charlieruane

Yeah, I think (lack of) awareness is a big part of it. John Train didn't profile Buffett until 1979, and his book-length works on Buffett came out much later (1987 and 1994 were the big ones, I think). Lowenstein's big bio was 1995. Also, the Solomon crisis raised Buffett's profile quite a bit, and that was in 1991.

Check out Spier's new Bloomberg op-ed here. Thoughts? According to this piece, Spier thinks his only edge as a value investor is the quality and depth of his research. LLMs, he argues, have obliterated that edge. I think reducing the edge of value investing to research is crazy! Our edge is equally, if not more so, rooted in identifying and taming the wilder sides of human psychology. LLMs certainly haven't changed human nature—just look at the crypto treasury companies. If investors can still become so irrationally exuberant, they will someday become equally delusional in the opposite direction. It doesn't take original scuttlebutt to know you should buy the S&P 500 when the Shiller PE is under 13. That's still value investing, and that opportunity will emerge again in time, LLMs or not. Sure, maybe the golden age is over... but wasn't the real golden age, like, the mid-20th century?

Indeed!

This is a sneaky, deep point that tickles the brain... why does the USD have intrinsic value? Because it's the only way to pay taxes to the US government, the avoidance of which can land you in prison by violent means!

Well, GRATs work well above $28mm, but there are also SLATs, FLPs, life insurance trusts... though we'll quickly hit the limit of my knowledge on those. Lots of law/tax firms have good summaries of the basics online, though.

Well, if you're married and your estate will at least modestly exceed $28mm in 2025 dollars indexed for inflation, it's a game-changer. So, yeah, quite wealthy. The "basic" zeroed-out GRAT maneuver isn't considered very aggressive at this point, it's settled law and good estate lawyers will know about it. The note swaps are aggressive if used to excess. Smaller estates (and estates of the size I mentioned) have lots of low-hanging-fruit strategies to deploy, e.g. annual gifting up to the exemption, paying for grandkids' private educations, paying for family members' health insurance... the list goes on.

No prob!

No, I'm pretty sure it's part of your tax return. Grantor-Retained. You personally owe tax on any interest, dividends, or realized capital gains from securities within the GRAT.

GRATs can make annuity payments in-kind with securities, so they can just pay out BRK shares (or reduce the value of a promissory note if you've done a note swap). And I'm pretty sure that since the GRAT is still part of your tax return, you don't owe tax on the annuity payments issued by the GRAT; the GRAT is still you, hence "Grantor-Retained." You do owe tax on any interest/dividends produced by securities in the GRAT, though. (I think that's right, at least. Again, I'm not an expert and haven't created any of these myself, I've only observed them work for others.)

Yeah, this strategy only becomes relevant at a pretty high level of net worth, and you're right that there are other methods (SLATs, FLPs, life insurance trusts, annual gifts, etc.). To your questions: - If you put in $10mm of BRK and it craters to $5mm, you should pull out that $5mm BRK and move it into a new trust. The first GRAT will fail, which costs you nothing, and the $5mm of BRK will (hopefully) mean revert up in the new GRAT; any increase in value above the token discount rate can then be passed on to heirs outside of your estate. So, yeah, if the securities you put into the GRAT crash by 50% because their intrinsic value has crashed by 50%, well, you're out of luck. But if the crash was rooted in random noise/volatility, that can be exploited with additional GRATs. Basically, GRATs give your heirs a (nearly) free option on the securities you put in them. - You are indeed still on the hook for the capital gains taxes in the appreciated securities, but your goal is to keep those securities in your estate as long as possible and pass on GRAT remainders to your heirs in cash/t-bills, or other high-basis securities. Try to keep the high unrealized capital gains stuff in your estate until you die so its basis will be stepped up. Also, think about it - GRATs can actually decrease the size of your taxable estate over time if the securities you contribute have a lot of volatility and you do all you can to exploit that. - If you do not outlive the GRAT, you're right, the assets remain part of your taxable estate. But say you start doing rolling GRATs with 2-year durations every 6 months at the age of 60. Assuming you live another 20 years, you'll probably live long enough to see multiple successful 2-year GRATs. - The IRS scrutiny concern is real and is magnified if you swap in promissory notes, but this is a totally standard estate planning tool at this point for folks of certain means. - Definitely agree that gifting the annual limit to as many people as possible is a better first step, as is paying for grandkids' private educations (can be done outside of one's estate). GRATs come later. Also, I'm not, like, an estate lawyer or anything, so anyone thinking about doing this should consult with someone experienced before moving forward with this.

Yes, exactly—you just trim the note in the GRAT to meet the requirement. Just have to net out the interest YOU owe on the note from the annuity payment the GRAT owes you.

Oh, one more cool move you can make with promissory notes: say you set up a GRAT and load it with $10mm of fairly-valued Berkshire. Then, the market crashes and those shares are trading for $5mm, a 50% discount to intrinsic value. You can swap the $5mm of undervalued Berkshire shares for a promissory note, immediately move the undervalued Berkshire shares into a new GRAT, and just let the original GRAT go bankrupt over its two-year life span with no cost to you. Meanwhile, the undervalued Berkshire mean-reverts in the new GRAT from $5mm to $10mm, which means you can pass on $5mm of appreciation free of estate tax to your heirs.

The GRAT is part of your tax return, and you can make annuity payments from the GRAT in-kind with securities, so you never have to sell securities along the way. No capital gains taxes incurred. You can just cycle the Berkshire stock into and out of GRATs over and over again. Also, I should've mentioned earlier that the minimum term for a GRAT is two years. EDIT: Oh, yeah, what Munger_Disciple said is right. Just didn't see his reply before I sent mine.

