texalope

2 Noteworthy Points From Warren Buffett's Annual Shareholder Letter

Primus is a good bet and here's my thinking.
You have to think like an owner of a privately held business with no daily quote.
They have a solid book. Spreads are going up so the income stream is rising. My company is getting paid quite well for the risk we're assuming (much like the Property and casualty business after hurricanes Katrina and Wilma).
My accountant comes in quarterly and tells me we're losing tons of money because he marks our holdings to market. My bank account is growing larger and larger and my prospects for continuation of this stream of money are very good in this cycle. I have no intention or need to sell my assets into this weak market, I'll hold them to term(about 5 years) until my insurance guarantee expires. My accountants' proclamations do not hold much value for me. My bank account does.
If a competitor came to me and offered half of book value for my good business with a growing stream of cash flows, I'd be a fool to sell it to him. Frankly, I'd buy his business under the same arrangement. So, these factors tell me Primus is a good buy here at 50% of economic book value.
The risk- a black swan event occurs with a huge bankruptcy that I couldn't predict. An outlier type event that can happen with any investment at any time.

I don't think that's enough to dissuade me from a bet that will double my money at the least($9 assigns no value to ongoing business) so this company is worth more. But,that amount is subject to debate.