Munger_Disciple

I disagree. The board has critical oversight role over the next CEO. I am confident Abel will be a fine CEO but board is there as a failsafe mechanism if something were to go wrong however low that probability might be. IIRC it is the board that acted decisively (not Buffett) when the unfortunate Sokol incident happened.

But that's not the only change. Walter Scott passed away and they added Susan Buffett and Chris Davis. That's quite a few changes since 2021. I think the quality of the board has gone down in recent years with Gates, Scott & Murphy departing and their replacements not of the same heft.

Is anyone else surprised at the lack of discussion about board changes in Buffett's letter?

Thanks Viking & Parsad for your responses.

I have recently started looking at Fairfax mainly due to its cheapness (it should be cheaper than Berkshire as I consider it lower quality). I am trying to answer (to myself) if it as cheap as it looks. A few questions for the Fairfax experts: 1. We know Ajit Jain is the genius running Berkshire's insurance businesses. Who is the equivalent of Ajit at Fairfax (not just in terms of running the ops but the brain behind it)? 2. Is the float primarily from long tail liabilities or short tail? 3. It appears that annual premiums written by Fairfax is a much bigger % of its net worth (also float as a % of net worth) than at Berkshire which implies higher insurance leverage. This implies any negative surprises in the insurance business will have a much greater impact at Fairfax than at Berkshire. How are people comfortable with this leverage? 4. What is the succession plan at Fairfax? If something were to happen to Prem tomorrow, who will be running the show the day after? Thanks in advance.

w/o a question Berkshire. It is not even close. Higher quality assets, better management, better succession plan, better capital allocation, deeper bench strength, better investment strategy (buy great businesses to own forever),......... I could go on & on.

As I understand this business, Ajit always insists on a maximum cap on the total liabilities. So the inflation risk is significantly mitigated if not completely eliminated.

I believe Warren looks at any holding as a % of total asset base of Berkshire including wholly owned businesses (2021 AM), not as a % of marketable security portfolio.

The rate is privately negotiated between Schwab & customer. The spread depends on the amount of assets you have at Schwab; the spread over the fed funds rate is guaranteed for 1 year and usually renewed automatically.

https://finance.yahoo.com/quote/BRK-B?p=BRK-B&.tsrc=fin-srch Not reflected in B share price, so it seems like a (fat finger mistake) market order on 3 A shares after hours LOL.

I feel like the board quality has been going down in recent times. We lost Walter Scott, who brought the energy business opportunity to Berkshire in the late 90s and had an outstanding business career and Bill Gates. Gates' replacement is ok but not as good as Gates. I don't understand why Susie needs to be on the board to provide input to the other members on Warren's mental acuity. Chris Davis is a decent fellow but why do we need one more investor on the board? We already have Meryl Whitmer in addition to Sandy Gottesman. What we really need are board members who have business operating background like Scott and Gates. Having a competent shareholder oriented board is more important than ever given Warren's advanced age and upcoming CEO transition.

Couldn't agree more

Some inconsequential news: https://www.bloomberg.com/news/articles/2021-10-22/buffett-brings-generali-close-to-completing-cattolica-purchase

Chris Davis is a decent guy but I am not blown away by his appointment either. Middle of the road large cap fund manager who overdosed on financials just before the GFC.

Underwhelmed

Thanks, I thought he did a great job. He also teaches at Johns Hopkins.

I highly recommend this book to anyone remotely interested in PE. Hooke destroys the BS being peddled by the industry; that PE earns earns outsize returns (relative to public equity) while taking less risk. https://www.amazon.com/Myth-Private-Equity-Transformative-Investments-ebook/dp/B08ZJXHWM7/ref=sr_1_1?dchild=1&keywords=jeffrey+hooke&qid=1634584438&sr=8-1

I am pretty sure the valuation of the "in-kind" asset distribution needs to be performed by an independent valuation company. I believe it is currently the case for small business pension plans.

If I understand correctly, the federal government just prints money and spends under the Kelton/MMT theory in stead of deficit spending first and then issuing debt to mop up the excess reserves in the banking system. Isn't MMT pretty much the same as the current situation where the federal govt deficit spends, issues debt and the Federal Reserve does (forever) QE to release the excess reserves back into the banking system? So we have had a "mini" MMT regime for at least 10 years now. The only difference between the two options is that under the current system the Federal Reserve can occasionally threaten to slow down the QE to keep things in check.

Perhaps you are not aware that there are large income taxes and significant capital gains taxes in the US. The proposed estate taxes and step-up-in-basis changes are in addition to increases in income and capital gains taxes which are assessed on an ongoing basis every year. BTW Biden is also proposing to tax LT capital gains at the same rate as income for high earners. So it is not either/or, but tax everything. I agree with Ericopoly that the estate tax changes (if enacted) will really screw the families that don't have the resources for sophisticated estate planning and will not affect the truly rich.

2018 annual report was the first AR (at least since 1984) that did not include Owner's manual. Interestingly, it was also the first AR where Buffett discontinued the use of gain in book value as a proxy for gain in intrinsic value and explicitly stated so in the 2018 letter. I don't know why Buffett discontinued the Owner's Manual section but here is my guess: Owner principle #9 showed an earnings retention test and it was based on the book value of Berkshire which no longer made sense in 2018 given that he specifically stated in the letter that book value became increasingly out of touch with reality. The retention test became even less meaningful once buybacks began in earnest at significant premiums to book value. Buffett could have chosen to modify the principle #9 though he already modified it once before. And perhaps he did not have an easy test (other than comparing Berkshire LT stock performance to S&P 500 index) for shareholders to independently verify whether earnings retention made sense.

Biden is proposing massive estate tax hikes including: (1) Lowering exemption amounts to $3.5M (from >$11M today), (2) Getting rid of step-up-in basis and (3) Increasing estate tax rates above the exemption amount. It is not clear how likely these proposals become law. However it looks like there is already a loophole to avoid these punitive tax increases in case they are approved by Congress: https://www.bloomberg.com/news/articles/2021-09-02/richest-americans-have-tax-loophole-that-s-legal-easy-to-exploit-hard-to-close?srnd=premium

What is funny about all these margin requirements is that Archegos had virtually no such limit on their "margin" and were levered 5 to 1 ($5 of assets for $1 of equity). Archegos & their IB frinds made a mockery of margin limits by using total return swaps.

+1 and thanks gfp for sharing the link. We are lucky to have such outstanding & ethical successors to Warren & Charlie in Ajit, Greg, Ted & Todd. The more I read about Ted, more impressed I am with him.

P/B post repurchase goes up if shares are bought back at a premium to book. The exact amount is a function of % of total shares repurchased and the premium to book the repurchases take place. It is simple algebra really .......