Mephistopheles

Interesting to see Ackman build 10% positions in both Freddie and Fannie common stock. He was buying heavy at $3 at least in Fannie. http://www.sec.gov/Archives/edgar/data/310522/000119312513443212/d630953dex992.htm http://www.sec.gov/Archives/edgar/data/310522/000119312513443212/0001193125-13-443212-index.htm The article says 10% stake, not 10% position. :) I'm confused though because a 10% stake in FNMA would be nearly $2 billion, and in FMCC would be $1 billion. According to Fannie's 10-Q, there are 5.8 billion shares outstanding. http://www.sec.gov/Archives/edgar/data/310522/000031052213000205/fanniemaeq30930201310q.htm#sBE5B9CCD847B2587CC9B7E4F6CD88837 But according to Pershing's 13D, there are 1.2 billion shares outstanding, which if so would make the 115 million share stake a 10% position. http://www.sec.gov/Archives/edgar/data/310522/000119312513443212/d630953dsc13d.htm Am I missing something here?

Doesn't Mohnish have a checklist just as long, if not longer? And he's said that results have been great since he started using it.

Interesting, I didn't know that Weschler/Combs had analysts working for them. For some reason I thought they did all the analysis by themselves like Buffett.

Is there a way to check Congressional stock holdings? I looked on Opensecrets.org but can't find anything. I am wondering if members of Congress are invested in either the common or the preferreds. That might be a good indicator of how things might play out.

Word on the street is that SHLD is the next BRK and Eddie Lampert is the next Warren Buffett.

Actually, what I am looking for is a decent rollover IRA account. IB cannot lend out shares in IRA accounts, and they charge $7.5 per quarter, which is not big fee though. I think the only advantage for IB's IRA account is that its foreign stock trading is quite nice. By the way, in Merrill, if you sell a stock, would you be able to use that unsettled cash proceeds to buy a stock? I can do this in Fidelity cash account, but for IB, I must have a margin account to do this. What about Merrill? BTW2, What about Merrill's international stock trading? Do they have that? I'm not sure about the unsettled cash thing, since I have an untapped margin account. And I'm 99% sure they don't have international trading.

I'm thinking now that IB may actually be better even in terms of cost, if I can lend out my sears shares for interest and because it has cheaper options trading (I think) than Merrill.

I used it and can confirm that it's crap. ...but it's worth the $0 trades. :) What do you dislike about it? I meant to say use* it. The platform is terrible. It's a bit slow and just unorganized in general. The customer service reps don't seem to know much. You might have a question for them and they will transfer you a few times or keep you on hold until they find someone who knows the answer. Certain issues they have never been able to solve for me. Such as: I wanted to get my stocks listed under my name rather than street name so that I can receive annual reports in the mail, and nobody seemed to have a clue as to what I was talking about. Even calling in is a headache because you have to give your account #, last 4 of ss, and zip code to the automated operator first, then you have to choose your type of inquiry from a menu of items, and then when you finally get a rep on the line you have to give certain details of your recent trading activity in order to confirm that it's really you. You have to do all this for even basic questions that shouldn't require security protocol. Their trade execution is fine. Even with a tiny OTC security like glacier, I was able to fill pretty quickly. However there is an added security measure if you want to trade OTC stocks or preferreds such as Fannie. They send you a card which you can click on and it generates a random number that you have to type in before each trade you make, which I find annoying. Overall it's an annoying experience but since I trade infrequently I don't mind it given the free trades. If I was a short term/momentum guy, I don't see myself using it.

I used it and can confirm that it's crap. ...but it's worth the $0 trades. :)

Anyone know what that letter from Buffett to Mohnish was regarding?

I don't think National Indemnity fits the description of "small privately held insurance company". :)

Greenspan was also on in the segment after Buffett. It's a shame that Charlie Rose didn't put them on together.

I can only imagine what the sentiment towards banks would be in this scenario.

Not saying that he doesn't watch TV or know pop culture, but I think what Munger and others mean when they say that is you don't need to act (as in buy or sell) all the time, so just sit on your ass and watch your investments. But at the same time Buffett and all good investors are constantly learning and reading about business, whether or not things are expensive at the time. :)

Let's get real, U2 are the best songwriters/band/performers :D

What is the purpose of routing to Canada instead of just buying it OTC in the U.S.?

"When an investment could work for either the mutual funds or the hedge fund, where he could reap larger fees, Mr. Berkowitz said it would be randomly assigned among the funds that could take the investment and that he wouldn't be involved in the selection process." Seems a bit odd. Why not just buy as much as possible/as wanted for both?

