longterminvestor

Understood on Gates Foundation being gifted B shares. I knew that. But to circle back, wouldn’t Gates Foundation, under mandate to dispose of shares in 12 years, naturally give BRK first right of refusal on the shares gifted by Mr. Buffett ? My point is 30% of the entire firm will be sold 12 years postmortem. That’s a certainty. So we already know the volume will be there - just hoping the price is right. And wouldn’t Mr. Buffett anticipate this and provide a rough plan to execute. I always have thought about this - interesting. Hope he loves to 100!

Barron's article is interesting - fact is volume is up to 2000 shares a day since Mid Feb. Whether Mr. Buffett is the buyer is not where my mind goes (obviously I hope its BRK buying). My question is more who is selling into that kind of volume on the A? Longtime A owners or flippers, I guess we wait and see. I have long thought about the 12 years post Mr. Buffett. Why would Gates Foundation sell back into open market - wouldn't it be so easy for Gates Foundation to sell out to BRK.A. Is there regulatory issue perhaps. Some gifting law I don't know. I have not been so much concerned with price as much as I have been concerned with lack of liquidity (2020 was not slouch at $24B). Anyone else thought of this?

I was poking around last night and found this link: https://www.nextlevelinvesting.org/mungerstories/ It is from Daily Journal Annual. Text shows dialog and has timestamps for corresponding video. Pretty neat. Mr. Munger is laughing so hard. That guy is just bigger than life.

Anyone have some good/great stories about the above to share? Some may not hit the news tape due to the lewd commentary, quirky nature of history, or unflattering result. I mean, a financial genius and a hero of mine (ours) signed his Christmas cards "Sincerely - Susie, Astrid, and Warren". The guy is the richest guy on earth, he can do what he wants I guess. The few that got me thinking were when Jack Ringwalt went to headquarters to pick up his check for selling National Indemnity, the seller was 10 mins late because he was trying to find a parking spot with time left on the meter. The other was Mrs. B basically unhappy with the fact that she sold her furniture business for substantially less than it was worth so she left the business and started a competitor which was ultimately bought by Berkshire and Buffett made her sign a life time non-compete. (I recently read this on twitter - is this true?) The Munger story about him setting his date's dress on fire because he was trying to impress her by smoking was incredible. You can't make this up. Anyway - spend time trying to figure out where the business is going. Just thought some fun stories about the past would be interesting to read about. I can dig up some others if no one has fun, obscure, interesting stories to share. Cheers!

Some old timers of COBF may have discussed this and I know Chris Bloomstran discusses a little in his letter; I have been thinking quite a lot about Differed Taxes (21% - maybe going to 35%) on the stocks - specifically Apple. Relevant to the 2030 Berkshire equation. Apple goes from $35B to $135B - that's a gain of $100B. Pause....we are talking about $100,000,000,000....incredible value creation in 5years. Just to put that in perspective, that's the entire value of: IBM ($106B), Caterpillar ($104B), American Express ($102B), Goldman Sachs ($100B), GE ($97B). OK, back to the post, $100B Gain in Assets and the offset on Liabilities is 21% Tax Differed on Gain for eventual sale at $21B. My point, if we are valuing Berk on Price/Book - can we "adjust" the differed tax liability amount essentially boasting the book value on basis that there will not be a sale in these holdings? Here are some positions that I would consider perma-holds: American Express...Cost:$1.287B.........Market Val:$19.124B.........UNREALIZED GAIN:$17.837B Apple....................Cost:$35.287B.......Market Val:$134.163B.......UNREALIZED GAIN:$98.876B Bank of America.....Cost:$12.560B.......Market Val:$32,586B.........UNREALIZED GAIN:$20.026B Coca Cola..............Cost:$1.299B.........Market Val:$19.396B.........UNREALIZED GAIN:$18.097B Moody's.................Cost:$248M...........Market Val:$6.579B...........UNREALIZED GAIN:$6.331B Visa.......................Cost:$349M..........Market Val:$2.017B...........UNREALIZED GAIN:$1.668B TOTAL UNREALIZED GAIN:$162.835B @ 21% = $34.195B Differed Tax With differed tax at $67B as of Q3, we could call the gains in the above 6 names 50% of the differed tax....that hopefully never gets paid. Isnt there an adjustment for this? At very least cant we allocated the $35B and call it "Float"? I could be missing something here - and I am sure someone has thought about this. Just wanted to share something I was noodling on. Hope all is well - looking forward to new site layout.