@Munger_Disciple If you and your partner stand any chance of passing on more than the lifetime gift exemption, GRATs are no-brainers. Compared to the savings, the costs are trivial—like, a few thousand dollars in legal fees to a trusted estate tax lawyer. And if the GRAT fails (i.e. if securities in the GRAT do not appreciate), there is no non-legal-fee cost to you; you just start a new GRAT. And yeah, you're correct—here's the Munger filing. Nothing GRAT-y here, I just flagged it because it involved some interesting estate-tax maneuvering centered on trading promissory notes for equities. Feel free to DM me if you end up doing it!

I believe so, yes. As you've probably read by now, there are many layers to this strategy... the most evolved involves "rolling" shorter-term GRATs with increasing annuity payments that were "zeroed-out" at the start. But the cherry on top, which fewer people know about, is doing the following: -Create GRAT -Put securities (say, public equities) into GRAT; make sure it's setup to be "zeroed-out" -Give the securities time to grow -Here's the magic: If the securities grow a lot while the GRAT is active, swap the securities in the GRAT for a promissory note that *you* write, i.e. move the appreciated securities back to your taxable estate and fill the GRAT with a promissory note of value equal to the appreciated securities being removed. This essentially locks in the gains that've happened within the GRAT -Immediately move the securities you removed into a new GRAT to start the process all over again; if the securities fall in value while they're out of the GRAT, perhaps because they got a little bubbly before you made the note swap, that's all the better for capturing future appreciation -Before the original GRAT expires, pay off the original GRAT's promissory note with T-bills or cash; these will go to the beneficiaries and will have essentially 0 unrealized capital gains (unlike the appreciated securities), on top of the 0 gift-tax consequences So, GRATs basically create a free option on the securities contributed to the GRAT. You can set these up so that all of the appreciation in the underlying securities passes to beneficiaries free of gift tax, locking the size of your estate (at least the piece of your estate represented by these securities) in the process. Ultimately, you can try to time your promissory note swaps so that you die with the securities in your estate, so they receive the step up in basis upon death; meanwhile, your heirs have received regular distributions of high-basis T-bills/cash from your series of GRATs. It's nutty stuff and may not always be allowed, but for now, it's the real deal. If you keep your eyes peeled, you'll see lots of references to GRATs in the SEC filings of wealthy folks. Propublica covers this topic pretty well, too—famous examples beyond the Waltons include Mark Zuckerberg and Jensen Huang. Munger did something a little similar to the promissory note swap with a bunch of Berkshire A shares at the depths of the GFC—that filing is worth checking out if you haven't already. EDIT: You do want to be judicious with the promissory note swaps—that's a relatively aggressive (albeit totally legal) strategy. Just don't go crazy with them, e.g. writing new notes and new GRATs every five days. Wait for real appreciation, then make the swap.

You're welcome. They're insanely powerful, but only useful to people who plan to pass on an amount greater than the lifetime gift exemption.

If you are quite wealthy, or will be some day, and face a big estate-tax burden, zeroed-out/"Walton" GRATs are the way to go.

What kind of outliers are you thinking of?

Back on the T&T beat for a sec - at 47:50 in this interview, Abel says the following of the dynamic duo: "...and outside of having relationships with both of them—which are important—that's their portfolio, and that's the way it'll always be, and they'll manage it accordingly." Ever since Buffett made his whole "actually, I think ultimate capital allocation authority should rest with Berkshire's CEO" pivot, I've wondered what Abel would do with T&T. This comment might be the answer... EDIT: That said, the size of "their portfolio" under Abel is still a big unknown.

Tricky example for various reasons but: Vanguard

Yeah, I really want to know what his "variant perception" is (as he puts it) on this one.

SIRI is pretty unlike the typical Buffett/Munger "great biz with low debt at a reasonable price" setup, right?

Chris Davis in 2021, three weeks before he was appointed to the board: "I don’t think I would want Warren’s successor to feel that at any day they should make a $50B or $70B acquisition. Whereas, I am very comfortable with Warren making a $70B, or $80B, or $100B acquisition. And so, I would think that their successor should be … no longer searching for, “What’s the next big M&A opportunity for Berkshire?” [Value Investing With Legends Podcast (October 1, 2021), Chris Davis: A Multifaceted Perspective on Financial Services, 00:43:45.] The Decker "fondness" I mentioned is only relative to regular dividends. Sue Decker in 2024: "Back in 2019, we started doing more systematic share repurchases for the first time. … In the hierarchy of choices [for returning capital to shareholders], a special dividend is something in between [share repurchases and regular dividends], something that on the Costco board we’ve employed really successfully. But that is not something that we’re discussing right now, and over time things could change, of course, but I think that redeploying the capital through share repurchases is the preferred method of the moment." [CNBC Television (May 3, 2024), Interview with Susan Decker, 00:05:55.]

Based on prior comments from Chris Davis, I bet mega-acquisitions will be even less frequent post-Buffett. Buybacks below intrinsic value will probably be the most attractive option in Greg's eyes after organic growth and bolt-ons. Sue Decker has also mentioned a fondness for special dividends, for what that's worth. Buffett also clearly thinks transmission/green energy generation is a multi-hundred-billion-dollar opportunity in the US—one to which Berkshire is uniquely suited—and I bet that was a big reason he tapped Abel. Unfortunately, that avenue has been diminished in the short- and medium-terms by the wildfire liability and Trump bill issues.

Welcome @mengan, keep posting!