Mephistopheles

From what I read in TBTF, Fuld called Buffett to talk about a possible deal. Buffett mentioned off the bat that he would want a minimum of 9.5% preferred securities, and at-the-money warrants, and that only if he felt comfortable after doing his DD. Fuld felt that was an outrageously expensive and leaned against the idea. Later, Buffett went through the 10-k and found way too many questionable items that he opted against a deal on any terms.

Mephistopheles, I think the key is that once a lease is entered into, it is non-discretionary. A firm can stop buying inputs into a manufacturing process if it wishes to slow manufacturing, the firm can lay off excess employees. But if it decides to stop paying its leases, bad things can happen. Ch11-type bad things. Not a whole lot different than if it defaulted on some bonds. Or so the thinking goes. Ah, that's what I assumed, thanks!

I'm a fairly new investor, and I've always had a question regarding this. Why should operating leases be put on the balance sheet, or considered as liabilities even if not on the balance sheet? Why do they just not count as regular expenses, in the income statement?

I remember once Charlie said that Google has the biggest moat that he's ever seen, and he doesn't know how anyone would be able to compete with it. But at the annual meeting this year, both he and Buffett said how they can't predict what either Google or Apple would look like in 10 years, like they can of IBM, and therefore they wouldn't invest in either. Can anyone explain the contradiction?

Does the 1.1x cutoff include the noncontrolling interests or no? I would think not, but I'm no expert.

I agree, unless he is actively involved (and not all are of course) in making up laws to suit his own needs: http://www.bloomberg.com/news/2012-02-07/private-equity-lobbying-protected-romney-s-tax-benefit-of-carried-interest.html That's otherwise known as corruption, but it's legal corruption because it's not illegal to hire a lobbyist and to make campaign contributions. Only the rich can do it. So while this Facebook guy gets a nasty headline, the specific individuals organizing these lobbies to change tax laws in their own favor do not get their personal names smeared. And isn't it worse to be changing the laws to suit your own needs, using your power and influence, than it is to be just avoiding taxes by playing under the rules as they already are set? The Facebook guy could organize a lobby to have that law changed, and then nobody would be pissed at him because there would be not tax to be dodged. Agreed. I feel that actively lobbying for something so wrong is being a whore for money.

I don't see what the big fuss is. He is just tax planning in order to pay the least amount possible. I think that almost everyone does that, albeit with much smaller sums. If you don't like the tax law, blame Congress, not the taxpayer. I even feel the same way about carried interest. I think that it is a completely fucked up tax law, but if a hedge fund manager took advantage of it, I would never blame him.

So the stock is at $20 and the potential deal would be for $24.75. Do you guys think that this is a good speculative trade to bet a small amount of money on? I was thinking of buying a little on Monday, before AVP replies.

I might be wrong but I think I've read elsewhere as well that he invested 75% into AXP.

One more question. Will it be possible at all to maybe meet/shake hands/take a picture with Buffett, Gates, or Munger? Or it's next to impossible?

A few questions about Saturday: 1) When is the best time to line up at the arena if I want decent seats? 2) When is the best time to shop around at the booths if I don't want to miss any of the Q&A? 3) When is the best time to visit NetJets, and how much time would it take, including shuttle time, if I don't want to miss the Q&A? 4) If you get up during the meeting to shop/eat lunch/visit NetJets, do you lose your seat? 5) In the visitor guide it says the only way to visit the NetJet private jet is by shuttle from CenturyLink. But on this thread someone mentioned we can drive over to the airport. So which is true? 6) Any other suggestions for the meeting day? Thanks everyone for answering.

If I am trying to get a job/internship at a good value fund, would this weekend be a good place to try to meet fund managers, get contacts, etc.? If so, at what specific events should I attend in order to network? This is my first annual meeting so I am not familiar with all of the little events. I am planning on going to the Yellow BRKer party and cocktail party at Borsheim's. I also heard that T2 Partners will be holding an event, is that correct? Thanks for your responses.

Thanks for your reply and advice. I've passed on the idea of opening up a small fund to run family any time soon. I've decided that I want training in the hedge fund field first, by working for a good value manager. I don't particularly love running a business, but I wouldn't hate it either. I do love investing and so eventually I hope to be in the fortunate position to be able to run a fund of my own, by having enough money to live off of until I would start to see a consistent profit. For the time being, like I said, I would just love to work for a good value manager, from whom I can learn a lot from.

Kinda off topic, but for those of you who have piggybacked Ackman on his trade of buying HKD call options, what broker did you use? Do you need a broker that offers forex + options, or one that offers only options is good enough?