Agree the Elephant in Omaha Zoo needs to be tagged, bagged, and put in the freezer. But why do anything to cause a stir and raise ticket prices to shoot the beast? Prefer to lull the market to sleep while accumulating shares.....just gonna cost more in the end. Prefer actually the price of the enterprise go down in value so the buy backs are more accretive. Understood, my "stock portfolio balance" will be depressed and my "returns" will lag the market however that is the signal of an undervalued business I want to own over the long term - 25yrs or more. As a believer in true cash flow and multiples of such rather than adjusted EBITDA - Berkshire is well positioned for the future as a wonderful business, not a stock. So to your point, I'll take to $500M/week and sleep soundly...waiting for opportunity to find value. Remember both Mr. Buffett and Mr. Munger during an annual meeting 2 years ago (2019 meeting quotes below). If we listen, they tell us what they are gonna do, we just gotta listen. Its all there. Merry Christmas Eve Eve to all!! 2019 Meeting: Mr. Buffett: “Whether we had $100 billon or $200 billion would not make a difference in our approach to the repurchase of shares. The real thing is to buy back…repurchase shares…only when you think you’re doing it at a price where the remaining shareholders have had…are worth more the moment after you repurchased it than they were the moment before. But we want to be sure, when we repurchase shares, that those people who have not sold shares are better off than they were before we repurchased them. And it’s very simple.” Mr. Munger: “Well, I predict that we’ll get a little more liberal in purchasing shares.”

I liked the format - kept the questions focused on the business rather than on dreamy life questions - "what would you do if you were 24 and had no money?". The revenue from shareholders buying products at meeting will be missed. https://www.berkshirehathaway.com/news/dec0320.pdf dec0320.pdf

If the address in top left corner said Omaha NE I would read more into it however the address says Tokyo, Japan so I think we are safe, no "investor relations" in Omaha!

When I think about Berkshire selling Apple, a few things comes to mind: #1 - Compare to KO position in in late 90's #2 - Apple was trimmed in 2019 #3 - Mr. Buffett does not look at Apple as a stock, its his 3rd largest business #4 (and what I think about mostly) - if Mr. Buffett sells Apple....what is he gonna buy? Where does he redeploy $120B in Capital?

what amazes me is BERK got a pass from CNBC/news outlets. Clinton sends a few emails and its a feeding frenzy, BERK negotiates with Iranian business and you dont hear a sound. I feel like I am back in High School when the teachers pet gets away with sending spit balls to the chalk board and when teacher questions class, everyone looked at me (haha). Seriously though, I don't know implications of this settlement and from limited research OFAC is willing to allow trade with Iran - you just need permission. Small blemish on the record of a great company however not the end of the world. The operating sub was out of Turkey so doubt the sales guy doing the deal cared about trade sanctions, probably just wanted his commission. Act was self reported so that is a saving grace.

Looking forward to reviewing marketing documents for a newly created $500MM Venture fund aptly named "The Brachistochrone Fund". thanks for sharing.

I believe Mr. Buffett's genius is the ability to continue to mature and grow his sense of place in the Berkshire System. For example, in his early years, he focused on pricing discipline - buying businesses at his price. Lesson has been learned and now he is above the notion to have the pricing discipline - it has become a learned behavior. Most managers spend their entire life just focused on that one lesson - price discipline. However as Berkshire has grown, Mr. Buffett discovers more important issues to tackle. A serious problem for Berkshire and Mr. Buffett is sustaining a normalized return above market average over long period of time as organization grows shareholder equity to a size unmatched in the history of the capitalism. For example, as headline says - "Buffett blasted for not buying". My opinion is Mr. Buffett is playing a COMPLETLY different game than everyone else. My hope is Berkshire shareholders are not saying, "man you idiot, you didn't buy", rather there was a complete calamity of unseen/unthinkable proportions with outcomes too difficult to predict and having dry powder was of utmost importance. Mr. Buffett's gut was to "buy when everyone else is selling", and anyone who doesn't know that, doesn't know the man. Despite his gut telling him to buy, Mr. Buffett paused....in my opinion, this pause was in part to a cardinal rule at Berkshire "No big mistakes". Monday quarterback shows buying in March lows was the right thing to do...for money managers/individual portfolio managers/stock jockeys...however Mr. Buffett is not in that game, he is playing the long game where 10yr returns are minimum to be measured. My own disappointments were mostly in the lack of share repurchase, not because the price was right, more so because the volume of shares available were enormous. Buying in bulk is Mr. Buffett's tool today. And he knows that, so again, when he reviews the volume of shares available during that period of time does he regret not buying...I doubt it....there were other "things" he was considering that the mere mortals and pundits would never understand or comprehend. These thoughts are all predicated upon the idea that Mr. Buffett still has his wits and is a learner everyday. If he is losing his marbles, then its the boards discretion to execute on a change. I trust the board, I trust Mr. Buffett ergo I am believing in something bigger than "he's washed up". There was a reason why he didn't buy and we as shareholders may never know. I do hope he shared that reason with Ted/Todd/Gregg. Then the lesson will endure and as shareholders we will benefit from the lesson for the next 50 years.

