BRK halted?

[Munger_Disciple]

Carol Loomis's article on the buyback:

 

http://finance.fortune.cnn.com/2012/12/12/berkshire-buffett-buyback/

 

Sorry if it is already posted.

[ERICOPOLY]

The tax windfall was that at the time of death the US government resets the cost basis to present market value.  Thus, all the BRK shares can be sold without any taxes at all.

 

Ericopoly,

 

Doesn't the estate still need to pay estate tax to the govt?

 

Yes.

 

However, I don't know how much.  The guy should have put the shares into a GRAT. 

 

[Parsad]

....after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.

 

It is business, not charity.

 

What Buffett does in his personal capacity in politics and charities SHALL NOT affect his investment/business decisions. Seem to have forgotten why we like him so much? Do you still remember GE and GS deals in 2008, why did you not call him a loan shark or a blood sucker then?

 

If it is is "business" then why did he not buy these shares on the open market?

 

 

The next time he buys a subsidiary using BRK shares as currency, he can reassure the seller that his/her heirs will be able to unload them upon death.

 

Classy way to treat the people -- just like agreeing to never trade away the company purchased.

 

This cultivates better transactions in the future by showing the world that any business owners willing to sell their company to Berkshire will be treated well till death do us part.

 

Yes, I can see that perspective, as long as it was someone who sold their business to Berkshire.  Do we know if that was the case here?  Was it Al Uletschi's estate?  Cheers!

[ERICOPOLY]

....after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.

 

It is business, not charity.

 

What Buffett does in his personal capacity in politics and charities SHALL NOT affect his investment/business decisions. Seem to have forgotten why we like him so much? Do you still remember GE and GS deals in 2008, why did you not call him a loan shark or a blood sucker then?

 

If it is is "business" then why did he not buy these shares on the open market?

 

 

The next time he buys a subsidiary using BRK shares as currency, he can reassure the seller that his/her heirs will be able to unload them upon death.

 

Classy way to treat the people -- just like agreeing to never trade away the company purchased.

 

This cultivates better transactions in the future by showing the world that any business owners willing to sell their company to Berkshire will be treated well till death do us part.

 

Yes, I can see that perspective, as long as it was someone who sold their business to Berkshire.  Do we know if that was the case here?  Was it Al Uletschi's estate?  Cheers!

 

True, I did make an assumption based on the rumors that this was his estate.

[twacowfca]

....after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.

 

It is business, not charity.

 

What Buffett does in his personal capacity in politics and charities SHALL NOT affect his investment/business decisions. Seem to have forgotten why we like him so much? Do you still remember GE and GS deals in 2008, why did you not call him a loan shark or a blood sucker then?

 

If it is is "business" then why did he not buy these shares on the open market?

 

 

The next time he buys a subsidiary using BRK shares as currency, he can reassure the seller that his/her heirs will be able to unload them upon death.

 

Classy way to treat the people -- just like agreeing to never trade away the company purchased.

 

This cultivates better transactions in the future by showing the world that any business owners willing to sell their company to Berkshire will be treated well till death do us part.

 

Yup.  Plus, to meet safe harbor regs, a company can only buy back a certain % of average daily volume, except a company can also make one huge private purchase of a large block of stock per week or something like that.

[twacowfca]

Yup.  Even if the tax rate is 70% on income/dividends you just need a plan, like Warren did... you know, back when he started Berkshire when the tax was 70%.

 

No, you can't do a Personal Holding Company to hold your passive investments -- you'd be hit with the undistributed profits tax.

 

A few things your holding company needs (to avoid the Personal Holding Company label):

1)  you need to hold your passive investments in financial subsidiaries (insurance companies will do).

2)  you need other shareholders -- BRK passes this test

 

Not sure if there were other criteria, but there you have it.

 

Take away the insurance subs and have Warren & Charlie as the sole shareholders and BRK would either have to pay a dividend or get slapped with the undistributed profits tax.

 

Nice job Warren!

 

Oh yeah, and you guys thought Warren managed the money of his partners "for free"  8)  Without you guys, he'd be paying those taxes.  That's his management fee.

 

Another very astute insight.  Warren saw this way back when.  An insurance company is ideal for avoiding the passive investment co tag.  I think it even constitutes an absolute exemption.  Plus, if you have the right regulator in the right state,  he's not going to take it away from you at the drop of a hat the way the Feds could do with a bank Holdco.  Margin of Safety, my dear Watson.  :)

[ERICOPOLY]

And the ultimate irony is yet to come.

