Geico has typically done 6% underwriting margin even with the majority of advertising expensed. That and growing premiums at 10% a year and the income from investing that float. Its not exactly throwing money away.
yeah its not exactly a windfall. Clearly the shoppers that spending the $29 billion in sears and kmart stores will go elsewhere but I dont know how much of that would go to walmart, probably a decent chunk though. Shoppers have already been doing that for quite some time, this would just force that transition faster.
No, in fact I think he called sears out in the letter as a former corporate titan whose destructive behavior led to its downfall. Walmart will perhaps hire some but not nearly that much. Sears has 200,000 employees helping to generate $30 billion of revenue. Walmart US has 1.3 million employees but they help generate $288 billion of revenue
Heinz has only filed a preliminary registration statement. The date hasnt been decided for the special meeting for Kraft, whose shareholders need to vote for the merger. If approved, the transaction is expected to close during the 2nd half of this year.
if you're worried about jobs, I'd be more concerned about the gutting and mismanagement of sears holdings which in the not so long run will probably result in bankruptcy and the loss of all of its 200,000+ jobs
banking is a different world than it used to be. Acting like this is horrible news or says that much about the broader economy is crazy. I haven't stepped into a branch in forever. Chase has been one of the slowest to close branches but ultimately its the smart thing to do. There are plenty of other growing industries that more than make up for banking job losses.
they could do it that way and take less shares, but I think its preferable to trade in the 6% preferred which is only about a 5.15% after tax yield, pretty unattractive for a perpetual security. Of course, a lot of that depends on how the valuation of Bank of America looks in 2021.
well what I mean is that its not currently worth $12 billion, its controls $12 billion in shares, but to exercise will still cost $5 billion. However, berkshire could trade in its 6% preferred to do that and probably ultimately will right before expiration.
In my opinion, theres only really a big 2 or 3 if you count bank of america. KO and AXP are legacy positions built in the 80's and 90s and untouched since then, only kept around because the tax cost of selling is so high. If you're going to judge buffett, judge him on his large active stakes which are primarily IBM and Wells Fargo.
if you're interested in some reading, the full agreement is part of the May 2011 10-Q
part of it is that the borrowing base is asset based, and is primarily limited by the net inventory. There was ~ $3.2 billion of net inventory at the end of the year. The borrowing base formula gives either 80% of controlled liquidation value or 70% of net inventory, whichever is lower. So if we're generous and give the 70% that gives you a borrowing base of about $2.24 Billion. The pari passu notes do get subtracted from the borrowing base because they're secured by the same asset base to essentially get a new borrowing base of about $1.24 billion. There are a couple of other things that affect availability, mostly the requirement that they must keep availability at 15% and the fixed charge ratio. So essentially the total revolver is ~$1 billion
Thinking they could rely on email marketing as a department store is ridiculous. The result of this is worsening same store sales and the full brunt of this decision is likely still to be felt. Even with $2.5 billion, sears won't last too long as increased rent, pension obligations and continued operating losses will quickly gobble up the money. And if they do make it to 2018, they no longer have any asset base on which they can refinance their debt. Its hard to see the bull case on the common stock here.
I've always like utilities, historically returns haven't been that far behind the indexes but its accomplished that with much less volatility. I think it will work out well and as you know attractive alternative investments are in rather short supply.
and how kirby has fallen since. Thats the problem with selling through distributors, you have little control over their prices and their ethics, in this case $1000+markups and aggressive salesmen. I'm not sure thats a good proxy for berkshire as a whole but its a fair point. I think its very difficult to invest only in companies that always act honorably and I'm not sure its wise either. Would you avoid PG&E because of their CPUC dealings?
yeah I dont agree, so maybe it is unlikely to pass congress at the moment but we can't afford to reject all good ideas because of the current feasability in congress. The makeup of congress changes every 2 years, sometimes drastically.
Well sure we have different opinions, but i promise you none of my opinions on this are shaped by buffett. On that graph, california was at 92 so if you want a single minimum wage worker to afford the average 1 bedroom at 30% of income and 40 hours/week, the minimum wage would have to be over $20/hour in california. The quickening pace of automation was already simewhat of a threat to lower end jobs in my view, at more than $20/hour for low skilled work, you run a very big risk of dramatically increasing that threat
Agreed. My point is just that while sears' sales have cratered, walmart hasnt seemed to pick up a great deal of that as theyve been struggling with their same store sales to some degree also
Well its been this way a long time, but its not quite as bad as it seems. In reality, it often is two people living together. Keep in mind, these are average fair market rents and a single minimum wage worker has the option of a lower end apartment or if it were me, i would rent a room in a house. So in Sacramento(one of the cheaper areas of california), 1 bedroom fair rent is $806, but you can definitely find some lower end apartments in the $525-$550 range, so then youre getting pretty close. Also, there is substantial help available for low income renters, I know a few people here that are getting their rent either fully covered or partially covered by the SHRA or HUD