London has written sloppy contracts. They accepted risk without charging a rate for the exposure. This reflects overall change of Lloyds from "names" to corporations looking to juice return. And it shows. Do not fear, Lloyds will be fine long term. They are also struggling with a transition from paper to tech platforms. Lots of deals are still done today without email (can you believe that?). Think of the same issues surrounding Lloyds of London (management/future - not underwriting) to the transition at NYSE and "specialists firms", trading commissions, computerized trading, dark pools, ect. Today's tech world took out alot of dinosaurs at NYSE and Lloyds is filled with them. But everyone still says "insurance is different, you cant put commercial insurance online"......we will see. With regards to Cal Fire exposure. Over the past 18-24-36 months carriers have been reducing exposure to Cal Fire BIG TIME! And price has increased 200-300-400%. There are 2 very distinct and separate markets: residential (homes) and commercial. State fund is taking much of the residential risk. And names you know are still writing commercial accounts with large rate increases. I have seen where a bunch of homogeneous enterprising corps (think a bunch of Hotel Operators, or guys who own 30+ chain restaurants) pool together and buy something called "Shared Limit Program". If that sounds sketchy, don't worry, IT IS. Its the insurance industry's version of the Synthetic CDO linked to a Mortgage Backed Security. Banks (and I bet a lot of brokers who sell it) dont even know what it is but they accept it. and its "cheaper". Here's the tell tale sign things are getting weird in that market, when you call a broker you have to specifically ask for "traditional risk transfer insurance" because they will assume you want the cheapest thing available - shared limit program.

My understanding, and Pupil alluded to this early in thread, Mr. Buffett and Berkshire ARE NOT required by any regulatory body to disclose publicly their "internationally held positions/businesses that trade in open market outside USA". Does seem a little like an advertisement. Think this through, so Berkshire Japan (didn't know we had an office in Japan BTW) went out of their way to write this press release stating to the business community around the world: #1 - it took us 12 months to build this position, #2 - we may go to 9.9% ownership (and we don't have to tell you if/when we do that) and #3 we may go higher if the investee companies allow us to. This is unprecedented in my opinion. I know nothing of these companies or Japan as a country for investment however $6B is a rounding error in Omaha so I ain't losing any sleep. No thought on if this was good/bad or unch on longterm outlook on Berkshire however it is interesting the manner in which this was all "disclosed". There is intent in everything they do - more so when a press release is drawn up with Berkshire letterhead. Time will tell on this one.

Mr. Buffett loves his business. He doesn't love money.....because he has enough.

Hopefully the ad is for GEICO. OK, OK Agree "exploit" is a harsh word. After reading Foley's summary of the case, put more appropriately: Mr. Buffett understands the rules of the game and his loss reserves are "fair and reasonable" for the benefit of the shareholders of Berkshire...I'm sorry...I mean benefit the ultimate client of Berkshire's insurance subsidiary - the first named insured client. I have come to understand behind the grandpa glasses and white hair is a shark who bites hard leaving a mark. Charlie might even bite harder than Mr. Buffett, especially in the early years.

Tax conversation is important and did not see anyone mention loss reserve account tax incentives. This has been my understanding and if anyone has additional info (or sources) for this - I want to learn so would enjoy any back/forth. The Unpaid losses and loss adjustment expenses (loss reserve account) receives a tax deduction - which leads Berkshire, in my opinion, to overstate loss reserves when possible. However most large insurers are publicly traded, and do not want to run the loss reserve account up because it affects (effects?) the EPS quarterly. If actual losses are 100 AND reserves (loss adjustment expense) are 100 going into a quarter, and for that quarter you paid 10 in actual and you "goose" your unpaid loss reserves by 15 - you get a NET 5 in deduction. (Please excuse the crude example). Overstating loss reserves is a way to "postpone" taxable income. WEB always talks about carriers under-reserving which is interesting because that means those carriers pay more in tax than they could have if they sacrificed their quarterly earnings per share amount. Curious if anyone else knows about this - might be 6 - 1/2 dozen to the other - my opinion is WEB found a little edge there and is exploiting as much as possible.

