Rabbitisrich

It's interesting that Buffett didn't view Lubrizol as a great purchase following a review of the financials. His explanatory letter references Sokol's report of a "January 25 dinner conversation with James Hambrick" as the conviction builder.

http://online.wsj.com/article/BT-CO-20110322-715628.html MBIA Insurance had loss reserves of $2.056 billion before reinsurance as of Dec. 31, 2008, according to its financial statements. But the independent valuation by BlackRock, taking in 450 deals for a combined $50 billion in assets, predicted future losses of $13.8 billion to $20.8 billion over the next several years. By those calculations, expected losses at MBIA Insurance as of Dec. 31, 2008, would have rendered the unit insolvent, the banks said in a filing. In the most recent ruling, the majority appeared to use current cash flow payouts as evidence of solvency, under which standard the banks have pretty much no chance of proving insolvency. I'm not sure how BlackRock qualifies as an "independent" valuator, though.

A company with $30B in float, and growing, largely built on various forms of low probability, high severity lines will never be idiot proof. Ajit Jain possesses huge leverage against Berkshire Hathaway.

If I understand the assumptions behind this question, it belies gross ignorance about India, 5-star hotels there and the menus they serve up. Been going for some 50 years not the last three days. Come on! Ask anyone who has stayed @ an Oberoi or a Windsor Manor or a Taj and a 5-star in the US and one will come away with a new definition for 5-star hospitality. And it comes with a price tag that will make people unfamiliar raise eyebrows. I didn't ask anyone who has stayed at those locations but I'm going to guess that hamburgers are not a big part of indian cuisine. However, Buffett is not known to be a foodie.

I wonder how the chefs will feel about cooking hamburgers for three days straight?

Looks like the end of the line for MAJC: http://stocks.us.reuters.com/stocks/keyDevelopments.asp?rpc=66&symbol=MAJC.O&timestamp=20110321124000 Majestic Capital, Ltd. announced that Bayside Capital Partners LLC (Bayside) has terminated the previously announced merger agreement with Majestic Capital. In its termination notice, Bayside cited a material deterioration in Majestic Capital’s capital surplus, an inability to secure regulatory approval for the merger, and a failure to satisfy the closing condition with respect to termination of Majestic Capital’s lease for office space in Poughkeepsie, New York on terms acceptable to Bayside. As a result, Majestic Capital and its subsidiaries expect to seek protection under applicable United States and Bermuda bankruptcy and other similar laws for the protection of creditors.

It would be more exciting to get some confirmation on the reporter's implied context. The answer and the question seem disjointed.

I have a fair bit of risk in my portfolio so I've been moving towards safety names such as HCC (though some may argue that it isn't safe) and I'm watching FE.

There was a bit of message board chatter about this issue when the libor-ois spread blew out. I guess the reasoning for such action is similar to the anti-M2M stance of banks, i.e. this too shall pass.

I didn't find the Netflix explanation to be particularly soothing either. None of the issues he mentioned represented new factors. He would have been more concise and accurate in his self-assessment if he simply said, "We posited a strong fundamental case against Netflix. Certain issues we raised, namely content costs, are currently playing out. We attempted to catalyze market reaction by publishing our opinions, but near-term positive results overwhelmed the response."

1) In your scenario the tax deferral benefits on the rest of the retained earnings are now zero -- this is meant to be a tax-deferred investment holding company. The annual tax-laundered-dividend payout in my example is only about 1%... but one can assume this holding company earns far more than that (it only pays out enough to fund his consumption and retains the rest of the earnings to reinvest). The retained earnings over time push the stock price up -- but you keep turning it over every quarter at 100% so you are paying capital gains tax every quarter on those retained earnings and therefore on a quarterly basis paying far more in taxes than you'd pay if you just took a dividend in cash. 2) The person has a 60% stake in the company. He can't sell and then immediately buy back a 60% stake. For one thing (liquidity aside) he loses control of the company -- what if somebody doesn't sell it back? You're right, the wash sale scenario doesn't work. Without the wash sale rules, the only offsetting tax benefit is the dollar value of (t)(dividend) when you realize the capital gains in the future, so you've effectively paid all the interest on that money to the government. How shitty is this deal?!

