Xerxes

Agreed. Technically speaking though the money created by Fed is not borrowed money. They are an investor in US Gov debt. It is US Gov that is borrowing on an epic proportions from various investors (China, Japan, US public, and the including Fed). BRK cash is also partially borrowed money (float)

I ll propose a different perspective: What if BRK trading low is not due to the investment portfolio dropping in Q1 nor Buffet not deploying the cash significantly not operating businesses underperforming But rather the drop is due to drop in the value of its “cash”. Sounds weird but hear me out. Central bank balance sheet pre-COVID was at around $4 trillion. Post COVID Fed balance sheet had expanded by several trillions. In this giant sea of cash slushing around, the intrinsic value of BRK “cash” must go down, no ? With it the value of optionality.

Not sure if this was already posted about Ensign Energy Services Inc. and FFH's swap contract on it. I guess by mid-June, when FFH entered this agreement the broader market was at all time high, so FFH went back to picking the weird apples. https://www.globenewswire.com/news-release/2020/06/15/2047994/0/en/Fairfax-Announces-Entering-Into-Swap-Contracts-in-Respect-of-Common-Shares-of-Ensign.html Q2 results should be interesting not only for FFH, but also for the triple-Bs: Brookfield, Berkshire and Blackstone. You get to see what this class of institutional investors actually did in terms of market participation in Q2, yes they all talked about it in April and hinted their views. But the "walk" ought to be more interesting than the "talk".

Another article (this time from FT) to be added to the repository of has-buffet-lost-his-touch articles. https://business.financialpost.com/investing/warren-buffett-lost-his-touch “If Berkshire is to have the prospects of generating the value it has in the past, it has to adapt by buying these companies that will generate significant value over the next 25 years,” said Christopher Rossbach, chief investment officer of J Stern & Co. J Stern manages money for the Stern family, which has held Berkshire shares for decades, as well as other investors. “Both Warren and Charlie (Munger, Berkshire’s vice-chairman) have acknowledged that they have missed Amazon and that they should be looking at these companies but they have also said they don’t understand them,” Rossbach said. “They have kept them in the box that Warren has on his desk that says ‘Too hard’. What will it take for them to take these stocks out of the box?” “Berkshire Hathaway remains designed to reward investors over time but not on time,” said Thomas Russo, a managing member of Gardner Russo & Gardner, which owns Berkshire stock. “It is one of the reasons we say to people, ‘Don’t be in a hurry to spend that money’,” referring to Buffett’s US$137-billion cash pile. “If you rush it, he could make a mistake.” “I am nervous that he may have missed this whole rally,” said James Shanahan, an analyst with Edward Jones. “If the rally started in late March and he was a net seller in April, it seems like . . . he missed it all. That’s frustrating. A lot of retail investors were ploughing money into the market and doing better than professional investors. I think you can include Buffett in that.” “Those two things, I believe, have really tarnished Berkshire’s reputation for dealmaking,” Seifert said of the two investments. The Occidental deal “was an unmitigated disaster.”

AWS I read that point of view also on Semptus Augustus news letter about Coke peaking in BRk portfolio and Gen Re purchase. What is really weird is that the writer of Semptus asserts that it was a stroke of genius issuing shares when it was 3x book to buy Gen Re. One would agree, yet Buffet complained about the equity that he has to issue and the dilution that took place even if it was at several time book value.

Isn't the underline a function how things are perceive in a given snapshot in the timeline. The bet that BX made on industrial warehouse seems to be right on the money now, but if we go back to the genesis of that bet, which was probably a decade ago in a much smaller magnitude would have had folks scratching their heads. The obvious bet 15 years ago was to be long office building & malls. Meaning that the malls that BAM is making a bet today, could be perceived differently another 10-15 years from now. After all they are in business of re-purposing them and as long as BAM has enough imagination to see the real estate can be far more than just a mall or can be completely different, than I think we can call that a contrarian bet in the making, which you can participate by using a 10-feet pole, through BAM itself as oppose to BYP.

Apple’ stake now supposedly 20% of BRK. Not to get all hedgie, but I think if one went long BRK and short AAPL (proportionate to the stake size) one can make the bet that Apple has peaked within BRK (I.e. BRK valuation would move to value other pieces that have been ignores).

