Jurgis

I am sorry merkhet, but I disagree. This is a common misconception introduced by "Buffettology" (can I even mention this book on CoBF? ;) :-[ ). The compounding only tends towards ROE if company can reinvest its returns into something producing the same ROE. If you look at KO, the ROE was always in high 20's-30's ( http://www.gurufocus.com/financials.php?symbol=ko ), but the return was only in 13-14% range (if we trust the print). Now, it might be a good study to find out where does the rest of ROE disappear... :) Common suspects are mediocre/bad investments and share repurchases at high premium, but there might be more.

Color me skeptical about: I don't know India. But I know corrupt societies. And corruption does not disappear in a year even with best people working for change. Maybe Watsa is just promoting a positive message. I hope I am wrong and he's right. That would be great. :)

Couple random thoughts after looking briefly at the print: - How would one hold a stock for 50 years when it's tough to hold stock for 1 year ;) - Smallish outperformance vs S&P500 in last 10 (and 20) years - The annualized returns of Buffett's big stock positions: KO, WPO, AXP - are pretty much in 13-14% annualized range. Considering these are great companies purchased by Buffett cheap, it seems to indicate that it's very hard to expect >15% returns from any company long term. WFC returned 17% and Geico returned more before it was bought out, so it's possible, but hard. (Caveat: the returns are from first batch purchase date; Buffett may have added more at cheaper prices.)

Do you guys think Lending Club and similar lenders will survive the next downturn? It seems there are at least two risks: - the lenders will implode because they currently don't price the loans for downturn - the regulators will step in once unsophisticated lenders get hurt.

Thanks. Now I feel stupid for not checking on Amazon.

I want to frame the 50-year BRK Wall Print ( http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/50-years-of-brk-wall-print-%28new-letters-book%29/ ). Any ideas how to do this without paying $300 or so for custom frame? This is in USA, MA if it matters. I think I'd rather buy 2 shares of BRK than $300 custom frame. ;D Or maybe I'm just framing the discussion incorrectly. :P

No.

I own some GTE in my oil basket bought before the activist shakedown. I am currently holding without plans to buy more. I want to see what the new CEO does. Good luck

+1

AFAIK, prefs trade mostly based on liquidity: more liquid ones have less upside, less liquid ones have more. Some of the less liquid ones trade at huge spreads and on appointment, so you can have big variations on upside that are hard to arbitrage away. I think that most people don't look at exact divvies since the upside to par dominates. Also FIDO does not allow online purchase for common and a lot of prefs: probably because they are afraid that widows-and-orphans will buy them and then blame Fido for purchasing "bankrupt" securities. They do allow online purchase of some prefs that they probably missed when they put on limitations...

I don't think so. I think diversification is just a sign of particular character. :) Disclaimer: I can't make myself to own a concentrated portfolio, but more because I like too many companies. I just can't say "no". :-*

Right. I prefer that people talk about numbers - which is what they are talking about now. ;) So... here's the number tease for you: Let's do backward and forward Graham arbitrage analysis. I'm taking the $6.55 price, $50 par. Don't count 9% interest - sorry Merkhet - you guys can adjust yourselves if you want. ;) Assume January 2017 resolution: 1.5 years remaining time. Assume zero on negative outcome. Assume you want 20% expected annualized return. Then you can calculate the implied chance of success: 17% and implied chance of failure: 83%. If you go with 2.5 years to resolve, the conditions imply about 20% chance of success and 80% chance of failure. The length of time to resolve does not influence return or probabilities much right now unless you start talking about 5 years+ to resolve. Clearly, you can go in the other direction as the calculation is usually used. Feed in probabilities of success and failure that you believe in, and you'll get expected annualized return. It is somewhat clear though that with probability above 20% you get a large annualized return. So the question becomes: is the probability of success higher than 20%? (and I won't get into that as promised :P ) Now if prefs run up to $20 on $50 par as they have done in the past, you are suddenly looking at implied probability of over 60% success. Whether it's worth holding at that time, is your call... ;) I completely agree with Mephistopheles that common will be likely diluted (a lot?), so calculations on common are IMHO much harder. Caveats: I used straight Graham merger arbitrage formula, you can use something more complicated to account for compounding, etc. Have fun.

http://reactionimage.org/1174804810.html That's what I am talking about! ;D

I kinda knew someone will ask ;), but I'd rather decline because that's ideological arguments again and I'd rather not go there. :) Peace.

Thanks. I would not evaluate the situation the way you did, but you might be right. While I think this is accurate, one has to put it in the proper context of the time. Men weren't supposed to spend a lot of time with their kids. Being completely a man of leisure was and is weird. And he definitely felt the pain of Susie leaving, long before her death, just because this was patched over a bit doesn't make it less so. You assume that they both would have found common interests and happiness if Warren edit: retired worked less and/or changed his habits. Maybe, maybe not. My reading of Snowball is that the situation was more complicated than just Warren working too much. But I only read the book, I did not know them in depth personally, so I can't know.

So it's an ideological investment for you? I think it's a value investment for him Well, none of his claims for me are value claims. They are all ideological claims, in particular suggesting that there is only one resolution - the one that benefits him. I can't say I am expert in this, but I see at least a number of ways to preserve 30 year mortgages with very little return to present shareholders and prefholders.

So it's an ideological investment for you?

Right. And then there's survivorship bias to which I pointed in my previous post. For every Gates, Walton and Bezos there are probably 100 entrepreneurs who fail. Not saying that entrepreneurship is a bad thing to do. Just don't expect it to be easy road to multibillions. Same thing about concentrated bets on a few companies. For most people - CoBF-pros-possibly-excluded - index funds or other diversified portfolios are the way to prosperity. Not chart-topping wealth, just prosperity. Do you really need chart-topping wealth though? ;)

Thanks. I would not evaluate the situation the way you did, but you might be right.

http://business.financialpost.com/investing/investing-pro/how-to-get-richer-faster-private-equity-is-your-best-bet And when you blow up, you can talk to the article author about what to do next. ::)

Value of R&D depends on R&D. You have to know the field. You have to know people involved. There is still no guarantee. Some R&D is worth zero, actually less than zero considering opportunity cost. I doubt anyone can give you a formula that applies to "average" biotech.

Anybody interested, I am selling a personal 100 year bond with 0.01% yield! AAA+ character references from CoBF! :P ::) Much better deal than those negative yield euro bonds! 8) ;D

Can you elaborate on this?

1% lottery ticket. Holding prefs. No buy timing. Would sell if it went to ~0.5 expected value without resolution in courts. Otherwise hold until resolution one way or the other. Unless you are a lawyer experienced in this particular branch of law, have read through all the legal documents and are experienced in assigning probabilities based on legal documents so far, this is a pure lottery ticket. Don't kid yourself that you know the "certainties" or probabilities based just on what Merkhet, Fairholme, Ackman and a bunch of journalists write.

How do you know when you're at the top? Miller was at the top for 15 years. Should've he retired 3 years into the streak? 5 years? 10 years? 20 years? ;)