So we have about 0.9B$ loaned out with collateralized assets that have a cash offer on the table of 2.8B$ from Shell. Does that about sum it up? Sounds pretty rock-solid to me. ;-) You know, kids, I'll bet Warren secretly hopes WMB fails, someway, somehow. We smell a lot better if they do, right?
<<<You know, kids, I'll bet Warren secretly hopes WMB fails, someway, somehow. >>>
I do not think that this characterizes Warren. Someone that takes advantage of opps, but not one to wish for someone else's failure. At least that what I hope is the case.
Heck, if he were the predator type, he could have bought the whole company by now...it had a market cap of less than 1/2 bill last week. And then, sold off what he did not like, probably for more than he paid for the whole.
WMB...Derivatives..."BOOM"....WMB goes BK...BRK gets $2.8-B in energy assets for $900-M...With WMB bankrupt, perhaps LVLT has better chance to get WCG in bankrupcy court.
Maybe each deal is sui generis. But they sure FEEL connected in some way. And Warren & Charlie are VERY conscious of derivatives issus these days. I'm confused, but fascinated.
Well, lets not forget that that 2.2 billion that Williams paid was also near the bubble as far as natgas prices were concerned. It might really only be worth 1.3 billion. But even then, we get a nice fat margin of safety.
"Whether BUFF lends Midamerican the money, or
they do these purchases with new cash is a good
That is a good question.
MidAmerica's balance sheet had $7 billion in debt at year end and only $10 billion in assets, according to the BRK annual report, but there's little detailed information.
FWIW, I note Moody's has MidAmerica debt rated at A3 and their preferred stock at Baa2.
Why do I get the feeling that Warren knows he could put huge amounts of money to work today and get returns better than bonds (probably even double figure returns), yet he is waiting for a price that will make the current ones look like ones only a spendthrift would go after? What would make most people very happy (8 - 12% stock returns) leave Warren unsatisfied at best. Might as well be in bonds for that kind of return.
He is finding places to put his cash as it comes in the door. Not bad considering recently he has said there is NO area he finds attractive. The cash isn't just piling up collecting the incredibly small interest payments and principal appreciation along the way. And if we get another leg down (how could Abby be wrong yet AGAIN?), maybe he'll find some place to add a zero to the mere billion at a time swings.
Whether BUFF lends Midamerican the money, or they do these purchases with new cash is a good question. My uninformed guess is that BUFF puts in new cash, and the others are given a chance to hold their position or lower their participation in the equity. The amounts are relatively huge for even Scott. Kirn River, Northern Natural, and the 'Secured Preferreds' at Williams, involve 2 to 3 times the up front cash that Midamerican did. My second guess is that the other three have not held a static percentage of ownership. They haven't been diluted. They just own a smaller fraction.
Well theres always the possiblity that he could buyout a company like Moody's or HR Block. He could gobble up Fidelity National Financial title insurance(with its 8 or 9 P/E ratio). He could gobble up MBIA muicipal bond insurace. He could repurchase 4 or 5 billion in Berkshire. He could add to AXP, gobble up Tootsie Roll, he could go after Mars(the candy company, not the planet!!). Sink another 4 or 5 billion in energy.
yep the amount of money needed to be invested to make a sizeble marke on a 75 billion security ball of wax is pretty darn daunting. The few billion in non insurance cash flow and the few billion of float growth does mean an awful lot of billion dollar shots will be necessary each year.
I was wondering that myself. Maybe he simply loans the money to MidAmerican at say 1%. Sure Scott and Sokol are getting in on a free ride sine they aren't putting capital up, but they run the show so its kind of give and take. Buffett needs them to run the show, they need his cash to grow. Who knows but I'm sure Buffett isn't on hte short end of the stick.