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Mangers should “think about what counts, not how it will be counted”.

Berkshire’s dividend income does have some tax benefits vs operating income on the corporate level. But capital gains are taxed similar to operating income.

Most people think Buffett’s investment skills are GOAT.

They try to replicate but it’s extremely hard.

Actually, even if people can invest like Buffett, they can’t replicate his success. There are other contributors that are less obvious.

1. most people don’t have low-cost capital. Your margin account is priced at above prime rate.
2. most people don’t have more bullets each year, as Buffett’s insurance business (float) is growing each year giving him more money to invest and add to his positions. Thus, when he can buyout the company if needed, most other people can’t.
3. most people don’t have access to mgmt. When you are Buffett, other people offer you the information in a very accessible manner. And if you are big enough, you become a board member.
4. most people don’t have enough tax knowledge. Buffett is obsessed with lowering tax legally.

Be happy about lower stock prices, as you are a net saver & investor!

Oh USAir stock can be up like crazy? From $4 to $73!

S&P Index is Buffett’s biggest competitor, and it doesn’t have double tax – Berkshire needs to pay tax on the corporate level for gains or dividends.

More than book value – “float is a major component of Berkshire’s intrinsic value that is not reflected in book value”.

“overpayment risk” – 买贵了. Excellent companies will need to catch up with the price & managers may be distracted.

Berkshire’s competitive advantages explained: 1) massive capital to absorb big losses, 2) embracing uncertainty/volatility for higher return (no mistake calculation).

Buffett talked about difficulties faced by Buffalo News, World Book, etc., which is likely due to this paradigm shift towards online.

Berkshire shall create Class B shares in 1996, with 1/30 of economic interests and 1/200 of votes of Class A.

When doing capital allocations, managers should focus on increasing intrinsic value per share –  however, “in contemplating business mergers and acquisitions, many managers tend to focus on whether the transaction is immediately dilutive or anti-dilutive to earnings per share.”

Besides, major acquisitions can be “a bonanza for the shareholders of the acquiree; they increase the income and status of the acquirer’s management; and they are a honey pot for the investment bankers and other professionals on both sides.”

Option rewards for managers and return cash to shareholders can conflict.

Don’t take profit on a star business – a CEO won’t sell a star
subsidiary.

Volatility is not risk – it’s a friend for true investors.

Buffett 2.0 – ” buying good businesses at fair prices rather than fair businesses at good prices”.

Value investing is not low multiples.. And high multiples could also be value investing.

Warren Buffett noted that investments in the secondary market have generally performed better due to periodic market inefficiencies offering bargains, unlike the new-issue market, where sellers rarely underprice their offerings.

There was an important change to accounting – companies must now recognize the present value of liabilities for post-retirement health benefits, increasing balance-sheet liabilities and reducing net worth.

Another important reminder – stock options are real expenses.