at home. IB does billing, but they also automatically record the trades into each client's account, right? I agree IB interface is atrocious. Are there any other brokers that offer SMA service that allows you to manage all accounts at once, at not much more of an expensive cost? Would you mind outlining the start up and operating costs if you're looking to run it very lean (no rent or staff)? I just want to compare it side by side with a hedge fund cost. You do save a lot by not needing audit, admin, or tax services I believe. And I think the legal starting costs are also significantly cheaper. I love IB's billing. I know IB has a feature that allocates trades into each client's account but that is not the same as recording every entered trade, whether executed or not. As an RIA you have a fiduciary responsibility so you have to have a reason for the trade, unlike a broker/dealer who is just subject to suitability standards. Other brokers do offer SMA service just that some have minimum AUM requirements to be on the system, for example Scottrade. You would need to call each to find out. A mutual fund has a higher startup and yearly cost than a hedge fund. Breakeven is $10 to $15 million in AUM if costs are tightly controlled. Even then the fund's annual expense ratio wold probably be around 2%. Thanks for the response. Isn't SMA different than a mutual fund? Do you happen to know the costs for SMA - startup and operating?

SMAs are cheaper to operate since it avoids the legal costs of an offering document. You still have to register as a RIA, create an advisory agreement and Form ADVs to file, etc. With SMAs you do lose out on carried interest. You also have more paperwork. For example every trade must be recorded for each account. So a hedge fund is one account and you record everything for it. For SMA's you are going to have a spreadsheet for each account. Billing each account is a pain. Interactive Brokers is nice because you don't have to have a certain level of AUM in order to do auto billing, but there statements and interface are horrible. And my experience is that a high number of clients will watch, some will copy trades in another account, and they will question mistakes much more strongly than crediting successes. My experience has been that the hedge fund client retention rate is far higher than the SMA rate. By focusing on SMA's you may have much higher office costs - rent, utilities and staff versus possible working at home. IB does billing, but they also automatically record the trades into each client's account, right? I agree IB interface is atrocious. Are there any other brokers that offer SMA service that allows you to manage all accounts at once, at not much more of an expensive cost? Would you mind outlining the start up and operating costs if you're looking to run it very lean (no rent or staff)? I just want to compare it side by side with a hedge fund cost. You do save a lot by not needing audit, admin, or tax services I believe. And I think the legal starting costs are also significantly cheaper.

Oh didn't know that, guess it's not a big deal then.

Deciding to continue or terminate the conservatorship should be up to the FHFA legally, at least that's what they tell us. Lew sharing his opinion strengthens the thesis that FHFA is not so independent of Treasury, does it not?

This thread made me look into SMAs and I really like how cheaper and simpler they are to operate. One con of this structure vs a hedge fund is that you can't take advantage of carried interest, as far as I know. Can anyone comment on this? If true this must mean there is a certain AUM where hedge fund makes more sense. (unless you have no long term positions; but then you wouldn't be on this board)

Call me crazy but I think a settlement would look better if we're looking purely at political spin. Agree to end the sweep, exercise the free options, and see a huge $100 billion windfall for taxpayers. 80% of valuation realized upfront vs. 100% in perpetuity. It's better for to go out with a bang with the former rather than worrying about current administration officials being held accountable in the future.

No -- read the opinion very carefully. (The vast majority of legal work is merely the ability to read really boring things very, very carefully.) Wheeler mentioned that the only alternative to a government rescue was bankruptcy for AIG. He wasn't talking about whether there were alternative measures that the government could have taken. Whether the government could have loaned the money at 0% interest with no equity taken is completely irrelevant. The issue isn't what could the government have done. The issue was given what the government has done, what would have been the alternative had the government not done what it did. The distinction is subtle but very important. Got it. But even then, wouldn't it have made more sense if he awarded damages based on a fair rate, or the maximum the Fed could charge, rather than no damages at all? Or was it because of a technicality as muscleman pointed out that there was no reward?

Agree on the rabbit hole, though I'm just thinking about the case in general with my question. Bush did commute Libby's prison sentence, though yes it wasn't a full pardon. I'm not saying there will be perjury or pardoning here, but the political consequences were much more dire for Bush. By that time the majority of the people were against him and the war. In this case, it's safe to say that the government is the political favorite against the Wall St. plaintiffs. On a related note, do you think Wheeler not awarding damages was politically motivated at all? He made it seem as if the only alternative was an AIG bankruptcy, but why couldn't an alternative be a fair interest rate/fee for the deal and just award damages in excess of that? Do you think he didn't want to get on the government's bad side too much? Richard Epstein said that judges give plenty more deference to the government over citizens, all else being equal. Just worried about how politics play into all of this. It would suck to see a win based on legality only to be taken away by Presidential power, or because of unnecessary deference, etc.