 

Our billionaire champion of higher taxes is going to be paying less taxes overall when the corporate rate is lowered.

 

99% in Berkshire.  1% in other.  I wonder which tax change will trump the other?  ;)

[onyx1]

And the ultimate irony is yet to come.

 

Our billionaire champion of higher taxes is going to be paying less taxes overall when the corporate rate is lowered.

 

99% in Berkshire.  1% in other.  I wonder which tax change will trump the other?  ;)

 

I posted on another thread that a drop in the corporate tax rate to 25% could lower the value of BRK's deferred tax loss by as much as 10.6bln.  With 169bln of equity, this would be an increase of 6% in BV.  With the new multiplier at 120%, the "put floor" will go up by over 7%, or $6 per B share.

[twacowfca]

And the ultimate irony is yet to come.

 

Our billionaire champion of higher taxes is going to be paying less taxes overall when the corporate rate is lowered.

 

99% in Berkshire.  1% in other.  I wonder which tax change will trump the other?  ;)

 

I posted on another thread that a drop in the corporate tax rate to 25% could lower the value of BRK's deferred tax loss by as much as 10.6bln.  With 169bln of equity, this would be an increase of 6% in BV.  With the new multiplier at 120%, the "put floor" will go up by over 7%, or $6 per B share.

 

 

Yes.  Also, even with a billion dollar plus hit from Sandy, we will likely see another increase in BV/SH this Q.  Maybe that speculative 6% could be 8% or so at end of Q4. :)

[jay21]

And the ultimate irony is yet to come.

 

Our billionaire champion of higher taxes is going to be paying less taxes overall when the corporate rate is lowered.

 

99% in Berkshire.  1% in other.  I wonder which tax change will trump the other?  ;)

 

I posted on another thread that a drop in the corporate tax rate to 25% could lower the value of BRK's deferred tax loss by as much as 10.6bln.  With 169bln of equity, this would be an increase of 6% in BV.  With the new multiplier at 120%, the "put floor" will go up by over 7%, or $6 per B share.

 

Awesome.  I think BRK can still compound at a high rate (maybe not 20%) despite everyone saying they are too big.

 

Also, I wonder how Buffet thinks about buying above book when one measure of his performance is increases in book value.

[Shane]

I think he has stated that BV no longer is a fair guage for BRK.

[twacowfca]

I think he has stated that BV no longer is a fair guage for BRK.

 

Yes. BV/SH is a good reference mark for IV, but proportionally lower.  Imagine Coke's  buying back shares  with retained earnings at two times BV/SH.  That would be a very good deal, although dilutive to BV/SH.  :)

[Palantir]

....after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.

 

It is business, not charity.

 

What Buffett does in his personal capacity in politics and charities SHALL NOT affect his investment/business decisions. Seem to have forgotten why we like him so much? Do you still remember GE and GS deals in 2008, why did you not call him a loan shark or a blood sucker then?

 

If it is is "business" then why did he not buy these shares on the open market?

 

 

The next time he buys a subsidiary using BRK shares as currency, he can reassure the seller that his/her heirs will be able to unload them upon death.

 

Classy way to treat the people -- just like agreeing to never trade away the company purchased.

 

This cultivates better transactions in the future by showing the world that any business owners willing to sell their company to Berkshire will be treated well till death do us part.

 

Fair enough, makes sense.

 

I think I might add to my position if the stock goes between the 1.1-1.2 level. We don't know whether he'll purchase a lot of shares at the sub 1.2 level.....but I hope so.

[Yours Truly]

From: Debbie Bosanek, Assistant to Warren Buffett

Sent: Thursday, December 13, 2012 12:08 PM

Subject: from Warren Buffett

 

TO:  Nik Deogun and Nick Dunn, CNBC

 

Gary Kaminsky earlier today made two major errors in describing our repurchase of 9,200 Class A shares yesterday.  He first stated that I had in the past advised against repurchases generally.  This is not true, and I’m enclosing material from the 1984 annual report where I discuss the conditions under which I strongly favor repurchases.  This position has been repeated many times since then, both in annual reports and in interviews.

 

Mr. Kaminsky also made the statement that the estate that was a seller was better off by selling in 2012 than 2013.  This, too, was incorrect.  Estates receive a stepped-up basis upon death and therefore the estate did not have a gain regardless of when the stock was sold.  The principle of stepped-up basis has been incorporated in the tax code for many decades.

 

Warren Buffett

 

 

http://www.valuewalk.com/2012/12/warren-buffett-responds-to-whitney-tilsons-letter/

[ubuy2wron]

Sold to beat the coming tax hikes?

