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Value Arbitrage?


JEast
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Anyone interested in shorting BRK and buying FFH at these levels.  The mark-to-market change at FFH has to be nice, but unsure on the losses they are going to report for Sandy and crop insurance.  The market seems to think the losses will negate the portfolio gains.  Somewhat tongue in cheek comment here, but there also seems to be huge disparity in the two.

 

Cheers

JEast

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Respectively - this is not an effective pairs trade.  Businesses don't line up at all...  Drivers are vastly different at each business

 

You are completely right on this one, that it why pair trade is not the strategy:

-We have a fairly good idea of the BV of Fairfax.

-This value is not represented in the stock price at the moment.

 

The strategy would not be to a pair trade but long only up until FFH value goes toward BV. Not a risk free investment but an asymmetric risk/reward.

 

BeerBaron

 

*Note, I don't think the gains on are big enough to warrant an arbitrage

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Think a little longer term ....

 

When WEB &/or Munger retire where do think the NA value community is going to go? And aren't the growing size of the FFH dinners, & the growing number/quality of folks on this board, an indirect indication of the future probabilities?

 

You pay an annual premium & buy life insurance to get a tax free payout upon expiry.

OR ... you can pay an annual premium & buy a long call/leap on FFH to get a tax free payout (tax free accounts) on WEB &/or Munger's retirement? ... and you pay for it by either annually reinvesting some BRK gain/divs in FFH calls/leaps, or periodically selling down BRK & buying FFH.

 

The FFH discount to BV disappears re the long term arbitrage,

& tends toward a premium the more it looks like WEB &/or Munger is getting ready to retire.

 

It IS a pair trade ... just not the way that most would think of it.

 

SD

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Technically you can pair trade anything.  If Gundlach can short aapl/long nat gas.  There are no rules.

 

Well, the only rule is don't lose money. With that in mind, shorting Berkshire is a terrible idea.

 

My long Pandora (Jewelry), short Pandora Media trade last year made a lot more sense.

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