Libs

Sorry if I missed this in another thread... By my math...80B / 565B= 14.1% Two things occur to me. 1) Obviously a great buy, over $40B in unrealized gains. I don't hear Warren get much press or credit for this. 2) How do BRK owners feel about this? makes me a little uneasy.

He's basically been saying that since like 1957. He might be right this time...I wouldn't bet on it. I'm sure that within the last 5 years, in the letter, he said he expected to marginally outpace the S & P going forward. I don't remember exactly when it was, but it was not that long ago. I find it somewhat shocking. So why own Berkshire?

Buffett no longer claims BRK should beat the S & P? Seems like a bombshell comment, IMO: https://www.ft.com/content/40b9b356-661e-11e9-a79d-04f350474d62 Edit: Paywall. Sorry about that. Here's where I first found it: https://www.cnbc.com/2019/04/25/buffett-says-investors-would-be-served-equally-well-by-sp-or-berkshire.html

Here's an alternative take, from one of our own (I hope Tim doesn't mind me posting this) Tim Eriksen January 15, 2019 at 10:15 pm Can I play devil’s advocate and say I think the purchase was mediocre and the decision to use equity was terrible. The dividends far exceed actual cash generation from the business. A better term would be distribution from cash and leveraging. Total dividends are over $31 billion. Free cash flow (cash from operations less cash used in investing) is only $19.5 billion. BNSF has taken on $18 billion in debt to cover the dividends beyond the cash flow. The decision to use equity means the acquisition price was actually much higher than $33 billion. Based on today’s $295,000 market price for A shares the true cost is over $50 billion. $50 billion spend to earn free cash flow of less than $20 billion in nearly nine years is not impressive. Here is another way of looking at it BRK spent $26 billion for the 75% of BNSF it did not own, 20% of BRK’s $131 billion of book value at the end of 2009. Since then BNSF has earned $39 billion. 75% of that is $30 billion. Since the beginning of 2010 BRK has earned $200 billion. The $26 billion buyout of BNSF has only generated 15% of earnings. Thus, the purchase was value destructive. Tim

Thanks Hjorth. I'd missed that. I'm getting the low 160's as the basis through Q3.

Getting back to the Apple discussion - I concur with Stubble. Putting such a huge % of BRK's market cap into Apple bothered me from the start. I hope he's done adding. I rarely question Buffett's purchases but the bear case here is worrisome. I've been trying to find BRK's ( most recent) cost basis in Apple. Does anyone have it?

Oops. Posted too soon. The A shares are the derivative security.

What does box 8 mean? ------------------------------------------- "Price of delivery security value $296,000"

That was good. There was a stat to behold: real estate commissions, in the aggregate, are 3 X what Canada is spending on R & D. That's seriously messed up, if true. I guess it is: http://www.cbc.ca/news/business/real-estate-fees-home-sales-1.4226630

How are you coming up with $45B earnings for BRK?

I laughed.

This article is getting attention re vulnerability of the power grid. My question is: Is Berkshire legally separated in any way from its utilities? Could a massive power outage that brings a region to its knees for weeks / months/ years bring down Berkshire? https://fas.org/sgp/crs/homesec/R45135.pdf

FWIW- I have a friend who has worked in the medical device industry for years, an executive at a firm known to everyone here. He says their DD made it clear the products could not perform to the hype, and they moved on quickly. He's astonished at the 'fools' who invested in Theranos.

<This isn't a 100% home run. It's probably even < 50% chance of happening. But it's absolutely >0%. Betting on asymmetric +EV probabilistic outcomes where there is variant perception against telephone opinions will do well long term.> This is the core of the issue. The bears, if they've even thought about it this way, must be assigning virtually zero chance of BTC becoming embedded in the financial system. I disagree, and am actually heartened by the bears' outnumbering bulls so vastly ( and by their general vitriol). This boils down to your gambling sense, IMO. Nice posts Snarky.

Nice post. I would add, I think there's a lot of over-thinking going on in this thread, with all due respect. I think there's a real chance Bitcoin has staying power ( periodic plunges aside). It could be as simple as this: https://www.nytimes.com/2017/12/18/opinion/bitcoin-boom-technology-trust.html?_r=0

Stumbled onto this piece about bitcoin, the origins of mediums of exchange, and much more. He sees Bitcoin as here to stay ( as a medium of exchange). I liked this section: <I have previously argued why there is no theoretical reason that a medium of exchange has to start out being material.9 It only has to be a scarce good. The digital age, and Bitcoin itself, have made it clear that goods do not have to be tangible. Despite word choices such as commodity in classic writings on this subject, there is no fundamental economic reason that a physical material has to be what secures the essential monetary characteristics—foremost scarcity. The supposed need for tangibility is an association leftover from the range of examples that was available prior to the internet age.> https://static1.squarespace.com/static/5720adbdc6fc0891cbcce17c/t/580d685959cc689a7b411ba4/1477275058522/On+the+Origins+of+Bitcoin+Graf+03.11.13.pdf

<In terms of the deception, control, restriction of freedoms and rights, etc, it's probably no better or worse than any Western democracy. > Chinese people are as free as American or European citizens? Is anyone telling us how many children we can have, or jailing / torturing journalists? Parsad, am I understanding you correctly?

