It’s not like they haven’t seen this coming for literal years.
Maybe they were assuming he’d give in?
1. Many retail investors do not have the funds to buy a full share.
2. Anyone who makes a spreadsheet containing the share prices of largest companies has to make that column wide enough to accommodate 6 digit numbers.
If not having power, that seems upsetting. But...thats how power works, otherwise it isn't powerful.
Shares, whether in one class or many, are packages of claims against the company, not really ownership of the company in the simple sense. That’s fairly fundamental to the corporate form as distinct from, say, partnerships.
That is a feature, not a bug
This also leads to those dodgy partial share adverts targeting younger unexperienced investors which is not a good thing in the long run.
If Nasdaq makes too many rules that investors or companies dislike, they'll list respectively trade elsewhere.
Developments in the rest of the market make stock splitting less of an imperative than in the past. Eg Robinhood and many other retail brokerages allow you to own partial shares now.
If you follow the logic of these recent developments, individual shares might become a thing of the past, and we will just directly trade fractions of whole companies.
(On your computer, rational numbers are easy to implement: just represent them as a pair of arbitrary-length integers.
Operations will be a lot slower than on floats or ints, but the exchange doesn't need to do too many operations per second. And market makers and hedge funds etc can use whatever approximation scheme they want in their internal systems.)
I find it much more likely that it's actually your broker who truly owns the share and you have a contract with them. This is not at all like a house which can actually have two true owners.
That doesn't mean there's anything wrong with such an arrangement, of course.
They are all held by 'Depository Trust Company' in the name of 'Cede and Company'.
> Cede technically owns substantially all of the publicly issued stock in the United States. Thus, investors do not themselves hold direct property rights in stock, but rather have contractual rights that are part of a chain of contractual rights involving Cede.
Modifying the last link in that chain isn't such a big deal.
I still wonder what might happen if the broker went bust and owed X different people various fractions of a single Berkshire share.
Legal liabilities ultimately are generally settled in dollars, though if an entity “goes bust” they tend to be written off or resolved at a small fraction of their theoretical worth based on the liquidation value of the remaining assets.
Your arrangement with your broker for fractional shares is similar, though not identical. They're not just selling you a derivative product that they may optionally hedge with BRK/A.
Well, a share of stock can have two true owners, it's just that public stocks don't.
The legal ownership structure isn't hard to find out; it is actually mandated by law. All publicly traded stocks are owned by the company set up for that purpose. Doesn't matter whether you're the contractual owner of a tenth of a share or the "sole owner" of a full share; the share is owned by DTCC.
You could form a contract with your co-share owners describing how you allocate that benefit, just like would be necessary with a house with co-owners.
I have no idea if that happens, but it's certainly just as possible.
I voted for part of a politician in my electorate.
Suppose you buy one share of a company that has a thousand shares outstanding. You now own one thousandth of the company, or 1/1000 of the company.
Suppose instead you buy one thousandth of a share. Now you own a thousandth of a thousandth, 1/1000/1000. Or you can call it a millionth of the company, 1/1000000. It's the same number either way you write it.
The point is that a share is already a fraction, and it's no great leap to have a smaller fraction than that.
They also provide indivisable benefits: the right to vote, and the right to inspect company documents.
The solution to owning "a thousandth of a share" is a stock-split, where the smallest fraction is still one share.
A follow-up question since you know more about this than I do: if some number of people each buy a fraction of a share, who gets to vote that share, nobody? Does it become effectively a non-voting share?
If you take the example of Robinhood, here's the relevant section.
> "I understand that fractional shares within My Account (i) are unrecognized, unmarketable, and illiquid outside the Robinhood platform".
 https://cdn.robinhood.com/assets/robinhood/legal/Robinhood%2... [Section 27]
However the vote could be exercised by whatever entity actually owns the whole share. That would be entirely a decision for the people who chose to divide up the resource. Presumably BH will only accept a single binary vote per share, so it would be up to the owners of the fractional share to agree (or not).
But: if there was demand, Robinhood could totally offer fractional shares with voting rights.
For each vote, there's typically only a finite number of possibilities.
