Berkshire Hathaway (BRK)

Berkshire Hathaway (BRK)

Postby LenaHuat » Thu Sep 18, 2008 7:29 am

This tight co-relationship between the TED (3month LIBOR minus 3month Treasury) and BH's share price is interesting. They surge hand-in-hand. :D Gonna track this in future:
Buffett's Phone Rings `Off the Hook,' Stock Jumps: Chart of Day

By Michael Patterson

Sept. 17 (Bloomberg) -- Warren Buffett's phone is probably ``ringing off the hook'' because distressed sellers are turning to the world's richest person as credit markets seize up, according to T2 Partners LLC's Whitney Tilson.

The CHART OF THE DAY shows the share price of Buffett's Berkshire Hathaway Inc. along with the TED spread, the difference between what the U.S. government and banks pay to borrow in dollars for three months and a sign of lender confidence.

The 4.3 percent jump in Berkshire's Class A stock yesterday, the biggest since April 2003, tracked the surge in the TED spread to the highest level this year. Banks' borrowing costs more than doubled yesterday after the collapse of Lehman Brothers Holdings Inc. and credit downgrades of American International Group Inc.

The moves in Berkshire and the TED spread were similar in August 2007, when speculation that mortgage lender Countrywide Financial Corp. would file for bankruptcy froze credit markets.

``Buffett right now is probably about the only money in the world, in the billions of dollars range, that the check will clear overnight,'' Tilson, co-founder of New York-based hedge- fund firm T2 Partners, said in a Bloomberg Television interview. ``I think his phone is ringing off the hook and that makes me very bullish on Berkshire.''
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Re: Berkshire Hathaway Inc

Postby LenaHuat » Sat Sep 20, 2008 9:26 am

Hunch abt BH turned out right :
In a stunning last-second spike, shares of Warren Buffett's Berkshire Hathaway closed today (Friday) at $147,000 each.

That's an increase of $18,990 a share, or 14.83 percent, the biggest one-day move ever for Berkshire.

It was just late July that Berkshire was down 25 percent from its all-time high set last December.

It is now just 1.5 percent below that closing high of $149,200 and up 31.5 percent above the near-term July 39 low of $111,750.

The stock is up 3.8 percent on the year, compared to the S&P's 14.5 percent YTD decline.

It has been a good few days for Buffett and Berkshire. He picked up a bargain in the energy sector and Reuters notes that his holdings in the financial sector may be up $3.5 billion from the two-day rally that's lit up the sector in the wake of the Treasury's plan to resolve the nation's credit crisis.

Berkshire reported big stakes in Wells Fargo [WFC 39.80 2.80 (+7.57%) ] and American Express [AXP 40.40 2.68 (+7.1%) ] in its most recent quarterly portfolio snapshot. Wells is up 19 percent over the two days. American Express gained 22.3 percent.
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Re: Berkshire Hathaway Inc

Postby iam802 » Sat Nov 08, 2008 1:43 pm

Berkshire Hathaway Profit Falls 77% to $1.06 Billion

http://www.bloomberg.com/apps/news?pid= ... refer=home


---------------

Maybe it's good that Berkshire belongs to the buy-n-hold group.

Imagine, if they have sell off everything and hold cash, bond and currencies. The market would be gone by now...
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Re: Berkshire Hathaway Inc

Postby winston » Sat Nov 15, 2008 11:30 am

Buffett's Berkshire Boosts Stake in ConocoPhillips (Update3)
By Erik Holm, Edward Klump and Linda Shen

Nov. 14 (Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc. became the largest shareholder in oil producer ConocoPhillips and took a stake in manufacturer Eaton Corp. in the third quarter as stock markets tumbled.

Berkshire had more than 83 million shares in Houston-based ConocoPhillips as of Sept. 30, compared with about 17.5 million on March 31, the company said today in a regulatory filing. Buffett also disclosed a reduced holding in Bank of America Corp. and more shares of NRG Energy Inc., the second-biggest power producer in Texas. The Standard & Poor's 500 Index dropped 8.9 percent in the three months ended Sept. 30.

Berkshire, which purchased MidAmerican Energy Holdings in 2000 and reported record profits last year from selling holdings of PetroChina Co., is betting on a long-term increase in energy demand worldwide. Global oil consumption will increase about 25 percent to 106 million barrels a day by 2030, the International Energy Agency said this week.

``Buffett is thinking decades ahead,'' said Jeff Matthews, author of ``Pilgrimage to Warren Buffett's Omaha'' and founder of Greenwich, Connecticut-based hedge fund Ram Partners LP. ``He's thinking about oil production falling and an eventual doubling of worldwide demand as countries like China reach U.S. levels.''

ConocoPhillips traded as low as $67.31 a share in the third quarter after closing 2007 at $88.30. The company slipped $1.79, or 3.6 percent, to $47.39 in New York Stock Exchange composite trading today before Berkshire's disclosure.