Nice article. As far as the question in the title of thread. What is everyone's thoughts about it? Clearly Prem has generated incredible returns for Fairfax over the last 30 years. And as an $8 billion market cap, it seems like it has a long way to go. So, does the fact that it's selling only slightly above book value make it an incredible bargain, to own over the course of a lifetime?

Assuming each acre is worth $10,000 today (a lofty assumption), then that is a compounded annual growth rate of roughly 6.27% pre-inflation. The Louisiana Purchase wasn't really a "trade" in the traditional sense, since it was kind of taken by force from the native Americans, who were already occupying it. But that doesn't account for all the wealth that the territory has produced over the last two centuries.

Interesting. I didn't realize that I could charge a management fee, but that makes sense given that non-rich people can invest in mutual funds. Yea I've heard that IB has a good platform for this. Thanks again.

I am not a lawyer but have started a hedge fund in Washington state. If you are less than $25 million in AUM you will not be required, nor likely allowed, to register with the SEC. It will be on the state level. I cannot speak to NJ requirements. Every state is different. Some follow SEC rules exactly, others are more strict, some probably less. You need to find out NJ law. Six years ago it cost around $30 to $50k in legal costs to set up the partnerships and write the fund documents. You might want to call a reputable firm and ask for an estimate. Expect ongoing legal costs as well if the state is strict. What you describe has a performance fee which can only be charged to "qualified" clients. I'm pretty sure there are articles online on How to Start a Hedge Fund. Lastly, you said later that you would run it out of your home and handle the administration. That may or may not be doable. In my state you would not be allowed to self-administer. I must have a custodian, a third party administrator, a yearly audit, and an independent representative to authorize all disbursements from the fund. This adds to yearly operating costs. I know in other states you can self administer. Lots to think about. If it is overwhelming then it may be that you are not cut out for running your own fund. You end up being more than an analyst. You have to be an administrator and marketer as well. Thanks for the info. This makes me think that I should probably wait for some time until I've gathered enough wealth to be able to spend $50k in legal costs. Also, I would probably me managing friend&family money, many of them who are not "qualified clients". I think the whole "qualified client" rule is just ridiculous. Why do you have to be rich to be able to invest in hedge funds? I'll call the NJ Securities Bureau to find out state specific rules, but thanks for giving me a rough estimate.

Yea, I get free trading with them. My dad has a $25,000 Joint CD with Bank of America, with his, my mom's, and my name's on it. So we get 30 free trades/month each. We have 5 accounts in total, so it saves a fair amount annually in commissions, even accounting for the better rates that we might get with another bank for the CD. Also, my own portfolio is fairly small, so the free trading certainly helps me out most. Despite all of this, I am seriously considering switching brokers. MerrillEdge is just horrible with features, like you mentioned, and their service sucks too. Not to mention a horrendous online platform. I was looking into several brokers, including Fidelity. I'm thinking about Interactive Brokers, because it seems to have access to the most number of international stock markets. It would be nice to have all of that in one account. How do you like Fidelity?

Thanks for your replies guys. I guess I'll try talking to someone at MerrillEdge again and hopefully I get better service this time. Just out of curiosity, what brokers do you guys use?

Thanks for your reply. I don't mind paying for legal advice, but I want to know what I'm getting into in terms of costs. Since I'll only be managing a very small pool of money (couple million at most) and since I don't have a very large amount saved up as of yet, spending like $100,000 would be too much for me. Would anyone be able to give a ball park estimate on what the startup cost would be? I would run it on an ultra low cost structure, out of my home, and do all the administrative work on my own.

Bump. Can anyone point me in the right direction? Also, would my investors have to be accredited? Would this technically be a "hedge fund"? Also, do all my investors have to be milli

I'm not sure if people still do this or if everyone just reads annual reports online. Personally, I find it much more comfortable reading printed materials than I do reading from a screen. I know that we can go to the company's website and manually order the annual report every year, but how can shareholders automatically receive materials in the mail? Someone once told me that you have to talk to your broker and ask them to take you off of "street name" so that you are directly registered with the companies you own. Is that true? I've talked to my broker, MerrillEdge, and they seem clueless on this issue. But MerrillEdge service associates are pretty incompetent on most issues, and so I thought I'd ask this on the forum to see how people go about doing this? Thanks.

If I wanted to open up a partnership with less than $25 million in capital and have a 0/20 fee structure, and I live in New Jersey, would I have to register as an investment adviser with the SEC and/or with the New Jersey Securities Bureau? I want to manage just one account with pooled capital, instead of managing a different account for each client, so would the friends and family group account work for that? I read this thread and tried searching online, but the laws are so confusing. Would anyone kindly be able to explain to me in baby steps on how I would go about setting this partnership up and how much it would cost me? Thanks, I really appreciate your help.