If only the week had ended on Wednesday, as by that point, everything except Berkshire Hathaway was up substantially. Unfortunately, the Dubai debacle on Thanksgiving resulted in a marked decline come opening on Friday. There was some recovery by the end of the day, but it certainly wasn’t enough to regain all that was lost. Nonetheless, most portfolios did end the week slightly up from where they had been a week ago. Still, the gains could have been so much greater.

Due to some software difficulties, there will be no chart this week. However, I have good reason to suspect it will make a full return next week. Until then, you’ll have to make do with the table:

If there were a chart, it still wouldn’t show you much. We are at the point where even several percentage points of gain or loss don’t add up to much in overall movement. In any case, here are my thoughts on the week:

• The precious metals remain at top. Until Friday’s slight decline, gold had been in the midst of nine consecutive up days, which made it very hard to beat. Silver hadn’t been quite as impressive, but the precious metals nevertheless ended the week slightly up.
• Thanks to a relatively decent week, the Magic Formula has reclaimed second place after a brief time in third. The lead is not very impressive, so I wouldn’t count on it lasting in the short run. Even in the long run, I expect it to fall to third, behind Caribou and Decision Moose. Of course, we all know how useful my predictions are.
• TMW ultimately didn’t go anywhere, falling right back to where it started the week. It’s good to know that even in a week that was neutral for the market as a whole, most of the portfolios made some gains.
• Still invested in EWZ, Caribou managed to gain slightly on the week. Of course, the gain had been 3.69% on Wednesday, but Friday had other plans for the portfolio.
• Inexplicably, Decision Moose somehow managed to keep its Wednesday position, though I’m skeptical. If you look at the chart for ILF, you’ll see a sudden spike immediately before close on Friday. There is an associated spike in trading volume, but it still seems strange to me that it happened to jump almost exactly to Wednesday’s close. All will be settled on Monday when the markets open, but for now I’m taking this with a grain of salt.
• Rounding up this herd, we find Berkshire Hathaway, casually lounging around at the bottom. Of course, the CAGR is in the range of what I’d expect long-term for BRK-B, so it’s not like there’s any overwhelming underperformance here. The market as a whole has outperformed general expectations this year, but that hasn’t transferred over to Berkshire Hathaway. After a few years, it should manage to maintain a position above TMW and the precious metals, but probably not above anything else. Then again, Buffett’s eventual retirement could completely change that prediction.

Like so many weeks before, Caribou has once again elected to remain invested in EWZ, though it hasn’t really gone anywhere in the past few weeks. I see no reason to suspect this will change for at least another couple of weeks. That said, it’s sometimes hard to predict exactly what will happen without digging up the historical prices.

Anyway, here’s the MFI portfolio detail:

QLTI climbed over a dollar to reclaim its ridiculous 200+% gain. That’s right, the initial $50 investment is currently worth $167.36. If only I’d had the foresight to invest my entire portfolio. Of course, that’d have been a pretty dumb move at the time, but it sure looks great in hindsight. A bunch of other stocks had good weeks, as well. A few other stocks had some terrible weeks, and SCMP is giving me no hope that it will ever make progress toward the green side of things. At least stocks have more upward-potential than downward: they can go as high as they want, but the most they can go down is to $0.

Disclaimer: This post is a description of my own forays into investing, and should not be construed as investment advice or the recommendation of any particular security over any other. Please consult your investment adviser or accountant before making any investment decisions. What’s right for me is very likely to not be right for you.

A McLane do Brasil, um dos melhores integradores de soluções logísticas do País, está investindo na construção ecoeficiente de seus centros de distribuição. A iniciativa sustentável começou com a obra de expansão do centro de distribuição localizado em Canoas (RS), concluída em fevereiro de 2009, e teve continuidade com a atual ampliação do CD de Resende (RJ) e a construção de um novo CD, em Jundiaí (SP). No total, foram investidos cerca de R$ 80 milhões.

Entre as ações que fazem parte deste projeto estão a otimização da luz solar para iluminação interna da companhia com domus acrílicos e o reaproveitamento da água da chuva, que prevê a coleta, filtragem e estocagem da água para sua reutilização em vasos sanitários, irrigação de jardins e lavagem de veículos. Por fim, a empresa se preocupou em realizar a recompostagem do lixo produzido. Recursos estes que devem alcançar ganhos significativos para a McLane na economia de água e energia.

Além de preservar o meio ambiente e economizar em muitos aspectos, o objetivo da companhia ao assumir este compromisso com a sustentabilidade é poder refletir os retornos positivos para seus clientes. Empresas como a Natura, já desfrutam dessa infra-estrutura sustentável e compartilham dos benefícios de um projeto consciente.

Sobre a McLane do Brasil

A McLane do Brasil é um dos melhores integradores de soluções logísticas no País. A empresa é subsidiária da americana McLane, do grupo Berkshire Hathaway que pertence ao investidor Warren Buffet. A companhia iniciou suas atividades no Brasil em 1997 e oferece serviços inteligentes como Supply Chain Strategy (estratégia de toda a cadeia de abastecimento), Supply Chain Design (desenho da cadeia de abastecimento), armazenagem, soluções customizadas, transporte, gestão integrada da malha logística, logística internacional e operação de Centros de Distribuição.

É responsável pela movimentação anual de milhões de toneladas de produtos de empresas como Samsung, Procter & Gamble, Unilever, Natura, Cadburry, Hershey’s, Panasonic, Pioneer, Avon, M.Officer, Hasbro, Carrier, Harley Davidson, entre outras.

Nos Estados Unidos, a companhia foi fundada em 1894 e opera com 37 centros de distribuição servindo o mercado de consumo.

