Just my 2 cents, but I take the position that money not paid in dividends ends up reflected in higher stock prices. Maybe not necessarily directly or immediately, but in the long term I think that's the way it works out.

 Also, this is a market made for Buffett purchases. Lots of confusion, insurance companies in the toilet and he's got tons of cash on hand. I think nothing but good is to come from this company. Might take 6 years for the pay-off, but that's how the real money is made.

But you gotta do what you gotta do. Are you reinvesting your cash or sitting tight?

 

For Eagle Ted, I am more than glad to tell you where I transferred the proceeds from my sale of BRK.B: I bought General Electric Capital 6.625% PINES due 6/28/2032 ticker GEA.  Although the issue price was $25.00, because of the panic I picked them up for a fire-sale price of only $23.50.

GE calls them "baby bonds" because of their $25.00 issue price.

So you see why I am happy: I collected my profits from Berkshire--thank you very much, Mr. Buffett--and placed them in a AAA-rated bond paying me at least 6.5% in real cash money, payable quarterly.  [Maybe one of these days Mr. Buffett will figure out that it is his duty as a steward of his shareholders' hard-earned money to pay them dividends, but I am not going to wait around holding my breath and waiting for him to figure this out.]

The only downside:  my GEA payments will be taxed as ordinary income, but unlike a lot of people I consider it my patriotic duty to pay my taxes.

Jagor 

Can't fault you there, Jagor. I don't fool with bonds, does the price usually go down after the "dividends" date? I notice yours has a dividend date of the 29th.

Since I am retired, I invest for income, not for speculation. So variations in price are not the primary criterion, but rather the financial health of the company and its ability to pay its dividends.  How can you beat GE?

Actually, I think it is fairly common for income investors to sell their stocks at a profit, then invest the proceeds in bonds or other income-producing instruments.  This, in fact, is exactly what Bill Gates does: each time he unloads a few gazillion shares of Microsoft, he invests the proceeds in bonds--he needs income to fund his charitable foundation.  So I feel I am in good company.

[I also gave some other reasons for selling Berkshire in the "Who Sold after Monday" thread.]

Jagor

Good Morning Jagor....

 You might want to look at "BIF" and "BTF" [closed-end funds] where both have "SUBSTANTIAL" holdings in Buffett [25-30%] in their current portfolio's. Both paying beyond reasonable returns currently [distribution to intrinsic value factor of 15-20%] because of current mkt conditions [where everything is basically down in mktprc]. Both have been "UP" in "NAV" [net asset value] over the last three week period. Sometimes owning something a little different [and reaction to] to the market is smart IMHO [for well diversified portfolio's]....

 Anyway, something to look at for investors investing for income IMHO....

Have a "GREAT" week....

Best Regards/Eddie....

Eddie, Many thanks for the tip about the Boulder funds, but I was already aware of them. As you imply, those funds enable you to buy Berkshire shares at what amounts to a discount.

On the other hand, even though I sold Berkshire and invested the proceeds in an income-producing investment, I still have some exposure to Berkshire via some of my mutual funds, notably the Fairholme Fund FAIRX.  It should be noted, however, that Fairholme has recently sold off a significant portion of its shares of Berkshire-Hathaway.

I guess I am not the only investor who realised that the "Emperor Buffet" had no new clothes.

I strongly recommend to anyone who holds Berkshire stock or is contemplating buying it to read the article by Stephen Mauzy entitled "Questioning the Cult of Buffet," in the April 23, 2007,  issue of Barrons.  Mauzy explains the origin of the Berkshire B shares--BRK.B: "A decade ago Berkshire issued the lower-priced Class B shares to pre-empt a Philadelphia-based entrepreneur from launching a fund offering fractional exposure to Class A shares."  My comment: what was wrong with that?

Mauzy continues, " Class B investors are indeed second-class parishioners, for the Class  B shares carry one-thirtieth the rights of Class A shares, except that they wield one-two-hundredth of Class A shares' voting rights."  My comment: there's only one word to describe this: "unethical."

Now I don't dispute the fact that Warren Buffet is a very smart man who has made great investment decsions.  What I do contest and I contest it very strongly, is that Warren Buffet is violating his investors' trust through poor stewardship of their funds and his inexplicable and mulish refusal to pay a dividend, to split the shares of Berkshire stock, and to break up the conglomerate.

Jagor 

 

More on Fairholme Fund selling Berkshire.  I checked the 2007 Annual report and the 2008 Semi-Annual report for the Fairholme fund. On November 30, 2007, Berkshire stock comprised 19.79% of the fund's portfolio. But by May 30, 2008, the fund managers had disposed of all their B shares--taking their profits just as I did--and retained only their A shares.  Berkshire stock now comprises 10.67% of net assets of the fund, making it tied with Pfizer for the top fund holding. 

Jagor 

jagor:

 

I had all that hard-earned money of mine tied up and not earning anything because that old coot won't pay any dividends to his stockholders who are in bedazzled thrall to him like members of a cult in thrall to their guru.

If you wanted income from dividends, then why would you buy a stock that is notororious for never paying dividends (except for one odd instance long ago.)?  Would you buy a Cadillac when what you need is a pickup? Sorry, but that is - just - plain - dumb.

Taken a look BRK.B stock and where it was 7 years ago, when we were also in the midst of a correction/recession? Pull up a chart, and you'll see the price is double that it was 7 years ago, and 18% up after a year into a serious market correction. And yet you wrote off his shareholder as being in a bedazzled thrall?  

You might be glad, but you should really be ashamed.

jagor:

Since I am retired, I invest for income, not for speculation. So variations in price are not the primary criterion, but rather the financial health of the company and its ability to pay its dividends.  How can you beat GE?

 

 

Well, GE just drastically lowered their earnings estimates for the coming quarter and the next year. And while they were at it they suspended their stock buybacks. What are the chances for a dividend increase - or suspension of dividends at this juncture?

BRK-B gained +4% on Sept. 24 after the announcement of Buffett's $5 billion investment in Goldman Sachs. Today, despite its profit warning, GE was recently up +4%. Sometimes it's better to sit on your hands so you don't shoot yourself in the foot.

closer:

BRK-B gained +4% on Sept. 24 after the announcement of Buffett's $5 billion investment in Goldman Sachs.

From a back of the envelope perspective, I'd say the market got it about right.  Berkshire changed $5 billion into a $500,000,000 income stream - that's about $323 for each A share.

With the B share value at about 1/30th of the A shares, that equates to about $11 per B share.  At an 18 multiple, the value of that additional $11 is about $194.

$194 plus the 9/23 close of $4300 is $4494.  BRK.B closed at $4475 on 9/24/08.

Another way of looking at ol' Warren's deal is that he just added $500,000,000 to his company's bottom line.  At an 18 multiple, the market says the company is now worth $9 billion more than it was a week ago.  And that is without regard to the stock price of Goldman Sachs.

Regards.

Cliff