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Berkshire Hathaway Inc. Message Board

  • jad1148 jad1148 Jun 4, 2013 5:59 AM Flag

    WEB's 1999 Wallet Pick

    astral, your mention of REITs triggered this "blast from the past".

    On 1Dec1999, WEB auctioned off his 20-year old wallet for the benefit of his daughter's charity. It contained a single stock tip. The winning bidder paid $200,000 for that tip. The tip, a REIT with a trailing dividend yield of about 9%, was First Industrial Realty Trust, FR. The WSJ made it public on 17Dec1999. If I remember correctly, much to his credit, WEB did publicly announce, a year or two later, that he had sold it, no doubt realizing that his loyal, copycat fan club had very likely piled into it as well.

    A review of its' dividend history (use FR's website, Yahoo's has an error) is enlightening. It paid no dividends in 2009, 2010, 2011, and 2012. It recently resumed paying a quarterly dividend per share of $0.085 on 31Mar2013. The dividend previous to that was $0.25 (31Dec2008), which in turn was less than the $0.72 paid on 30Sep1999.

    If you had bought it at the 17Dec1999 close of $26.50, and had sold it at yesterday's close, you would have earned about 6.6% per year (XIRR, dividends taken, not reinvested).

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    • Yeah. And was his "favorite holding period" "forever"? Ha ha. *He* played it right I bet.

      Yields have a bizarre power over people's minds. They get the 8%, and somehow the mental wheels come off. They convince themselves they got it on a savings account that's 100% sure still going to be there tomorrow. And then that's *it*, man. End of story. They'll mumble a *little* about future, but it always comes right back to the 8% in hand. Last year's divvy is the whole story, and they keep coming back to that no matter what you ask them. MV isn't unusual at all. That's how they all behave. Somehow paying out $100 and receiving $3, $5, $8, $12 is an irresistable transaction for a lot of people.

      I know what drove Mr. Ponzi crazy and made him do what he did. He was tired of listening to his stupid mother in law. "You wish you could have 8% of your own money?" Sure, babe, I can do that. Gimme the 100, ok, now here's your 8. Don't spend it all in one place.

      The cognitive trap of current yield works even on some very bright folks. The pumpers around here? ... well. Maybe we just turn our heads away charitably at this point.

 
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