charlieruane

From the 2000 AR: We have added so many new companies to Berkshire this year that I’m not going to detail all of the products that we will be selling at the meeting. But come prepared to carry home everything from bricks to candy. One new product, however, deserves special note: Bob Shaw has designed a 3 x 5 rug featuring an excellent likeness of Charlie. Obviously, it would be embarrassing for Charlie - make that humiliating - if slow sales forced us to slash the rug’s price, so step up and do your part. Anyone here pick up one of these novelty Charlie rugs back in the day?

@gfp Any chance you could tell us a bit about that BNSF dividend? Intriguing...!

Danke!

Nice! Any chance you happen to have that link handy...?

Beautiful simile! Thanks for sharing.

Fun fact I learned from Berkshire's 2024 Proxy Statement: in 2023, Buffett reimbursed Berkshire $50,000 for personal use of Berkshire's materials (e.g. "postage or phone calls that are personal") and personnel.

It's fun (is fun the right word?) to read this comment today and think about which of these risks have come true in part or in whole.

Checking in on this fun thread—did a quick pass at the math and came up with a smidge over 15% p.a. for the ten years following Feb 19, 2009. The board was just about dead-on! Edit: And through today's close, the B shares are up an even bigger smidge over 15% p.a. since this thread was posted!

To play devil's advocate for a second: is investing in any given company not merely outsourcing one's capital allocation to someone else (i.e. the CEO of that company)?

You're not wrong. I'm reminded of this exchange from the 2017 annual meeting (although to be fair, the firm has grown a lot since then, and cash is now wildly more attractive, so there are good reasons to believe the $150B figure Buffett cited is outdated for good reason): JAY GELB: Berkshire’s cash and Treasury bill holdings are approaching $100 billion. Warren, a year ago, you said Berkshire might increase its minimum valuation for share buybacks above 1.2 times book value if this occurred. What are your latest thoughts on raising the share with purchase threshold? WARREN: ... At the moment, we’re still optimistic enough about deploying the capital that we wouldn’t be inclined to move to a price much closer where there’s only a narrow spread between an intrinsic value and the repurchase price. But, at a point the burden of proof is definitely on us. I mean, the last thing we like to do is own something that a hundred times earnings where the earnings can’t grow. As you point out, we got almost $100 billion. It’s $90 billion plus invested in a business—we’ll call it a business—where we’re paying almost a hundred times earnings and it’s kind of a lousy business. CHARLIE: It’s more after every tax earnings. WARREN: Yeah, so we don’t like that and we shouldn’t use your money that way for a long period of time. And then, the question is, are we going to be able to deploy it? And I would say that history is on our side, but it would be more fun if the phone would ring instead of just relying on history books. I am sure that sometime in the next 10 years—and it could be next week or it could be nine years from now— there will be markets in which we can do intelligent things on a big scale. But it would be no fun if that happens to be nine years off—and I don’t think it will be—but just based on how humans behave and how governments behave and how the world behaves. But like I say at a point, the burden of proof really shifts to us big time and there’s no way I can come back here three years from now and tell you that we hold $150 billion or so in cash or more snd we think we’re doing something brilliant by doing it. Charlie? CHARLIE: Well, I agree with you and the answer is maybe.

Fun stuff!

He has already explained it. It seems like the "something better" is simply the optionality and decent real returns of short-term Treasurys, especially considering AAPL's rich valuation (KO in 1998 being the model) and the USA's all-time low cap gains taxes: So, we will end up, if something dramatically happens that really changes our capital allocation strategy, we will have Apple as our largest investment, but I don’t mind at all, under current conditions, building the cash position. I think when I look at the alternative of what’s available, the equity markets, and I look at the composition of what’s going on in the world, we find it quite attractive. We don’t mind paying taxes at Berkshire, and we are paying a 21% federal rate on the gains we’re taking in Apple. And that rate was 35% not that long ago, and it’s been 52% in the past when I’ve been operating. And the government owns… The federal government owns a part of the earnings of the business we make. They don’t own the assets, but they own a percentage of the earnings, and they can change that percentage any year. (2024 Berkshire Annual Meeting)

I have never heard Buffett speak in terms of "rebalancing," in fact I've heard him espouse the opposite: concentrating on and in one's best ideas. Munger said owning 3 high-quality businesses provides enough diversification.

@gfp Great thoughts, as always! Where'd you find the Wells Fargo fun fact? Ha.

Were the ~$50B of buybacks across 2020 and 2021 not dipping a toe?

Wowee! Any thoughts on the sale, @gfp?

Yeah, if I had to guess, Berkshire will hold off on elephant hunting until there's blood in the streets, even if a Chubb buyout would work at current prices (or be no more expensive than Alleghany was). Buffett will probably wait for more of a margin safety to deploy that kind of cash. But, yeah, fun to think about. I wouldn't mind it, really.

The outperformance is in risk-adjusted terms, and it doesn't have anything to do with being "close to retirement." If you're young and trying to compound as fast as possible, you too should care about risk, i.e. the chance of permanent capital impairment. Seth Klarman says this over and over—"we don't have an absolute hurdle rate, we target risk-adjusted rates of return." Take an extreme example. What would you rather own, an investment that is certain to offer 5% p.a. every year with 0 risk of blowing up, or an investment that offers 10% p.a. but has a 2% chance of being wiped out in a 100 year period? You must own either investment for 100 years. I'll pick the former every time because the odds that the "better compounder" gets wiped out at some point are way too high, rendering all gains moot. If someone thinks he/she can "trade around" this blow-up risk, well, best of luck with that. Berkshire used to offer both risk-adjusted and absolute outperformance. Going forward, it's likely to offer just risk-adjusted outperformance... but in reality, risk-adjusted outperformance is what true investors really care about. So, Berkshire is still worth looking at and owning for those of us who do not need to get rich quickly by taking on a lot of existential risk.

Vicki Hollub of OXY was one of three oil execs to host a fundraiser for the Trump super PAC "MAGA Inc.": https://www.nytimes.com/2024/05/23/climate/trump-oil-democrats.html

Yes—that's right. BofA made the initial outreach to Todd, Greg was dispatched to execute. Apollo is inevitable, I guess.

Ah, thanks!

Further edified by WB's comments today re: sending Ted up to do a deal in Canada recently. Todd and Ted are keeping busy beyond their public equity duties.

It's also clear that Combs and Weschler are doing way more than public-market stockpicking. Combs is spending the vast majority of his time fixing up Geico, which is a huge value-add for Berkshire. Ted also does meaningful work on private deals, the results of which are not reflected in his portion of the public equity portfolio.

Fascinating! Mind if I ask where you heard this?

Geopolitical risk seemed to be Buffett's primary concern, but he did cite "seismic action" once—though now I realize that was in the following CNBC interview, not at an annual meeting: There’s actually a danger of seismic action, I mean, and where they’re located. But that’s a low probability and they, you know, they’re smart people but would I rather have it, there was a U.S. domicile company than be a subject of who knows what, depending on conditions outside their control? Transcript link.