Ravi Nagarajan

Berkshire Hathaway on Sale - Financial Times

You're entitled to your opinion, but I have found that reading FT along with the WSJ every day provides the right balance of articles/information. I also read The Economist, that other British provincial magazine, no doubt also not to be taken seriously by anyone who is anyone...

On Dec 07 03:11 PM Buckoux wrote:

> The Financial Times (of London) is not a reliable source of financial
> information for US investors. Most of the reporters are provincial
> English types and have little to no experience of US business and
> government models. The panic about "nationalizing" US banks last
> Winter was started in the pages of the Financial Times by silly scribes
> who know little about finance and even less about the US Constitution.
> FT is best enjoyed as British satire. No one who is anyone takes
> it seriously.

What's Buffett's Ideology?

"Before I comment, I'd like to know exactly who is writing an article that, on this website, appeared as if Buffett himself was writing."

I was wondering the same thing. This seems misleading to say the least. It is one thing to use an anonymous identity and another to use Buffett's name in this manner.

Has Buffett Lost His Mind?

Calling the deal "crazy" or "insane" does little to add to the discussion in my opinion. These are merely emotionally loaded terms. To get a sense for whether this deal makes sense, one only needs to listen to what Buffett has actually said:

(1) He is not claiming that this is a home run and has acknowledged that returns will be similar in size to what can be expected from utility type investments.

(2) He is not claiming that BNI is "cheap" although Buffett has a history of being diplomatic when it comes to doing deals. It would hardly help the deal go through to go around boasting about getting a good price.

(3) Berkshire's operating companies have large amounts of free cash flow that cannot be reinvested in the operating companies generating that cash flow at acceptable returns. Therefore, the cash comes to Omaha for redeployment. For the last several years, that cash has just piled up. Last October, some of it was put to good use opportunistically (GS, GE, etc). However, Berkshire needs a long term dependable place to reinvest cash flow and the railroads seem to be a good solution for the "problem" of all this cash coming into Omaha.

Of course, the other options for deploying free cash flow include dividends, share buybacks, and buying private companies. I don't think BNI precludes any of these additional options from being pursued.

Shareholders who have realistic expectations for Berkshire (that is, increases in intrinsic value exceeding the S&P 500 by a few points/year) are not the ones who are disappointed. The critics are mainly upset that Buffett has settled for something unlikely to deliver a home run. But that's not what he's trying to do at this stage.

Buffett's Betrayal

Let me get this straight - Warren Buffett, a man who is giving away almost all of his fortune built over a lifetime to charity, decided to manipulate the political system for his own personal enrichment putting 50+ years of reputation and track record on the line in doing so.

Sorry, but this article has no credibility. Mr. Buffett obviously believes that he has an important role to play in the public policy area and rightfully so given his track record. I personally do not agree with all of his recommendations (particularly on taxes) but this does not prevent me from appreciating his involvement. The country would be worse off if people like Mr. Buffett chose to retreat from the public arena.

I realize that the various "Buffett has lost it", etc articles get a significant amount of attention for the authors. Sadly for these critics, the fame is always short lived and fleeting. In this particular case, I suspect that the attention will soon turn to amusement as we start to see that Buffett was right on the money with most of his statements and his management of Berkshire.

5 Reasons Why the Apple iSlate Will Be a Failure

The real killer app for the tablet, and the one that is required to make it a "mass market" device, will be for newspaper content. Without an outstanding interface for reading newspapers, one that is equal to or better than print, the tablet cannot gain mass market appeal in my opinion, for the reasons mentioned in this article.

As I waited for my WSJ and FT to arrive this morning (landed on my door at 6:45), I was thinking about how great it would be to have a "killer app" for electronic delivery of newspapers - one that all of my fellow early risers could read at 5 or 5:30 in the morning. Yes, I could go online to wsj.com but the form factor and portability of a tablet could approach or exceed the experience of newsprint while logging onto my computer (or a tiny mobile device) can never replicate newsprint.

Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance)

> As much as I worship the avuncular, chocolate milkshake loving,
> Sees Candy eating Oracle of Omaha, memorizing his annual letter to
> investors and hanging on his every spoken word, he hasn’t been doing
> that well lately.

Well, I beg to differ. Market price of Berkshire stock is a poor indicator of how well Buffett and Munger have been doing over the past several months.