Waiting for Spring

Buffett, the world's preeminent stock picker, has said he's also spending his own money to buy U.S. stocks as prices decline amid the worst financial crisis in 75 years, switching holdings from government bonds. Berkshire, where Buffett is chief executive officer, spent about $3.94 billion on stocks in the quarter and sold shares for about $300 million, according to separate filings.

``Most major companies will be setting new profit records 5, 10 and 20 years from now,'' Buffett said in a column in the New York Times in October. ``If you wait for the robins, spring will be over.''

Berkshire held about 59.7 million ConocoPhillips shares as of June 30, Buffett revealed in a separate filing. Buffett, 78, won permission from regulators to omit that number from his second-quarter filing and withhold it until today to prevent copycat investing.

Looking for Stability

``Energy is an industry that has the stability that he's looking for,'' said Michael Yoshikami, the president of YCMNet Advisors in Walnut Creek, California, which manages $850 million, including Berkshire shares. ``Conoco is a huge refiner, and while refiners are certainly under some pressure, they are essentially a service-for-fee business, so they are a classic kind of stable, core business for his portfolio.''

ConocoPhillips rose $1.06, or 2.2 percent, to $48.45 at 7:10 p.m. in New York in extended trading. Bill Tanner, a spokesman for ConocoPhillips, had no immediate comment.

Berkshire increased holdings in NRG Energy by 54 percent to 5 million shares, a 2.2 percent stake. The firm was the object of a takeover offer from Exelon Corp. after the Princeton, New Jersey-based company lost half of its market value in two months. NRG's board of directors this month rejected the offer.

Buffett also disclosed a 1.8 percent stake in Cleveland- based Eaton, the maker of parts for Boeing Co. planes and Volkswagen AG cars.
Eaton Corp.

``Eaton fits exactly with his investment strategy,'' said Gerald Martin, a finance professor at American University's Kogod School of Business in Washington. ``He likes to say that he wants to invest in companies that he can understand, that he can really get his arms around, and take a look at them and project their cash flows.''

Eaton rose $1.54, or 3.7 percent, to $42.69 at 6:24 p.m. in late trading in New York. Prices for new Berkshire holdings typically jump as mutual funds and individual investors mimic the stock picks. Martin co-wrote a study in 2007 that found buying after such disclosures would have delivered annualized returns of about 25 percent over 31 years, double the performance of the S&P 500. Eaton spokesman Peter Parsons declined to comment.

Buffett cut his stake in Bank of America by almost half, while increasing his investment in U.S. Bancorp. Charlotte, North Carolina-based Bank of America, which purchased money-losing mortgage lender Countrywide Financial Corp. in July, has lost 64 percent of its market value in the last 12 months.

Changing Perceptions

``It's pure speculation on my part, but it could be that the Countrywide acquisition changed his perception,'' Martin said of Buffett. ``He may have felt that bringing Countrywide in was too much.''

Scott Silvestri, a spokesman for Charlotte, North Carolina- based Bank of America, had no comment.

The U.S. Bancorp holdings rose 6.3 percent to 72.9 million shares from the second quarter. Berkshire is the Minneapolis- based bank's largest shareholder. Buffett lowered the stake in Wells Fargo & Co., the largest bank on the U.S. West Coast, less than a percent to 246.4 million shares.

Berkshire is also the largest shareholder of companies including Coca-Cola Co. and American Express Co. as of Sept. 30, with a portfolio worth $76 billion.

Buffett, named America's richest man by Forbes magazine, built Berkshire from a failing textile manufacturer into a $155 billion holding company by investing premiums from insurance subsidiaries such as Geico Corp. in out-of-favor securities and buying businesses whose management he deemed superior.

``Once every three months we get a glimpse into the inner workings of the mind of the greatest investor in the history of mankind,'' said Mohnish Pabrai, founder of Irvine, California- based Pabrai Investment Funds, which holds Berkshire shares.

Buffett discloses other holdings in filings with non-U.S. regulators.

Goldman Sachs

Buffett is finding other opportunities amid the economic turmoil, funding buyouts, buying preferred shares and acquiring whole companies. In the past two months, he agreed to spend $5 billion of Berkshire's cash for a stake in Goldman Sachs Group Inc., betting the Wall Street firm would be among the survivors of a worldwide credit crisis, and another $5 billion in preferred shares of General Electric Co.

Deals and investments reduced Berkshire's cash holdings to $33.4 billion on Sept. 30 from $47.1 billion a year earlier, according to a regulatory filing last week.

Berkshire shares, which rose in 17 of the last 20 years, are down about 29 percent since Dec. 31. The firm has reported profit declines for four straight quarters, the longest streak in more than a decade, as insurance results worsened.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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Re: Berkshire Hathaway BRK

Postby millionairemind » Wed Nov 19, 2008 8:29 am

Maybe that's the reason Y he asked ppe. to buy stocks back in October??? :?

