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  • A 100 Year Bond: The Ultimate Money Printing Device [View article]
    This idea is not new, IBM sucessfully issued a 100yr bond in 1996 on this day.
    I.B.M.'s Issue Draws Interest From Investors
    NYT By ROBERT HURTADO
    Published: December 4, 1996
    I.B.M. entered the debt markets in a big way yesterday, offering an issue of 100-year bonds that featured attractive returns relative to Government securities. Combined with a lower dollar, that pushed Treasuries off their early highs to finish mixed.

    The International Business Machines Corporation issued $850 million of 7.125 percent 100-year bonds, priced at 98.687 to yield 7.22 percent through underwriters led by Salomon Brothers.
    Dec 04 01:30 am |Rating: 0 0 |Link to Comment
  • Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries [View article]
    > Berkshire’s maximum exposure is $37.0 billion,
    What makes you think the max loss is 37 bn, the 10Q says this is the notional portfolio value. I ran some numbers and my quick and dirty estimate is a loss of 86bn if S&P was 0 at expiry. The puts were written close to market, lets say the strike was 1500 and market was 1500, the vol was 18%, with risk free rate of 3.75% and 15 yr term the fair val is about 81 pts (delta 0.1281) and if we have a premium of 4.66 bn and that is equivalent to 230,000 exchange contacts at $250 a point. So if S&P is zero the loss is 86 bn. I believe the notional portfolio value is the delta, divided into the premium (4.66/0.12181 = 36.4 bn)
    Now at S&P = 800 risk free rate 3% long term vol 35% the time to run 13.5 yrs the put fair val is 538 pts (delta .33) and fair val 30 bn. Lets say there has been a 20% gain due to currency so net is 24bn the loss to be recorded for 2008 is 19 bn the notional portfolio (currency adjusted) is now (24/.33) = 73 billion.
    This is why investors are running away.
    Nov 22 05:43 am |Rating: 0 -1 |Link to Comment
  • Berkshire Valuation Questionable as Business Fails Guidance Tests [View article]
    Value of Put Notional
    portfolio Index level 20 day vol
    December 31, 4,610 35,043 1468.36 17.97%
    March 31, 6,171 40,088 1322.70 29.43%
    June 30, 5,845 39,878 1280.00 20.60%
    September 30, 6,725  37,042 1164.74 57.72%

    There is something rotten in the state of Omaha - the numbers do note compute - just maybe they changed the vol to 18% as the long term rate
    How can the Sept position be a lesser notional value than March given the market has fallen and vol doubled.
    Nov 09 23:58 pm |Rating: 0 0 |Link to Comment
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