Para mais informações acesse www.mclaneco.com.br.

PLANIN Worldcom – Assessoria de Imprensa e Comunicação da McLane do Brasil

Omaha leads U.S. in recovery

Related News

• Neb. unemployment rate unchanged
• Iowa unemployment moves higher

Related Links

• List of cities Omaha bested

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When it comes to riding out the Great Recession, we're No. 1.

Forbes on Thursday put Omaha-Council Bluffs at the top of its list of the nation's fastest-recovering major metropolitan areas. Magazine editors said the area's diverse economy, stable housing prices and low unemployment helped it rate the best in their study of the 100 largest metro areas.

“Though Omaha, Neb., seems second-rate to some, Warren Buffett may have been on to something when he chose it for the headquarters of his massive holding company, Berkshire Hathaway,'' says the article published on Forbes.com.

“According to our research, the city has hit upon a formula to weather the economic downturn better than any other in the country.''

Of course, no city has been immune from economic downturn. Like every other city, Omaha has shed thousands of jobs. But Omaha didn't really begin feeling the downturn until last fall, almost a year after the rest of the country, and it has not been as deeply affected.

The Forbes study is consistent with a Brookings Institution study that ranked the Omaha metro area 10th among those least hit by the recession. Another study by Moody's had Omaha and Lincoln among the first metropolitan areas moving into recovery. Forbes appears to rank Omaha higher than Brookings does because Forbes relies more heavily on housing measures.

Omaha ranks well in foreclosures, stability of housing prices and home sales rate.

The studies also included gross metropolitan product, a measure of productivity, and unemployment rate. Forbes said Omaha's low unemployment rate is the main reason “it sails to the top of our list.”

Said Forbes: “Omaha's economy is less dependent on manufacturing than other Midwestern cities, and is boosted by a strong agriculture sector and growing biofuels industry. And while the city has a big stake in the financial industry ... it doesn't specialize in the types of institutions that took big risks and chased exotic financial structures. Instead, it's home to roughly 30 insurance companies and regional banks like Mutual of Omaha.”

Omaha; San Antonio; Austin, Texas; Pittsburgh; and Harrisburg, Pa., held Forbes' top five spots. Des Moines, which ranked 13th in the Brookings study, came in 39th in the Forbes study. Detroit and four Florida metro areas ranked last.

Forbes said there is a lesson to be learned from top-ranked cities: “Rather than chasing rising home prices or apparently plentiful jobs in one-industry towns, families looking for long-term economic stability should seek spots where industry is diverse and housing price shifts are benign.''

Contact the writer:

444-1130, henry.cordes@owh.com

(read World-Herald article)

I know precious metals aren’t that interesting, but for the moment, they seem to be the assets with the largest wings. This is reflected in this week’s portfolio comparison, with both gold and silver doing superbly. The rest of the portfolios? Not so much. That’s not to say none of the others were up, because they were, but not by nearly as much. If you look at the market as a whole, things were even uglier. In short, every portfolio dropped relative to my precious metals baseline.

No changes have been made to the comparison this week. I suppose that at this point, there’s no point in even mentioning this completely expected and mundane factoid. On the off-chance I do make a change to the comparison, that would be noteworthy. Anyway, here’s this week’s data:

You can see the precious metals portfolio just barely peeking up out of the morass of colorful lines on the right side of the chart. Everything else remains clustered in their two little groups, with the eventual victor remaining elusive for the moment.

• As I stated above, the comparison has a new leader this week, and that’s the precious metals portfolio. Of course, since I use this portfolio as a proxy for inflation, this isn’t boding well for the other portfolios’ performances. However, even if the prices are rising in certain assets, I haven’t yet seen these price changes at the grocery store, for instance.
• Next in line is TMW, which despite performing the worst of any portfolio this week, manages to fall only to second place. We’ll have to wait until next week to see if some kind of pattern is emerging.
• The Magic Formula had a fairly positive week, if not completely impressive. You’ll see more in the MFI detail below, but while some stocks are turning completely atrocious, a few gems are keeping the boat afloat.
• Berkshire Hathaway was actually the second best portfolio this week, climbing a little over 1%.
• Caribou managed a slight gain, still invested in EWZ. Mind you, as with most portfolios this week, the gain was much more impressive on Wednesday. However, Thursday and Friday’s poor performances managed to erode almost all of the gains, leaving us with this rather paltry jump. I’ll take it, anyway.
• Strangely, Decision Moose actually fell on the week, as ILF actually fell on the week. The difference from EWZ wasn’t spectacular, but when you’re this close to zero, the results can show up like this.

Caribou has elected to stick with EWZ for yet another week, despite the continued strength in the precious metals market. GLD is now the fourth-highest ranking asset, but it still has a long way to go if it wants to surpass EWZ as the top choice in the model.

Anyway, here’s the MFI portfolio detail:

A couple of stocks received dividends this week: MSB and HSII. Of course, the dividends were actually from last month, but that’s how long they take to show up at the broker, I guess. A few more stocks are moving decidedly into the clunker range, which gives me some bad feelings about their futures. Luckily, a few gems at the top are keeping the ship sailing well above the water line. The monthly decisions that will start coming up in a couple of months will no doubt be interesting.

Disclaimer: This post is a description of my own forays into investing, and should not be construed as investment advice or the recommendation of any particular security over any other. Please consult your investment adviser or accountant before making any investment decisions. What’s right for me is very likely to not be right for you.

Goldman Sachs’ CEO Lloyd Blankfein and his largest investor, The Wizard of Omaha, Warren Buffett , descended from the mystical heights of Valhalla with some startling news.  They were bearing a new mythical golden ring.  As they held the ring aloft they made a bold proclamation.  They would embark on one of the grandest social entrepreneurial programs of all time by offering some of the rings precious power, about $500 million worth, to capital starved small and mid-size enterprises (SMEs).  The 10,000 Small Businesses Initiative will distribute $100 million per year over the next five years to SMEs through Community Development Financial Institutions.