 

Most likely!  And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha.

 

I hope there are more in the next few weeks.

 

this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount.

 

The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. 

 

I just think the timing wasn't great.  He could have bought the same 9,200 shares on the market for less...no reporting, nothing.  The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.  Cheers!

I almost never disagree with you Parsad. With this I do. It is highly unlikely Warren could have purchased 9000 a shares at a lower price. This is one months volume for the A shares. The optics are fine he is signalling to the mkt he thinks his company is cheap so cheap he is willing to retire shares. I think every one wins here. Even the Warren haters because they can now say he is a hipocite. LOL

[Parsad]

Sold to beat the coming tax hikes?

 

Most likely!  And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha.

 

I hope there are more in the next few weeks.

 

this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount.

 

The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. 

 

I just think the timing wasn't great.  He could have bought the same 9,200 shares on the market for less...no reporting, nothing.  The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.  Cheers!

I almost never disagree with you Parsad. With this I do. It is highly unlikely Warren could have purchased 9000 a shares at a lower price. This is one months volume for the A shares. The optics are fine he is signalling to the mkt he thinks his company is cheap so cheap he is willing to retire shares. I think every one wins here. Even the Warren haters because they can now say he is a hipocite. LOL

 

Sure he could have.  Take a look at the NYSE chart for BRK-A in the last month.  Thousands and thousands of shares traded below $132K:

 

http://www.nyse.com/about/listed/lcddata.html?ticker=brka&fq=D&ezd=1M&index=3

 

Also, the economic interest is the same whether he buys A's or B's.  He could have bought hundreds of thousands of B's in the open market for less than the equivalent of $89 each, retiring tons of shares in the process.  I almost never disagree with Buffett...this time I think he was doing a shareholder a favor, as well as other remaining shareholders, and the optics and timing weren't appropriate relative to his comments about taxation.  Cheers!

[roundball100]

Perhaps I interpret Buffett's comments on taxation a different way than others, but I see no inconsistency with his public comments on where taxation should go, and his purchase of shares from a BRK shareholder to possibly (?) help an individual avoid higher taxes.  If Buffett doesn't buy the shares, someone else does, and possibly higher post-January taxes are similarly avoided.  Buffett plays by the rules, and the current tax rules specify certain tax rates.  What Buffett is suggesting is that the rules be changed, but until they are, I don't see it as fair to criticize him for following the (current) rules, while openly saying that he favors a different set of rules.

 

[Hielko]

Sold to beat the coming tax hikes?

 

Most likely!  And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha.

 

I hope there are more in the next few weeks.

 

this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount.

 

The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. 

 

I just think the timing wasn't great.  He could have bought the same 9,200 shares on the market for less...no reporting, nothing.  The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.  Cheers!

I almost never disagree with you Parsad. With this I do. It is highly unlikely Warren could have purchased 9000 a shares at a lower price. This is one months volume for the A shares. The optics are fine he is signalling to the mkt he thinks his company is cheap so cheap he is willing to retire shares. I think every one wins here. Even the Warren haters because they can now say he is a hipocite. LOL

 

Sure he could have.  Take a look at the NYSE chart for BRK-A in the last month.  Thousands and thousands of shares traded below $132K:

 

http://www.nyse.com/about/listed/lcddata.html?ticker=brka&fq=D&ezd=1M&index=3

 

Also, the economic interest is the same whether he buys A's or B's.  He could have bought hundreds of thousands of B's in the open market for less than the equivalent of $89 each, retiring tons of shares in the process.  I almost never disagree with Buffett...this time I think he was doing a shareholder a favor, as well as other remaining shareholders, and the optics and timing weren't appropriate relative to his comments about taxation.  Cheers!

Just because shares traded below that value doesn't mean that WB would have been able to buy them at that price. Before he could execute transactions on the public market he would have to communicate the change in the buy back policy, just as BRK did yesterday, and shares almost directly jumped to a higher level. 

[Parsad]

Perhaps I interpret Buffett's comments on taxation a different way than others, but I see no inconsistency with his public comments on where taxation should go, and his purchase of shares from a BRK shareholder to possibly (?) help an individual avoid higher taxes.  If Buffett doesn't buy the shares, someone else does, and possibly higher post-January taxes are similarly avoided.  Buffett plays by the rules, and the current tax rules specify certain tax rates.  What Buffett is suggesting is that the rules be changed, but until they are, I don't see it as fair to criticize him for following the (current) rules, while openly saying that he favors a different set of rules.