Also with the first guy it wasn't because of the vacation. Buffett denied that was the reason back then and it even has an update in the article: UPDATE: Buffett refuted reports that he fired Abrams because of the party, instead saying the decision was "based on a differing view about distribution channels and brand strategy," according to CNBC. Buffett wrote in a letter he sent to Abrams: The recent story coupling a top management convocation on a boat with the decision to make a management change at Benjamin Moore is completely false. I think the Abrams wanted to sell the paints in stores such as Home Depot and Lowe's whereas Buffett wanted to keep it exclusive to Benjamin Paints stores.

That's a creative idea. A couple of questions though. Why do I need to go into margin to do this? Can't I just invest, say, $50k into an annuity (or whatever the limit is), and short $50k of the same bond fund? Also, what about the cost of borrowing to short and the cost of the margin borrowing (if the margin does in fact make sense)? Why is it still worth it after paying those fees, especially when rates go up? Edit: In case it helps, my parents are in the 28% federal bracket and 6.37% state bracket

I looked a while back and couldn't find any that allowed you to manage the investments yourself -- you get stuck choosing from mutual funds or bond funds. The variable annuities are famous for being expensive in terms of fees, which is why I was careful to point directly to Vanguard's site. They are very inexpensive relative to most. It's about 50 basis points in total all-in fees for their bond or REIT funds wrapped in variable annuity. That's relatively high for a vanguard fund, but they know they have you over a barrel because your alternative is perhaps paying very high marginal tax rates annually. However with these very low interest rates the expense becomes a high percentage of the actual gains -- it's a bit silly. But I think if you were going to go that route, it would be better to do it with income funds that generate investment income that is normally taxed at the high personal income rate -- one that is high because you perhaps are also working at the same time. Then later when you retire your tax rate will be lower. So you use it as a tool to lower your effective tax rate, and of course you get the valuable deferral of the taxes. Especially useful if you are working at a career in California but plan to retire in a state with no income tax -- although in that case the RothIRA conversion doesn't make as much sense. But since we're talking about somebody else's parents, I figured the words "mutual funds" or "bond funds" are likely what they want anyhow. So the investment restrictions of variable annuities aren't that bad for them. Well even though it's my parents I'm the one who manages all their funds and will continue to do so in the future, and so I am all for the stock picking and against mutual/bond funds. Too bad these annuities don't allow buying individual stocks.

Wow, thanks for all the replies so far everyone! This is pretty confusing. It would be easier if the OP would gives us more information. Maybe they don't have the cash to settle the tax bill without drawing down the retirement account in the process. Yes they have the cash to pay the tax bill without tapping the IRA. Furthermore they are in the 28% bracket right now but am not sure what bracket they will be in retirement. It depends on how much the IRA (if kept traditional) grows I guess, and how much they have to withdraw every year.

But what about the opportunity cost of paying taxes upfront vs. paying them well into the future? Let's say hypothetically I make a 20x return over the life of the IRA, and then start paying income taxes at 35% based on minimum distributions vs. paying taxes upfront and not having the opportunity for that money to grow. Wouldn't the former be a better deal?

I'm trying to decide if it's worth converting my parents IRAs to a Roth IRA. I know a big factor here is the expected rate of return on the portfolio. All the online conversion calculators have a max expectation of 12% for us to select, I don't know why. So I was wondering if anyone here has recommendations on how to properly figure this out? Or do I have to consult an accountant?

Interest rate risk is the last thing i would worry about in this investment. The higher coupons could go well above par if the dividends are paid. It is up to the issuer whether or not they redeem them for par (at any time, in which case they are all worth par), or continue to pay the dividends in which case the majority are worth more than par. What if they don't redeem them, and they don't pay the dividends either? Since the dividends are non-cumulative, why would they trade anywhere near par in that case? I guess my question is a general one for perpetual non-cumulative preferreds.

Hi valuecfa, a couple questions for you. You are saying that there is less of a likelihood of them paying the dividends then there is of the ruling to be in the investors favor, in which case the shares should jump up to par, correct? I have no experience investing in preferred stock, so I am wondering why would the stock go up that much without them paying a dividend? Are they convertible shares? Also, since the dividends are non-cumulative, is there an interest rate risk with this investment? Let's say the litigation takes several years, the Fed's money printing takes into affect, and rates jump substantially. Aside from the variable rate preferreds, wouldn't this put a damper on the price? Thanks