Buffett Proposes 30% Minimum Tax on Incomes Over $1 Million

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Nov 262012
 

In an op-ed in today’s New York Times, Warren Buffett proposes a 30 percent minimum tax on taxable incomes between $1 million and $10 million, and 35 percent on amounts above that.  He argues that a higher marginal tax rate on capital gains and dividends would NOT discourage investment versus leaving “the money in [a] savings account earning a quarter of 1 percent”.

The entire op-ed is available at:

http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html?hp&_r=0

 

 Posted by at 7:54 am

Berkshire’s New Stake in Deere and Other Portfolio Changes

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Nov 152012
 

In its SEC 13-F filing for the third quarter 2012, Berkshire Hathaway revealed numerous changes to its portfolio.  The largest addition was an initial stake in Deere & Co. (DE, 4 million shares, $340 million current value).   Other new positions included Precision Castparts (PCP, 1.25 million shares, $220 million) and Wabco Holdings (WBC, 1.6 million shares, $90 million).

Increased stakes were reported for Wells Fargo (WFC), General Motors (GM), IBM (IBM), National Oilwell Varco (NOV), Viacom (VIAB), Bank of New York Mellon (BK), DaVita (DVA), and DirecTV (DTV).

Holdings were eliminated in Ingersoll-Rand (IR), Dollar General (DG), and CVS Caremark (CVS).

Berkshire’s reduced stakes included Kraft Foods (pre-spinoff, KFT, -$1.3 billion), Johnson & Johnson (JNJ, – $680 million), Procter & Gamble (PG, – $452 million), ConocoPhillips (COP, -$260 million), and General Electric (GE, – $90 million).

The large portfolio reductions in KFT, JNJ, PG, and COP are believed to have been made by Warren Buffett, since his initial positions generally exceed $1 billion, and these investments were made prior to the arrival of his portfolio managers, Todd Combs and Ted Weschler.  The other portfolio changes (less than $500 million) were apparently made by Combs and/or Weschler.

I was quoted in a  Bloomberg article on this topic:

Elephant Hunting

Buffett may be selling the consumer stocks to provide more funds to his deputies while reserving money for a large acquisition, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. Berkshire’s cash pile climbed to $47.8 billion in the third quarter, buoyed by the stock sales and earnings at operating units.

“He may be really wanting to keep that aside for his big elephant,” said Kass, who has accompanied students to meet the Berkshire chairman and chief executive officer in Omaha.

The entire article is available at:

http://www.bloomberg.com/news/2012-11-15/berkshire-takes-deere-stake-as-buffett-deputies-build-portfolios.html?cmpid=yhoo

This blog post has also been published by Forex Pros:

http://www.forexpros.com/analysis/berkshire%E2%80%99s-new-deere-stake-and-other-portfolio-changes-143765

 

 

 Posted by at 8:48 am

Berkshire’s Excellent Third Quarter Earnings and Large Cash Position

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Nov 062012
 

Berkshire Hathaway reported its third quarter earnings rose 72% versus the corresponding 2011 quarter, largely as a result of a reduction in losses in its derivatives.   Although operating earnings declined by 11%, this resulted from a one-time adjustment to reinsurance reserves in 2011.  Otherwise, operating earnings would have increased by 15%.  (Berkshire’s derivatives portfolio is largely comprised of put options sold by Berkshire on four major stock indexes.  These options cannot be exercised until maturity between 2018 and 2026.  The derivative losses reported are unrealized, but required by accounting standards.)

Berkshire also reported a very high cash position of $48 billion.  Since Warren Buffett has stated that he requires to have $20 billion on hand, he now has up to $28 billion to invest.  He prefers to make one large acquisition exceeding $20 billion.  In the recent past Buffett has said that his “elephant gun” is loaded and he is “salivating”.

I am quoted in a Bloomberg Businessweek article on Berkshire’s “Elephant Hunt”:

“The U.S. presidential election tomorrow and the so-called fiscal cliff of automatic tax increases and spending cuts at the start of next year may create an opportunity for Berkshire if stock prices fall, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business. Kass has accompanied students to meet Buffett in Omaha.

The S&P 500 may end the year little changed from its close on Nov. 2, according to the average estimate of Wall Street brokerages surveyed by Bloomberg. The most bearish prediction is for a 17 percent drop.

Fiscal Cliff

Goldman Sachs Group Inc.’s chief U.S. equity strategist David Kostin said stocks may end the year lower because lawmakers’ resolution of the fiscal cliff may be “messy.” The pressures from that risk begin this month and continue through January, he said at a conference in San Diego Sept. 10.

“To the extent that it looks like we’ve run into another deadlocked situation, equities could sell off” giving Buffett more favorable conditions for a buyout, said Kass.”

The entire article is available at:

http://www.businessweek.com/news/2012-11-05/berkshire-s-cash-nears-record-as-buffett-extends-elephant-hunt

I am also now on Twitter @DrDavidKass

 

 

 Posted by at 8:13 am