jdawg Posted March 3, 2014 Posted March 3, 2014 So why would DVA overall holdings have a disproportionally large allocation to the pension versus other equity positions? Yes. Lot of Davita stock is held by Pension fund. It was posted by someone on the board and mentioned by Buffett in one of the interview.
original mungerville Posted March 3, 2014 Posted March 3, 2014 What is a "cycle"? ;) Now I don't hold it against web for underperforming, but why not a mea culpa? He had been touting the metric in previous years, he should stand by it now. A market bottom in 2009 and then a market top - ie end of 2013 - is not the best period for measuring performance even though it happens to be 5 years in this case. His rolling 5 years is a great measure, it worked every year except 2013 - that's a pretty good record for the yardstick. So not only has Berkshire's performance (over the past 5 years) been amazing but so has the yardstick (for several decades). There is no need for a mea culpa.
original mungerville Posted March 3, 2014 Posted March 3, 2014 Had Berkshire's book value collapsed in 2007/08/09 in line with the value of the S&P, Buffett would have beat the S&P over the past 5 years. So should we want a mea culpa for a book value that didn't collapse during a time of extreme market stress and therefore didn't rebound?
merkhet Posted March 3, 2014 Posted March 3, 2014 Had Berkshire's book value collapsed in 2007/08/09 in line with the value of the S&P, Buffett would have beat the S&P over the past 5 years. So should we want a mea culpa for a book value that didn't collapse during a time of extreme market stress and therefore didn't rebound? +1
JBird Posted March 3, 2014 Posted March 3, 2014 I agree that he should have said he was changing the yardstick, instead of just changing it. Maybe having said last year that he WOULDN'T change the yardstick made it harder, but he in fact has, so he might as well own up to it. That said, the new yardstick, I believe, is not 6 years, it is full cycle. Time will tell if the end of this cycle is 2014 or later. This is bonkers. Mark my words-- the yardstick hasn't changed. It's still a five-year test.
Mephistopheles Posted March 3, 2014 Posted March 3, 2014 On the topic of 08/09, can anyone explain why Buffett wasn't a more aggressive buyer of common stocks in those days? He spent a lot of money on those preferred deals and of course paid $100/share for BNSF in 2009, but shouldn't he have bought common stocks hand over fist at such discounted prices? Alice Schroeder said that his hands were tied because of the equity index puts. Is there any truth to that?
Guest wellmont Posted March 3, 2014 Posted March 3, 2014 So why would DVA overall holdings have a disproportionally large allocation to the pension versus other equity positions? Yes. Lot of Davita stock is held by Pension fund. It was posted by someone on the board and mentioned by Buffett in one of the interview. because ted manages pension money.
Guest wellmont Posted March 3, 2014 Posted March 3, 2014 On the topic of 08/09, can anyone explain why Buffett wasn't a more aggressive buyer of common stocks in those days? He spent a lot of money on those preferred deals and of course paid $100/share for BNSF in 2009, but shouldn't he have bought common stocks hand over fist at such discounted prices? Alice Schroeder said that his hands were tied because of the equity index puts. Is there any truth to that? He bought cash paying pref and got equity kickers. he got huge upside with what he did in 08/09 with very little downside. I think he did extraordinarily well. The pref was a fantastic way to put a Lot of money to work at great valuations, with the stroke of a pen. I don't believe his hands were tied at all. Oh yeah he also bought bnr. :)
JBird Posted March 3, 2014 Posted March 3, 2014 On the topic of 08/09, can anyone explain why Buffett wasn't a more aggressive buyer of common stocks in those days? He spent a lot of money on those preferred deals and of course paid $100/share for BNSF in 2009, but shouldn't he have bought common stocks hand over fist at such discounted prices? Alice Schroeder said that his hands were tied because of the equity index puts. Is there any truth to that? He said if he knew stock prices would continue to fall, he would have just waited and invested in the general market. Basically-- he pulled the trigger as soon as he saw a good opportunity, and in hindsight it happened to be a little too soon.
rmitz Posted March 3, 2014 Posted March 3, 2014 Had Berkshire's book value collapsed in 2007/08/09 in line with the value of the S&P, Buffett would have beat the S&P over the past 5 years. So should we want a mea culpa for a book value that didn't collapse during a time of extreme market stress and therefore didn't rebound? I agree with you, but what you wrote there really should have been in the content of the letter. There's nothing magical about 5 years, but explaining a change clearly is always a good idea.
tiddman Posted March 3, 2014 Posted March 3, 2014 On the topic of 08/09, can anyone explain why Buffett wasn't a more aggressive buyer of common stocks in those days? He spent a lot of money on those preferred deals and of course paid $100/share for BNSF in 2009, but shouldn't he have bought common stocks hand over fist at such discounted prices? Alice Schroeder said that his hands were tied because of the equity index puts. Is there any truth to that? A large portion of the funds for Buffett's investments come from insurance float, and there are restrictions on how much of that money can be invested in equities. Insurance regulations dictate that a substantial percentage of an insurance company's assets be in fixed income or preferred securities. I am not an expert in these rules but I know that a typical small insurance company can only invest 5-10% of its assets in equities. I have often thought that this is why Buffett makes so many investments structured as preferred + warrants, it is a way for him to meet the fixed income requirements of the insurance companies but also make an equity investment. However this is just an educated guess, I've never seen this spelled out anywhere. I am sure the equity index puts had an impact as well since those were losing value at the same time the market was, but again I am not sure exactly what capital this freezes up, if he did this through an insurance company or through some other means.
alpha231616967560 Posted March 3, 2014 Posted March 3, 2014 Does anyone have the link to the full interview? I am always a bit flummoxed trying to find videos on CNBC.
value-is-what-you-get Posted March 3, 2014 Posted March 3, 2014 Does anyone else laugh at the same "that is, since present management took over" line every year? I know it's coming but I chuckle every time!