So Robinhood could just pool the voting intentions for everyone with factional shares, and then vote the whole shares accordingly.
(To be really nice, Robinhood would just own a small handful of extra shares, so that they can round up those pooled votes to full integers.)
share (noun) 1) a part or portion of a larger amount which is divided among a number of people
If you Google (or DuckDuck) "fractional share ownership", you will find a bunch of hits with a list of brokerages and an explanation about how it works.
I assume these products are "captive audience" -- you must buy or sell your fractions with the same broker. Thus, they cannot be transferred to other brokers. That said, I also assume it a very price competitive product so the margins would be thin and prices fair.
More like a deliberate plan to concentrate voting control.
You can perfectly well buy Berkshire Hathaway without plonking down a half million dollars--there are class B shares. It's just class B shares don't have anything like the voting power that class A shares have. Class A shares can be divided up into class B shares but you can't combine class B shares to make a class A share. The result is the owners of the class A shares have voting power far beyond their percentage of the company.
Warren Buffet has no need for a market in class A shares to even exist. The common man should buy class B.
Also, to give credit to your answer, >5K CHF is more than 5K USD! Looks like CHF->USD is about 1.09 right now.
But note: they’d also only trade once a month or so.
So his stock can’t be bought by small players.
I own B shares. It doesn’t bother me that I have fewer voting rights because I trust my fellow Berkshire owners. So there’s little barrier to entry in merely owning a small stake in Berkshire’s economic output.
Second, if you want to argue there’s a barrier to entry for voting purposes, that also doesn’t make sense: you need to have a ton of ownership in any stock to make a difference in ownership as an outside investor. It doesn’t matter if the share price is $1 million or $10 if I need $50 million in share value to make a dent in voting.
Third, Buffett has stated that he doesn’t want to split shares because he wants to encourage long-term owners. There’s a lack of liquidity in A shares; I’ve heard usually only about 1,200 trade a day. He, and I’m sure many other Berkshire shareholders, want their fellow shareholders to think like long-term owners of a private business, especially for shareholders with a lot of voting influence. A high share price and its corresponding low liquidity encourages that.
Samseong in Korea also had (has?) a huge stock price that used to cause issues.
* Until 2000, stocks were priced in fractions of a dollar (8ths, 16ths, etc) before moving to cents (https://www.sec.gov/hot/decimal.htm)
* These days, prices on exchanges must be in one cent increments, and not smaller (https://www.sec.gov/divisions/marketreg/subpenny612faq.htm)
Perhaps they're using the same software as for overseas markets, or its some future-proofing gone wrong or something.
For example one can submit a mid-point peg order which can be filled at a fractional penny:
There are also auctions that take place on a daily basis, such as the opening auction and closing auction, where trades may execute at a fractional price.
Furthermore NASDAQ also operates as a reporting facility, and as such reports trades made through ADFs such as FINRA, dark pools, off-exchange block trades, and inside quotes which are quite often executed as fractional pennies.
Anyways, all this to say that the situation is a lot more detailed that you make it seem from your two references. It's not just a simple matter of SEC says orders have to be to the penny, so NASDAQ must be doing something really bizarre here.
The rationale and effects of the sub-penny rule are quite complicated. And there's lots of lobbying done in either direction.
The bigger the smallest price increment, the more important speed becomes.
The original justification for minimum increments has gone: it was a workaround the limitations of human traders and human market makers.
But, alas, even with computers there are still some downsides to just allowing essentially arbitrary precision prices.
(I do find it somewhat strange that the SEC makes rules about this, though. Why don't they leave that to the individual exchanges?)
I think we had a discriminant for the denominator, so it wasn't a rational type, but we could also easily represent both fractional and decimal prices. We could handle fractions smaller than 1/16, though I don't know if any equities traded at such prices. What you suggest would also be reasonable, but would have had to be rewritten when decimalization happened.
But these things sometimes surprise me. A few years ago I paid a visit to my coworkers at the job I had in high school in the mid nineties. I had written some sort of email processing program in C; I don't even remember what it did any more. I was told they are still using it, 25 years later. Awesome or scary, I don't know which.
