2) He want to use some cash so that his successor won’t have too much cash to squander (this is legit considering his age, and a lot of times people make mistake when they are rich);
3) Last but most important, financial crisis taught Buffett a lesson: liquidity is very important. GE and GS got his endorsement and got cash by issuing stocks in one day. Buffett could not do that before buying BNSF and the stock split. Now he can. BRK is S&P component, much more widely held. “Get access to capital market” is one reason Goldman went public in 1990s.
I think Buffett only said 1. But I think 2 and 3 are also the factor here. Remember Buffett was against stock split up to this BNSF deal. Although he said publicly splitting Berkshire stock is for small BNSF shareholders, a valid point. Nonetheless I would be astonished that was the only reason to overthrow 40 years belief/rule in one deal.
I did not go to the Berkshire annual shareholder meeting, partly because of the recession (cost cutting), partly because I sold the stock recently (note: one does not have to buy stock to get the admission ticket, they sell it at $5 on eBay). There are live blog and twitter on the meeting (6 hours Q&A), such as MarketBeat (WSJ), CNBC BuffettWatch and NY Times Andrew Sokin. But there are no webcast, because Warren and Charlie are old fashioned.
(Original) We all know the stock rating game: I mean those “buy”, “hold” and “sell” rating usually issued by sell side (brokeage) analysts. They are mostly not objective, because at the end of the day the dealers want to sell you more stocks, regardless they are good or bad. At the height of this analyst game is Goldman “conviction buy”, my question for them is why there are no “conviction sell”? Presumably, one can use a sell list to short stocks?
Oh well, Michael Lewis, the former Soloman bond salesman, described the analysts in his “Liar’ Poker” very well. So I won’t keep beat on them. My focus on this little article is on the credit rating (bond rating) game. We all know the credit rating agencies (agencies may have mislead some to think they are independent organization, they are really for-profit companies) have been under attack for the debale of housing/mortgage markets because they had been slept in the same bed with the issuers of MBS (mortgage backed securities).
I sold my remaining BRK.B share last week, and got some US bank (NYSE: USB) shares instead. The main reason I sold BRK.B is:
1) I don’t really understand the valuation of the business, which is 50% insurance + 50% manufacturing, housing, retailing etc. I have no idea for insurance and the whole thing is too complicated (big) for me.
2) I feel while Buffett escaped the worst market in 2008 with relatively few wound, he has appeared too much in public (CNBC?), and may have spent too much time with people he felt comfortable with (CEOs of Goldman Sach etc.). In other words, I hope he spend more time in Omaha, doing his thing/improving himself, rather than “start get into bubble”.
For the similar reason, I decided not to worship him in Omaha this May, although I understand the chance of seeing the great investor becomes slimmer and slimmer as time goes (as I told my wife 🙂
That’s OK, at least I voted with my best judgement. I will explain why I voted against some of the directors if you are curious.
I remember years ago (in dot com era) there is a book named Dow 36,000. Obviously that predication was a laughing stock becaue Dow crashed in year 2000. No I am not trying to make a fool of myself, my title Dow 5,000 is merely to reflect today the Dow and S&P dropped to 12 year low again (source: bloomberg).
Berkshire Hathaway (NYSE: BRK.A; BRK.B) has not done well lately. Nonetheless, Nightly Business Report (PBS) interviewed Buffett. The topic ranges from new administration, recession and investing. The interview is about 30 minutes long.
May be Bill Gates is selling on behalf of Gates foundation (USAToday article)? As you may know in 2006 Buffett donated large number of shares to Gates fundation (NYTimes article). I was wondering who is buying BRK.B on Friday? I know I could only afford 0.5 share at this time (hint: President Bush, could you speed up the tax rebate 🙂
It seems there is lots of confusion about Berkshire (NYSE:BRK.A, BRK.B) options (paper) loss in its Q1 earning report, especially among individual investors. First, let me quote Buffett’s take on those options in his recent annual shareholder letter (link to letters):
“The second category of contracts involves various put options we have sold on four stock indices (the S&P 500 plus three foreign indices). These puts had original terms of either 15 or 20 years and were struck at the market. We have received premiums of $4.5 billion, and we recorded a liability at yearend of $4.6 billion. The puts in these contracts are exercisable only at their expiration dates, which occur between 2019 and 2027, and Berkshire will then need to make a payment only if the index in question is quoted at a level below that existing on the day that the put was written. Again, I believe these contracts, in aggregate, will be profitable and that we will, in addition, receive substantial income from our investment of the premiums we hold during the 15- or 20-year period.