Berkshire's Credit Risk Soars on $37 Billion Bet (Update2)

By Erik Holm and Shannon D. Harrington

Nov. 18 (Bloomberg) -- The cost of protecting against default by Warren Buffett's AAA rated Berkshire Hathaway Inc. has almost tripled in two months, a sign of just how skittish investors have become amid the global financial crisis.

The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody's Investors Service, one level above junk. The price may have risen on concern that the billionaire's firm could lose a $37 billion bet on world stock market values more than a decade from now.

``That's just so stupid,'' said Mohnish Pabrai, head of Pabrai Investment Funds and a Berkshire shareholder. The swap buyers are projecting ``present circumstances into infinity'' and concluding Buffett's bet will cost the company $40 billion, Pabrai said. ``It will never happen,'' he said.

For the swaps to pay off, Berkshire would have to exhaust its $33.4 billion cash hoard, and Buffett's decades-long record as the world's most successful investor would have to come to a cataclysmic end. President-elect Barack Obama seeks him out for advice and the world's biggest firms, including Goldman Sachs Group Inc. and General Electric Co., turned to Berkshire for capital and the prestige that comes with Buffett's backing.

Buyers of default protection are being charged 1.45 percentage points more for Berkshire swaps than for insurance against Allstate Corp. Allstate last month had its credit grade cut by Fitch Ratings after hurricane claims and declines in its investments caused a $923 million third-quarter loss. Berkshire has remained profitable amid the worst financial crisis since the Great Depression, and wouldn't pay out on its stock market bets, if it lost them, until at least 2019.

Unlikely Target

``If you were going to start picking companies that are going to default, you probably wouldn't put Berkshire at the top of the list, so it's totally unexpected to see them there,'' said Jeff Matthews, author of ``Pilgrimage to Warren Buffett's Omaha'' and founder of Greenwich, Connecticut-based hedge fund Ram Partners LP. Of the swaps, he said: ``I wouldn't buy them, and yet it's there.''

Standard & Poor's said Buffett's bet on the stock indexes wouldn't cause a liquidity crisis. Berkshire spokeswoman Jackie Wilson said she had passed along requests for comment to Buffett. The stock fell below $100,000 a share for the first time in two years last week and has dropped about 33 percent this year.

Buffett's Bets

The cost of protection on Berkshire debt has jumped to 415 basis points from 140 basis points two months ago, according to CMA Datavision. That translates to $415,000 a year to protect $10 million for five years. The median for companies rated Baa3 was 348 basis points yesterday, according to data from Moody's capital markets research group. Credit-default swaps, used to hedge against losses or to speculate on the ability of companies to repay their debt, rise as investor confidence deteriorates.

The increase may be tied to a series of bets that Buffett has taken on four stock indexes across the globe, including the Standard & Poor's 500 Index, according to Berkshire shareholders. Buffett sold contracts to undisclosed buyers for $4.85 billion that protect the buyers against declines in those markets.

Under the agreements, Berkshire will pay as much as $37 billion if, on specific dates beginning in 2019, the market indexes are below the point where they were when he made the agreements. By Sept. 30, Omaha, Nebraska-based Berkshire had written down the contracts by $6.73 billion as the S&P declined for a fourth straight quarter.

`Greater Gains'

``I believe these contracts, in aggregate, will be profitable,'' Buffett said in a statement in May, reiterating comments from his letter to shareholders in February. ``We are always ready to trade increased volatility in reported earnings in the short run for greater gains in net worth in the long run. That is our philosophy in derivatives as well.''

A total of 2,450 credit-default swaps had been sold on Berkshire as of Nov. 14, protecting a net amount of $4.7 billion, according to data from the Depository Trust & Clearing Corp., which runs a central registry for the derivatives.

Buyers of derivatives typically aren't disclosed, and representatives at 20 potential buyers including insurers and pension funds either didn't know who was involved or declined to respond.

Buyers of the credit-default swap protection on Berkshire may include the companies that stand to gain if Buffett loses on the stock bets, said Matthews. They may be hedging their gains against Berkshire by entering into separate agreements to ensure they recover some funds if Berkshire is unable to pay, he said.

`Mass Destruction'

The increase in perceived credit risk contradicts Buffett's record of building Berkshire over 40 years from a failing textile maker into a $145 billion company with businesses ranging from carpet making to utilities.

Buffett has at times decried derivatives as ``financial weapons of mass destruction'' and criticized their complexity and popularity. Berkshire hasn't disclosed which stock indexes besides the S&P are covered under the contracts or how they're structured.

