Buffett buys new train set

[unclemick]

Quote:

Originally Posted by brewer12345 I think that in addition to a play on economic recovery, this is a bet on higher energy prices in the future. Rail let's you move a ton of freight 20 to 40 times the distance trucks can on a given amount of diesel. And I bet the utility holdings gave them extra insight into BNI's business. Seems like a good bet, but a big one. I suspect Berkshire will not be writing much cat reinsurance for a while after doing this. Fine by me, given that I own pieces of other cat reinsurers.

I notice CSX is running tv ads making the same point?

My suspoius mind immediately wondered why as my hand went to check that my wallet was still there.

heh heh heh - running ads on cable tv is a way to efficiently reach shippers?? .

[Nords]

Quote:

Originally Posted by clifp Nice investment Gumby. In the past some of Buffett's purchase have cause shareholders to protest the price was too low. On the perfectly logical basis that Buffett never overpays ergo we shareholders are getting taken. If you are any example I suspect most BNI shareholder will be happy to take the profits either in cash or Berkshire stock. I have mixed feelings. It doesn't strike me a real bargain, on the other hand even though I know it is foolish to believe that anybody can beat the market , the guy in Omaha has pretty good track record so I am inclined to believe that this isn't a stupid purchase.

Rumor is that the BNI board wasn't happy with the $100/share offer but Buffett said that's all he could afford. They eventually agreed to the tax-free aspects of swapping their shares for BRK "C" shares. And maybe some free See's Candies.
Buffett cuts BNSF deal at Fort Worth's Ashton Hotel | Fort Worth | Star-Telegram.com
'Courtesy Call' Turns Into a Quick Agreement - WSJ.com

Another financial firm is speculating that this will speed Berkshire's entry into the S&P500 to the extent that they're telling their customers to start buying March call options.
Berkshire Hathaway in the S&P 500? - Striking Price Daily - S. Sears - Barrons.com

Um, I'll let someone else jump into that one first...

[clifp]

On the Berkshire Motley Fool board, I think more people are excited about seeing Berkshire added to the S&P 500 than the purchase of BNI.

[Nords]

Quote:

Originally Posted by clifp On the Berkshire Motley Fool board, I think more people are excited about seeing Berkshire added to the S&P 500 than the purchase of BNI.

I'm looking forward to it. As the demand drives up Berkshire's price I'll just keep converting "B"s into "C"s and writing OTM covered calls rebalancing into it...

Looks like Buffett has also been doing a little end-of-year planning involving low-income-housing tax credits, too:
http://seekingalpha.com/article/1717...ed-a-month-ago

[Gotadimple]

Bumping this thread just to update all:

Special meeting of Berkshire Hathaway investors is January 20.

Requests are to approve a 50:1 stock split for class B shares and change par value to $.1667.

-- Rita

[seabourne]

Following up on this thread, I'm quietly happy checking BRKB (almost all of my 401k as of about last friday) and comparing this week to the DJI. So far, the return this week is about enough to get 2 more days of income for life :-)

[flyfishnevada]

Just to show you where my head is, I thought this was about Jimmy Buffet for about 10 seconds.

[Nords]

Quote:

Originally Posted by seabourne Following up on this thread, I'm quietly happy checking BRKB (almost all of my 401k as of about last friday) and comparing this week to the DJI. So far, the return this week is about enough to get 2 more days of income for life :-)

It's quite a shock to watch your favorite stock close near $3500/share one trading day and open near $70/share the next.

Anyone planning to write covered calls on this exciting new high-volume trading market?

[clifp]

Quote:

Originally Posted by Nords It's quite a shock to watch your favorite stock close near $3500/share one trading day and open near $70/share the next. Anyone planning to write covered calls on this exciting new high-volume trading market?

I was toying with the idea, but I just finished reading To Big to Fail. In the book Warren was pitched a new deal, every few days during Sept and Oct. 2008 (e.g. Bear Stearns, AIG, Lehman, Goldman Sachs) He let a lot of pitches go by, "too risk", "too complicated", "too big". The ones he swung at have been at least singles (GE) and have the potential for being a home run like Goldman Sachs. The guys batting average is incrediable, I think Tilson valuation of 130-140K is probably right.

[Nords]

Quote:

Originally Posted by clifp ... I think Tilson valuation of 130-140K is probably right.

That sounds so much better than "$86.67-$93.33"...

It's been two years since Berkshire was that high. I can wait.

[ziggy29]

Quote:

Originally Posted by flyfishnevada Just to show you where my head is, I thought this was about Jimmy Buffet for about 10 seconds.

Yeah, you know that song, "Cheeseburger in Omaha"...

[Nords]

Well, this happened fast. Berkshire's goin' in the S&P500 as soon as BNSF is acquired:
Berkshire Hathaway to Replace Burlington Northern in S&P 500 | The Rational Walk

(BTW Rational Walk is a pretty good Berkshire blog.)

The shares are already up over 5% in after-hours trading on expectations of heavy buying by index funds. Yet the acquisition won't go through until next month, so this seems like ample time for front-running. In retrospect this is the simplest possible way for S&P to replace the loss of BNSF.

But this seems to be a problem: these index funds presumably already own shares of BNSF, which they're tendering for shares of BRK. So they wouldn't need to buy shares of BRK unless they had somehow "replicated" or "sampled" their way around owning BNSF and wanted to own BRK.

