[Berkshire closed down to near book value]

Apple keeps on trucking, and now Berkshire's stake is worth 80b at the current market value.  That's about 19% of Berkshire's market cap.  It's not quite a big as weighting as coke was back in the 90s, but it's getting there.

 

So buying 100 of BRK is buying 81 pears and 19 Apples. Wondering who will buy $1500 iPhones this fall? Cola, well, different story in a depression..

[Buffett AGM Comments]

He told Becky that he spoke to his science advisor Bill Gates that he is bullish on a vaccine over the long term. He talked about buying stocks in the quarter.

 

It was a radical change based on the same pandemic that he was aware of and had spoken to Gates over a roughly 6 week time frame.

 

When the facts change, you change your mind, sir.

 

The world is filled with hope on thin air.

 

Vaccine news is either cheerleading by the administration, pharma co‘s pitching their businesses to shareholders, or pharma team‘s soliciting budget.

 

Buffett said it - a crisis doesn‘t fold out over a couple of weeks.

 

The wheel started turning, and there will be second and third order effects (and so on). Whoever talks about an „artificial“ recession (because it was caused my a „planned“ shutdown) is also the one who values businesses on the basis of „earnings as if Corona never happened“

 

Liquidity doesn‘t fix valuations... We just need to be patient...

[Buffett AGM Comments]

Buffett was criticized a lot for not putting his cash pile to work; I do not share that criticism at large. It is far too early to judge whether Buffett was right or wrong in his positioning. Let‘s discuss that by the end of the year.

 

The main issue, though, why I didn‘t buy Berkshire stock when it was at 240k, is that I couldn‘t justify why I would need Buffett for buying Apple and Airlines, and that in the operating businesses, I was worried about PCP (which was a 30B investment), given that its business model became impaired. I just didn‘t think it was cheap - and Buffet did as well, given his comments on share repurchases.

 

But the markets are tricky these days - being prudent might not be rewarded ultimately. While we see a huge gap between Wall Street and Main Street, Investors, who bid up the S&P to 2900, might not be completely dumb. Consider the following.

1) In the future, there will be no alternatives to stocks, and residential real estate - to some extent. Treasury (and to a certain extent, corporate bond) yields will stay low for very long, given the measures implemented, and, consider that when the Fed buys securities, the seller will look for other securities to acquire - bidding up prices for anything that has a yield - at large.

2) 20% of the S&P are just a few big tech players, who might turn out as net beneficiaries of the Pandemic (Think about this happening just 10 years ago without their capabilities)

3) Big companies might enjoy lower competition on the other side, as weak ones might be forced to exit the market.

4) Summing up, the Fed ensures that there is plenty of money around that will seek to be invested, but not consumed. The injection is into Wall Street, not Main Street. Will that money go away? Not for many years (or decades) to come.

 

A lot of businesses might come out of this with a huge financial burden, though, so the best way to deploy capital might be to start an „unburdened“ business competing with burdened ones.