In which: the SEC does nothing at all, Berkshire increases its buyback threshold, North Korea is a problem child, Zambia has some urgency, and Berlusconi. Oh Berlusconi.

Good morning

The headlines:

  1. The Fed does more.

    Link: <shakes head>

    Wrote about it here.

  2. The Buffett buyback.

    Link: when in doubt, back yourself.

    Berkshire is buying back more shares. Previously, the only time they would do a buy-back was when the share price fell below 110% of book value. They’ve raised the limit to 120%.

    If you follow WB’s shareholder letters, you’ll see that he has fairly strong opinions on “intrinsic value”. And basically, he’s of the opinion that the best estimate of intrinsic value is book value. But it does look like that opinion is relaxing – which makes sense because your company/companies generally tend to have more worth than just historic profits recorded in a balance sheet.

    And for Berkshire – what else are they going to do with their cash? They’ve done so much better than most in the crisis. It must be a great moment to say “yes – I’d invest in me too”.

  3. Wait a SEC.

    Link: he who hesitates…

    Here’s yet another story released by the SEC where I think they’re expecting congratulation for picking up on an issue before it became an issue. Even though they did absolutely nothing about it. And the issue wasn’t really the issue at all.

    The SEC apparently asked JPMorgan to disclose their proprietary trading* better – and they did this about a year before Bruno Iksil’s infamous trade went bad and lost them $6.2 billion. I think that there is a cue here for us to draw our own conclusions…

    But I’m not sure that it’s relevant. The Iksil “bet” was a hedge of JPM’s risk. And it sounds like it was a sensible hedge at the time. JPM sat with customers and projects and loans in the US. It stood to benefit if the economy did well, and to lose if the economy did badly. So it took out a derivative hedging position, which would do well if the economy did badly, and lose if the economy did well. And yes – that sounds like a hedge fund. Because lest we forget, the original hedge-funds were there to hedge risk.

    So even if the SEC had carried through on its recommendation to improve disclosure on proprietary trading – this would have had no impact on the trading loss. Because that particular position would have fallen under risk-management disclosures, and everything would likely have happened exactly the way that it did.

    Unless I’m missing something…

    *Banks investing their own money.

  4. North Korea.

    Link: annoying.

    When countries with irrational dictators go rogue and start missile launching…what is the appropriate response? Because rational appeals don’t work with the irrational, and invasion is a bit self-defeating.

    December 21. That’s the one.

  5. Zambian Airlines.

    Link: the trouble with being state-owned.

    The Zambian government is appealing for investment in its state-owned railway and airline.

    I mention it because Zambia Airways went bankrupt in 1994. And now, according to Mutaba Mwali, the deputy minister for Transport Works, Supply and Communications:

    “This is an urgent issue.”


  6. Berlusconi.

    Link: what is he doing?

    Mr Berlusconi is both running and not running for Italian premier. After all the tax evasion and the sex parties – how is he still going?

    My favourite quote so far:

    “Berlusconi’s return riled allies and critics alike.” 

    When you’re riling your allies… It’s not a good sign.

That’s all for now.

Have a good day.