These lords of commerce have heard the cries from endangered SMEs.  In their infinite wisdom Blankfein and Buffet understand that the real economy needs to resuscitate and incubate the critical SME segment as an absolute prerequisite to a vibrant economic recovery.    The buzz about this news in the marketplace ranged from cynical suspicion at one extreme to puzzled bemusement and  ecstatic aplomb at the other.

What motivated Goldman to announce this initiative is an interesting question.  Was it guilt, greed or a sense of corporate social responsibility?  Some suggest it is a master PR move to counter a growing public perception that Goldman Sachs,  the poster child of government favoritism and bailout largess,  has leveraged its unfair advantage to achieve historic levels of profitability.  Thus enabling management to pay obscene bonuses to company employees.  But capital has no psyche,  and half a billion dollars is a tall bill to underwrite absolution for some phantom form of guilt.  True to its nature, capital always  seeks a place where it will find its greatest return.  Goldman and Buffett are casting some major bread on the receding waters of a distressed economy.  As its foretold in the Good Book , doing God’s work will produce a tenfold return.  If the Bible’s math is correct, thats a lot of manna that will rain down from heaven for the shareholders of Goldman Sachs and Berkshire Hathaway.  Looks like our modern day version of Moses and Aaron have done it again.  Leading their investors across the dangerous waters of the global economy to live in the promised land of happy shareholders.

As one of the world’s preeminent investment banks and purveyor of capitalist virtues,  company shareholders must be questioning how Goldman’s managers will realize a return on this investment?  Has management examined the potential corporate and societal moral hazards surrounding the program?  Surely shareholders have asked when they expect to be compensated for this significant outlay of capital.   The desire to realize gain is a more plausible motivator and makes more sense for an enterprise like Goldman and the storied investment Wizard from Omaha.

Its wise to ascribe the best intentions and virtuous motivations to actions that we may not fully understand.  This program should be viewed as a seminal event in the history of corporate social responsibility and social entrepreneurship.  Its important to understand that institutions that practice corporate social responsibility do not engage it solely as a philanthropic  endeavor.  Indeed, the benefits of good corporate citizenship pays multidimensional dividends.  All ultimately accrue to the benefit of company shareholders and the larger community of corporate stakeholders.

Goldman’s  move to walk the point of a capital formation initiative for SMEs seeks to mitigate macroeconomic risk factors that are prolonging the recession and pressuring Goldman’s business.   Goldman needs a vibrant US economy if it is to sustain its profitability,  long term growth and global competitiveness.  Goldman needs a strong regional and local banking sector to support its securitization, investment banking and corporate finance business units.   Healthy SMEs are a critical component to a healthy commercial banking sector.  Goldman recent chartering as an FDIC bank holding company may also be a factor to consider.  This SME lending initiative will provide interesting insights into the dynamics of a market space and potential lines of business that are relatively new to Goldman Sachs.  This initiative might presage a community banking acquisition program by Goldman.  At the very least the community banking sector is plagued with over capacity is in dire need of rationalization.  Goldman’s crack team of corporate finance and M&A professionals expertise would be put to good use here.

Goldman’s action to finance SMEs will also serve to incubate a new class of High Net Worth (HNW) investors.  Flush with cash from successful entrepreneurial endeavors, the nouveau riche will be eager to deploy excess capital into equities and bonds, hedge funds and private equity partnerships.  Healthy equity markets and a growing Alternative Investment Management  market is key to a healthy Goldman business franchise.

Community banks, principal lenders to SMEs are  still reeling from the credit crisis are concerned about troubled assets on their balance sheets.  Bankers can’t afford more write downs on non-performing loans and remain highly risk adverse to credit default exposures.  Local banks have responded by drastically reducing credit risk to SMEs by curtailing new lending activity.  The strain of a two-year recession and limited credit access has taking its toll on SMEs.  The recession has hurt sales growth across all market segments causing SMEs to layoff employees or shut down driving unemployment rates ever higher.  Access to this sector would boost Goldman’s securitization and restructuring advisory businesses positioning it to deepen its participation in the PPIP and TALF programs.

The financial condition of commercial and regional banks are expected to remain stressed for the foreseeable future.  Community banks have large credit exposures to SME and local commercial real estate.  Consumer credit woes and high unemployment rates will generate continued losses from credit cards and auto loans.  Losses from commercial real estate loans due to high vacancy rates are expected to create significant losses for the sector.

Reduced revenue, protracted softness in the business cycle and closed credit channels are creating perfect storm conditions for SME’s. Bank’s reluctance to lend and the high cost of capital from other alternative credit channels coupled with weak cash flows from declining sales are creating liquidity problems for many SMEs.   Its a growing contagion of financial distress.  This contagion could infect Goldman and would have a profound impact on the company’s financial health.

The 10,000 Businesses  initiative will strengthen the free flow of investment capital to finance national economic development and empower SMEs.  It strengthens free market capitalism and has the potential to pool, unleash and focus investment capital into a strategic market segment that has no access to public equity and curtailed lines of traditional bank credit. The 10,000 Businesses initiative  will encourage wider participation by banking and private equity funds.  In the aggregate, this will help to achieve strategic objectives, build wealth and realize broader goals to assure sustainable growth and global competitiveness.  All to the benefit of Goldman Sachs’ shareholders and it global investment banking franchise.

Goldman Sach’s has always been a market leader.  We salute Goldman Sachs’ initiative and welcome its success.

