ValueBuff Posted March 19, 2009 Share Posted March 19, 2009 Since FFH dopped their hedges late last year...has anybody been able to ballpark a NAV sensitivity to a 10% movement in equity markets? thanks for the info. Link to comment Share on other sites More sharing options...
Guest ericopoly Posted March 19, 2009 Share Posted March 19, 2009 80% of book is in equities. And I don't know, let's assume 33% tax rate. .10 * .80 * .67 = .0536. I guess that lands us at a 5.36% hit. My thinking is that operating income (assumes 100 CR) should be about 13%-15% after-tax boost per annum. On a quarterly basis that is 3.25% to 3.75% contribution from operating income. So, adding it all up, that leaves us with a 1.61% to 2.11% drop in book value per share. (an assumption is made that CDS hedges bond portfolio from mark-to-market movement) Link to comment Share on other sites More sharing options...
SFValue Posted March 19, 2009 Share Posted March 19, 2009 are you assuming the CDS hedge the whole bond port? I am under the impression that the munis portion are + ve (as of now ) and unhedged... Link to comment Share on other sites More sharing options...
Guest ericopoly Posted March 19, 2009 Share Posted March 19, 2009 are you assuming the CDS hedge the whole bond port? I am under the impression that the munis portion are + ve (as of now ) and unhedged... Total bond portfolio is $8b, including municipals. Total CDS hedge is $8.87b. Link to comment Share on other sites More sharing options...
ValueBuff Posted March 19, 2009 Author Share Posted March 19, 2009 80% of book is in equities. And I don't know, let's assume 33% tax rate. .10 * .80 * .67 = .0536. I guess that lands us at a 5.36% hit. *so to sum that up... every 10% move (up or down) in their underlying portfolio adjust for a rate of tax at 33% moves the NAV 5.36% (ballpark figures) Link to comment Share on other sites More sharing options...
Guest ericopoly Posted March 19, 2009 Share Posted March 19, 2009 80% of book is in equities. And I don't know, let's assume 33% tax rate. .10 * .80 * .67 = .0536. I guess that lands us at a 5.36% hit. *so to sum that up... every 10% move (up or down) in their underlying portfolio adjust for a rate of tax at 33% moves the NAV 5.36% (ballpark figures) Not every 10% move, just the initial one. I mean, if you look at Berkshire's unrealized gains they are paired with a tax liability that they'll likely not pay for a very long time, if ever, and it works to their advantage long term like float (interest free loan from the IRS essentially). Link to comment Share on other sites More sharing options...
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