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BRK 2008 Annual Report is out.


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other than the section that dealt with derivatives my fav part was this:

 

<<Our long-avowed goal is to be the “buyer of choice” for businesses – particularly those built and owned

by families. The way to achieve this goal is to deserve it. That means we must keep our promises; avoid

leveraging up acquired businesses; grant unusual autonomy to our managers; and hold the purchased companies through thick and thin (though we prefer thick and thicker).

 

Our record matches our rhetoric. Most buyers competing against us, however, follow a different path.

For them, acquisitions are “merchandise.” Before the ink dries on their purchase contracts, these operators are contemplating “exit strategies.” We have a decided advantage, therefore, when we encounter sellers who truly care about the future of their businesses.

 

Some years back our competitors were known as “leveraged-buyout operators.” But LBO became a

bad name. So in Orwellian fashion, the buyout firms decided to change their moniker. What they did not change, though, were the essential ingredients of their previous operations, including their cherished fee structures and love of leverage.

 

Their new label became “private equity,” a name that turns the facts upside-down: A purchase of a

business by these firms almost invariably results in dramatic reductions in the equity portion of the acquiree’s capital structure compared to that previously existing. A number of these acquirees, purchased only two to three years ago, are now in mortal danger because of the debt piled on them by their private-equity buyers. Much of the bank debt is selling below 70¢ on the dollar, and the public debt has taken a far greater beating. The privateequity firms, it should be noted, are not rushing in to inject the equity their wards now desperately need. Instead, they’re keeping their remaining funds very private.

 

In the regulated utility field there are no large family-owned businesses. Here, Berkshire hopes to be

the “buyer of choice” of regulators. It is they, rather than selling shareholders, who judge the fitness of

purchasers when transactions are proposed.>>

 

imo, private equity is exceedingly deserving of being called out as the rip-off artists that they are. yes, the PE operators come in & institute a "lean & mean" operating culture. but that is more than offset negatively by the peril they expose those co.'s to in the longer term by piling on massive debt appended to sliver thin equity structures. its a fools game that requires buoyant capital & credit markets & an ocean of emboldened greater fools to forward lateral it off to before the music stops.

 

as for webs comments & analysis of his long dated derivatives sales, i wonder how doug kass & others belonging to the cramer club cadets corp will spin their absurd charges of (to paraphrase) "buffett suffers style drift" and "hypocritically embraces the same 'weapons of mass destruction' that he warned others about" type of arguments they have been scoring brownie points with in the news lately?

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Guest ericopoly

i wonder how doug kass & others belonging to the cramer club cadets corp will spin their absurd charges of

 

 

I was reading today that Kass has already covered his short position on Berkshire.  So he will probably stop slamming it.  He will buy it soon and start pumping is likely.

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My favourite part is the acknowledgement of Joe Brandon.

 

Other interesting aspects...

 

- Traded COP.  Not usual buy & hold.

 

- Sold some quality high-price/value holdings to finance purchase of others lower-price/value.

 

- Problem of govt backed financing competing unfairly with Berkshire financing of Clayton eg.

On the other hand, may be short term problem.  During Japan's great recession, companies

like Hitachi and Sony were able to issue long term bonds at say 1.5 pct.

 

Making money, well run, what's not to like?

 

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If WEB has continued to sell puts against the S & P, (and possibly against his large individual stocks) since jan 1,09 ---at the much more depressed  stock and index valuations,  could brk be gradually counter balancing  the "mark to market" effect of the long term puts sold at earlier higher index valuations ?

 

I believe he mentions doing a minimal amount of this in the letter ?

 

Thank you all for your good work on this new board as well as the former board . Your collective experience , knwledge,and wisdom is very much appreciated.

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i wonder how doug kass & others belonging to the cramer club cadets corp will spin their absurd charges of

 

 

I was reading today that Kass has already covered his short position on Berkshire.  So he will probably stop slamming it.  He will buy it soon and start pumping is likely.

 

kass MAY buy it for a quick pop. he frequently layers his so called fundamentally based theme trades with shorter term (sometimes intraday) setiment based counter trades. but i doubt he will sing mea culpa anytime soon on web & berkshire. i think he REALLY believes warren has lost the mojo & that berkshire is doomed to sub-par long term returns stemming from an out-moded buy & hold mentality. as he has so often gloated: its a traders paradise & an investors hell. and if kass doesnt really believe that then HE'S got some explaining to do, because he has been banging on that drum relentlessly, with the beautific fervor of a man who has seen the light, & believes himself to be its shining example. in his recent writings he has painted web as a man who has lost the light. as a trader i know kass can turn on a dime & go long that which he was short, and visa versa, but i doubt the same is true of his very public pronouncements that web is a has been.

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hmm nice loss in Swiss Re, who's was that(p.17)

 

the 14.45 bill in other investments? (p.31)

that's all the preferreds (p.41 [39])

not in equity?

 

5 bill in leased assets? tank cars? (p.44)

 

hmmm ration of B's to A's has increased from

8 - 1 to  14 - 1

(is the trading in B's driving A's?)  (p.54)

 

hmm inv. loss 4.6 bill (p.64)

 

 

 

 

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This what Berkshire's worst year ever in 44 years. Telling tale of the times we live in.

 

Blue cover? That's a first ... Warren was selling this year ...

 

Suprised with the -90% loss on the Irish Banks. Wonder what he was thinking.

 

Derivatives seem okay ... long term.

 

 

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BRK results - a mirror image to FFH's: Great operational results. Less than desired investment wise.

WeB should consider stepping down, nominating a triumvirate in his stead: Ajit on insurance, Prem on investments, Eitan on non-insurance :-)

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i cant wait to see how wfc plays out & whether web continues to buy it....or not. and i wonder what he makes of wfc's wachovia acquisition? they got it cheap, but was it cheap enough? they get to book some huge tax losses but will that compensate for the risk of even greater future writedowns, particularly wachovias derivative book?

 

interesting discussion from tom brown (wow, like bill miller, has he ever fallen from grace!) vs nuriel roubini, including some of the comments:

 

http://seekingalpha.com/article/123298-dr-doom-responds-on-wells-fargo?source=article_sb_popular

 

 

 

 

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