So lets say BRK purchased some Markel shares. Knowing Markel owns some BRK shares, is there some kind of tax-free exchange the two corporations could make if they gave each other an equal amount of the others shares? Weird question but just curious.

Thrifty3000 - thanks for sharing. All opinions/thoughts are welcome even if some are not well received. I am curious on your comment above regarding Ajit/Todd and Gregg/Ted. Ajit is hands down wonderful insurance man however he may not be as long lived as we all want. Pray he is grooming a deep bench. Todd is doing just fine. Don't agree with comment on Gregg - you believe he does not have "the right stuff"? Please expand. I was very impressed with his tone/candor during meeting and believe he can allocate capital very well. Ted is gonna do just fine as well. With regards to management taking over, I think its easier than people think. I believe new management's charge from BOD will be to "not make a big mistake" rather than "grow earnings at XX%/yr". Basically Gregg will sit in the Ivory tower with Tedd/Todd (or Gregg has his own lieutenants) and WAIT for 10-12% year 1 return to deploy significant capital. WAITING is the discipline. Only difference will be Gregg is gonna have a spreadsheet to do calculations where Mr. Buffett calculates in his head real time. And Mr. Buffett is leaving Gregg/Tedd/Todd 2 ACES to play when no opportunity is available: #1 Buybacks & #2 Dividend. The tone of Thrifty3000 post is assuming WAITING = DUMBNESS. I very much disagree, waiting is the ENTIRE GAME!!! No one else waits, they all scour the earth for 10%-12% returns and when they see nothing is available they reduce expectations to 6%/8% or even 3%/5% and say "well, if we lever that - we will get 10%/12%". I mean, VC's and PE Groups are now investing in Copywrite Vehicles that own music to license to for commercial use - wow have we reached a new level of creativity looking for yield. Could be a wonderful business, I have no opinion however the point is "Helpers" will find or manufacture vehicles for investment to give the yield market needs to feed itself. Idiots, all of them! and ssssshhhhhhh - dont tell them. BRK will pick the bones of their dead carcasses and now the return will be 15%/17%!!!

Seems like small fry restaurant/tavern in Pennsylvania is unhappy with coverage. Link below. Doesn't bother me in the least - knew these would come. HEADLINE: Suit against Berkshire argues virus exclusions should be barred https://www.businessinsurance.com/article/20200616/NEWS06/912335145/Suit-against-Berkshire-argues-virus-exclusions-should-be-barred-1-SANT-Inc-

Short term this may look bad, seem bad, but not as bad as it looks/seems. If rates continue to tick up long term, Berkshire RE will begin to take risk at "their price". Buffett has been saying for past few years RE insurance biz has not been as good of a business because of over capacity. Back in 2008, Buffett got paid $244MM as an option to "lend" $4B @ 6.5% in event of storm (see article below). Interesting structure because he was dealing with State of Florida Government (FHCF). FHCF has been running a surplus AND book of business has declined rapidly b/c private markets have taken risk so FHCF's needs for risk reduction has diminished since 2008. https://www.heraldtribune.com/article/LK/20080731/News/605231753/SH

I'm watching Hiscox here. Chatter in the insurance broker market says Hiscox is exposed. Management for Hiscox says all is "under control". Time will tell.

Thank you for contributions. I have read more on RE biz because of your posts and was gearing up to do my CLNY analysis however now seems to be moot. Hope you catch a large grouper bottom fishing!!! Cheers.

Tobias Carlisle interview (good podcast on its own). He just interviewed Mr. Bloomstran. Good insight. Listen to Tulip Mania: Chris Bloomstran on Warren Buffett and Berkshire Hathaway with Tobias Carlisle on The Acquirers Podcast from The Acquirers Podcast on Apple Podcasts. https://podcasts.apple.com/us/podcast/the-acquirers-podcast/id1454112457?i=1000474944217

My sincere hope is sellers will value buyers with no Material Adverse Change Clauses(MACC). Not many buyers are willing to put terms on table w/o MACC. Mr. Buffett is notorious for large deals without MACC's. Seeing some deals drop: Xerox/HP merger, Exor deal soured, surely there are more. Thinking back the to Tech Data deal and wonder if they are sweating Apollo closing (pretty sure Apollo closes). Here's to hoping BRK has the upper hand in future negotiations as purchase agreements will now be 25 pages longer with carve outs for pandemics. Doubt the purchase agreements for BRK will see any change at all and that might be enough to get an edge on deals moving forward. For the right seller, the memory of PE firms/Large Corps backing out of deals will be in the back of their minds and BRK's checks will always clear.