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The Banker Who Said No

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Re: The Banker Who Said No

#41

Post by catz »

karl11 wrote: post #34
catz wrote: post #32

Earlier quoted context omitted.

Didn't Berkshire Hathaway loose a lot of money because of the current mess?

They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years. Sorry for the Buffett fanboyism, but he's the man.

As I understand it he made some serious missteps in the recession. WP:

> Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses.

Warren Buffett tarnished as Main Street oracle http://www.thestar.com/Business/article/604619

Buffett suffers big losses at Berkshire Hathaway http://www.bloggingstocks.com/2009/02/28/buffet-suffers-big-...

(d Berkshire's net worth dropped a whopping $10.9 billion in the final three months of 2008.

Berkshire's shares have fallen 44% since the end of February 2008. )

etc...

Re: The Banker Who Said No

#42

Post by karl11 »

catz wrote: post #41
karl11 wrote: post #34

Earlier quoted context omitted.

They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years. Sorry for the Buffett fanboyism, but he's the man.

As I understand it he made some serious missteps in the recession. WP: > Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. Warren Buffett tarnished as Main Street oracle http://ww…

Actually, the preferred stock in Goldman is an option. He has the option to buy the stock at $123 indefinitely, meaning if it ever goes above that amount he can then choose to buy it and sell it for a profit.

And like I said, the stock went down with the market. Yes, at one point his stock was down 44%, but so was everything else. And if you look at the fundamentals, they have a small leverage ratio, close to zero actually if I remember correctly, lots of cash, and are one of a handful of companies still rated AAA.

The guy in the article keeps saying if only he had access to more cash he would be making piles more money. Well Buffett has the cash, and he's going to rake it in when the market rebounds.

Re: The Banker Who Said No

#43

Post by ilkhd2 »

anamax wrote: post #20
byrneseyeview wrote: post #16

Earlier quoted context omitted.

Is it really responsible for a bank to back 30-year loans with demand deposits, at 25-to-1 leverage? I really can't imagine that happening without government intervention, and if it only happens when the government makes it happen, there's a good reason to expect that it's irrational. Banks are hybrid companies in the sense that FDIC insurance means they are basically conduits for lending to the government. If I depo…

>E.g. if I pay someone $100 now for $100 worth of lawn care over the next five years, I make damn sure I can trust that person. If I pay the bank $100 for a CD maturing in five years, I don't. > This gives all banks an incentive to take undue risk Actually, you've just demonstrated that FDIC insurance gives you an incentive to take undue risk. You'll deposit your money at any bank without regard for whether said bank…

Bank of North Dakota. A government run one..

Re: The Banker Who Said No

#44

Post by ojbyrne »

smanek wrote: post #19
Tangurena wrote: post #18

Earlier quoted context omitted.

To start with, you have to be what is commonly called an "accredited investor." This is a requirement because almost none of the "investments" sold as CDOs are registered with the SEC. The accredited investor loop-hole is the one you'll need to invest in hedge funds and the like: it means something like you're a big boy now, and you don't need the feds protecting you from crooks . Alternatively, your organization wil…

I'm a bit short of the wealth requirements to be called an accredited investor ... (1M net worth + 200K/year income). That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich.

Just a slight quibble. It's 1M net worth or 200k/year. You make it sound like it's "and."

Re: The Banker Who Said No

#45

Post by joe_the_user »

jmtame wrote: post #6

To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.

One has to consider that he is simply investing after almost everyone else screwed up. This could be a great opportunity but results are not yet in. It important to consider this.

Re: The Banker Who Said No

#46

Post by joeyo »

BobbyH wrote: post #23
jmtame wrote: post #6

To prepare bids he locked himself in his office to write a computer program with 50 variables (now 250), ranging from home price changes by neighborhood to interest rates to origination dates. Yep, he's a hacker.

This sounds like a multi-variable linear regression he did in Microsoft Excel?

Other than excel having some floating-point arithmetic problems, what difference does it make what tool he uses?

Most things are linear to a first approximation anyway.

Re: The Banker Who Said No

#47

Post by tlb »

joeyo wrote: post #46
BobbyH wrote: post #23

Earlier quoted context omitted.

This sounds like a multi-variable linear regression he did in Microsoft Excel?

Other than excel having some floating-point arithmetic problems, what difference does it make what tool he uses? Most things are linear to a first approximation anyway.

Only because most first approximations are linear.

Re: The Banker Who Said No

#48

Post by [deleted] »

gojomo wrote: post #38
gscott wrote: post #22

Earlier quoted context omitted.

> That just seems blatantly unfair to me. It's the government setting up a different set of rules for the rich. There was one VC here that mentioned how someone emailed him about also investing in 3 of the companies that he had invested in, and how he couldn't let the person do it because the person didn't fit the requirements to be an "accredited investor" then he mentioned what three companies they were. They were…

But doesn't the current crash highlight the superfluousness of the 'accredited investor' limits? Even investments poor people are allowed to make -- like common stock of giant financial institutions, even those with government sponsorship (Fannie/Freddie) -- can essentially go to zero. The general markets are down 45% from their peaks. Why should submillionaires be denied the chance to put 55% of their portfolio in T…

[deleted]

Re: The Banker Who Said No

#49

Post by ellyagg »

catz wrote: post #41
karl11 wrote: post #34

Earlier quoted context omitted.

They went down as the market went down and did have some losses, but they also had an enormous pile of cash and not very much debt. Buffett has been waiting for the market to go down like it has so he could make his move with that cash. As a result, I think he's going to make out extraordinarily well in the coming years. Sorry for the Buffett fanboyism, but he's the man.

As I understand it he made some serious missteps in the recession. WP: > Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs at $123[40] only for it to fall to below $60. Furthermore some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. Warren Buffett tarnished as Main Street oracle http://ww…

You understand incorrectly, for the most part. A sinking tide lowers all boats. Buffett doesn't care what the stock market prices his company at in the short term, only how the intrinsic value of his company improves over decades.

Also, the financial press loves to take pot shots, even though Buffett repeatedly and thoroughly explains that Berkshire's stock price will go through severe beatings from time to time.

Re: The Banker Who Said No

#50

Post by kqr2 »

jmtame wrote: post #24
BobbyH wrote: post #23

Earlier quoted context omitted.

This sounds like a multi-variable linear regression he did in Microsoft Excel?

That's very possible. Reporters tend to exaggerate certain elements, but he has a pretty strong math background. Either way you look at it, he's hacking the numbers to increase his own odds of investing in the right stuff.

Actually, from the description of his high stakes poker games, he ran computer simulations in order to gain a competitive advantage so I wouldn't be surprised if he actually wrote a program.

Beal, for his part, took a mathematical approach, at one point running millions of computer simulations of various poker problems, in search of an edge against the pros, who rely on an uncanny intuition honed by thousands of hands

http://www.amazon.com/Professor-Banker-Suicide-King-Richest/...

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