I can see that a number of closet-indexing funds would want to add BRK, as well as institutions that now feel obligated to dress their windows with one of the S&P500's most respected stocks. But I'm not understanding the demand. It was thought that when BRK went into the S&P500 then investors would buy as much as 10% of the float. But what if most of the investors are already getting BRK by virtue of owning BNSF?

Eh, BRK is just shy of 25% of our ER portfolio. If it goes above 28% we'll sell a few covered calls. It'll be interesting to see what the volatility does to the options prices.

[knucklehead 61]

anyone else here buying brk-b shares?
i plan to buy more on monday...

[clifp]

Quote:

Originally Posted by knucklehead 61 anyone else here buying brk-b shares? i plan to buy more on monday...

I one point I decide that really rich was having a 1,000 share of Berkshire stock. Now that I have it , I don't feel all that rich.. .
But, I still think it is decent investment.

[yakers]

Quote:

Originally Posted by clifp I one point I decide that really rich was having a 1,000 share of Berkshire stock. Now that I have it , I don't feel all that rich.. . But, I still think it is decent investment.

1,000 A class shares of Berkshire would indicate you are fairly wealthy. All I ever had was 1 B share and now I have 50!

[clifp]

A 1,000 A shares would be more than 100 Million (113 mill at today's close), I'd call that person rich. Back early in the dot com era an acquaintances, company went public and I remember thinking that had just enough money to buy 1,000 A Shares (at the time Berkshire was trading at around 35-40K) and if I had that kinda of money I'd be very inclined to let Warren managed it. As it is I am happy to own 1 A Share and 1,100 B shares, but another 999 A would be sweet .

This whole exercise has been interesting case in the efficient Market Theory.
Back in Nov. I posted this

Quote:

n the Berkshire Motley Fool board, I think more people are excited about seeing Berkshire added to the S&P 500 than the purchase of BNI.

It seemed pretty obvious at the time to many people that Berkshire would included in the S&P and yet all of the price action happened in the last few days. I foolishly assumed that market had already factored this into Berkshire stock price oh well.

This chart shows the action

[clifp]

Including Berkshire in S&P helps poor kids in Africa. Ok that is my conclusion.

Good article on Morningstar.

Quote:

Standard & Poor's decision to add Berkshire Hathaway to the S&P 100 and S&P 500 benefits a lot of people and groups connected to the Omaha-based conglomerate. Berkshire investors benefit from the buying demand coming from index funds that must add Warren Buffett's firm to their holdings after the Burlington Northern Santa Fe Corp. deal closes and Berkshire joins the flagship S&P 500. That realization may be the reason behind Berkshire stock's roughly 9 percent surge since S&P made its announcement Tuesday. The B shares closed today around $74. ... But one final beneficiary of the S&P decision has received less ink, bits and air time. That's The Bill & Melinda Gates Foundation. As this GuruFocus data show, Berkshire represented about 53.4 percent of the Gates Foundation's more than $10 billion portfolio as of Sept. 30. A sharp rise in Berkshire's stock price obviously benefits the foundation in funding its charitable endeavors. ... Buffett plans to keep donating his Berkshire stock to the Gates Foundation every year, with the number of shares donated falling 5 percent each year. The Gates Foundation is likely to be a daily seller of Berkshire stock for years to come. The index investors provide a constant stream of buyers. Because those investors buy big quantities, the Gates Foundation may be able to increase the pace of its selling without hurting the stock price, and perhaps at times sell in bulk. That makes life easier for the foundation that bears the name of Buffett's bridge pal and fellow Berkshire board member. Think Buffett didn't see this a mile in advance? Don't bet on it.

Rest of the article here

[Nords]

Whitney Tilson has long been bullish on Berkshire and is talking even more of his book than usual, but here's an interesting analysis of why Berkshire is at least 20% undervalued.

http://www.marketfolly.com/2010/02/hedge-fund-t2-partners-berkshire.html

I don't know how well their PDF version displays on that link, so I've also attached it here.

[clifp]

Quote:

Originally Posted by Nords Whitney Tilson has long been bullish on Berkshire and is talking even more of his book than usual, but here's an interesting analysis of why Berkshire is at least 20% undervalued. .

I always learn something from reading Whitney's analysis.

More info financing Warren's latest toy'

Quote:

Berkshire Hathaway Inc., Warren Buffett's investment holding company, is selling an $8 billion offering of senior secured notes to help finance its takeover of Burlington Northern Santa Fe Corp. The issue will include $2 billion of one-year floating-rate notes, launched at a spread flat to 0.03 percentage point above the three-month London interbank offered rate; $1.1 billion of two-year floating-rate notes, launched at a spread of 0.18 percentage point above Libor; $600 million of two-year fixed-rate notes, launched at 0.65 percentage point above Treasurys; $1.2 billion of three-year floating-rate notes, launched at 0.45 percentage point above Libor; $1.4 billion of three-year fixed-rate notes, launched at 0.85 percentage point above Treasurys; and $1.7 billion of five-year fixed-rate notes, launched at 0.95 percentage point above Treasurys.

A fair amount of floating rate notes, which is somewhat surprising. Although the 5 year notes are strictly fixed. For those interested you can make more money buying CDs from PenFed then buying bonds from Warren.