I think power (^) has higher precedence than subtract (-).
So (2^32-1)/10000 == ((2^32)-1)/10000
WolframAlpha agrees: https://www.wolframalpha.com/input/?i=%282%5E32-1%29%2F10000...
I have seen differences in the precedence of logical operators between languages (and > or but what happens when you have both math and logic in the same statement isn't entirely consistent) and always use parenthesis in those cases--although these days if Resharper says it's redundant I let it remove them.
I always assume the floor for equity is the first tick above zero, e.g., 1 US cent or 1 Euro cent or 1 Japanese yen. Honestly, I don't know if any traditional stock exchanges allow zero price or less for shares. If anyone knows an example, please post about it!
Another reason why this comment matters: Does anyone remember when oil futures went negative? (April 2020) I am sure more than a few computer systems were unprepared for that scenario. I remember when short-end Japanese rates were zero and negative after the 2008 Global Financial Crisis. It was a real monkey wrench in the machine!
The the intention of both comments was clear... To discuss signed vs unsigned integer.
Both are a bit slower than using ints built into the machine, but exchanges don't have to be particularly fast. (In contrast to HFT participants. But they just need to be faster than their competitors.)
When you say rational numbers, do you literally mean a fraction, or are you talking about a floating point representation? I'm not sure what a fraction would do over fixed point in this usage, and floating point is best avoided for anything finance related due to the fact that they're approximate.
They probably regret not just using 64-bit from the start, but on the other hand somebody likely saved a measurable amount of money on storage over the years. Potentially not worth the cost to figure out a workaround now, though.
Perhaps they could implement a rule where if the field equals MAX_UINT32, then the value must be looked up in an auxiliary database table. Depending on how much crufty code there is assuming 32-bit though, it may be their equivalent of y2k.
Yes, variable length fields are a bit annoying. But my argument is that the exchange itself doesn't need to be that fast. And the market makers just need to be faster than each other.
(For anyone else, exchanges just need to be fast enough.)
Yes, just using a 64 bit integers is probably the easiest here.
Floats would be worse than my suggestion to use variable length rational numbers, for exactly the reasons you know.
$429,496.7296 would overflow
there's BRK.B for that. BRK.A is what, a vanity stock?
I've long had the idea that the reason to buy any BRK.A is because ownership of a single share allows you to go to the shareholders meeting in Omaha.
https://www.investopedia.com/ask/answers/021615/what-differe... doesn't mention the shareholders meeting, so maybe that's outdated or apocryphal.
With respect to Buffet who has talent and is not a total fraud he gets a large fraction of his outsized returned in trades not available to you and me. Off market placements for example. Do you think your returns would have improved if you could buy Goldman Sachs at a 20% discount to market? Yeah me too.
Marketing and promotion is one way he gets those offers you and I don't. (No not the only way, he has billions to invest too, but his name helps). Having the highest share price for a single unit of stock is something else to talk about and color a story if you're reporting it. He's very good at this promotion. His annual letter was a previous generation's version of Elon Musk's tweeting, hiring onion writers, flame throwers and so on that gets Elon so talked about.
It's a skill, a talent. Finding the opportunities and exploiting them in a way that doesn't significantly blow back at you. Buffet executes it brilliantly. Something to consider in your own business. Is there something else you can exploit like that which would make for a paragraph in the story of your company?
The 'Buffett halo' is worth paying for.
Even BRK.B would be 50x more its current price but it had to be split when they bought Burlington Northern with stock to accomodate BNSF shareholders.
The major difference is voting power. Economic interest is pro rata, but voting is much different (not that it matters in the current environment). That, and BRK issues direct tender offers to BRK.A holders.
One example is BNSF. Most railroads are on warpath to increase operating margin as much as possible. Cutting routes, laying off staff, and neglecting customer satisfaction are the norm. Imagine being laid off after your company has had its most profitable year ever. These actions are being dictated by institutional investors. BNSF is the only major railroad not taking on precision railroading. It's possible that this will be a failure on BNSF's part, but Berkshire is willing to take the bet and act differently from everyone else on the idea that this will be better long term. Institutional investors are not interested in that.
