Thursday, July 06, 2006
Teflon Buffet Part 2
First, I have to admit that it was a cheap shot, and a little unfair to lead my last post with Buffet's flawed personal life. In fact, the real story seems to be that the late Susan Thompson Buffet decided that she wanted to physically separate from Warren and move to the West Coast, to Warren's consternation. Furthermore, she encouraged, and may have even arranged for the development of Warren's long term extra- marital relationship. So with that mea culpa, I can now move to the last few things that bug me (but seemingly, no one else) about Warren.
Berkshire Hathaway has been an aggressive investor in various insurance arbitrage plays, where policies are purchased not for protection reasons but as investments. This abuse of life insurance products hits very close to home and threatens the tax favored treatment these products get and deserve. Warren should know better. In addition, Berkshire companies have also provided the annuity side of some of these arbitrage plays.
Another thing that Warren plays up is that he opposes stock splits. All well and good, since splits basically amount to paper shuffling and neither create nor change any real values. However, splits do serve one important purpose and that is to maintain the liquidity in the stock. With Berkshire "A" trading around 90,000, it would be difficult for individual investors to purchase even one share without upsetting their diversification standards. Also, for long time shareholders, selling is awkward. The type of selling I do, usually about 5-15% of my holding at a time, would be virtually unworkable with Berkshire. What's good for Warren and his vast portfolio is not much good for other investors. At this point, a 2000 for one split would be helpful, putting the stock at 45 and within easy reach of most investors.
There's a lot to admire about Warren. He has taught people a lot about investing, particularly value investing, and buy and hold strategies. He has been a bulwark against the ridiculous executive pay packages common today. And he IS a bridge player. But he is not really holier than thou, although he acts that way and the media makes him out to be a true sage.
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On Wednesday, I sold 600 shares of CNRD.PK, my pink sheet stock, at 3.40, out of my IRA. A lot of holders ran out of the stock when the company stopped providing guidance, press releases, and required public company disclosure (they dropped below the number of public shareholders requiring it). That depressed the price, so I bought some more. Of the 600 sold, I had bought 300 of the shares in July of 2004 at 2.53, the rest in March of 2005 at 2.22. Still have 8000 left between IRA and non-qualified accounts.
Also I would like to thank Jim Cramer for pumping AXYS on his show the other day, giving the stock a nice little artificial bounce.
Berkshire Hathaway has been an aggressive investor in various insurance arbitrage plays, where policies are purchased not for protection reasons but as investments. This abuse of life insurance products hits very close to home and threatens the tax favored treatment these products get and deserve. Warren should know better. In addition, Berkshire companies have also provided the annuity side of some of these arbitrage plays.
Another thing that Warren plays up is that he opposes stock splits. All well and good, since splits basically amount to paper shuffling and neither create nor change any real values. However, splits do serve one important purpose and that is to maintain the liquidity in the stock. With Berkshire "A" trading around 90,000, it would be difficult for individual investors to purchase even one share without upsetting their diversification standards. Also, for long time shareholders, selling is awkward. The type of selling I do, usually about 5-15% of my holding at a time, would be virtually unworkable with Berkshire. What's good for Warren and his vast portfolio is not much good for other investors. At this point, a 2000 for one split would be helpful, putting the stock at 45 and within easy reach of most investors.
There's a lot to admire about Warren. He has taught people a lot about investing, particularly value investing, and buy and hold strategies. He has been a bulwark against the ridiculous executive pay packages common today. And he IS a bridge player. But he is not really holier than thou, although he acts that way and the media makes him out to be a true sage.
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On Wednesday, I sold 600 shares of CNRD.PK, my pink sheet stock, at 3.40, out of my IRA. A lot of holders ran out of the stock when the company stopped providing guidance, press releases, and required public company disclosure (they dropped below the number of public shareholders requiring it). That depressed the price, so I bought some more. Of the 600 sold, I had bought 300 of the shares in July of 2004 at 2.53, the rest in March of 2005 at 2.22. Still have 8000 left between IRA and non-qualified accounts.
Also I would like to thank Jim Cramer for pumping AXYS on his show the other day, giving the stock a nice little artificial bounce.