 

I agree with you.  That's exactly his stance.  That doesn't make it right.  Again, this is my personal opinion viewing his actions on this matter, and TO ME (emphasis is me), it doesn't seem right to be taking a position on a rule, and then watching/assisting someone take advantage of that rule because it hasn't changed. 

 

If I was against backdating stock options, but the rules had not changed, should I take advantage of that and backdate options while I can?  Or in terms of something that happened to me in the past...I was against naked short selling, so I would not lend out my shares to short-sellers in Fairfax or Overstock when they were being heavily shorted.  I could have made a fat buck, but ethically it didn't seem right based on the position I took on the matter, so I chose not to. 

 

In those terms of ethics, his action did not seem correct to me here.  Not unethical per se, but the optics were fuzzy.  Cheers!

[Parsad]

Sold to beat the coming tax hikes?

 

Most likely!  And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha.

 

I hope there are more in the next few weeks.

 

this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount.

 

The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. 

 

I just think the timing wasn't great.  He could have bought the same 9,200 shares on the market for less...no reporting, nothing.  The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.  Cheers!

I almost never disagree with you Parsad. With this I do. It is highly unlikely Warren could have purchased 9000 a shares at a lower price. This is one months volume for the A shares. The optics are fine he is signalling to the mkt he thinks his company is cheap so cheap he is willing to retire shares. I think every one wins here. Even the Warren haters because they can now say he is a hipocite. LOL

 

Sure he could have.  Take a look at the NYSE chart for BRK-A in the last month.  Thousands and thousands of shares traded below $132K:

 

http://www.nyse.com/about/listed/lcddata.html?ticker=brka&fq=D&ezd=1M&index=3

 

Also, the economic interest is the same whether he buys A's or B's.  He could have bought hundreds of thousands of B's in the open market for less than the equivalent of $89 each, retiring tons of shares in the process.  I almost never disagree with Buffett...this time I think he was doing a shareholder a favor, as well as other remaining shareholders, and the optics and timing weren't appropriate relative to his comments about taxation.  Cheers!

Just because shares traded below that value doesn't mean that WB would have been able to buy them at that price. Before he could execute transactions on the public market he would have to communicate the change in the buy back policy, just as BRK did yesterday, and shares almost directly jumped to a higher level.

 

That goes back to what I said earlier that the buyback policy was silly to begin with, because it set the floor and also set the fact they would have to publically declare any changes in the policy.  I know Buffett doesn't want to take advantage of any shareholders, but he is doing exactly that when he's buying large investments in public companies at discount prices...why should Berkshire be any different.  If shareholders sell, then Berkshire should be able to buy stock at the right price on the open market without having to worry.  For God's sake, the man's done enough over the years to enlighten his shareholder base.  There's not much more he can do.  It would also prevent situations like this were the optics become fuzzy because of his political views as well.  Cheers!

[gfp]

Perhaps I interpret Buffett's comments on taxation a different way than others, but I see no inconsistency with his public comments on where taxation should go, and his purchase of shares from a BRK shareholder to possibly (?) help an individual avoid higher taxes.  If Buffett doesn't buy the shares, someone else does, and possibly higher post-January taxes are similarly avoided.  Buffett plays by the rules, and the current tax rules specify certain tax rates.  What Buffett is suggesting is that the rules be changed, but until they are, I don't see it as fair to criticize him for following the (current) rules, while openly saying that he favors a different set of rules.

 

I agree with you.  That's exactly his stance.  That doesn't make it right.  Again, this is my personal opinion viewing his actions on this matter, and TO ME (emphasis is me), it doesn't seem right to be taking a position on a rule, and then watching/assisting someone take advantage of that rule because it hasn't changed. 

 

If I was against backdating stock options, but the rules had not changed, should I take advantage of that and backdate options while I can?  Or in terms of something that happened to me in the past...I was against naked short selling, so I would not lend out my shares to short-sellers in Fairfax or Overstock when they were being heavily shorted.  I could have made a fat buck, but ethically it didn't seem right based on the position I took on the matter, so I chose not to. 

 

In those terms of ethics, his action did not seem correct to me here.  Not unethical per se, but the optics were fuzzy.  Cheers!

 

The estate needed cash to pay estate taxes.  Estates in the United States receive a stepped up cost basis when someone dies.  This shareholder died.  Warren did not 'help' anybody lower their tax bill right before a rule change.  Not that it would matter if he had.  But he did not.

