Dear Mr. Buffett_ What an Investor Learns 1,269 Miles From Wall Street - Janet M. Tavakoli [137]
22 Jeremy R. Cooke and Darrell Preston, “Moody’s Loses Credibility; Muni Ranks Mean No Savings,” Bloomberg News, 11 September 2008.
23 Benjamin Franklin, The Autobiography of Benjamin Franklin (1868; reprint, Mineola, N.Y.: Dover, 1996), 75, 81, 82.
24 “The Quotable Franklin,” The Electric Ben Franklin, http://www.ushistory.org/franklin/quotable/index.htm.
25 Andrew Tobias, The Invisible Bankers (New York: Washington Square Press, 1982), 15, 94.
26 Berkshire Hathaway 1987 Annual Report. The chairman’s letter containing this quote is posted on the Berkshire Hathaway Web site (www.berkshirehathaway.com/letters) without page numbers.
27 Jonathan Stempel, “Buffett Poised to Cash in on Bond Insurer Woes,” Reuters .com, 30 January 2008.
28 Ibid.
29 Martin Z. Braun, “Auction-Bond Failures Roil Munis, Pushing Bond Rates Up,” Bloomberg News, 13 February 2008. The tender option bond market, which relies on periodic auctions to set the reinvestment yield, failed the second week in February. Bonds sold by the Port Authority of New York and New Jersey could not attract bidders at reasonable rates, and yields popped up to 20 percent from 4.3 percent the previous week.The U.S.Treasury’s 10-year bond yields traded at less than 3.7 percent, yet the supposedly triple-A-rated tender option bonds traded at a yield of 20 percent.
30 John Glover, “Auction-Rate Bonds Lure Investors with 20% Interest,” Bloomberg News, 18 February 2008.
31 Vikas Bajaj, “Buffett Offers to Reinsure Bonds,” New York Times, 12 February 2008. On February 6, 2008, Mr. Buffett offered a better deal, but it was a package deal for around $800 billion in municipal bonds. The bond insurers had to first accept the offer.Then they would have 30 days to shop the offer. If they found a better deal, they would pay a 1.5 percent kill fee to Berkshire Hathaway Assurance. He proposed to reinsure the bonds for a premium equal to 1.5 times the remaining premium left over the life of the bond, which is the original premium less the amount proportionally earned up until then. This solution would allow $800 billion of municipal bonds to keep a solid and dependable AAA rating. The solution was elegant. Even if the monolines lost their AAA ratings, the municipal bond markets would maintain AAA ratings with the assurance of Berkshire Hathaway Assurance’s AAA backstop. The financial guarantors would release regulatory capital equal to the premium they would pay Berkshire Hathaway Assurance, so they could continue doing business.The monolines turned him down.
32 Warren Buffett made this comment about the 206 transactions during a March 3, 2008, interview on CNBC.
Chapter 12: Money, Money, Money (Warren and Washington)
1 Erik Kirschbaum, “Buffett Sees ‘Long, Deep’ U.S. Recession,” Reuters.com, 24 May 2008.
2 Benjamin Graham, The Intelligent Investor (New York: Harper & Row, 1973), 101.
3 Eliot Spitzer, “Predatory Lenders’ Partner in Crime,” Washington Post, 14 February 2008.
4 Alan Feuer and Ian Urbina, “Affidavit: Client 9 and Room 871,” New York Times, 11 March 2008.
5 Eliot Spitzer, “Full Text of Spitzer Resignation,” New York Times, 12 March 2008.
6 David Koceiniewski and Danny Hakim, “Felled by Scandal, Spitzer Says Focus Is on His Family,” NewYork Times, 13 March 2008.
7 “Testimony, Ben S. Bernanke, Developments in the financial markets: Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, April 3, 2008, Federal Reserve press release. See http://www.federalreserve.gov/newsevents/testimony/bernanke20080403a.htm.
8 Alistair Barr, “Bear Portfolio Worth $28.9 Billion, Fed Says,” Market Watch, 3 July 2008.
9 Jim Rogers has made these comments on Bloomberg TV and CNBC several times in the past several months.