On elections, i don't think it will be a factor, in the "pivot" back to great power competition. U.S. national security is far less concerned with the Persian Gulf, now that U.S. is the top oil producer. The long term trend will be that of dis-engagement from the Gulf region, and subcontracting Saudi and Israel to do their bidding.

I don't mean to derail, those interested in the "muddiness" of the central Asian countries borders would be interested in this book. It is a favorite of mine. https://www.amazon.com/Great-Game-Struggle-Central-Kodansha/dp/1568360223/ref=sr_1_1?dchild=1&keywords=great+game&qid=1593185601&sr=8-1

Spekulatius, Looks like we have the same background more or less. Agreed that the gems in the A&D are the rollups that happen in the shadow of the giants with the headlines. I recommend you add this Podcast to your roster, if not there already. There is wealth of info there. I have been reading Aviation Week for 10 years+. I love the magazine and get the hardcopy at my door. Podcast => https://aviationweek.com/check6 Specifically, on Northrop Grumman and GBDS, here is the title. Great stuff to listen to while jogging. https://aviationweek.com/defense-space/podcast-nuclear-modernization-point-no-return On L3, itself it was a minor spinoff from Lockheed, with "L" from the Lockheed being one of the three "L"s in L3. The other two "L"s being individuals/management when L3 was created. If you are interested, one of the other "L" started his second investment vehicle, doing roll-ups in electronic/defense (i.e. C4ISR) etc. Here is the related Podcast => https://aviationweek.com/air-transport/podcast-challenges-southwest-spacex-c4isr

Listening to quarterly results now. BB confirmed that they are redeeming the convertible when it comes due. Cash released for FFH, i guess ...

I listend to Blackberry AGM today. https://www.blackberry.com/content/dam/blackberry-com/Documents/pdf/investors/Blackberry-AGM-2020-Presentation.pdf They did a good job to capture the size of the market for s/w security. Unfortunately, but funny enough, they screwed up their Q&A session by getting only one question, some system issue about the work-from-home-AGM or whatever. I didn't like the optics. A software company shouldn't screw up the AGM by not getting the system right. Interestingly enough, the one question that did get through was about Fairfax, where someone asked if a low-ball bid by FFH can be prevented by a poison pill. To me that tells me that there is a interest from BB shareholder base in the long term potential of BB, and that there would be push back on any low-ball bid that would undervalue that potential. Quarterly results are tomorrow, so perhaps we can get more on the Q&A session that didn't happen today. BlackBerry Fiscal Year 2021 First Quarter Results Conference Call Date: Wednesday, June 24, 2020 Time: 05:30 PM Eastern Daylight Time

Spekulatius, Great pick ! Northrop is the best of the bunch, however beware that for GBDS there is reason why Boeing dropped out and the reason was not it being preoccupied with the MAX' woes. I believe the model that Pentagon is going with for GBDS is one that it will own the underlying technical baseline of the GBDS program as oppose to the contractor owning it. Meaning that the best part of the contract which is the 50+ year aftermarket can be re-distributed by the Pentagon to other parties (which may or may not include Northrop). On the other hand, Boeing went hard for the TX fighter trainer, (and got it) because it knew that it could sell what is develops through taxpayer money through international markets. i.e. (the F-16 model with Lockheed). For GBDS, Northrop has no international market for these Doomsday weapons and if it cannot own the technical baseline (thus not owning the Aftermarket), it remains to be seen how profitable that "captive" program will be even if it is the sole bidder. The +$50 billion value for GBDS its huge, but most of it is not front-loaded. But i very much like Northrop, anyways. I think a combination of Northrop, Lockheed, General Dynamics and Raytheon Technologies gets one covered on the nuclear triad and then some. The last two are perhaps cheaper due to their exposure to business and commercial aviations.

It was just an example. I agree that HQ is probably not that involved and they give lot of room for the operating business to do what they believe best.