[ERICOPOLY]

I know Buffett doesn't want to take advantage of any shareholders, but he is doing exactly that when he's buying large investments in public companies at discount prices...why should Berkshire be any different.

 

He views his insider knowledge regarding Berkshire as making it a different situation as compared to when he buys shares in public companies. 

 

[Hielko]

Sold to beat the coming tax hikes?

 

Most likely!  And a nice public advertisement to any other large blocks of stock who now know they can lock in a 15% rate on a lifetime's worth of appreciation at 13x,000/share with a call to Omaha.

 

I hope there are more in the next few weeks.

 

this is a one off imo. in fact the media is going to roast buffett for doing this to help a friend avoid paying higher taxes. he doesn't want to buy back a lot of stock at these levels. this is a token amount.

 

The optics don't look particularly good, but at the same time, if he can't find better investments than his own company, then you can't fault him. 

 

I just think the timing wasn't great.  He could have bought the same 9,200 shares on the market for less...no reporting, nothing.  The fact that there is tax savings for a long-time investor, after Buffett so adamantly stated that taxes for the super-rich should rise, is kind of hypocritical.  Cheers!

I almost never disagree with you Parsad. With this I do. It is highly unlikely Warren could have purchased 9000 a shares at a lower price. This is one months volume for the A shares. The optics are fine he is signalling to the mkt he thinks his company is cheap so cheap he is willing to retire shares. I think every one wins here. Even the Warren haters because they can now say he is a hipocite. LOL

 

Sure he could have.  Take a look at the NYSE chart for BRK-A in the last month.  Thousands and thousands of shares traded below $132K:

 

http://www.nyse.com/about/listed/lcddata.html?ticker=brka&fq=D&ezd=1M&index=3

 

Also, the economic interest is the same whether he buys A's or B's.  He could have bought hundreds of thousands of B's in the open market for less than the equivalent of $89 each, retiring tons of shares in the process.  I almost never disagree with Buffett...this time I think he was doing a shareholder a favor, as well as other remaining shareholders, and the optics and timing weren't appropriate relative to his comments about taxation.  Cheers!

Just because shares traded below that value doesn't mean that WB would have been able to buy them at that price. Before he could execute transactions on the public market he would have to communicate the change in the buy back policy, just as BRK did yesterday, and shares almost directly jumped to a higher level.

 

That goes back to what I said earlier that the buyback policy was silly to begin with, because it set the floor and also set the fact they would have to publically declare any changes in the policy.  I know Buffett doesn't want to take advantage of any shareholders, but he is doing exactly that when he's buying large investments in public companies at discount prices...why should Berkshire be any different.  If shareholders sell, then Berkshire should be able to buy stock at the right price on the open market without having to worry.  For God's sake, the man's done enough over the years to enlighten his shareholder base.  There's not much more he can do.  It would also prevent situations like this were the optics become fuzzy because of his political views as well.  Cheers!

I kinda agree with you that the buyback policy is a bit silly, but on the other hand: it's never easy. If you have a discretionary program it's often difficult to buy stock back since then you have to worry about blackout periods, and if you have an automated program you can't stop and resume it without communicating this to the market (creating basically the same problem).

 

PS If you are against naked short selling: you should have lended out your shares in Fairfax or Overstock! Naked short selling is the act of selling a security short without borrowing it first!

[Parsad]

PS If you are against naked short selling: you should have lended out your shares in Fairfax or Overstock! Naked short selling is the act of selling a security short without borrowing it first!

 

Actually what was happening was that the actual legitimate shares were being lent out repeatedly by brokers before the shares were ever delivered to any of the institutions.  By lending out the shares, I would just add to the quantity of shares being bandied around...then multiplied by 5-10 times because they were never delivered on time to any of the institutions. 

 

"A" lends to the institution who lends to the client borrowing, but the shares are lent out again by the institution to "B", "C", "D", etc, before they even hit the clearing house.  You then watch as these shares fail to deliver for up to several months, but because the legitimate shares are being swapped around.  Eventually you have them cleared, but in the mean time the naked short sellers leverage their ability to manipulate the stock price.  Cheers!

[alwaysinvert]

Optics schmoptics. I really don't see how this in and of itself could be considered unethical and from my viewpoint it's clearly accretive to shareholder value, so I am more than happy. If you are going to worry what every nutter might think all the time you aren't going to get much done.

 

As for the buyback programme, I would personally prefer if it was not set in stone (at least as long as Buffett is still at the helmet - I might not trust others as much not to dilute shareholder value via buybacks) but Buffett wouldn't be Buffett without watching out for the interests of his 'less sophisticated' partners.