raytayzmd

The 15 Most Cash Rich Companies

...hilarious that this got 38 positive ratings -- including mine, by the way...frustrating so many seekingalpha posters conveniently leave out such pertinent details.


On Mar 13 09:04 AM martyg wrote:

> the author provides the same lack of clarity as do many previous
> commentators on the cash rich companies.
>
> how much is the net cash? having a billion and owing a billion makes
> the company's amount of cash worth zero.

Berkshire, Leverage, and Triple-A Ratings

..."So it's worth looking quite closely at triple-A ratings, to see exactly how they're arrived at."...truly, and add to that "how they're lost" as well...reviewing insurance company 10Q's a few weeks back, I noticed that most had the greatest partof their assets listed as "Level 2"...closer inspection reveals that these consist of assets whose values are derived from markets that are not active or inputs that are observable either directly or indirectly and include the following:

1. Quoted prices for similar assets or liabilities in active markets

2. Quoted prices for identical or similar assets or liabilities in non-active markets

3. Inputs other than quoted market prices that are observabled

4. Inputs that are derived principally from or corroborated by observable market data through correlation or other means

...well, that certainly covers a lot of territory and certainly leaves the "assessor" a lot of room to interpret value...and, in turn, makes it next to impossible for a shareholder or company client to assess the insurer's strength...and it's now clear that we can't depend on Moody, Fitch or anyon else's assessment...more worrisome are Level 3 assets with their "unobservable inputs"...look at this article from a year ago which lists companies with more Level 3 assets than shareholder equity:

www.minyanville.com/ar...

...well, isn't that an interesting list?...

Berkshire Testing November Lows - Already Down 17% YTD

..."But if it breaks, look out below."???...is this supposed to be the wisdom that I am to derive from this article?...and exactly how many yachts do your customers own?

Buffett Serving Free Lunch?

This guy better explains what I'm getting at:

"He (Buffett) has the cash, he doesn't have to post collateral (we hope), he's comfortable that in 18 years the market will be 65% higher, and he claims he doesn't care about the mark to market risk. I'm not sure he thought it through completely though: even if he has no collateral issues, the action of the person covering themselves against his risk certainly does, and that person is screwing up Warren's ability to finance himself elsewhere."

crookery.blogspot.com/...


On Nov 25 05:51 AM Fran the man wrote:

> Yes, you are right, BRK will have to recognise the liability on their
> Balance Sheet and mark-to-market/model the “fair value” movements
> in these puts.
>
> However, from a credit worthiness perspective, the approach the ratings
> agencies (who are the final authority when it comes to credit risk)
> will take would be to look at the terms and tenor of the obligation.
> BRK has written these at-the-money puts for a duration of 15 years
> (minimum) and does not have a present obligation to settle this “debt”.
> Remember there is a condition probability here a.) firstly the indices
> must close below the agreed value, and b.) should this occur BRK
> must pony up the cash to the extent the puts are in the money (for
> the counterparty). BRK can only ever default on this obligation (should
> it be in the money for the counterparty) in 2019 and longer dated
> debt carry a much lower weighting than shorter dated debt in assessing
> credit risk (to clobber this point to death: BRK cannot default on
> this obligation for 11 years still).
>
> Secondly, and more importantly, what all this illustrates is the
> inherent limitations of accounting (don’t get me wrong accounting
> is imperative for the proper functioning of capital markets, but
> will never be an exact reflection of economic reality). This BRK
> put is a case in point: the question here is what is the economic
> reality for BRK? Let’s take the S&P500 put as an example, firstly
> obviously Mr Buffett is bullish about the prospects of the American
> economy (and probably an increase in inflation) with a resultant
> increase in the underlying nominal earnings of the S&P500. During
> 2004 (when these options would have been written) the S&P500
> earned c. 63 per unit and S&P500 was trading at 1150 (the S&P500
> on was trading at or slightly above its long run historical average
> in terms of. price earnings, price-to-book, price-to-sales etc.).
>
>
> Should nominal GDP growth in the US average 5% p.a. (say 2.5% inflation,
> 2.5% real GDP growth) the S&P500 would earn 131 p.u. in 2019,
> at 1150 this would translate into a PE of 8.8. The S&P500 has
> traded at this multiple or lower only 35 quarters out of 288 (i.e.
> since 1936). Although possible it is not probable. Also bear in mind
> that the S&P500 is subject to survivorship bias i.e. if a company
> loses a big chunk of its value a new, higher valued, company will
> be included, introducing a upward bias to the S&P500 (and an
> additional benefit for BRK) vs. e.g. a single stock reference asset.
>
>
> The above illustrates the practical reality, BRK’s thinking and the
> economics. With respects to the real cash flow argument there is
> truth to the argument that traders will be able to sell these puts
> at the prevailing market price to other traders. That is exactly
> it: other traders, the real patsies are the traders trading this
> thing because at some point, like all other market inefficiencies,
> it will correct and pity the poor sole stuck with it who bought it
> using historical volatility to value it instead of looking forward.
>
>

Buffett Serving Free Lunch?

...however, that put sits on BRK's balance sheet its entire lifespan and has a negative effect since it has to be accounted for...presumably, that currently has a negative effect on the company's credit worthiness and increases costs associated therewith...a pertinent question is how much effect will that be?

Value Investors: Stay Strong, and Follow Warren Buffett

...the problem lies in trying to assess value...BRK now has a potential 37 billion dollar bomb sitting on its balance sheet IF the market doesn't recover in ten years...37 billion?...ten years?....how does one assess the "value" of that?...anymore so many companies have such complicated structures -- e.g. GE -- that who can assess them...buying Marmon and paying a buck for a buck of revenues from a construction/industria... conglomerate heading into a recession was good "value"?...maybe times have changed and Buffett is out of his element.

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

...actually after yesterday I think they're down about 80% in one year...maybe Harvard'll give him a refund.



On Nov 20 05:39 PM Terry Huebert wrote:

> I'm nowhere near down 70% yet and I'm just a bum from Moose Jaw Saskatchewan,
> with a BSc and a teaching diploma.

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

...just got through looking at your mutual funds -- hmmm, down something like 70% in a only a year?...wow, did you pick pick a great time to start some mutual funds or what!...so much for getting a Harvard MBA!

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

...I bet it must be hard to type with those rose-clored glasses on, huh?...Buffett's good but even Michael Phelps couldn't swim his way out of a tsunami...maybe Warren beginning to believe in his own "myth"...after all, he shucked out 5 billion for 60% of Marmon -- a conglomerate of businesses that are almost all building and industrial related...that's about a buck for every buck of Marmon's revenue that BRK is entitled to -- pretty expensive going into a recession, I would think...and then you write something like:

"If these contracts were written by anyone else, I would be worried about substantial losses over the next few years, but given what I know about Buffett, I think it’s likely that this will prove to be a profitable investment."

...hmmmm -- what'd you say your stop-loss was?