Liberty Posted March 3, 2014 Posted March 3, 2014 Does anyone have the link to the full interview? I am always a bit flummoxed trying to find videos on CNBC. I usually look on the Buffett Watch page to see when they appear: http://www.cnbc.com/id/19206666 Looks like part of it is up. Not sure if there's a better way to find the videos or if they're already up somewhere else, though.
rogermunibond Posted March 3, 2014 Posted March 3, 2014 CNBC is a business right? They've always made the Buffett interviews hard to access since it serves them well to break it into 3 minute clips and play lots of ads before each segment. I'm sure a transcript will pop up in a few days from someone who DVRed the whole three hours.
Liberty Posted March 3, 2014 Posted March 3, 2014 CNBC is a business right? They've always made the Buffett interviews hard to access since it serves them well to break it into 3 minute clips and play lots of ads before each segment. I'm sure a transcript will pop up in a few days from someone who DVRed the whole three hours. http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/03/03/2014-03-03%20Ask%20WarrenBuffett%20complete%20transcript.pdf
rogermunibond Posted March 3, 2014 Posted March 3, 2014 That's pretty awesome. I bow down to you, sir! :D
Palantir Posted March 3, 2014 Posted March 3, 2014 On IBM... Well, the revenue trends have-- been less than-- anticipated...The financial numbers have been pretty good, but it's been helped by low tax rates and things of that sort. There is a transition going on in the business-- you know, particularly in-- in terms of the cloud...And-- so I would say it's fair-- it's fair to say that I know less about the future of IBM than I might know about the future of Wells Fargo or-- Coca Cola or the businesses we own. I think I do know enough about it that I feel good about owning the stock. But-- -- my level of understanding of a company like IBM is not as high as my level of understanding of a Wells Fargo or a Coke. In terms of the price action, that doesn't make any difference to me. That-- if-- IBM bought in a lot of stock last year. And if the stock had been even lower they would've bought-- they would've gotten more shares. So the fewer the shares outstanding the better I-- the better I like it. And they've continued to buy in shares. They buy 'em at a good clip, and I-- I like that. But I would like to see the revenues pick up.
Guest deepValue Posted March 3, 2014 Posted March 3, 2014 There is a transition going on in the business-- you know, particularly in-- in terms of the cloud... LOL. I really want to see Buffett say 'the cloud.'
Palantir Posted March 3, 2014 Posted March 3, 2014 ^I wonder if this was the business he was really referring to with the farm example. A business where he's not the expert and doesn't understand all the details, but he sees no possibility of losing. I disagree on that last count....but anyways.
VAL9000 Posted March 3, 2014 Posted March 3, 2014 On IBM... Well, the revenue trends have-- been less than-- anticipated...The financial numbers have been pretty good, but it's been helped by low tax rates and things of that sort. There is a transition going on in the business-- you know, particularly in-- in terms of the cloud...And-- so I would say it's fair-- it's fair to say that I know less about the future of IBM than I might know about the future of Wells Fargo or-- Coca Cola or the businesses we own. I think I do know enough about it that I feel good about owning the stock. But-- -- my level of understanding of a company like IBM is not as high as my level of understanding of a Wells Fargo or a Coke. In terms of the price action, that doesn't make any difference to me. That-- if-- IBM bought in a lot of stock last year. And if the stock had been even lower they would've bought-- they would've gotten more shares. So the fewer the shares outstanding the better I-- the better I like it. And they've continued to buy in shares. They buy 'em at a good clip, and I-- I like that. But I would like to see the revenues pick up. It's interesting because he's 100% right. Transition to cloud means that on premise licenses are exchanged for cloud license rentals. The result is that instead of selling x license fee, you sell x/3 cloud fee, but you collect it every year. The short term economics aren't as good, but the long term engagement is stickier. Plus there is less room for audit issues (licenses used but not paid for). Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%.
Kiltacular Posted March 4, 2014 Posted March 4, 2014 On IBM... Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%. Val, I've enjoyed your previous posts about MSFT. Can you expand on this sentence I've quoted? Literally, I don't know what it means. IBM has very little in the way of cloud business?...is that all you're saying?
VAL9000 Posted March 4, 2014 Posted March 4, 2014 On IBM... Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%. Val, I've enjoyed your previous posts about MSFT. Can you expand on this sentence I've quoted? Literally, I don't know what it means. IBM has very little in the way of cloud business?...is that all you're saying? I meant that it's not a big % of the business that they write, so the impact of deferred revenues due to cloud is negligible. Where the impact is measurable is probably in lost business because not all of IBM's software offerings support a cloud deployment model. There will be a period of transition as IBM converts its on premise offerings to cloud applications.
Kiltacular Posted March 4, 2014 Posted March 4, 2014 On IBM... Where he's wrong is that IBM's % of deals that are cloud deals is just above 0%. Val, I've enjoyed your previous posts about MSFT. Can you expand on this sentence I've quoted? Literally, I don't know what it means. IBM has very little in the way of cloud business?...is that all you're saying? I meant that it's not a big % of the business that they write, so the impact of deferred revenues due to cloud is negligible. Where the impact is measurable is probably in lost business because not all of IBM's software offerings support a cloud deployment model. There will be a period of transition as IBM converts its on premise offerings to cloud applications. Thank you Val, as always, for your interesting insights conveyed with class.
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