Buffett Trip

Every year Warren Buffett invites a dozen business schools to visit with him in Omaha. Students each get to ask him one question during the 3-4 hour Q&A session, followed by lunch at Gorat's steakhouse. In addition, the students get to pitch a company (public or private) for him to purchase. If they are successful, each student gets 2 Berkshire-B shares and the professor will get 1 Berkshire-A share. Only one class has been successful (University of TN - Knoxville and Clayton Mobile Homes) so far.

After over a year of "persistence" I called his secretary and Emory University's Goizueta Business School will be visiting with him during the '07-'08 school year. A tad bit of irony, considering Roberto Goizueta was one of the key drivers for Buffett's large purchase of Coke stock. We will have to make sure to bring Mr. Buffett a fresh case of Cherry Coke from Atlanta.

This experience will be highly valuable for all the students. How valuable, might you ask? If we look at public comps, we see a recent transaction of a $600K Lunch With Buffett paid for by a successful Chinese entrepreneur. If we consider that we will have between 40-100 students, the trip could be worth between $24 - 60 MM. Thats definitely a great value in my book.

CRF / CLM Exposure

CRF continues to chug along at 90+% premium to NAV. Its sister fund CLM is close behind with an almost 80% premium to NAV. I am considering shorting CLM as well soon once its premium gets closer to 90%. CLM is also more attractive in that it is much more liquid than CRF. However, all of these actions would give me considerable short exposure to the SPY, much more than I would like. One of the major risks to this strategy is a massive jump in the NAV which would close the premium spread. I have recently started looking into some Dec '09 SPY calls in order to hedge against my short positions.

Here's a back-of-the-envelope snapshot of what my positions would roughly look like afterwards:

CRF - $19 * 1000 shares short = -$19,000
CLM - $9 * 1000 shares short = -$9,000
NAV - ($19,000 = $9,000) * 50% = $14,000
SPY '09 155 Call - $1,700 ($150 * 100 = $15,000 SPY exposure)

The one SPY call covers the NAV of the shorts, which SHOULD eventually result in a profit of $19,000 + $9,000 - $14,000 - $1,700 = $12,300

I will need to keep a sizable cash cushion to protect against further widening of the spread as well as a dreaded short squeeze.