In the interest of being a devil's advocate: I know people have stated the agency principal problem applies here - why would anyone lie under oath for the benefit of the government when their own ass is on the line? Obviously if shareholders prevail here, it would be very damaging to the Obama administration. Would it be possible for the deposed not to rat out the government in exchange for Presidential immunity or pardon from legal consequences? In other words, can Obama use his power to protect government witnesses and defendants? Unlikely I know, but just a thought exercise.

When do you think this will happen? thanks - C. The government reply on the motion to unseal Ugoletti's deposition is due on June 29th. My guess is that a rebuttal will be due July 15th. So you might get a decision a month or so after that. http://www.ft.com/intl/cms/s/0/45a86570-1441-11e5-ad6e-00144feabdc0.html?siteedition=intl However, if Bruce et. al. are correct in their assumption that the government swept the profits away in order to buy time on the sequester (and were able to prove it in Ugoletti's deposition), then I don't think we ever get to see an unsealed deposition. Are you implying that the government would rather settle than allow such a deposition to be public?

I'm the opposite. I'm in the healthcare field and would love to manage money professionally. But I'd rather join another fund first. My returns are good and I think can handle running my own fund, I also have quite a few people interested in investing with me, without even marketing to them or telling them of my idea. But I want the satisfaction of having the proper training to build models and understand the knitty gritty of financial statements, which I know most on this board will say is not as important to know about, but it's more for personal satisfaction than anything.

Someone suggested to me via PM to start as investment advisory instead of a full fledged HF manager. The cost would be much lower and I would only provide services to manage individual accounts. I log into their accounts and trade, instead of asking them to send me their money. This will be much easier to earn trust than asking people to send me money and just trust whatever I do with their money. IB has an automated feature to support this and it sounds like it can automatically withdraw fees from client's account into my advisory master account. I've considered this, but what bothers me is that the client can see all of the trades being made. What's stopping them from just copying everything you do in real time, while giving only a small amount of money? Also, I fear giving access to real time portfolio value, with all of its ebbs and flows can cause distress to a client, and in turn problems for the portfolio manager. I think this is why Buffett reported account value only once a year, but I might be wrong on that. Not to mention that they will second guess you every step of the way. Value investing often in practice means investing in the shunned and the ugly. Your clients may be calling you every day asking you why you are holding what you hold. Too much hand holding needed, in my opinion I have invested some of my money with a manager who does the IB-managed-account thing. I don't copy his trades. I don't secondguess him. So don't bark on the clients. 8) One issue with IB setup from the client point of view might be the taxes. The trades and foreign currency exchanges that may be horrible to deal with at tax time if I can't get them automatically into TurboTax Online... You don't second guess him, but you're also a value investor yourself. Needless to say most people are not like me and you. Copying trades is such an easy and obvious thing to do; I can't imagine not doing it if I were a client. It's also why 13-f's are popular. Imagine having that info in real time?

Someone suggested to me via PM to start as investment advisory instead of a full fledged HF manager. The cost would be much lower and I would only provide services to manage individual accounts. I log into their accounts and trade, instead of asking them to send me their money. This will be much easier to earn trust than asking people to send me money and just trust whatever I do with their money. IB has an automated feature to support this and it sounds like it can automatically withdraw fees from client's account into my advisory master account. I've considered this, but what bothers me is that the client can see all of the trades being made. What's stopping them from just copying everything you do in real time, while giving only a small amount of money? Also, I fear giving access to real time portfolio value, with all of its ebbs and flows can cause distress to a client, and in turn problems for the portfolio manager. I think this is why Buffett reported account value only once a year, but I might be wrong on that.

It's not necessary for you to register with the state or even finra, depending on the state you're in and how much money you have. It's not that complicated. I can send you the name of law, audit, and accounting firms that many on this board rely on. Feel free to pm me.

When did Buffett stop taking the performance fee and start taking only a salary? Was it right when he took over Berkshire or some time after?

This really depends on how the judge rules a win. He can say it violated 13(3) of the Federal Reserve Act but was not a 5th Amendment taking. Greenberg would win but Fannie and Freddie would tank in this case. Unfortunately for us, it seems like there's a greater chance of it being a 13(3) violation based on what I've read of Judge Wheeler's and David Boies' (Greenberg's lawyer) remarks.