gjg49

Riding the Rails: Why BNI Was Berkshire's Best Bet - And Vintage Buffett

no one in these comments asked a very important question: why did BNI's board and, most importantly, BNI's management decide to sell the whole company now rather than years from now at a presumably much greater value (i.e. price)?

buffett talks about waiting for people, probably most often private family-owned enterprises, to want to sell their businesses and then scooping them up for what will be the most advantageous circumstances for the sellers, the employees, and the customers of the firm. from the seller's perspective, this deal does not contain any components of what buffett generally seems to practice--well, maybe it will be good for the employees. as examples, recent deals for buffett resolved family issues for privately-owned mars and for the pritzker family with marmon/hyatt--how does BNI reflect any intractable issues that the sellers might face?

so, two questions:
first, if BNI holds such a promise of great long term value, why would BNI's management (not just the ceo, but the promising up-and-comers etc) want to effectively reduce their bets on what they can control, BNI itself, and instead stake their longer term futures on the vast and diffuse BRK empire??

second, why has buffett chosen this time to seemingly break his own very-well-tested modus operandi on acquisitions (yes, he bought all of flight safety and dairy queen, but these were relatively small and had somewhat special circumstances from the sellers perspective) and buy 100% of a large company??

buehler, buehler?? ...anyone, anyone ???

disclosure: i own some brk/b and bought bni last week as a risk arbitrage play.

Nine Companies Increasing Dividends

user458794:
vanguard has a relatively low fee (0.35% per year) fund called the dividend appreciation index fund (vdaix) that mimics the index of the s&p dividend achievers. mstar gives it 4 stars, but i didn't check out who mstar benchmarks the fund against. one caveat, firms like wells fargo and pfizer cut their dividends during 2009, but s&p only creates the list once per year; hence, vanguard includes them in the fund just as s&p currently includes them in the list of dividend achievers--you and i know with virtual certainty that s&p will exclude them in the 2010 list but vanguard will not eliminate the position until the new list comes out (ironically, wells fargo is the largest holding according to vanguard's web site.)

vanguard also has an actively managed fund, the dividend growth fund (vdigx) that gets 5 stars from mstar, has slightly lower fees (0.32% per year), and also offers a higher current yield than vdaix.

by the way, if you prefer etfs, vanguard also offers vig, an etf that should tracks the same index used by vgaix but only costs 0.24% per year. mstar gives vig 4 stars.


On Nov 03 08:52 AM User 458794 wrote:

> To: Dividend Growth Investor (not sure how to reach you otherwise),
> or other contributor:
> Question: Is there a highly rated (Morningstar 5-star) Mutual Fund
> you would suggest as a core holding for my Roth IRA which contains
> the top Dividend Growth U.S. companies that you mention often, that
> is also no load and low fees? This would hopefully anchor a portfolio
> of individual dividend stocks. Looking at a 10 to 15 year time frame
> now. I am having trouble looking for this data myself. Thanks.

An Opportunity in Chevron

just how safe is the dividend??

by my calculation (and i err as frequently as anyone else, so i am open to correction) over the past 12 months, cvx generated $20 billion in operating cash flow and spent $21.1 billion on capital spending. if that is correct, then cvx did not generate a sufficient level of cash flow to pay the dividend over the past 12 months. if correct, cvx effectively "borrowed" (either consuming cash off the balance sheet or increasing external borrowing) by approximately $6.3 billion to pay the $5.2 billion in dividends over the past 12 months.

as of june 30, 2009, cvx also runs a net debt position of $4.7 billion (that is, total debt exceeds cash on the balance sheet--this contrasts with a $600 million net cash position at dec 31, 2008 and a $2 billion net cash position at june 30, 2008), albeit not very large relative to the size of the $161 billion asset base and $87 billion equity base. if the operating cash flow and capital spending remain on the same path, chevron will need to increase net debt to continue to pay the dividend at the same rate.

management may well be able to tweak the operating cash flow and/or capital spending to improve the free cash flow generation, but unless they do, i would be less comfortable about the sustainability of the dividend at the current rate. i would not expect a dividend cut imminently, but at the same time, things will need to improve to sustain the dividend at the current rate.

