In 1923, a lawyer from Columbia University named Robert Lee Hale wrote the charmingly titled “Coercion and Distribution in a Supposedly Non-Coercive State” to argue that there is a significant gap between the theory of a how is supposed to work and how it actually gets applied in practice. It was Hale’s work, along with the Supreme Court opinions written by justice Oliver Wendell Holmes, that helped give rise to a school of philosophy called legal realism in which you focus on the real-world effects of laws rather than regarding laws as self-executing principles that get properly applied as intended.
A similar shift is taking place in the field of investing … Read the rest of this article!
Warren Buffett’s investment in Apple stock is particularly interesting because it is the only example of a Berkshire investment in a large-cap stock that is both repurchasing shares aggressively and does not require Berkshire to sell the stock at certain levels do to pragmatic legal reasons. For instance, he would never allow the Bank of America, Wells Fargo, or American Express holdings to ever eclipse more than 20% of each stock even as they repurchase their own shares because it would activate the “financial strength” (sometimes called “source of strength”) doctrine that requires the parent entity of a failed financial institution to pay for liabilities.
In other words, if you own 19.9999% of … Read the rest of this article!