I couldn't sleep on Sunday night, March 8, 2009, and lo and behold, I get up at 4 AM and there's Buffett on CNBC. He said something along the lines of, WFC has $40B of normalized pre- tax, pre -provision profit, and you could by it for 2 X ( or some such ridiculous number). I was 100% into BRK at the time, and sold half and put it into WFC at $10 on Monday. This is probably my greatest investment memory. Buffett himself had basically endorsed it. For me, the fear was in 2008. But by March of 2009 I was sure we were going to be ok, and I was filled with greed.

Is Berkshire shorting Dow Chemical? Dow Chemical’s Stock Action Works in Warren Buffett’s Favor By ANUPREETA DAS Sept. 1, 2016 10:11 p.m. ET 0 COMMENTS Dow Chemical Co.’s shares are showing clear signs of tinkering, according to an analysis by a Yale University professor. The shares come within cents of an important threshold—$53.72—pretty often, but they have closed above that level so rarely that there’s less than a one-in-a-thousand chance that​it’s happening randomly, according to the analysis. If the stock closes above $53.72 enough times, Dow has the option to buy back $3 billion worth of preferred shares from Warren Buffett’s Berkshire Hathaway. The Wall Street Journal reported last week that people familiar with the matter say that executives at Dow believe someone is selling its stock short—or betting that its price will fall—to keep it from rising above $53.72. In his analysis, Yair Listokin, who teaches contracts at Yale Law School and is a trained economist, picked 48-cent ranges for the daily closing price of Dow stock from April 1, 2014 to Monday. He plotted every 48-cent increment of the share price during this period against the number of times the shares have closed in that range. For instance, the shares have closed just below $53.72 more than 50 times. They have closed in the​$52.71 to $53.71 window 91 times. The number of times they have closed​in the window just above $53.72? Seven times.​ This week, the shares closed at $54.13 on Monday and $53.99 on Tuesday after the Journal story was published. Mr. Listokin’s histogram shows the dramatic drop-off. Even accounting for different methods, Mr. Listokin said the chance of this being a random occurrence is remote. “The probability that this would happen by chance is essentially zero,” he said, noting that his findings offer “pretty clear evidence of manipulation.” ​Mr. Listokin said he’s working on a more detailed paper and plans to make the Dow action part of his class discussion.​ Who would benefit from Dow’s share price being below $53.72? Berkshire comes to mind, since it gets a $255 million annual dividend from Dow for helping finance its 2009 takeover of Rohm & Haas. Kuwait’s sovereign-wealth fund also helped fund the deal and owns $1 billion of Dow preferred securities. When asked, Mr. Buffett declined to comment last week on whether he or his deputies at Berkshire were shorting Dow to exert downward pressure on the stock price. Under the original agreement, Berkshire was forbidden from engaging in short selling or hedging its preferred stake in Dow until April 2014. The clause ensured that Berkshire was locked into its investment in Dow and couldn’t reduce “the economic consequence” of ownership through a hedge. http://www.wsj.com/articles/dow-chemicals-stock-action-works-in-warren-buffetts-favor-1472782317

Berkshire is still quite attractive IMO. Below average risk, above average prospects, and priced well below the market. What more could you ask for? It's a 30% weighting for me. After that, I agree, it gets tougher.

He was really likable in 2012 when he told a black audience the Republicans were going to "put them back in chains." Amazing there wasn't hell to pay for that. ( That said, it is true he has relationships across the aisle, so in private he must be OK to work with).

I'm just grateful Parsad is getting in on the action, via Premier. Would be nice to cash in on a bubble for once ;D http://nebula.wsimg.com/c65f92956e487e536a15840eedd70b17?AccessKeyId=D9BC91A237FD97511E7C&disposition=0&alloworigin=1

CM hit it out of the park here. Great interview.

Thanks for posting - I thoroughly enjoyed it, especially the 1999 reprise.

What about CVX ( Chevron) at $95? The market is valuing them as if oil is already at $70. They lost $$ last Q at $42 oil. This Q won't be any good either. They are borrowing and selling assets to pay the dividend. LNG prices are depressed; I'm skeptical Gorgon will produce much FCF. Assuming oil between $45- 50 in 2017, and LNG contributes $3B in FCF, they will be close to even operating cash flow; and then have to come up with ~$20B in capex and $8B in dividends. How much can they borrow before their credit rating is impaired? How much sense does it make to borrow to pay the dividend? Seems like $179B is a very bloated valuation for a company with FCF problems like this. I see a variety of EPS projections around $4.20 in 2017. That's assuming $50+ oil, which is no gimme. Even then, with a historical P/E around 10, that would be a $42 stock. Here's the rub though: The dividend, unsustainable as it may be, is $4.28 a year. As long as it stays, that will prop the stock up. What am I missing....