FFH NAV - Market Sensitivity

[ValueBuff]

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.

[Guest ericopoly]

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)

[SFValue]

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...

[Guest ericopoly]

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.

 

[ValueBuff]

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)

[Guest ericopoly]

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).