JBird

Yes that's what the sell-off strategy means. Forget recent years, this strategy has worked better over the past 35+ years. If you're an active investor, you own stocks that you believe are undervalued. If their appreciation produces unrealized gains, you now have income potential. You choose how much income you want and when you want it. You also get a tax break to whatever percentage your cost basis makes up your capital value. This strategy is not synonymous with high potential growth stocks. You choose your own basket of securities - could be zero coupon bonds. If you're a passive investor, you own the index. The S&P 500 retained 64% of its earnings last year. Logic and past experience shows us that on average, every dollar retained produces more than a dollar of market value. It's the gift that keeps on giving.

Buffett's 2012 letter contained a section called "Dividends" which outlined the benefits of generating income from price appreciation as opposed to dividend payments. There are 3 primary benefits: 1) More potential capital value and more potential income 2) More control over the size and frequency of income, and 3) Far less tax liability than generating the same income from dividends. Billionaires like Jeff Bezos, Larry Page, and Marc Benioff actually recognize this and are actively use the sell-off strategy. But it's still under-appreciated. I worked for Charles Schwab for six years and found that basically no one was taking advantage of the strategy's benefits. So as an advisor when they gave me $250 million to manage for 205 client households, I put the sell-off strategy to work. Clients were able to realize all 3 benefits and were far ahead of the dividend-focused strategies that are so prevalent today. In my experience investors on this forum are a clever bunch and recognize the sell-off strategy as a useful one (shout out to Ericopoly). If you want to learn more about how to implement the strategy and disinherit the IRS along the way, I wrote a short book about it called Income on Demand. It's available on Amazon this week for 99 cents. Here's the link: https://geni.us/incomeondemand Happy investing everyone!

I don't follow here. Well, the shareholder is no longer getting a 28 cent per quarter cash dividend any longer (it was cut to zero). Let's say the shareholder has 100,000 shares. In the old days, he would get $28,000 of cash dividend each quarter. Under my regime, the company will be using that very same $28,000 (28 cent per share per quarter) to repurchase shares. Now (under my regime), he just sells shares each quarter amounting to $28,000 cash proceeds. He might not even owe any tax on this (depends on his cost basis). Potentially he sold for a capital loss and can actually take the $28,000 distribution completely tax free, as well as reducing his capital gains tax bill from other sales. Compared to the world where he's automatically paying tax on $28,000 of dividend, that's a huge leap forward for mankind. Eric, I'm still in agreement regarding dividends vs. buybacks. There's one consistent statement of pushback I receive regarding capital-gain-income over dividends: "If you sell shares at any kind of loss, you're just taking principle." In other words, in a falling market the strategy doesn't work. I would love to hear your thoughts on that. My take is that you can only take as much income from a stock as the company earned in profit attributable to you. If it earns $5 in profit attributable to your holdings (look-through earnings) then you can take $5 from the stock as a dividend or by selling $5 worth of shares. If it doesn't earn, you can't take. Therefore, the stock price being up or down from your cost basis is really not a factor regarding your income withdrawals from the stock.

Hello all, While there is value to active investing in certain cases, we know society as a whole is better off with an indexing strategy. Right now index funds make up about 17% (and rising) of the total US stock market. I believe this number should far exceed 50%; that society should move from net active to net passive. I believe the hindrance to this is the laity being uninformed about answers to key questions: what is investment risk, what drives stock prices long term, why the market fluctuates and how to view those fluctuations, why a passive index strategy is superior to active, and why we should have confidence the market will do well over the long term. Therefore I believe the societal solution is to provide engaging and entertaining education on these questions to help investors a) rise above market-driven anxiety and fear and b) start thinking like business owners so they may profit like business owners. Wondering if there's anyone here who not only agrees but wants to do something about it with me. Cheers!

What's the backstory here?

Fantastic news. Thanks for posting, Liberty!

LOL-- Thanks for sharing that

Nobody has tough skin like you Donald, nobody.

If BRK accounted for the KHC investment at market, the new buyback price would be $137. Instead its $131.

Are you adding back the excess of BRK's KHC investment at market over its carrying value? I have that as $13 billion

Interview with Elon released today: https://www.ycombinator.com/future/elon/ Takeaways: Musk spends 80% of his time at SpaceX and Tesla on engineering and product design. The Tesla production line in Fremont runs at 5 cm/sec. He's confident the factory can run at 1 m/sec, a factor of 20 increase. (The factory is currently producing cars at a rate of 100k / year. A 20x increase puts it at 2 million / year.)

1) I thought I'd give you the 9 word explanation on how Tesla will make its investors rich. 2a) Yes. The first 200k Model 3 purchasers will get a fed tax credit of $7.5k (50% of the 2018 Model 3 production). Tesla will also receive from Nevada a transferable tax credit of $12,500 per permanent full-time job, up to 6,000 jobs as well as transferable tax credits of 5 percent for the first $1 billion and 2.8 percent for the next $2.5 billion investment (source: Forbes). Don't know how this is relevant though. Accepting tax breaks is not bad business practice and is also not unique to Tesla or the auto industry. b) Somewhere between 0 and 100. c) Since we're talking about the future I don't know how this is relevant either, but now we've come full circle on your not reading too much about Tesla. Is the selling price of a Model S today more than its cost of production? Yes. They have negative net income because they're making all the investments and R&D expense required to grow a car company that produces 600 cars a year in 2010 to one that produces 500,000 in 2018. If you're curious to read more about Tesla: www.tesla.com Disclaimer: I've never owned TSLA shares.

Respectfully, this is a conversation disqualifier. By selling 500,000 cars in 2018 at ~20% margins.

Really well said, Picasso!

This P100D is unbelievable! Acceleration as fast as a Bugatti Veyron :o I just figured what my license plate will read when I buy a Model 3.