I have a feeling it's a rigged industry, and has very powerful lobbyiests. (That part after the comma is true in California.)
1. age 50
2. no moving violations.
3. bare bones legal minimum in CA. (15-30-5)
4. $550 year, with a Covid credit of $6.30
5. I'm with Mercury.
(I looked into pay per mile, but I don't have a computer in my vechicle.)
Also, auto insurance has the lowest profit margins of any type of insurance.
- type / year / color of car (gives price and your attitude)
- how many km driven / year (no risk if it stays always on your drive!)
- where is it parked
Gender famously matters too - a 18/M is (statistically) likely to be a worse driver than a 18/F. Rates reflect this. Having once been a 18/M, I have no trouble believing this.
That said, it's very difficult to compare across states. Car insurance is regulated at the state level, so inevitably different states (or territories, or DC, etc.) have made different choices over time. You can do a dollars-to-dollars comparison between any two states but there's a good chance the elements of the policies and liability rules aren't the same.
I suspect there's also some adjustment to premiums done for how much it costs to repair things where you live. Medical care, building repair, and car repair are all things that likely come up a lot on claims. If you're some place where these are twice national averages, you might have higher premiums than you would in a place where these cost half the national average. In addition to the chance of a loss varying by location.
29, Clean record for 7+ years, 2013 honda civic, $1140 a year with Geico, in DC/NoVA.
Car insurance is extremely regulated and transparent. If you think you’re getting ripped off, go to a different website and shop around.
If you borrow money for the car, the lender might require coverage for the car itself. I pay for $500k bodily injury and $100k property damage liability only coverage for $40 per month per vehicle for 10k miles per year.
I had Geico on the east coast at a similar price ($50), but they were more expensive on the west coast so I switched to Amica.
1 speeding ticket
1080 a year
Also you are technically and legally a shareholder even if your broker holds the shares on your behalf as is usually the case these days, and attending any shareholders meeting is a legal right whatever the size of the shareholding.
Although just now they are online due to covid but I'm sure the physical meetings will return.
If you do hold 0.001 shares with a broker and you want to go you should request with them to be sent the annual report, also a legal right, and that'll have the invite card. Or if not you can phone Berkshire and ask for one.
Haven't "sophisticated" investors been conned, suckered, and fleeced as long as stocks existed and even before?
From participation in the South Sea Bubble (the original "bubble") to the Tulip Craze to Bernie Madoff to Enron to cryptocurrencies and beyond.
Not to mention that deep pockets don't necessarily equal sophistication (even when they spend enormous sums to hire professionals to manage their money), and the fatter your pockets the juicier a mark you're going to make for people whose lives are dedicated to funneling money from your pocket to theirs.
That said, Berkshire has always been on the side of the little guy in a sense, even if they're a bit condescending about it -- Warren Buffett has been very vocal about investing in index funds (even putting a tiny bit of his money where his mouth is and challenging fund managers to beat it) this whole time and it's been a good strategy over a very long time frame.
Now, one of the things that no one tells you about the stock market is that a LOT of players make money by front-running and middle-manning the whales (index funds, pension funds, etc), so you'd maybe think it was a trap to just make the whales bigger, but in general the strategy of just investing in broad index funds has been good regardless for individual investors.
Another thing that's been made pretty clear in the previous year is that governments will bail out businesses first in crises. One of the really crazy things that Warren mentioned was just how wide "spreads" (difference between pristine debt aka bonds and debt from struggling companies aka junk bonds) got in march of 2020 -- near/surpassing 2008. He joked that Berkshire couldn't even have floated debt in that market, which is why the Fed doing what it did was necessary. The usual arguments of businesses as "job creators" is maybe valid in some sense, but capitalism without repercussions/negative feedback is what we seem to be trying to drive hard to. Companies that are not prudent with their cash and record profits for the last 10 years of extremely loose fiscal policy should be punished. We expect individuals to save for a rainy day, why don't we expect companies to do so?
