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Interesting Discussion of BRK at Aleph Blog


zarley
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I've recently been reading the Aleph Blog after adding it to my RSS feed.  It's a great blog, written by an advisor named David Merkel. 

 

In the last couple days he's posted a bit about the corporate structure at Berkshire.

 

Part 1:

http://alephblog.com/2014/03/12/on-the-structure-of-berkshire-hathaway/

 

Part 2:

http://alephblog.com/2014/03/14/on-the-structure-of-berkshire-hathaway-part-2-the-harney-investment-trust/

 

There's an interesting bit in Part 2 which discusses the structure of National Indemnity and something called the Harney Investment Trust . . .

 

But more of it is due to BRK’s lack of willingness to discuss/mention the Harney Investment Trust.  I did a lot of digging on this, and found  little that was definitive.  One seemingly intelligent opinion I found here.  I will quote the most relevant portion from “globalfinancepartners” . . .

 

Now, I was reading quickly, so I didn't think anything of that the first time through.  But after finishing I went back and looked at the quoted part in that section again and followed the link he was helpful enough to provide.  Which lead me to a thread right here at the corner:  http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/insider-quarterly-article-on-ajit/10/ 

 

The globalfinancepartners noted in the post is, of course, a regular here.  Although somehow, I managed to miss that particular thread.

 

The two part discussion at The Aleph Blog are well worth reading for owners of BRK.  the circle-back reference to this board was just a nice cherry on top.

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It's interesting to have a glimpse into the internals of Berkshire, but I don't think Buffett or Berkshrie can "hide" its publicly traded stock positions by squirreling them away in a trust.  Berkshire has to report its consolidated holdings in a 13-F unless it gets a specific regulatory exception of some kind, i.e. this is an SEC requirement, not an insurance regulation requirement, which I don't think they can avoid based on the internal structure of the subsidiaries.  Note that all of the positions the author mentions are in Berkshire's 13-F.

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The main point of Harney is to hide the US equity positions that are being accumulated and have received confidential treatment from the SEC.  Once they are done buying something, and no longer get confidential treatment on their 13-F, everyone can see them.  If they weren't in Harney, I would be able to pull the quarterly NAIC filings and find out the 'secret' stock they were accumulating.

 

The other big benefit of Harney is Berkshire's investments in individual corporate bonds.  The bonds disclosed in NAIC filings are all highly liquid mortgages and government bonds.  The individual high yield and corporate bonds are all hidden inside Harney.

 

He's used it for years.  It's only real purpose is confidentiality.

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I'm picturing the conclusion drawn the from the Aleph post - hundreds of heads nodding in agreement; 99% of whom have never looked at a NAIC filing. :)

 

I do wish personally that BRK insurance filings showed this detail like Fairfax's.  But at the end, this article seems like a way for a blogger to look smart as opposed to say something insightful... it would only come from someone who wants to know Buffett's investing secrets, an investor in Berkshire would not need (or even usually want) this level of detail. 

 

My 2 cents at least.

 

Ben

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