According to a study published yesterday, one American dies every 12 minutes due to the lack of health insurance.

monroe trader, carlos liam, and anmy other interested bystanders:

allow me to clarify my comment. the $800 billion should have been $80 billion per year cost for the proposed system. the study that prompted this whole thread suggested that only 40,000 lives would be saved annually by insuring people who are currently uninsured. if we save 40,000 lives per year at a cost of $80 billion, that equals $1.8 million per life saved. the article and the comment said nothing about illegal immigrants.

the question is: who believes that spending that much money to save that few lives is worth it??
a corollary question might be: how could we (the people of the united states) spend less money to save more lives??
i don't necessarily have answers to these questions, but if you are either for or against the proposed health care plan, you ought to have some framework for answering those two questions. one question addresses the potential return from the plan and the second question addresses alternative investments to gain the same benefit.

Gold: The Moriarty Warning

you might want to check the tax code.
page 66 of irs publication 550 indicates that the long term cap gains rate for collectibles (and this includes gold--gold, silver, and platinum are specifically noted) is 28%. that may be less than your tax rate on ordinary income, but the tax rate for long term gains should probably not be a consideration for whether you hold or sell gold.


On Sep 18 03:38 PM tb1975 wrote:

> If you are in gold for the right reasons, then the long term is all
> that matters. I wouldn't take profits here. I'd wait to there was
> a clear and legitimate reason for the 8 year bull run to be over
> in gold.
>
> Are we printing less money? Is the dollar set to rally long term?
> Are interest rates high? etc, etc. When the answer to those questions
> is yes, that's when you sell gold.
>
> If you are trying to time the market and jump in and out, good luck
> with that. I'll hold and pay long term gains tax rather than the
> harsh short term gains tax.

According to a study published yesterday, one American dies every 12 minutes due to the lack of health insurance.

oops, my mistake...it should have been a cost of somewhere north of $80 billion per year... or $1.8 million per life saved

as for manipulating stats... if you "invest" (in this case the proposed plan would hopefully save lives) but don't consider the potential return, then you will soon burn through your investment. that is not manipulating stats. it is asking what kind of return you get for how much investment. the plan baucus proposed would cost over $800 billion over ten years and the articles that triggered this thread suggest that insuring the currently uninsured would save around 44000 lives per year. how would you propose measuring the return from the investment???

On Sep 18 09:28 AM battman wrote:

> Talk about manipulating stats. Do you work for the Fed?
>
> 800 billion would be to cover EVERY American, not just those lives
> it could save.

According to a study published yesterday, one American dies every 12 minutes due to the lack of health insurance.

so if we put through a national health care program that costs roughly $800 billion a year, the cost per life saved will be approximately $18 million per life. who exactly is worth $18 million that is not insured now??

13 Consistent Dividend-Raising Companies Currently on Freeze

itw raised their dividend sept 26, 2008; that is less than 1 year ago. they also raised their dividend in late sept of 2007, so they apparently consider dividend increases at this time of the year.

why do you include them on a list of firms that have not raised their dividend in a year when they actually have and when they very probably will again this year?

i estimate that itw paid out just under 30% of their available free cash flow in dividends over the latest 12 months. further, itw could pay off all their debt in less than two years excess free cash flow (cash flow from ops minus cap exp minus divdiends) if they maintained free cash flow at the rate of the past 12 months. unless they see something very bothersome in the economy, they probably will again raise the dividend in late september.