I am ok for holding for the next 10 years with Buffet and another 15 years without him. That is why I called it one giant call option that one can buy today at fair or below fair price. And I don’t really care much about any succession communication from Omaha. When it happens it will be sudden and he won’t telegraph it I think. If he doesn’t telegraph his investments and buybacks, he won’t telegraph anything tangible related to succession. All I am saying that “juice” wont be extracted in Buffet era

+1 I think WB's involvement is irrelevant moving forward especially if you're relatively young and holding long. Cheers ! I am very close 40, so not that young. BRK is one massive call option with no expiry.

I don’t know who said it some weeks ago. But a comparison was made with MSFT in Ballmer era and how after ValueAct got in with a more aligned BoD things start to look differently. I kind of agree with that. To be clear, In no way is Buffet is comparable to Ballmer but I agree that ‘hidden value’ can only by unearthed by the next management. Wether is implementing Precision Scheduling on BNSF or deploy some of the cash. My investment in BRK is really based on what next management will do and am just buying is close to book now .... while dealing with the pain of going sideways for some more years. And I am ok with whatever Buffet does in the meantime. I think that a low risk proposition.

Not to over analyze this, but: Can we make the statement that of all the investments that Prem has done either personally or through FFH in the past decade, this one has a high chance of success with risk-reward tilted toward the upside and with good margin of safety, I.e a classical B Graham deep value type, in a world where that framework seem antiquated. Maybe bank of Ireland come close. Though that was before I was following FFH so I wouldn’t know much of it. Atlas/Seaspan I see that more as a growth investment and not Grahamiah type.

Key point is that he is putting back money in the franchise worth 6-7 times his annual dividend that he takes out. This is not options/grants or no-cost money. At least I am happy to say that I got some lower than Prem did at $350 CAD. Somehow I don’t think he is going to do the same thing for Fairfax India.

Not at all. I was just giving scale to his $150 million. Which at first I struggled to categorize as significantly big or just ok. That was my way of saying if he is getting this much every January from his captive investment so a number that is multi fold greater must be viewed as a significant purchase.

Just to give this context. Common share dividends is about $275 million. 8% of that is $22 million in dividend cash payment. So the $150 million that he put in is 6-7 times the size of his annual dividends. Assuming my math is correct this must be a good.

So really ultra low yield knocked out the investment engine of the twin-engine insurance business. Now it all comes down to the one remaining underwriting engine performing and lifting the whole business. Game is much harder without the investment lift, so capacity leaves the market. Kind of counter intuitive, I would have thought that aspect would have exasperated the market share game.

Great read on your blog. Some comments about FIH as a whole: - discount to BK although provides a margin of safety is not really relevant IMO, since it has the fees, it is in emerging market etc. it will always be there. Unless one is a strategic investor who has the ability to make changes on the company structure, the investment based on the discount spread isn't justified. Book value growth is the key. On the airport - haven't seen anyone that follows FIH to yet make a comment on this: unlike say the airport in Amsterdam that thrives from international flow through, the Bangalore airport has a huge domestic market. Is that a plus ? definitely it cannot be a negative. On the overall structure - FIH feels like a locked-in investment account that you cannot add money into it. i.e. FIH doesn't have a steady cash generator within to provide additional funds for future investment. I am not talking about paper earnings that of course is there. I feel that is something that is missing. That means future cash flow in for investment needs to be either via asset-sale or equity offering; both of them really bad option, if you want to be taking advantage of a distress market in a counter cycle move. So I am thinking what stops, FIH to raise funds (ala Brookfield) with third-party investors; and deploy those funds and charge them management fees. This way FIH future potential can tilt from purely being an asset-appreciation vehicle to one that also collects actual cash in terms of management fee on top of being asset-appreciation vehicle while deploying a larger check (i.e. investment prowess).

Bearprowler, so that I don't understand the logic, Low interest rate, takes away the incentive to write insurance, because the float has less alternative 'safe' investment options. Less underwriting capacity means fewer underwriting not fore market share sake but for return's sake. Did the low rate regime that first started in 2008-09, also caused similar behavior

I may be wrong, but I think the value of BNSF and mid-American energy are their historical purchase cost without any upward adjustment to account for all the value created since their purchase.. So an adjustment would be a boost to BRK book value. I think your comment assumes BNSF was being carried out fair market value, in which case a mark to market drop would bring it down.