Tweedy Brown on Investments and Taxes

[racemize]

I've been working through various tax implications on my portfolio and found this:

 

http://www.watheeqa.com/App_Themes/watheeqa/pdf/Lessons%20from%20Warren%20Buffett%20l%20Tweedy%20Brown.pdf

 

it is old and pretty basic, so probably no one needs it.  Nonetheless, it may be useful to a few. 

[racemize]

This actually ended up being pretty great, as I finish reading it.  Here's a link to "Great 10 Year Record = Great Future Right?" which is cited in the prior paper:

 

http://www.legend-financial.com/files/Great%2010-Year%20Record%20Great%20Future,%20Right.pdf

 

I'm looking forward to reading that one next.

[beerbaron]

Quote from Buffett:

And once you’ve estimated future cash inflows and outflows, what interest rate do you use to

discount that number back to arrive at a present value? My own feeling is that the long-term

government rate is probably the most appropriate figure for most assets.

 

That would mean a P/E of 36!

 

And when Charlie and I felt subjectively that interest rates were on the low side — we’d

probably be less inclined to be willing to sign up for that long-term government rate. We might

add a point or two just generally. But the logic would drive you to use the long-term

government rate.

 

That would mean a PE of 21... much more realistic.

 

Still, lots of room on the macro side judging from Buffett's simple equation.

 

BeerBaron

[MVP444300]

I normally use a discount number that is several basis points above the long-term US Govt bonds.  Recently I've been using 8 or 9, sometimes even higher depending on how risky I think the company is as an investment.

 

What discount rate do board members normally use?

[racemize]

I normally use a discount number that is several basis points above the long-term US Govt bonds.  Recently I've been using 8 or 9, sometimes even higher depending on how risky I think the company is as an investment.

 

What discount rate do board members normally use?

 

I just leave mine at 10 and adjust the margin of safety to the company.