You can skip ETF management fees and just look up their latest SEC filing. Here is a pie I made in M1 (which you can invest with the click of a button if you have an account) which is similar to their public holdings but with tech stocks (Apple and SNOW) removed: https://m1.finance/6rAREGn34Ai2
Depot tools should work and about 1.5 years you could build most of Chromium on Windows with Python 3.
1. Banks and other stakeholders subscribe to binary formats of price data. Making this change means forcing everyone to update. And those subscribers are paying customers who will likely be against this change.
2. These are old codebases with likely many uses of 32 bit prices, and if written in C/C++, conversion from int is particularly hard because those languages like to automatically cast to int without a warning (so you can’t rely on compiler errors to tell you what you have left to fix).
3. These are performance critical systems. Adding an extra 32 bits of all zeros (or, all zeros 99% of the time) means you slow everything down for one special case.
I’m not saying it cannot be done, but I can see being very pissed at any company who makes you do tons of work for their marketing trick. (Surely a 200k stock is just as out of reach from the average person?)
BRK.A was written in black Sharpie on a post-it above my desk, I would just point to it. I think it was $90,000 back then.
I doubt the insurance companies are driving BRK’s price growth anyway. The biggest contributor is probably his stake in Apple.
Any broad market index fund ETF probably did just as well, if not better.
The same applies in reverse.
Making limiting simplifications is one of the important legs of engineering (the other two being making tradeoffs and focusing on accomplishing the goal).
Those of us over a certain age remember how much work went into patching the Y2K issue, and how it changed the software industry, and yet was pooh-poohed by the general press in the final year of the last millennium (2000) when nothing material went wrong.
My point was the article was a little bit alarmist, which it almost had to be to spin out a brief article about what is otherwise an amusing piece of trivia that would fit in a sentence: "Berkshire Hathaway's price has almost reached the point where it can't be represented in NASDAQ's computer, but they are patching their code and expect everything to work fine by the time the stock reaches that point, if ever."
I'd be glad to chuckle in passing upon encountering that sentence, but was annoyed at the padding used by the poor reporter to make an article of it. Given the state of the world it's hard to blame anyone (reporter, editor, Bloomberg management...) for this phenomenon.
There were things like the supermarket whose inventory computer was tossing a bunch of perfectly good product until someone noticed that the "expired" goods they were disposing of weren't expired at all.
All of mainstream computing should have 64 integers by now, 4 digit years, etc.
Other kinds of code may not have these kinds of requirements in which case I agree that these kinds of limitations can be short sighted.
But that kind of decision is what I was talking about with respect to engineering.
I highly recommend it for those curious about Buffet
No one likes messing with stuff that’s never gonna move, doesn’t matter if it’s $1 of $100, it might as well not even be an investment opportunity.
The returns on these high priced and low volume stocks will always be shit.
Don't you own the same amount after the split?
Isn't the total value of compounding the same after x year?
I feel like I am either missing something big or Buffett just has one of those "I'm gonna do it my way b/c" things here.
And since I am a fool with finance I must be missing something big :)
The continuously compounding exponential return formula is
P(t) = P0 e^rt
Note that only time enters the argument of the exponent, not the principal. So the returns are invariant to divisions of the principal (ignoring human behavior effects).
As an aside a lot of my bank / brokerages basically give a number out of range error if you try going back more than five years or so. Which is a pain for this sort of stuff - Buffett started buying into Berkshire in 1962.
Also the whole digits thing gets much worse in crypto where you have have 10^24 shares of some coin worth $10^-23 per coin or similar. I was trying to write some software the other day and the only thing I found was to store the numbers as strings in the database and convert them to something like Python long integers which can have unlimited digits.
EDIT: like an expandable floating point type, where as you increasing the needed max_digits, you just have this implicit migration that occurs. Idk this is super half/quarter-baked but just going off script a bit
It just seems silly that I'm building some PoC, and 3 years later all the assumptions I applied initially become something I need to actively design around, or just refactor my data schema. How many layers of abstraction would I need to add to create a kind of more flexible types that just know to expand if I add more significant figures, or contract (on a row basis) depending on the entry.