In  September of 2008,  Sum2 announced The Hamilton Plan calling for the founding of an SME Development Bank (SDB).  The SDB would serve as an aggregator of capital from numerous stakeholders to focus capital investment for SME manufactures.   More on the Hamilton Plan can be read here: SME Development Bank.

Risk:  SME, bank, recession, unemployment, credit, private equity

You Tube Music: 10,000 Manaics, Natalie Merchant: Dust Bowl

by Tay Kay Luan, for The Star Online, November 19, 2009.

What makes good corporate governance? Fundamentally, stakeholders must realise that good corporate governance is not the sole responsibility of the regulators.

“Every market participant has a role to play, particularly the companies themselves in exercising self-discipline. The board of directors must act fairly and demonstrate high standards of ethics and integrity in their decision-making,” Securities Commission chairman Tan Sri Zarinah Anwar told StarBizWeek in February 2009.

US PLC Berkshire Hathaway is a prime example of how top management’s personal values combined with corporate and board discipline has delivered stunning returns on investment and immense accolades. Not only was Berk-shire’s billionaire chairman Warren Buffett voted the most admired director in Directorship magazine’s annual survey of exceptional directors in April 2008. But under Buffett’s stewardship, Berkshire stock appreciated 362,319% from 1964 to 2008 (measured in after-tax dollars), compared with 4,276% for the S&P over the same period (measured in pre-tax dollars)…(continue reading)

by Jennifer Schonberger, for The Motley Fool, November 18, 2009.

One year after the government bailed out Wall Street, Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) are awarding record billions in bonuses. Clearly, compensation practices are just as out of line now as they were before the financial crisis. But compensation is just one part of the larger issue of corporate governance weighing on companies across America.

According to Nell Minow, editor and co-founder of The Corporate Library, a research firm that focuses on corporate governance, agency costs and conflicts of interest are the inherent problems in corporate governance today.

“If you’re going to have a large, complex organization, and you’re going to take capital from people who are not going to be in the boardroom all the time, what can we do to ensure those directors are as vitally concerned with the long-term success of the organization? That’s what corporate governance is all about,” Minow said on a recent visit to Motley Fool headquarters…(continue reading)

Berkshire Hathaway and Cascade Investments have both just disclosed positions in Republic Services Inc (RSG), the second largest waste disposal company in the US.

Cascade is the investment vehicle that manages Bill Gates‘ investments exclusively and Berkshire is obviously Buffett’s holding company.  We know they’re good friends, but this is the first time I’ve seen them acquiring the same stock at the same time.

Gates has been involved in Republic since prior to the merger with Allied Waste that made the company the number 2 in the industry behind Waste Management (WM).  Its not hard to see why Buffett has joined him, this is a business with long-term contracts with municipalities and they’re certainly not approving many new landfills these days for political reasons.  This is right up his alley.

From Bloomberg:

Buffett’s company had about 1.28 million shares of Exxon, the world’s largest oil company, as of Sept. 30, Omaha, Nebraska-based Berkshire said today in a regulatory filing disclosing U.S. equity investments. Berkshire held 3.4 million American depositary deceipts of Nestle, the world’s largest food producer, 3.63 million shares of Republic and about 27,000 shares of New York-based Travelers.

and from 24/7 Wall Street:

If you thought that Bill Gates might have an ambition beyond just passive investing in the garbage and waste disposal sector, you might be correct.  Bill Gates’ Cascade Investment, L.L.C. and the Bill & Melinda Gates Foundation Trust own a collective share of about 15% of Republic Services, Inc. (NYSE: RSG).  Republic is the #2 waste management player now that it acquired Allied Waste Industries behind the dominant Waste Management Inc. (NYSE: WM).

I have no idea what these two have planned, but just something to be aware of, I suppose.

Sources:

Buffett’s Berkshire Discloses Stakes (Bloomberg)

Bill Gates Gets Further Entrenched in Waste Sector  (24/7 Wall Street)

by Jennifer Schonberger, for The Motley Fool, November 16, 2009.

One of our mantras at The Motley Fool is “do your due diligence!” This includes examining — among many other metrics — a company’s revenues, earnings, cash position, return on equity, and … corporate governance.

Corporate governance? Yep. On a recent visit to Motley Fool headquarters, Nell Minow, editor and co-founder of research firm The Corporate Library, said the first thinginvestors should examine when assessing a company is executive compensation. “For most people, executive compensation is a once-a-year story — who gets paid how much every spring when we see the proxy statements,” Minow says. “To me, it should only be a starting point.”

Minow says executive compensation is as important to understanding a company as free cash flow or any of the other fundamental indicators investors should examine. “In fact, it’s less susceptible to manipulation,” she says. “So in some ways it’s a better indicator. It’s a 365-day-a-year story.”…(continue reading)

Warren Buffett, attraverso Berkshire Hathaway, ha definito, per la modica cifra di 44 miliardi di dollari, l’acquisto della Bnfs (Burlington Northern Santa Fe), una compagnia ferroviaria con 51.766 km.di tratta.

Ha dichiarato di averlo fatto perché, da piccolo, non ha mai ricevuto in dono dal padre un trenino, come invece avrebbe desiderato.

Indubbiamente i traumi subiti nel corso dell’infanzia definiscono i comportamenti degli adulti e la spiegazione è credibile e verosimile.

Ma le ferrovie, anche negli Stati Uniti, sono un monopolio “quasi” naturale. E Berkshire Hathaway non solo non ha mai perso come altri titoli importanti quotati al NYSE, ma ha sempre mantenuto un elevato valore di quotazione. Comprare treni è solo uno dei tanti modi di declinare la semplice e basilare lezione di Buffett, quella per la quale occorre sempre fare riferimento ai fondamentali.