4 Dividend Stocks to Hedge Against Social Security Failure

the yield mentioned for abt in this article is incorrect--it is approximately 3.5%

Why Dividend ETFs Can Help You Through Hard Times

fgh_21:
jayb is correct..you looked at the wrong etf.
additionally, the last dividend for spy was 0.518, but you also need to look at the frequency of dividend payments. spy pays a dividend 4 times per year, so the annual yield is approximately 2%, not 0.5%

Apple's Current Valuation Is Still Reasonable

tom b makes an outstanding point. apple has low market share in pcs--if anyone has some up-to-date share from idc or gartner, please inform. with somewhere around 6% or 7% share, apple can still double its base business and still hold less share than h-p or dell. most importantly, apple will still probably evade the viruses and spyware and all that other trash that windows attracts. i still own pc (and use it to run schwab's trading platform), but the last three computers in my household (all bought within the last two years) and all future computers will be mac-based--imac or macbooks. the pc runs so slowly and requires so much maintenance (virus scans, scotty the watchdog surveillance, running spybot). arrgh!!--windows is really dreck. apple can double its revenue with reasonable share gains in the pc world--just growing to something roughly equivalent to the computer sales of either h-p or dell.

if apple ever ports the iphone to verizon i will jump on the platform with all the apps (iphone). and as tom points out, the developer world will start to gravitate toward apple (not abandoning windows, but taking advantage of apple consumer appeal). currently, apple appeals to the consumer pc market, but look for apple to start making headway in the small biz market with developers' efforts.

my biggest concern with apple is the ipod, but even there, they have the "razor blade" of itunes etc to go with the ipod "razors". itunes seems to be a durable franchise.

Dividend Contribution by Sector for the S&P 500 Index

your 12 month weighted s&p total return looks way off--it should probably be minus 32%, not minus 3.2%.

U.S. Treasury Owned Gold: What Can It Buy?

westcoaster,

my wife says that i worry about everything--she is probably correct. sorry, couldn't resist a bit of levity.

anyway, deflation should theoretically increase or improve the future buying power of bonds, certificates of deposit, money market funds, etc. someone paying me back in future dollars would actually be returning me more buying power in the future than i give them today (that is, with enough deflation, one dollar will buy me a pack and a half of m&ms instead of one pack today--so they would pay me back in more goods and improve the value of my savings.) from what i can tell, the buying power of TIPs probably will hold constant or improve slightly as well. as long as one gets repaid, deflation clearly benefits most holders of debt. however, serious deflation probably also increases the risk of default by virtually all debt issuers. that clearly raises my concern about deflation in regard to government and corporate debt.

under deflation, however, the future buying power of an ounce of gold and/or a certain number of shares of an equity and/or a certain property may rise or fall from the current level under deflation. the issue would be whether the prices of gold, the common stock, or the property deflated more or less than the general price level. the price of gold should be a function of the demand and supply of it; concern over inflation may be unduly raising demand currently and hence, the price could drop much more sharply than the general price index if inflation fears subside. don't take this a forecast--but take it as an acknowledgment that you might very well be correct. i think that the same probably would be true of equities and real estate.

Spiraling Federal Debt: It's Likely to Get Worse

for the price index (or anything else for that matter) to double in 10 years, the compound annual growth would be 7.17% (rounded). while high, this is considerably lower than 10% per year. then again, john taylor's assumptions to re-equilibrate the debt to gdp ratio assumes numerous other assumptions that give a huge margin of error to any estimate. let's hope that his assumptions are not too generous and that inflation doesn't skyrocket much more than 7% per year.

U.S. Treasury Owned Gold: What Can It Buy?

dave wrixon and westcoaster,
you are both correct that fiat money and credit are far more efficient than gold (or barter, silver, etc) to provide the transaction value of money.
however, money serves two purposes 1) to make transactions more efficient and 2) as a store of value (that is, to efficiently provide for saving or postponing current consumption to provide for current consumption. as a store of value, the recent explosion in the money supply creates considerable doubt about whether the currency will maintain anything close to the same purchasing power. if aggregate money supply doubles and all else stays the same (not always the case, but at least a sensible starting point for discussion), the value that money "stores" will be radically reduced. the so-called gold bugs assert (and i can't see any clear reason to doubt them on this) that gold will maintain some semblance of value. recently someone stated that an ounce of gold would approximately buy a man's suit in 1900 and still approximately buy's a man's suit in 2009. as a retiree, personally i am interested in maintaining or hopefully increasing the future buying power of my current wealth. how comfy should i feel that i can retain purchasing power in us government "fiat" money when bernanke seemingly is printing it 24 by 7 ??