Like I was building a django app 2 weeks ago, and pulled in django-money to deal with currencies without reinventing the wheel, and then with another field on a model (meant to simulate a crypto asset), I had to arbitrarily decide what level of precision and what the "max digits" were for a class of potential instances of this model. I get that this might be overoptimization, but really - this is silly. By specifically asserting a max length for some field, aren't you wasting space? If not, then my entire point is moot.
Not super quantitative, but just thinking out loud a bit.
Unless I'm not understanding what you mean by fixed point?
People's names are fundamentally oral and spelling is just an encoding to communicate them in writing. Being worried about spelling correctness it like being worried about the choice of binary encoding of the spelling. My name is only correctly encoded in binary as ASCII, not some bastardized similar-looking unicode codepoints, and certainly not that archaic IBM encoding! Future generations had better respect my preference! /s
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The A shares are convertible to B (though not vice-versa), so if A is trading at a discount it will be quickly arbed away.
I cringe at how they had to parse that string input on an online stock trade form... "128 3/8" imagine the typos...
The culprit turned out to be a Y2K38 bug on my part triggered by a salesman fat-fingering an order into the 2060s. The only Y2K bug I had wasn't worth fixing--one list of reports was "date"-sorted (dates in the filenames) and making the display wider was more of a downside than dealing with the mis-sort at rollover.
On this crazy timeline (considering the last 10 years), I wouldn’t be surprised if B2K sparks a world wide fiscal meltdown.
In fact, splitting has become surprisingly rare in recent years
Change it so that what is listed on Nasdaq as BRK.A is not actually BRK.A but rather 1/2 BRK.A. So when Nasdaq says BRK.A is $X it is really $2X, and when they say N shares traded that day it was really N/2 shares. Only allow transactions that involve an even number of the 1/2 BRK.A shares.
Hopefully the code to handle all that would just need to be in the interfaces between the 32-bit systems and the rest of the world, and should be a lot less work than changing the whole thing to 64-bit.
What am I missing?
In fact it seems like voting is actually not that important, since if you didn’t trust Buffett to run the company for you, you would be investing in something else.
In practice the rise of stuff like cryptocurrencies and NFTs shows that this theory is only partially true, and perhaps there is some nonzero lift on the price due to people just buying it because they think the company is cool or whatever.
If you can construct a portfolio that exposes you to only that specific event (and not something like the further increases in value until that point -- seems difficult but maybe possible?) you might learn the probability of it happening at various points in time, through its price!
Maybe you'll find that portfolio seriously underpriced (another comment gave some potential reasons why it would be) in which case there's money to be made.
You'd do that by going long in all stocks that Berkshire owns, and short Berkshire itself. The problem with that is that Berkshire also has a bunch of non-listed subsidiaries you can't buy.
You don’t need to buy BRK.A to benefit from Buffett’s financial acumen. You only need to buy BRK.A if you want to say you own BRK.A.
Also, the harder it is to transact a stock (and a price over $400,000 makes it hard), the less efficient price discovery is.
There is a booked called "the millionaire next door" that is a good read.
I think the idea is that he doesn't want to return cash while there are still good investments and made the B shares available for those who need liquidity.
Their stock transfer agent will give you B shares in exchange for an A share, which is not a taxable event. It’s a mechanism to encourage arbitrageurs to keep the prices of the share classes in lockstep.
I mean this seriously, is there a benefit to the company to do this? It requires at least a little work on their part to do, why fix what isn't broke?
For other businesses, stock splits can increase investment/price since it makes that stock more accessible to retail investors and more importantly their huge pile of retirement savings. For example automatic investment plans that can buy whole shares of a company each month (via salary redirected savings) are much more popular than sitting on cash for up to months to buy a single share (and that is harder to automate/brokers don't support it).
Fractional Shares should solve this issue, but many 401Ks simply don't support them, different brokers have a patchwork of what can/cannot be done with fractional shares (e.g. market orders only), and there's also questions about voting power/stock splits/broker transfers/legal rights/etc.
If fractional shares were offered not at the broker level but at the exchange level with identical [proportional] power/legal rights/access/etc to regular shares none of this would matter, but they don't at all. So we've got a system where share price is both meaningless mathematically but also somehow an impediment to an entire investment class.