Most recently, WIH Resource Group has been contacted and retained by a range of public and private sector clients to assist in performing wastebyrail feasibility studies, facility siting studies, waste generator radius market studies and to conduct financial analysis for various clients throughout the nation. 

Berkshire Hathaway already owned about 22 percent of BNSF, the nation’s second largest Class One railroad.

This move by Buffett will most likely spur even more interests in railroad transportation.  Railroad transportation compared to Trucking allows for an approximate 3:1 ratio of weight and volume per rail car to that of an individual truck.  By comparison, and on a per ton calculation, rail emits a much smaller percentage of harmful diesel-fuel carcinogens than that of trucking.  In addition, the cost for rail transportation is almost a third to that of trucking costs for the same traffic lane. 

Sources: WIH Resource Group & Berkshire Hathaway

Should you have any questions about this news or general questions about our diversified services, please contact Bob Wallace, Principal & VP of Client Solutions at WIH Resource Group and Waste Savings, Inc. at admin@wihrg.com

Feel free to visit our websites for additional information on our services at: http://www.wihrg.com and http://www.wastesavings.net and our daily blog at http://wihresourcegroup.wordpress.com

WIH Resource Group on Linked In: http://www.linkedin.com/groups?home=&gid=1150967&trk=anet_ug_hm

Follow Bob Wallace and WIH Resource Group on Twitter: http://twitter.com/wihresource

by Jennifer Schonberger, for The Motley Fool, November 12, 2009.

“Too often, executive compensation in the U.S. is ridiculously out of line with performance,” Warren Buffett stated in his 2006 annual report to Berkshire Hathaway shareholders.

Nell Minow, editor and co-founder of The Corporate Library, a research firm that focuses on corporate governance, would likely agree with Buffett. On a recent visit to Fool headquarters, Minow — whom BusinessWeek once dubbed the “queen of good corporate governance” — said she believes executive compensation is at the root of what’s wrong with corporate governance today.

Minow’s company grades corporate management teams on the job they’re doing. Out of the 3,500 companies The Corporate Library rates, just 17 have As.

If companies want a good grade, Minow says, they must get compensation right. Minow weights compensation structures heavily because she has found that excessive compensation is the best predictor of investment risk, litigation risk, and liability risk. “Too many pay plans today are all upside and no downside,” Minow says. “We find that when there is no downside to the pay plan, people don’t try very hard.”…(continue reading)

Berkshire Hathaway reported late Friday its 3rd quarter results.  As expected its book value went above $80K to $81,247 per A share.  It is now trading at 1.26 times book value.  Its book value is now at an all time high.  Pretty impressive performance in the middle of a recession!

However, there is still much more upside potential with its operating profits not fully recovered from the recession.  Many of its businesses are still suffering from the effects of the recession with reduced revenue and profits.

Total earnings did triple from the third quarter of 2008.

Proving its critics wrong, is one thing, but driving its book value to an all time high in a recession is simply an amazing performance.  The future is really bright as we see slow improvement in operating businesses this quarter over the first two of the year.  Tremendous value is being created by the deals Buffett made in the last 2 years and the purchase of BNI announced last week should continually improve both cash flows and profits for many years to come.

I will continue to own and add to my shares of Berkshire going forward.

By the way, there is tremendous upward potential over the short-term for Berkshire, IMHO, and folks who have been sitting on the sideline should now strongly consider purchasing BRK.

Next post will go over the other two stocks I own, HCN and MMP.

Berkshire Hathaway, the holding company run by Warren Buffett and Charlie Munger, recently purchased Burlington Northern, http://www.bnsf.com,  a very large provider of freight rail transportation.  Burlington Northern transports various consumer products, which include motor vehicles and vehicle parts; and industrial products comprising construction, building, petroleum, chemicals and plastic, and food and beverages, as well as cotton, salt, rubber and tires, and miscellaneous boxcar shipments. The company also transports coal products; and agricultural products, such as wheat, corn, bulk foods, soybeans, oil seeds and meals, feeds, barley, oats and rye, flour and mill products, milo, oils, specialty grains, malt, ethanol, and fertilizers. As of December 31, 2008, Burlington Northern Santa Fe operated a railroad system consisting approximately 32,000 route miles in 28 states and 2 Canadian provinces.

I really like this purchase for a lot of reasons!  For one, the yield to Berkshire on a yearly basis is great.  Combine the 22% they bought for around $80.00 a share, plus the rest they bought at $100.00, their total cost will be about $32.2B.  The net income for Burlington in 2008 was $2.1B, plus the dividends that will no longer be payed out of 470m, bring last year’s total income to go to Berkshire going forward, to about 2.57B. 2.57B into 32.2B brings the yield on the purchase to about 7.9%.  Getting about 7.9%+ yearly on 32.2B is really good!

Plus it’s a hedge on a falling dollar and higher oil prices.  Higher oil prices over time will cause more and more of a demand for rail transportation in the U.S, because moving goods by rail is about three times more fuel-efficient/cheaper than moving goods on the highway. So there’s good steady earnings growth going forward too.

And the final reason I like it is, the moat of Burlington is very wide/big.  How difficult would it be for a new company to enter into the railroad business?  How much of an investment in time, energy, resources, and money would it be to compete or beat Burlington? The answer is a lot and for that reason, their earnings power is protected over time.

A very great company added to the porfolio of operating businesses owned by Berkshire Hathaway.

