maz

Has Buffett Lost His Mind?

Duude,

Cap & Trade would benefit BNI far more than its likely loss of coal traffic - which in any case would not be disastrous - you can't switch electricity generating coal power plants overnight and they are around 50% of total.

OTOH cap & trade puts rail at enormous advantages over trucks so bring it on I say

Long term this looks good but I reckon Greenwald is right in the next 5 or even 10 years - BNI will not improve Berkshire's results much (except you could say that earning a pittance on billions in cash is a poor alternative) & you'd have to adjust Berkshire's valuation downward if that's all you considered. But this is still a long term triple play imo

1. Oil prices go up long term because of excess demand over supply - regardless of currency
2. Oil prices go up as the US$ devalues because they are quoted in US$.
3. Rail stands to benefit from any cap & trade or other climate change legislation.

#3 might end up being the biggest benefit. In Europe rail is used on much shorter distances than in the US because of much higher (2x) gas prices, congestion and a much stronger environmental lobby & we can expect these trends to eventually hit the US imo

So I'd agree short term he's outta his mind but long term he's got it right & the trouble is that investors don't want to look one year ahead never mind 10 :-)

The 15 Most Cash Rich Companies

mkreisel,

You make the classic mistake of assuming that all debt is equal but it isn't. Debt on GM's balance sheet is completely different from that at a utility company (like Berkshire's Mid-American which holds 90% of Berkshire's debt. All utilities are funded with debt because of the royalty like stream of their revenues. This makes complete sense as debt funding is a heckuva lot cheaper than equity & the revenue streams are preductable way into the future. Contrast that with tech companies that have to re-invent themselves every 5 years or so or lose their revenue streams - they have to be very careful about using debt & need cash to invest in new ideas or acquire new ideas.

Also it is important to know interest coverage & leverage ratios - net debt in isolation is a pretty useless measurement


On Mar 13 02:35 PM mkreisel wrote:

> If we include debt, things look very differently:
>
> Ticker, debt, net cash
> XOM, 9425, 22582
> CSCO, 6848, 22683
> AAPL, 0, 25647
> BRKA, 36882, -11343
> PFE, 17283, 7272
> TM, 118626, -95745
> MSFT, 0, 20298
> GOOG, 0, 15846
> RDSA, 23269, -8081
> WYE, 11739, 2806
> IBM, 99925, -21018
> JNJ, 11825, 957
> INTC, 1988, 9855
> HPQ, 20458, -9203
> ORCL, 10238, 408
>
> Now things look quite different!
>
> In addition, many companies are burdened with massive pension obligations,
> the stuff that did GM and Bethlehem Steel in. For example, IBM has
> 19452 million on its balance sheet; XOM 20729 million.
>
> BRKA also has a maximum of 67 billion derivatives exposure, including
> 37 billion in equity index puts, 19 billion in CDS, and 18 billion
> in muni bond insurance.
>
> PFE has just squandered its cash horde on that panic deal with WYE.
> When the deal closes for good, PFE will have a monstrous debt load
> and very little cash left.
>
> So if you really like company with lots of cash, AAPL, CSCO, MSFT,
> GOOG, INTC, and XOM are your best choices.

Q4 Holdings of Bruce Berkowitz, Robert Rodriguez and Mohnish Pabrai

Sorry he holds Sears but didn't add - my mistake

Q4 Holdings of Bruce Berkowitz, Robert Rodriguez and Mohnish Pabrai

How can you say that selling out of Berkshire does not indicate a stand on the stock? At the end of June Berkshire was 10.67% of Fairholme's portfolio & the largest holding and today it is virtually nothing - Berkowitz was very specific as to his reasons

"We made this move because we cannot see how the company can replicate its past stellar performance given its current size and the age of its key personnel."

In the meantime Pfizer has gone from 10.26% to 18.73% so you could say he was selling Berkshire to buy Pfizer and other healthcare companies.

He also added to Leucadia, Sears and Canadian Natural Resources - companies run by very able capital allocators. So may be he's switching to younger & smaller :-)

Tempting Buffett

Agree that the comment on the stock being down 15% not being the kind of performance to be expected from Buffett is ludicrous. Anyone who has followed Berkshire for any length of time knows that the shares often go down quite a lot - just like any other stock!

Now if you'd said "value" instead of "price" that would make more sense