Buffett/Berkshire - general news

[sleepydragon]

4 minutes ago, gfp said:

As a fella on a different forum pointed out.  BRK looks an awful lot like the KIE insurance ETF if you squint

 

But Brk is not even in the top 15 holdings of this etf. I think it’s not probably not in this etf at all.

But Brk is in XLF , which is indeed surging too

[gfp]

I'm not claiming Berkshire is trading off of KIE fund flows - those are probably small.  I'm saying Berkshire is just trading like the rest of the insurance companies.

[aws]

2 hours ago, boilermaker75 said:

 

I have one account where I have 500 shares of BRKB with about 80% capital gains. I got cute and wrote some 420-strike calls. I have bought them back and resold at 430, then 435, and a week ago at 440. Each time I sell for a little more than the cost of buying them back and raise the strike price. If BRK does move sideways for two years I'll be able to do this till I have calls I can let expire, LOL! I am always worried someone is going to call me before expiration. (Edit: so I usually do this about a week before expiration.)

 

If you use IBKR, they allow you to buy new shares to deliver against any assigned calls so you never face the tax hit from getting low basis shares called away. I'm not sure if other brokers offer similar but it's something you might want to look into.

[Munger_Disciple]

2 hours ago, 73 Reds said:

You can squeeze out a couple/few extra points each year in tax-deferred accounts without too much trouble.  In taxable accounts you've got to be constantly attuned to the share price and roll the calls forward if you don't want to lose the shares when the price rises like Berkshire recently has.  OTOH, there are funds that trade covered calls as an investment strategy and I've not heard of any that do particularly well over time.  Short puts - admittedly a different strategy altogether -  seems like a much easier strategy for tax deferred and taxable accounts when you want to own the stock at a particular price regardless of how shares trade in the interim. 

 

I agree that writing covered calls makes more sense in a tax deferred account. In a taxable account, it's better not to be too cute. Just a simple buy and hold coupled with small sales to satisfy cash needs is the better approach. 

[Munger_Disciple]

1 hour ago, aws said:

 

If you use IBKR, they allow you to buy new shares to deliver against any assigned calls so you never face the tax hit from getting low basis shares called away. I'm not sure if other brokers offer similar but it's something you might want to look into.

 

That's interesting. At least avoids capital gains taxes. 

[LC]

1 hour ago, aws said:

 

If you use IBKR, they allow you to buy new shares to deliver against any assigned calls so you never face the tax hit from getting low basis shares called away. I'm not sure if other brokers offer similar but it's something you might want to look into.

 

That's good to know! Do you know how to enable this? Is it something you select when you initiate a short call position?

[nwoodman]

Interested to learn what other members think is the forward return on Berkshire (share price) at these levels?  My expectations are in the 6-9% range, the upper end depends on favourable investment opportunities.  Relative to the overall market, I expect that they will outperform by a significant margin.  This is more a reflection of the major north american indices being fully valued or perhaps even overvalued. Perhaps someone who knows what they are doing could set up a poll 

[Munger_Disciple]

2 hours ago, nwoodman said:

Interested to learn what other members think is the forward return on Berkshire (share price) at these levels?  My expectations are in the 6-9% range, the upper end depends on favourable investment opportunities.  Relative to the overall market, I expect that they will outperform by a significant margin.  This is more a reflection of the major north american indices being fully valued or perhaps even overvalued. Perhaps someone who knows what they are doing could set up a poll 

 

My guess is 5-7% range (and may beat the market). Intrinsic value may grow at 10% on the high side, and P/B (even though it is less relevant now, but it's a quick & dirty valuation tool, and not a bad one) let's say shrinks from 1.75 to 1.5 over the next 5 years, so that shaves away 3% per annum from returns, so you will get 7%. If IV only grows at 9%, then you will get a lower 6% annual return. All these numbers are over the next 5 years. 

Charlie (Munger) said secret to happiness in life is having low expectations; so it is better to lower our expectations after the tremendous run-up in 2024. 

I think a lot would depend on the interest rate environment in the next 5-10 years and sadly that's almost impossible to predict. 

Edited September 1, 2024 by Munger_Disciple

[UK]

[UK]

7 hours ago, nwoodman said:

Interested to learn what other members think is the forward return on Berkshire (share price) at these levels?  My expectations are in the 6-9% range, the upper end depends on favourable investment opportunities.  Relative to the overall market, I expect that they will outperform by a significant margin.  This is more a reflection of the major north american indices being fully valued or perhaps even overvalued. Perhaps someone who knows what they are doing could set up a poll 

 

Nothing to add:)

[John Hjorth]

Based on the interesting discussion above about what's been going on in the market with regard Berkshire B shares and A shares I did a lookup today on the NYSE website to get an overall perception of daily trading volumes within the last few months.

 

For the A shares, there appear to be an abrupt change in trading volumes between June 6^th and June 7^th - trading volumes appear reduced - give or take - on June 7^th with about five sixth or so - in one huge one-time drop [<-!, ?].

 

Please see NYSE website, page for BRK.A, volume column - scroll down to June 2024 data rows .

 

Does anybody here on CoBF have any idea, guess or personal speculation about what this may be about?

[Whensthepaintdry?]

Could brk do a deal with BAC kind of like they did with Graham holdings to dodge some taxes and buy back some stock. 

[gfp]

2 hours ago, John Hjorth said:

Based on the interesting discussion above about what's been going on in the market with regard Berkshire B shares and A shares I did a lookup today on the NYSE website to get an overall perception of daily trading volumes within the last few months.