Akhirnya dominasi Bill Gates memudar juga. Setelah 13 tahun berturut-turut bercokol sebagai orang terkaya di dunia versi majalah Forbes, pendiri raksasa peranti lunak Microsoft itu tergeser juga dari tahtanya. Tahun ini, orang terkaya sejagad adalah Warren Buffett, seorang pebisnis dan investor yang ketajaman pikirannya amat luar biasa sehingga ia diibaratkan sebagai perpaduan antara fisikawan Einstein, seniman Picasso dan raja kaya raya pencipta koin emas Croesus, dalam satu tubuh.

Berikut ini adalah wawancara yang pernah ia lakukan dengan CNBC.
Dalam wawancara tersebut ditemukan beberapa aspek yang menarik dari hidupnya :

1. Ia membeli saham pertamanya pada umur 11 tahun dan ia sekarang menyesal karena tidak memulainya dari masih muda.
Pesan : Anjurkan anak anda untuk berinvestasi [Encourage your children to invest]

2. Ia membeli sebuah kebun yang kecil pada umur 14 tahun dengan uang tabungan yang didapatinya dari hasil mengirimkan surat kabar.
Pesan : Dorong Anak Anda untuk mulai belajar berbisnis [ Encourage your children to start some kind of business ]

3. Ia masih hidup di sebuah rumah dengan 3 kamar berukuran kecil di pusat kota Ohama, yang ia beli setelah ia menikah 50 tahun yang lalu.

4. Ia berkata bahwa ia mempunyai segala yang ia butuhkan dalam rumah itu.
Meskipun rumah itu tidak ada pagarnya.
Pesan : Jangan membeli apa yang tidak dibutuhkan, dan dorong Anak Anda berbuat yang sama. [ Don’t buy more than what you “really need” and encourage your children to do and think the same ]

5. Ia selalu mengemudikan mobilnya seorang diri jika hendak bepergian dan ia tidak mempunyai seorang supir ataupun keamanan pribadi.
Pesan : Jadilah apa adanya. [ You are what you are ]

6. Ia tidak pernah bepergian dengan pesawat jet pribadi, walaupun ia memiliki perusahaan pembuat pesawat jet terbesar di dunia.
Pesan : Berhematlah [ Always think how you can accomplish things economically ]
Berkshire Hathaway, perusahaan miliknya, memiliki 63 anak perusahaan.

7. Ia hanya menuliskan satu pucuk surat setiap tahunnya kepada para CEO dalam perusahaannya, menyampaikan target yang harus diraih untuk tahun itu.

8. Ia tidak pernah mengadakan rapat atau menelpon mereka secara reguler.
Pesan : Tugaskan pekerjaan kepada orang yang tepat [ Assign the right people to the right jobs ]

9. Ia hanya memberikan 2 peraturan kepada para CEOnya.
Peraturan nomor satu adalah : Jangan pernah sekalipun menghabiskan uang para pemilik saham.
Peraturan nomor dua : Jangan melupakan peraturan nomor satu.
Pesan : Buat Tujuan yang jelas dan yakinkan mereke untuk fokus ke tujuan. [ Set goals and make sure people focus on them ]

10. Ia tidak bersosialisasi dengan masyarakat kalangan kelas atas.
Waktu luangnya di rumah ia habiskan dengan menonton televisi sambil makan pop corn.
Pesan : Jangan Pamer, Jadilah diri sendiri & nikmati apa yang kamu lakukan [ Don’t try to show off, just be your self and do what you enjoy doing ]

Bill Gates, orang terkaya di dunia bertemu dengannya untuk pertama kalinya 5 tahun yang lalu. Bill Gates pikir ia tidak memiliki keperluan yang sangat penting dengan Warren Buffet, maka ia mengatur pertemuan itu hanya selama 30 menit.

Tetapi ketika ia bertemu dengannya, pertemuan itu berlangsung selama 10 jam dan Bill Gates tertarik untuk belajar banyak dari Warren Buffet. Warren Buffet tidak pernah membawa handphone dan di meja kerjanya tidak ada komputer.

Berikut ini adalah nasihatnya untuk orang-orang yang masih muda:

Hindarilah kartu kredit dan berinvestasilah untuk diri Anda sendiri dan ingat Uang tidak menciptakan orang tetapi oranglah yang menciptakan uang.

Hiduplah secara sederhana.

Jangan lakukan apa yang orang lain katakan, dengarkanlah mereka, namun lakukan apa yang menurut Anda baik.

Jangan memaksakan diri untuk memiliki barang-barang bermerk, pakailah apa yang sekiranya nyaman bagi Anda.

Jangan memboroskan uang Anda untuk hal-hal yang tidak diperlukan;
gunakanlah uang untuk membantu mereka yang kekurangan.

Biar bagaimana pun orang lain tetap tidak dapat mengatur hidup Anda sendiri.
Andalah yang mengendalikan hidup Anda sepenuhnya.

Semoga Bermanfaat..

Reference: http://count27bless.wordpress.com/20…warren-buffet/

Warren Buffet

Warren Buffett has picked up one of the stocks I have championed before on this blog, railroad stock Burlington Northern Santa Fe (BNI).  Berkshire Hathaway (BRK.A, BRK.B) had previously acquired a sizable minority position in BNI, and Mr. Buffett must have liked it a lot because he decided to buy the rest of the company at a price of $100 per share (about a 30% premium from the previous days close).

In addition to the announcement of his largest acquisition ever, Buffet announced a 50-to-1 split of the Baby Berkshire shares, his class B tranche (BRK.B).  This announcement, he said, was so that he could offer the small investors some BRK shares, whereas before they couldn’t afford the high prices (somewhat of a contradiction to what he said a few years ago about how a stock split was stupid and would allow inferior investors to own its’ stock…).

