MCR

I've had the sense of late that more times than not over the past month or so Berkshire's daily price moves appear more out of sync with the broader market than what I've seen in the past few years. Out of curiosity, I went to Portfolio Visualizer to look at the correlations for daily returns between BRK.B and SPY. I set the rolling correlations to 20 days and the date range for January 1 through July 24. I did this for each year from 2000 through 2024. Yes, the time period is arbitrary and as we all know the start and end dates of any analysis can skew the results. So, with these caveats (and more unmentioned) in mind, here's what I found: Asset correlations for time period 01/01/2024 - 07/24/2024 based on daily returns (Year and Correlation): 2000 0.26; 2001 0.29; 2002 0.31; 2003 0.22; 2004 0.24; 2005 0.25; 2006 0.17; 2007 0.31; 2008 0.18; 2009 0.70; 2010 0.62; 2011 0.81; 2012 0.76; 2013 0.84; 2014 0.73; 2015 0.84; 2016 0.82; 2017 0.72; 2018 0.85; 2019 0.73; 2020 0.93; 2021 0.64; 2022 0.73; 2023 0.73; 2024 0.36 Net-net: through the first 206 days of the year (one additional day for leap years), this is the lowest correlation between Berkshire and the S&P 500 in 15 years. There were high correlations over this time period every year since 2009. So far this year, Berkshire appears to be providing more diversification than it has in a long time...

Interesting piece in the Washington Post today: "Want affordable housing? Take the chassis off manufactured houses." Didn't realize this limitation was in place...wonder what the impact would be for Clayton if this gets changed by Congress... https://wapo.st/3QYdbll

Regardless of size of the positions or whatever profits might be realized, what puzzles (concerns) me is the lack of clarity about the investment philosophy/approach for Todd and Ted. Warren (and Charlie) over the years has talked (and written) many times about his view of stock purchases of companies such as American Express, Coca Cola, or Apple as partial ownership of companies. I realize it's unrealistic that every equity purchase initiated by Warren over the years squarely fell into this category. And not all of them worked out (e.g. airlines -- at least twice). But that's true for some of the wholly owned companies as well. But at least I understood what their "ideal" situation is and can understand and articulate their core philosophy and approach. I cannot do this for Todd and Tedd. For exaample, I've never understood purchases such as SNOW or PAYTM. Both felt so far outside of what Warren & Charlie would do or have explained to us as partial owners in the company with them. I've been wondering about drift for several years now. I am more than a bit wary of the idea of the two of them taking over investment decisions for Warren someday. I was relieved to hear earlier this month of Warren's confidence in Greg's ability to make capital allocation decisions. The way I heard Greg talk about capital allocation sounded just like Warren and Charlie. I left Omaha feeling better about Greg's role in the company.

+1

Article in today's WSJ about the impact of the Key Bridge tragedy on the reinsurance industry: https://www.wsj.com/finance/baltimore-bridge-collapse-could-fuel-reinsurance-pricing-e2db34fc?reflink=desktopwebshare_permalink I hope to hear Mr Buffett's and Mr Jain's views about 1) Berkshire's likely exposure to the tragedy in Baltimore, 2) their thoughts on the likely impact of this incident on the reinsurance industry as a whole, and 3) whether they anticipate any specific challenges/opportunities for Berkshire going forward.

Thanks @nwoodman. This heart warming nugget from the Bishop's blog: "Emilie also said he placed a call from his hospital bed to Warren Buffett, his friend since 1959 and longtime business partner."

My very first "run in" with Berkshire Hathaway was in 1993. I was about to graduate from college. My then girlfriend (now wife) had a family friend, Sam, whose family bought into Berkshire in the early years. Sam's family owned a local bank in a town in Kansas, and he was a cab driver (went to law school, didn't practice law, long story...). We bumped into Sam unexpectedly one day and he was talking about something called "Berkshire Hathway". He was wearing a Berkshire Hathaway hat and talked about going to some meeting. I don't recall if he mentioned Warren Buffett or not. I didn't know what Berkshire Hathaway was and, not wanting to look dumb, I didn't ask any questions. There are many times I mentioned to my wife that I wished asked Sam a simple question ("What is Berkshire Hathaway?") and not worried about looking stupid. Sam was pretty loquacious and I'm sure would have talked with us for over an hour. (Thinking back, this might have been one reason I didn't ask...) I can't remember exactly when we bumped into Sam. A shares in 1993 (no B shares yet) were between about $12K and $17.5K. This was way beyond what I had as a college student (I "owned" debt), and in a pre-Internet age (I didn't have my first email address until Fall 1993) it was not as easy to learn about Berkshire Hathaway let alone Warren Buffett and Charlie Munger. So this is doubtless pure fantasy and wishful thinking on my part that "if only..." It would be another 17 years before I "ran into" Berkshire Hathaway again...by this point those A shares would be worth over $120K. Thankfully there were B shares available by this point in time...

I felt exactly the same about this year's letter. It feels like a return to form. There are a few years' letters (or portions of letters) that I've shared with my kids and others. This one merits sharing in its entirety.

