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Interesting Excerpt From Berkshire Letter to SEC


Guest JohnReuwer
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Guest JohnReuwer

Full article: http://www.reuters.com/article/idUSTRE69O2S820101025

 

Excerpt:

In an April letter, the SEC asked Berkshire why it was not recording write-downs on shares with $1.86 billion in unrealized losses, all of which had been in that position for at least a year.

 

Given the duration of those losses, the SEC said they appeared to be more than temporary and as such should have been written down.

 

In a detailed response, Berkshire Chief Financial Officer Marc Hamburg said most of the losses with more than 12 months' duration as of December 31 were concentrated in Kraft and U.S. Bancorp, shares it had acquired in 2006 and 2007.

 

Hamburg said that as of December 31, Berkshire determined both companies had enough earnings potential that their share prices would eventually exceed the original cost of the stock. It also has the "ability and intent" to hold the shares until they recovered, he said.

 

"We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate," Hamburg said

 

Berkshire USB Cost Basis: ~$30.94

Berkshire KFT Cost Basis: ~$33.24

 

It might give some indication as to Buffett's opinion of the IV of these stocks.  Just a little food for thought.

 

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