This puts BRKB on the radar of both Mike and myself.  Previously, we both had looked at BRK as a favorable investment, especially during March when it had reached such a low level, however, the price was cos prohibitive. Now, Warren has offered me the chance to either accept $100 in cash for my shares of BNI, or some of his new, cut price, BRK.B shares.  And I am unsure how to act.

On the one hand, BRK is a one stop diversification stop.  It has exposure to banks, insurers, manufacturing, transportation, and a host of others.  It has a proven track record of providing its investors with outsized gains, and excellent capital preservation.  And it is the best way to ride the coattails of the one who is considered the world’s greatest investor.

On the other hand, Mr. Buffett is not a young man anymore.  I am aware that there are several remarkably smart people waiting in the wings at Berkshire, but it is a huge risk to assume that the company can continue its remarkable run without its point man at the helm.  His deal with Goldman Sachs (GS) during the height of the financial crisis was inspired and hugely profitable, but his similar timing with a similar deal with General Electric (GE) was less so, with the warrants he acquired remaining worthless.  Finally, BRK is highly leveraged to the US economy.  With this deal, Warren openly admits that he is taking a huge risk on the future of America, which he is undyingly positive about. Add to this his other positions and you have a company which is leveraged to a country with anemic growth, a declining currency, and a government with a huge debt load.

During the course of writing that last paragraph, I have convinced myself that I will take Warren’s offer of cash to the bank.  There are too many variables involved in Berkshire, especially as Mr. Buffett gets older.  I respect him hugely as an investor, I just think I can achieve a superior Sharpe ratio investing elsewhere.

Disclosure: Long GE, GS and BNI (pending the buyout)

If you’ve been living under a rock for the past couple of days then you have not heard the news. Warren Buffett through his company Berkshire Hathaway (BRK.A, BRK.B) is buying the remaining outstanding shares of Burlington Northern Santa Fe Corp. (BNI). The buyout price is $100 and shareholders can elect to receive $100 in cash per share, 100% Berkshire Hathaway stock, or a combination of the two. Yes, if you own enough Burlington Northern Shares you can elect to receive Berkshire Hathaway class A stock.

I would elect to receive cash. I’m playing this as a merger arbitrage with a high probability of being completed. When Warren Buffett wants to buy a company the only thing that will stop him is a bidding war. Case in point, the buyout of Constellation Energy and even then he still made a lot of money on the lost business acquisition opportunity through a break up fee. This deal is no different. Burlington Northern Corp will have to pay a break up fee of $264 million if it wants out of this deal now. If a higher bidder suddenly emerges than our arbitrage play would return even more.

Currently, morning of 11/5/2009, Burlington Northern (BNI) is trading at $97.12. A 2.97% discount to the buyout price. In the press release after the announcement of the merger it was stated that the deal is to be completed in the first quarter of 2010. If the deal closes on the last day of the fist quarter of 2010 we will have an annualized return of around 7.13%. But wait, there is more! Part of the press release was a FAQ sheet and in it one of the questions pertains to the dividend declared by Burlington Northern back in October, that goes ex in the beginning of December, and is paid in the beginning of January. Burlington Northern (BNI) will still pay it. It looks like we will get another $0.40 per share while waiting for the deal to close. This brings the annualized return up to 8.11%.  A nice annualized return on a deal that I would assign a very high probability of being completed.

Note: The annualized returns do not factor in trading costs. Every trading platform is different and these costs will need to be factored into trading to make sure the deal makes sense and money.

FAQ for the Burlington Northern (BNI) and Berkshire Hathaway (BRK.A,BRK.B) merger.

Link to information on Burlington Northern (BNI) and Berkshire Hathaway (BRK.A, BRK.B) merger.

Marcus Licinius Crassus

Disclaimer

Great excerpt from Rosenberg’s daily email:

MYTHS AND REALITIES

Myth: Warren Buffett is making a big wager on the U.S. economy.

Reality: The Oracle believes that with oil prices where they are and likely to go higher, rails will grab transport share from the truckers. This may also be a back-door bullish call on coal. Or maybe it’s a constructive sign on buying of U.S. made goods out of Canada where local domestic demand is hanging in just fine, thank you very much.

Myth: There are signs of life in the retail sector.

Reality: Also, don’t forget that these are YoY same store sales from surviving retailers. Thousands have gone bankrupt in the last year, for example Circuit City, which for sure has helped BestBuy’s activity, and there are countless other examples. So the data, for lack of a better term, are distorted and tell you very little about what consumers are doing in the aggregate. October auto sales in the U.S. did pick up from September’s abyss, but this was still the eighth worst month in the last 27 years. And yes, it does look like U.S. chain store sales are going to come in somewhere between +1.0-2.0% year-over-year. But beware. This actually says more about the detonation that took place a year ago — the “base” for the year-over-year calculations — than anything truly robust at the present time.

Myth: The low end consumer is adjusting to the new frugality more than the high end.

Reality: Also keep an eye on where people are buying their food and what food they are buying (good article in yesterday’s Wall Street Journal on this) — Cheesecake Factory is all of a sudden seeing a burst of sales activity (Starbucks too from what we are hearing and reading) that is eluding the fast-food chains at the moment. If only it were only so. Unfortunately, a gap has opened between employment-dependant spending and wealth-dependant spending. After all, the investor class is giddy after a 60% rally from the March lows in equities, a rally in which 2.7 million jobs in the U.S. have been lost. Epic. So in October, luxury goods sales came in at +6.5% YoY and jewellry at +7.2%! Meanwhile, department stores who cater to the guy (and gal) on the street posted a 1.5% sales decline (as per MasterCard’s SpendingPulse survey).

Myth: We have financial and tech leadership.