Pilot settlement... https://link.cnbc.com/public/33922084

No trial on Monday... https://www.reuters.com/sustainability/boards-policy-regulation/court-cancels-warren-buffett-jimmy-haslam-trial-over-pilot-2024-01-07/

Article in today's WSJ online about Greg Abel and post-Buffett era: https://www.wsj.com/finance/greg-abel-berkshire-hathaway-executive-6b7d8988?st=yi3lwjna3acnbhb&reflink=desktopwebshare_permalink

Gregg Warren at Morningstar's take on this question (from ~8:35 mark to about 12 min mark): https://www.morningstar.com/markets/charlie-munger-warren-buffett-built-berkshire-hathaway-thrive-after-theyre-gone

https://www.dailyjournal.com/articles/375936-charles-t-munger-1924-2023

https://www.cnbc.com/2023/11/29/charlie-munger-these-basic-career-rules-made-me-successful-in-life-with-warren-buffett-i-had-all-3.html

Well, this countersuit against the Haslams begins to provide some additional color on actions that might otherwise seem out of character for the culture playbook at BRK.

From the 2023 shareholders letter in Mr. Buffett's own words: Nothing Beats Having a Great Partner Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence. His version, moreover, is always more clearly reasoned and also more artfully – some might add bluntly – stated. Here are a few of his thoughts, many lifted from a very recent podcast: • The world is full of foolish gamblers, and they will not do as well as the patient investor. • If you don’t see the world the way it is, it’s like judging something through a distorted lens. • All I want to know is where I’m going to die, so I’ll never go there. And a related thought: Early on, write your desired obituary – and then behave accordingly. • If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results. • Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage. • You can learn a lot from dead people. Read of the deceased you admire and detest. • Don’t bail away in a sinking boat if you can swim to one that is seaworthy. • A great company keeps working after you are not; a mediocre company won’t do that. • Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time. • Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying. • There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice. • You don’t, however, need to own a lot of things in order to get rich. • You have to keep learning if you want to become a great investor. When the world changes, you must change. • Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy. We were slow to recognize the change, but better late than never. • Finally, I will add two short sentences by Charlie that have been his decision-clinchers for decades: “Warren, think more about it. You’re smart and I’m right.” And so it goes. I never have a phone call with Charlie without learning something. And, while he makes me think, he also makes me laugh. Rest In Peace, Charlie.

Wondering about the potential impact of the $1.8B - $5B ruling this week against HomeServices (and National Association of Realtors & Keller Williams) on BRK? https://www.nytimes.com/2023/10/31/realestate/nar-antitrust-lawsuit.html?unlocked_article_code=1.7Ew.a41H.EF4-FdX6QOld&smid=url-share Bonus: on Bogleheads found a link to this interesting blogpost about the prospects for appeal of the verdict: https://notoriousrob.substack.com/p/thinking-about-nars-appeal

That comment about struggling with poor balance...

The Rational Walk has an open call for questions about the Annual Meeting and Q1 results. He's taking questions through the end of today (6/18). He says he plans to respond to questions he receives this week: https://rationalwalk.substack.com/p/ama-1-call-for-questions-on-berkshire

Hi, All. I was the one who submitted the question that Becky Quick asked about OXY, CVX and the Permian. While it was great to sit in the arena on Saturday and hear my question asked, honestly I don't feel like I got a direct answer. The WSJ reported in March that Permian production may have reached its peak. So, as a shareholder it would be helpful to hear the reasoning behind the position. IMO, Buffett and Munger's response to the question didn't entirely line up with this reporting -- either challenging or affirming it. I didn't gain a clearer understanding of what they see or know that others may not see or understand.

There was an article in the WSJ yesterday on WEB's history of oil-and-gas investments and anticipation that there will be questions about OXY & CVX tomorrow. As it happens, I sent a question in early April asking about BRK's investments in both companies. There was reporting in the WSJ in March that producers in the Permian are producing less oil and may have reached their peak. Both OXY & CVX of course have heavy Permian presence. It would be nice to hear more of WEB's rationale. I read somewhere (can't remember where) that the OXY & CVX positions might be related to the way both companies are currently run: low capex and healthy share buybacks at both companies. But I'd much prefer to hear from WEB and CTM themselves about this. I agree it would be cool to hear Becky say your name and ask your question. We'll see what happens...

Here you go...

WSJ - "U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear" https://www.wsj.com/articles/u-s-shale-boom-shows-signs-of-peaking-as-big-oil-wells-disappear-2adef03f?st=pl2jiawq15rqbpt&reflink=desktopwebshare_permalink Obvious question is how to think about those Oxy and Chevron investments. Anyone got a bead on this? Energy outside of my circle of competence...

Just saw Adam Mead Tweet about ROIC.AI: "It's like ValueLine for free." What do you think? https://roic.ai/company/BRK-A

Hotels close to the building are very expensive. Prices always higher for the weekend of the annual meeting. If you're going to go, I'd jump on housing ASAP. Don't forget AirBnB.