Nevertheless, for those with short term mindsets, the Q2 report coming out in August should provide some "momentum" given that the mark to market gains on the derivatives will have reversed Q1's losses and the stock portfolio will be up significantly. The derivative mark to market nonsense is discounted by those who understand Berkshire but I suspect investor interest will be sparked by the improved results. None of this matters for a long term investor but I've observed Berkshire for long enough to come to terms with how misunderstood it is, and the reality that eventually price and intrinsic value will converge.

Meredith Whitney Quitting Oppenheimer Shows Contrarian Indicators Still Work

Cetin Hakimoglu's
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On May 12 05:16 PM nyoneway wrote:

> Cetin, what is your track record? Feel free to disclose your long
> positions and see where we've at in 30 days.

Electric Car Initiatives Heat Up: Implications for Investors

For electric vehicles to gain broader appeal, they need to be viable for road trips even through it is true that most people drive daily distances that would be supported on one charge. The idea of just getting into your car and driving wherever you want is deeply ingrained into the culture of the country. That is why the idea of battery exchange stations is very exciting. This could be a complete game changer for electric vehicles:

www.betterplace.com/ou...

Most people do not want a specialized vehicle only for commuting so it is important to have more than commuting range. Given the longer recharge times, the idea of battery exchanges (which takes no longer than filling a tank) could be the solution. Obviously this would require a huge infrastructure investment.

Buffett's Big Rail Buy: What It Means for Berkshire Shareholders

On Nov 03 10:45 AM Graham and Dodd Investor wrote:

> Clearly, Buffett considers Berkshire Hathaway stock "overvalued"
> relative to Burlington Northern. Whether or not that means it's overvalued
> relative to everything else, that's another question.

Agreed, he must think that what he is paying is worth less than what he is receiving or the deal wouldn't be done.

The big question: What is the intrinsic value of Burlington Northern Santa Fe? I'm sure many Berkshire shareholders (myself among them) are reading BNI's 10K today to come up with an estimate.

Natural Gas Extraction May Be More Expensive Than It Seems

On Nov 03 10:09 AM koolsool wrote:

> Whether natural gas is $3 or $9 does not matter.

Well of course it matters. If the extraction costs for shale deposits are greater than the prevailing price for gas, then the deposits are not economically viable.

Our Nation's Risk of Default

The government would monetize the debt rather than default. Very little of the debt is inflation protected and it is all denominated in dollars. Of course, inflating out of the debt would destroy the country's ability to borrow going forward and the US Dollar's status as a reserve currency would be destroyed as well. Furthermore, foreign relations would be harmed, perhaps permanently, as creditor countries like China are burned severely.

Warren Buffett's latest shareholder letter included a comment about the upcoming "onslaught" of inflation and both Buffett and Munger spoke about how treasuries are a terrible deal at current interest rates. I would not bet against their views on this point.

What Is the Real Unemployment Number?

Yeah, only 70% or so of GDP is consumption. Unemployment isn't relevant. Is there a mathematical formula showing this?

On May 11 03:34 PM Cetin Hakimoglu wrote:

> Can we stop dwelling on job loss? Those aren't important.

Questioning Berkshire Hathaway's BYD Purchase: Long-Term Economics?

This was somewhat unusual purchase, but in my opinion fully justified by BYD's technology which has yet to be even remotely approached by competitors. 250 mile range for an electric vehicle is a game changer. Achieving 50% recharge in 10 minutes is another game changer. I would not bet against BYD (although neither would I own it at current levels except through my indirect stake via Berkshire).

More on BYD:

www.rationalwalk.com/?...
www.rationalwalk.com/?...

Was That the End of the Rally?

Unemployment peaked in 1982 and steadily dropped throughout the rest of the decade ending at 5.3% in 1989. This was also a decade in which nearly 17 million new jobs were created.

www.bls.gov/cps/cpsaat...

In an economy with consumption accounting for consistently over 2/3 of GDP, a healthy labor market is essential for economic growth. Isn't this obvious?


On May 13 03:00 PM thiazole wrote:

we had pretty good economic growth throughout the
> 80s, yet unemployment was persistantly high during that period as
> well.

Natural Gas Extraction May Be More Expensive Than It Seems

Interesting op-ed in the WSJ this morning on the shale topic:

online.wsj.com/article...

I don't doubt that shale provides real reserves. The question is at what cost natural gas must trade at to make extraction economically viable.