Berkshire, which typically gets about half its profit from insurance, on Nov. 7 posted its fourth straight quarterly profit drop, the longest streak of declines in more than a decade, on hurricane costs and investment losses. Further declines in debt and equity markets reduced shareholders' equity, a measure of assets minus liabilities, by $9 billion in October, after the third quarter ended, the company said.

Berkshire's stock decline this year compares with a slide of 41 percent in the S&P 500. Berkshire shares rose in 17 of the past 20 years.

Not `Crazy'

Buffett may use the $4.85 billion paid to Berkshire in the derivative deals to buy stock or make acquisitions.

``Shareholders should rejoice that he was able to obtain that capital to invest on such attractive terms for years before the chance comes that he'll have to pay,'' said Tom Russo, a partner at Gardner Russo & Gardner, whose largest holding is Berkshire stock, in an interview this month. Still, he said, the increasing cost of Berkshire credit protection in the swaps market ``isn't crazy in light of the way the markets performed.''

American International Group Inc., the insurer that needed $150 billion from the U.S. government to stay afloat, nearly was forced into bankruptcy by derivatives. As credit rating firms lowered their grades on AIG, the New York-based firm was required to post collateral to show it could meet its obligations to the counterparties who took the opposite side on their bets.

No Collateral Damage

Berkshire may have to post collateral on some derivatives ``under certain circumstances, including a downgrade of its credit rating below specified levels,''
the firm said in a regulatory filing this month. Damien Magarelli, a credit analyst for Standard & Poor's in New York, said the losses are merely an ``accounting loss.''

``They've had no collateral requirements to date and the losses are not viewed by us as a cash loss,'' Magarelli said. ``It is not something that would be creating any type of liquidity issues or near term cash payments.''

Berkshire's AAA rating is the highest available. ``If Berkshire isn't triple A, I'm not sure which company would be,'' Buffett said in May.
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Re: Berkshire Hathaway BRK

Postby iam802 » Wed Nov 19, 2008 11:17 am

millionairemind wrote:Berkshire's Credit Risk Soars on $37 Billion Bet (Update2)

By Erik Holm and Shannon D. Harrington

........


``That's just so stupid,'' said Mohnish Pabrai, head of Pabrai Investment Funds and a Berkshire shareholder. The swap buyers are projecting ``present circumstances into infinity'' and concluding Buffett's bet will cost the company $40 billion, Pabrai said. ``It will never happen,'' he said.

...............



If there's anything I learn in this financial crisis, is NEVER NEVER NEVER say "It will never happen."
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Re: Berkshire Hathaway BRK

Postby kennynah » Wed Nov 19, 2008 11:24 am

i agree....NEVER is just an event that has yet occurred...to even contemplate the term "never" is to have too myopic a view... never say never...but i just said "never"..... :lol: :lol:
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Re: Berkshire Hathaway BRK

Postby ucypmas » Thu Nov 20, 2008 5:44 pm

Look at the odds.

Buffett has taken 4.5bil in premiums to insure against something that could potentially cost the company 40bil at the end of the insurance term. He has explained (though not in great detail) that the bets are on whether some equity indices (e.g. S&P500) will not perform to a certain level in 15-20years time. There are some discussions that I have seen, that the insurance are bought by funds who are in the annuity business, and need to ensure that they have enough money to pay up to the annuity buyers eventually. And unlike the normal options it is non-callable until the end of the period even though it is "in the money" now (don't understand this though).

Berkshire is first and foremost an insurance business. In the insurance business you calculate your risk and name a sum for the premiums that you are willing to take in order to assume the risk. From his track record of assessing risk it is probably a remote, something like 1 in 100 or 200 event, and yet he is taking a 5% premium on the insured sum. He priced it like it is a 1 in 20 event. In addition you get to take the underwriting premiums up front, invest it and compound it and the expectation of having to pay out on the money is pretty low.

4.5bil compounded at 10% will be worth 19bil in 15years. Compound at 15% is 36bil. While it is arguable whether he will have to pay out eventually (as well as the ability to compound at that level), there's a long time before anyone finds out, and there's money to be earned for him in the meantime.
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Re: Berkshire Hathaway BRK

Postby financecaptain » Thu Nov 20, 2008 6:14 pm

ucypmas wrote:And unlike the normal options it is non-callable until the end of the period even though it is "in the money" now (don't understand this though).


Good assessment.

I guess the above means it is a European Option and can be exercised only upon maturity. Normal option is an American one and is exercisable anytime before maturity.
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Re: Berkshire Hathaway BRK

Postby LenaHuat » Thu Nov 20, 2008 6:58 pm

He priced it like it is a 1 in 20 event. In addition you get to take the underwriting premiums up front, invest it and compound it and the expectation of having to pay out on the money is pretty low.

WB has repeatedly said this was the reason why he thought the insurance/re-insurance biz is lucrative.
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