That is a good point, but keep in mind that the dividend receiver's (DR) stock declines according to the pre-tax value of the dividend. If (DR) sells the stock and repurchases it immediately, the "loss" is added to the basis of the holdings. Assuming that all tax rates are equal and unchanging, and that appropriate income is available to offset the tax benefit, the benefit of t(new basis - old basis) should equal the cost of t(dividend), given that new basis is simply old basis + dividend. The buyback strategy offers smaller transaction costs and less tax benefit/cost mismatch risk, but given certain assumptions it shouldn't offer significant benefits to the dividend. If you relax those assumptions, you can also create situations where a dividend provides a tax advantage. For example, when short-term gains pay a higher tax rate than dividends, a dividend receiver would benefit from using wash sales on short-term holdings of dividend paying stocks.

I'm not sure that Japan needs money--they so far have only requested expertise and manpower--but here is a list of charities with established relationships in Japan: http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1221

I'm not sure that I understand your argument Ericopoly. If the 60% owner gets his $24M dividend, he now owns $24M + .60($3.96B) vs. if he holds through the buyback and retains .606($3.96B). It's a wash before taxes (and all other costs... I'm also treating the buyback as a single event for convenience). If capital gains and dividend taxes are equal and unchanging through the holding period, you don't even get a tax deferral benefit.

Just remember how people felt stupid in March '09 after going all in during November '08. But the holders and selective reallocators made bank after a few painful months.

Thanks for the link, Parsad. Going by some of the old posts, a lot of current and former board members increased net worth over the recession.

Does anyone have a link to the old board? I remember a search engine, though I don't know if it works now, that ran even after the board closed. Edit: Looks like the search engine is inactive and the old board dissolved. Edit (again): If anyone is so inclined, you can peruse the board through google caches. Enter "site:visualhash.com msn berkshire" into the search box, quotes removed, and click the "cache" option to view all comments listed under the search term. You can narrow the field by entering a term next to the quoted search string.

It's amazing that a professional money manager would short a company without understanding the short thesis. At the risk of over simplifying, it suggests that Loeb is an overrated and lucky manager, or that he made a rational bet on something pushing down the price. Parsad, do you have a link to Hempton's argument, or to any of the old anonymous attackers? I'm always

I find that definition of speculation to be too broad for my purposes. It equates bets based upon greater fools to bets on rational incentives. Someone playing the greater fool angle is relying upon an actor who, in turn, relies upon an even greater fool. A land developer, on the other hand, counts upon rational business incentives that should be realizable in a stable market. During the period in which both actors are holding the asset, they seem superficially indistinguishable, but time will differentiate them. If you analyze their returns, you should see differing factors, where the greater fool benefits from momentum, and the land developer benefits from expected cash flows.

You should put this thread in the investment ideas section. It would be easier to return to the topic over time.

Have him pour over the 10ks for the five years leading to Gen Re's sale in '98, and the 7 years leading to MBIA's fail in '07, and let him figure out the warning trends.

Zorrofan, may I ask how old you are? I can't imagine an adult making such an assinine remark.

Berkshire's size is probably a main limiting factor. Multi-billion dollar properties tend to attract competitors with access to low cost non-recourse debt and the willingness to reinvest huge sums.

When observing your competitors, your focus should be on their approach and process, not their results. Short-term performance envy causes many of the shortcomings that lock most investors into a perpetual cycle of underachievement. You should watch your competitors not out of jealousy, but out of respect, and focus your efforts not on replicating others' portfolios, but on looking for opportunities where they are not. That's the most significant source of style drift I've seen among businessmen and investors in my circle.

A steady dividend might unravel a great deal of Buffett's efforts to attract business oriented shareholders. Google dividend aristocrats, or check out the defenses of people who owned ALD prior to the recession, or survey JNJ shareholders. Consistent dividends seem to attract or induce cash fetishism. Berkshire Hathaway already has an ironically worshipful contingent. Dividend entitlement might be like a Madonna statue crying. Buybacks or special dividends!