Reality: As for tech, well, Morgan Stanley researchers laid down the guantlet with its downgrade of semiconductor stocks to “cautious” from “attractive” (we love Wall Street lingo, having been there and done that. Why not shout “sell, Mortimer, sell!”?) And what about that downgrade to Intel? We did. But not any longer. Not after UBS reported its larger-than-expected Q4 loss, and not after Lloyds and RBS announced their need to raise capital (can they really be the only ones?).  So the U.S. economy is growing again, but the real question should be “why only by 3.5%”?

Myth: The boom in mergers and acquisitions (M&A) activity says that corporate America is feeling good about recovery prospects.

Reality: While this is what we hear from many strategists, there may be other factors at play that are more strategic and micro in nature. Keep in mind that companies are sitting on a record cash hoard ($702 billion in the S&P 500 universe). If they were truly optimistic, they would be moving to expand their business organically. Instead, most of the M&A activity has been driven by companies buying out their competitors to grow a part of their operations that they were lagging in. As for the “boom” part — let’s get a grip. So far this year, there have been 5,786 deals worth $620 billion (Dealogic data — for the U.S.). That is down 37% from a year ago (the level) and down 55% from where we were two-years ago. Matt Krantz at the USA Today could not have put it more succinctly — “despite the banner headlines, dealmaking is still stuck in the post-credit-bubble malaise.”

to Read the entire text : http://bit.ly/2lREWG

Warren Buffett bought the balance of Burlington Northern Railroad [78%] this week.  As usual there is much chatter, most of it negative about the latest Berkshire move.  But the truth is this is classic Buffett.  He bought a well managed business, for a fair price.  Now much is made of his 30% above market price, but this is from people who have never bought a local business, let alone a $34 Billion business.

Does anyone out there think that railroads are suddenly going to stop being the transportation of choice for coal?  Or stop moving product around the country?  Does anyone think that trucking will be able to compete with the price of diesel where it is at or where it is going? Consider the railroad is profitable in a recession, how much cash flow will it produce as the economy heats up?

Just another reason to believe that Berkshire Hathaway will continue to double the returns of the S & P 500 Index.

Now, the other move was that it is splitting the B shares 50 to 1.  I am agnostic about this, but this move probably results in Berkshire being included in the S & P 500 index in the future.  So all those index mutual fund investors can get  some of those superior returns!

“If you buy a railroad, you can’t move it to China or to India or anyplace else. You are betting on the United States. I can’t think of a surer bet.”

- Warren Buffett, explaining Berkshire Hathaway’s (BRKB) $44 billion buyout of Burlington Northern Santa Fe (BNI).

Click here to see Buffett talking about his biggest deal ever with CNNMoney anchor Poppy Harlow.

While the size was a surprise, the bet on America was not. In September, at the Fortune Most Powerful Women Summit, Buffett said he was busy buying stocks and had lots of faith in the U.S. “Our genius in the U.S. is not avoiding problems. It’s overcoming problems,” he told my colleague Carol Loomis.

Their on-stage conversation–recalling the collapse of Lehman (BCS) and its awful aftermath, and also looking ahead–was terrific. We ran snippets earlier on Postcards. But since Buffett is back in the news, we’ll share all 22 minutes:

And if you’re curious to know what it’s like to work for Buffett, read “How Warren Buffett manages his managers.”

The biggest railroad news in a while occurred yesterday when it was announced that Warren Buffett and Berkshire Hathaway were purchasing BNSF (Burlington Northern Santa Fe).  Buffett agreed to purchase the 77.4% of the company that he did not already own for $26 billion.

BNSF, which is a relatively new railroad as an entity, is actually a combination of many older railroads including the Burlington Northern and the Santa Fe.  The railroad covers 32,000 miles of track, 6,700 locomotives and 220,000 freight cars.  The company’s biggest clients are coal and agricultural product shippers.

That begs the question of why Buffett made the investment.  Is he betting on trains, coal, industrial agriculture, or all of the above?  Streetsblog’s Elana Schor takes a swing at that question:

That environmental rationale for Buffett’s deal struck some in Washington as dubious. Frank O’Donnell, president of the green group Clean Air Watch, wrote on his website that the BNSF deal was “the biggest climate story of the day,” bigger even than the political maneuverings of the Senate environment committee:

This is a $34 billion dollar bet that coal will remain the centerpiece of American energy policy in the future. Buffett clearly believes that coal use will remain strong – and possibly grow. So he is putting his money on a vision of America with no effective climate policy at all – or at least one that doesn’t slow coal growth.

BNSF’s reliance on coal is indisputable; the black stuff has accounted for nearly half of its tonnage this year, and MarketWatch estimates that 10 percent of U.S. electricity comes from coal hauled by the railroad.

As coal-hauling railroads go, however, BNSF has made an attempt to distinguish itself on the energy efficiency end. The railroad is developing an emissions-free hydrogen-powered locomotive, and in May started to test-run a group of GE locomotives that cuts emissions by 40 percent over previous, dirtier models.

My take (and part of Elana’s) is this purchase is a good thing.  I personally don’t care if Buffett is invested in coal – because it is admittedly not going anywhere any time soon – because Buffett will be invested in transportation and rail infrastructure.  He will be invested in making the rail infrastructure solid, having working trains and hopefully growing the network.

Passenger transportation gets the most news coverage, but freight transportation is equally important.  The effect of truck freight transportation on roads and the environment is well documented.  Moving more of our freight to rails is good for everyone, including driver safety and those living close to highways.

Moreover, maintaining high quality rail corridors is also good for passenger rail as Amtrak and many public transit commuter rail systems already run on freight-owned rails.  Expanding networks is good for the future of commuter and inter-city rail too.

Good for Buffett in seeing that America’s transportation future lies on the tracks, not on its asphalt roads.