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Berkshire's Annual Shareholder Meeting Replies |
HenryTo
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 Posted: Sat Nov 07, 2009 1:25 am Post subject: |
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Morningstar's first impression of Berkshire's earnings:
http://quicktake.morningstar.com/StockNet/san.aspx?id=315274
| Quote: | Berkshire Hathaway BRK.A BRK.B reported solid third-quarter results largely in line with our expectations, and we will keep our fair value estimate. Book value per share rose 10% in the quarter after an 11% increase in the second quarter. These very strong annualized increases (40%-plus) are arriving amid light catastrophe losses for the reinsurance operations, as well as improving equity and credit markets and the impact on the value of Berkshire's derivative positions. We had been anticipating somewhat better third-quarter results out of Berkshire's operating subsidiaries amid the developing economic recovery, but we note that revenue growth in these operations did improve a bit on a sequential basis, after discounting for normal seasonal trends, as did the aggregate margin in those operations.
Berkshire closed the quarter with nearly $27 billion in cash, and we see its liquidity as more than amply supplementing other features of its robust financial strength. Berkshire's overall operating cash flow has been heading higher in the last couple of years, even as reported earnings and book value remained depressed (at least until the last two quarters). Berkshire has been gaining quality market share and writing expanding premium amid unsettled insurance markets, leading to higher overall cash flow even as the contribution from the operating subsidiaries waned in the recession. During the third quarter, premium volume was flat compared with that of a year ago, but the light catastrophe quarter damped that result a bit. Overall operating cash flow was basically flat or modestly higher from the second quarter, after discounting for normal seasonal trends. |
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rffrydr
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rffrydr
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| Posted: Sun May 03, 2009 10:32 pm Post subject: |
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"Toke" what?
The LSD is the LDS 
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HenryTo
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| Posted: Sun May 03, 2009 6:40 pm Post subject: |
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The LSD are the various characters around Omaha. 
Morningstar's video summary - including an update on its derivative contracts (Berkshire toke down the strike price from an S&P print of 1,500 to 950 but shortened the duration from 19 to 10 years), the housing market, and the US consumer:
http://www.morningstar.com/cover/videocenter.html?bcpid=1184614598&bctid=21912463001 |
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nodoodahs
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| Posted: Sun May 03, 2009 8:21 am Post subject: |
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If it's really a Woodstock for capitalists, I wanna know, where's the LSD?
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rffrydr
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| Posted: Sun May 03, 2009 6:58 am Post subject: |
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CDS market would work better if it didn't exist says Munger:
| Quote: | | “If I were the governor of the world, I would eliminate it entirely -- 100 percent,” Munger said in a Bloomberg Television interview today. “That’s the best solution. It isn’t as though the economic world didn’t function quite well without it, and it isn’t as though what has happened has been so wonderfully desirable that we should logically want more of it.” |
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rffrydr
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| Posted: Sun May 03, 2009 6:54 am Post subject: |
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CDS market would work better if it didn't exist says Munger:
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HenryTo
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| Posted: Sat May 02, 2009 11:45 am Post subject: |
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Morningstar's live blog in the Berkshire annual meeting:
http://discuss.morningstar.com/NewSocialize/blogs/berkshire/archive/2009/04/28/woodstock-for-capitalists-2009-blog.aspx
| Quote: | 10:22am
One other aspect to that new investment leader question--Munger said they wouldn't be interested in someone who went entirely to cash in a timely way, and Buffett agreed.
10:15am
New question from a journalist on the successor issue for investment management, and how well did they do last year, given how bad it was.
Buffett: There are three candidates for CEO, all internal candidates. There are four possibilities for investment management leader, which may or may not be just one position, and they could be inside or outside the organization. But the CEO will come from within Berkshire Hathaway. Those four candidates for the investment position--they didn't cover themselves with glory last year, but I didn't either. They were about in line with the S&P, down 37%
10:07am
Regarding housing, Buffett cites a pickup in housing activity in California in the last few months. Not in prices yet, but it looks as if there is something close to stability in lower to medium housing. The situation is getting corrected, but the road to solution will be long.
10:04am
Munger on credit rating agencies: It's an example of clever math, being too smart for your own good. Buffett: They believed their own kool-aid, those AAAs. At Berkshire, you can't say "do this because everyone else is doing it." But that happens in security markets all the time.
10:02am
Sell Moody's? Down the road, it's probably still a good business, but it's hard to say what Congress may do impacting the credit rating market.
10:00am
Buffett's answer on ratings agencies: The conflict of interest question (getting paid by issuer) wasn't as big a deal for the rating agences as is being made out. The fundamental problem was broader, in terms of beliefs about housing prices. They just didn't understand what could happen to housing with leverage. |
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HenryTo
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diesel
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| Posted: Mon Nov 10, 2008 4:29 am Post subject: |
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Its interesting that the 5 year credit default spread on Berkshire Hathaway corporate debt has climbed above 200 basis points. Wouldn't it be ironic if Buffett went bankrupt, along with Berkshire. Maybe Livermore new more than people gave him credit for when he said "no one beats the market, no one".
So who is still standing? Bill Miller is down and out. Trump is all but bankrupt. Citadel is in trouble. SAC capital is flat to down. The hedgies are being taken to the cleaners left right and center. The only big money winning that I can see is the market makers with their fancy black box systems and those sitting tight in cash.
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rffrydr
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nodoodahs
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| Posted: Sun May 04, 2008 12:45 pm Post subject: |
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IMO this is materially the same condition that many holders of CDOs based on subprime mortgages would be in, if they could have afforded to weather the swings in mark to market ~ a paper loss on a quarter, followed by their receiving full value for their investment over time.
Why is Buffett's situation viewed differently by the market?
Is it because of the lighter leverage (probably part of it) or because he's Buffett (probably part of it)?
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HenryTo
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| Posted: Sun May 04, 2008 12:22 pm Post subject: |
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Yes, a significant chunk of this loss was on put options that Berkshire wrote in four major market indices. Since March 31st, Berkshire has probably recovered 30% to 40% of this $1.2 billion loss on these put options:
| Quote: | Our second major category of derivatives is long-term equity put options that we sold on four major stock indices, including the S&P 500. These contracts come due between 2019 and 2028. As they expire, we will make payments to the holders of these puts only if the index in question is below its level at the time we wrote the put. If markets are higher, we will owe nothing. In the meantime, the premiums we have received are ours to invest freely.
At yearend we were holding $4.5 billion in premiums we had received for these puts and had recorded a liability of $4.6 billion for possible payments in 2019-2027. During the first quarter we received $383 million from the sale of additional puts, which are due in 2023-2028, and increased our overall liability to $6.2 billion. This change largely reflected the decline in world stock markets, but we also made valuation adjustments that took account of movements in foreign exchange rates and interest rates. Overall, our first-quarter accounting loss on our put contracts was $1.2 billion.
We believe that these contracts will prove profitable over the 15-20 year periods they cover, even if we exclude the investment income we can expect to earn on the $4.9 billion that we hold. However, as the first quarter indicates – and as we warned in our 2007 annual report – Berkshire’s earnings may swing widely because of the accounting regulations that govern the reporting of derivatives contracts. |
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rffrydr
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| Posted: Sun May 04, 2008 7:34 am Post subject: |
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The great decrier of derivatives takes a 1.6bn non-cash loss--on mark to market--final proof that in times like these it's not the numbers, it's the counting.
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HenryTo
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