 

For the A shares, there appear to be an abrupt change in trading volumes between June 6^th and June 7^th - trading volumes appear reduced - give or take - on June 7^th with about five sixth or so - in one huge one-time drop [<-!, ?].

 

Please see NYSE website, page for BRK.A, volume column - scroll down to June 2024 data rows .

 

Does anybody here on CoBF have any idea, guess or personal speculation about what this may be about?

 

If I remember correctly, a representative of the NYSE actually visited Buffett in Omaha a few days before that A-share volume reporting switch.  In my imaginary version of events Warren mentioned that it was a pet peeve of his, as the most active market participant in the A-class trading, that the A-share volume was hugely inflated / misreported every day since fractional share trading became "a thing."  Tiny fractions of A-shares purchased on robin hood or other fractional brokers are being logged as Volume = 1 and Warren is very aware of the actual A-share daily trading volume because when the shares are in his buying zone his trade execution firm is in the market daily buying a certain percent of the actual A-share ADV.

 

Miraculously, a couple days after the NYSE management visit to Omaha, the reported A-share volume returned to something - if not totally correct - at least a lot closer to reality.

 

It pays to speak up Warren!  LOL

 

 

 

edit: - Oh yeah, I remember why they visited him - they were playing cleanup over the erroneous trade fiasco on June 3rd!

https://fortune.com/2024/06/04/warren-buffett-berkshire-hathaway-discount-deals-canceled/

Edited September 1, 2024 by gfp

[73 Reds]

15 hours ago, aws said:

 

If you use IBKR, they allow you to buy new shares to deliver against any assigned calls so you never face the tax hit from getting low basis shares called away. I'm not sure if other brokers offer similar but it's something you might want to look into.

That is interesting and I too wonder how exactly that works.  Once the shares are called away how can the tax consequence be undone?

[gfp]

Just now, 73 Reds said:

That is interesting and I too wonder how exactly that works.  Once the shares are called away how can the tax consequence be undone?

It has to be done within the settlement window.  Just like when you sell some stock and have a day or so (lately, used to be a few days) to adjust which cost basis lot you would like the sold shares to come from. 

[John Hjorth]

Thank you, @gfp !

 

I'll buy that explanation about the drop in the trading volume of the A share at par!  Nice story, by the way.

Edited September 1, 2024 by John Hjorth

[73 Reds]

1 minute ago, gfp said:

It has to be done within the settlement window.  Just like when you sell some stock and have a day or so (lately, used to be a few days) to adjust which cost basis lot you would like the sold shares to come from. 

In that event you already own the shares (?). Here you have to initiate a separate transaction that occurs after the taxable event even though settlement occurs later.

[aws]

13 hours ago, LC said:

 

That's good to know! Do you know how to enable this? Is it something you select when you initiate a short call position?

 

You do it after you are assigned on the call, but you need the feature enabled in your account settings as well: https://www.interactivebrokers.com/en/trading/early-settlement.php

[73 Reds]

Just now, aws said:

 

You do it after you are assigned on the call, but you need the feature enabled in your account settings as well: https://www.interactivebrokers.com/en/trading/early-settlement.php

If it works it is certainly a nice feature but I'm surprised the IRS lets you do it for tax purposes.

[gfp]

1 hour ago, 73 Reds said:

If it works it is certainly a nice feature but I'm surprised the IRS lets you do it for tax purposes.

 

I don't see why the IRS should care.  I am allowed to naked short calls on any stock and have the exercise result in a short position that I can cover whenever I choose to cover.

 

Fidelity, for instance, lets me hold a long position and a short position in the same security at the same time - I know because I have accidentally put on an offsetting separate position when trying to close both long positions and short positions in the past.  They have their "buy to open", "buy to close", "sell to open", "sell to close" buttons. 

[73 Reds]

1 hour ago, gfp said:

 

I don't see why the IRS should care.  I am allowed to naked short calls on any stock and have the exercise result in a short position that I can cover whenever I choose to cover.

 

Fidelity, for instance, lets me hold a long position and a short position in the same security at the same time - I know because I have accidentally put on an offsetting separate position when trying to close both long positions and short positions in the past.  They have their "buy to open", "buy to close", "sell to open", "sell to close" buttons. 

Because when your shares are assigned it means they have been sold - right?  Any CPAs here who wish to chime in?

[LC]

3 hours ago, aws said:

 

You do it after you are assigned on the call, but you need the feature enabled in your account settings as well: https://www.interactivebrokers.com/en/trading/early-settlement.php

 

Thank you! 

[cubsfan]

13 hours ago, Munger_Disciple said:

 Charlie (Munger) said secret to happiness in life is having low expectations; so it is better to lower our expectations after the tremendous run-up in 2024. 

I think a lot would depend on the interest rate environment in the next 5-10 years and sadly that's almost impossible to predict. 

 

Wise words indeed

Edited September 1, 2024 by cubsfan

[Spekulatius]

On 8/30/2024 at 1:20 PM, Eldad said:

Not sell the Apple when you already have cash problem. 

Cash is never a problem.

 

No cash, now that’s a problem.

[boilermaker75]

On 8/31/2024 at 4:38 PM, Munger_Disciple said:

 

Seems like a lot of agony for little upside. If you think BRK is trading somewhat above its intrinsic value, why not just lighten up a bit instead of all these mental gymnastics?

 

Because I don't want to pay $35k in taxes. It takes a couple of minutes to make the trades. And I don't have cash in that account to just buy higher cost basis stock to be called out.

Edited September 1, 2024 by boilermaker75