Munger_Disciple

Nice plot UK. However as the share repurchases become more or less an on-going phenomenon, P/BV loses meaning more and more as time passes. In other words we expect to see P/BV keep increasing as shares are repurchased at a premium to book value but at a discount to intrinsic value. So I think a plot of P/IV is more meaningful.

Thanks Cigarbutt. The manuscript looks interesting; will check it out.

Amen!

True, but Berkshire bought back $1.8 Billion in July. From April 22 until July 26th, they bought back roughly $6.6 billion. Anyhow, we expect the repurchases to be dependent on price of shares and not at a constant pace.

Strange headline from Bloomberg: https://www.bloomberg.com/news/articles/2021-08-07/buffett-s-berkshire-slows-share-repurchases-to-6-billion?srnd=premium https://finance.yahoo.com/news/buffett-berkshire-slows-share-repurchases-121054505.html (article can be accessed via Yahoo Finance w/o Bloomberg subscription)

I found this line from 10-Q interesting: Berkshire will not repurchase its common stock if the repurchases reduce the total value of Berkshire's consolidated cash, cash equivalents and U.S. Treasury Bills holdings to less than $30 billion. The minimum cash balance now has gone up from $20 billion to $30 billion.

Thanks gfp!

I found the paper on QE published by UK Parliament to be quite informative: https://publications.parliament.uk/pa/ld5802/ldselect/ldeconaf/42/4202.htm

You are most welcome gfp!

I think the families are cashing out sooner to take advantage of current lower rates on capital gains taxes which will almost certainly go up next year if Biden's proposal is enacted by the Congress.

Pilot Flying J levering up to buyout the Haslam and Call families. Looks like a mini levered buyout inside Berkshire: https://www.yahoo.com/finance/news/berkshire-backed-pilot-seeks-3-164604204.html. Haslams will continue to own 20% of the business after 2023.

Cigarbutt, I have learned a lot from your posts. They are always thoughtful, respectful, well reasoned and analytical. Moreover you are trying to teach others (like me) with your posts. Please keep them coming!! IMO you are one of the best contributors to the board. -MD

I haven't analyzed Micron in detail so I have no particular insight on it. My guess is that Micron is still a commodity business that is perhaps slightly better than it used to be. I cannot imagine Micron having pricing power in negotiations with a customer like Apple.

Buffett also said that you need to "adjust" reported BNSF earnings downward to come up with a true picture of its earnings power. So he obviously understands & took into consideration that maintenance capital at the railroad is higher than depreciation. Even taking this into account BNSF is a decent business unlike a construction equipment rental company. These two are very different businesses; BNSF is a duapoly with zero chance of new entrants in the market unlike an equipment rental business with almost no barriers to entry (other than wasted capital which will be earning poor returns). It is like comparing apples and elephants. Lesson: you need to take wholistic view of the businesses, not just look at one aspect.

What Munger was trying to say is that in some businesses you are forced reinvest all the cash the business generates to simply stay in the business at the same spot (i.e., not grow unit volumes and things like that). This happens because your depreciation charges are much lower than maintenance capital. As the old construction equipment rusts or dies, the new one you need to buy to replace it costs way more than your depreciation charges. And you are not doing more volume of business necessarily. This is in sharp contrast to See's Candies type business where you are swimming in cash at year end and you don't need to reinvest much if anything back in the business.

wabuffo, Interesting hypothesis on the relationship between higher tax rates and higher inflation. Do you think this relationship holds in other countries? I think most European countries seem to have higher overall tax rates than the US but there wasn't much inflation in the Eurozone during the last decade. -MD

It is possible that Ted had some flow through business losses that were related to the wind down of his hedge fund management entity which partially offset the $131M income from Roth conversion.

After reading Ted's letter, in addition to being blown away by his investing prowess all I can think of is "What a Class Act!" Those of us who are Berkshire shareholders are lucky that the company has such an outstanding bench that includes Ted, Todd, Ajit & Greg ready to step up to the plate when the time comes.

Don't know, never used it.

Just FYI, Schwab's one year agreement is better than IBKR's. IBKR can and does change margin rate basis calculations overnight whereas Schwab actually guarantees the margin rate calculation for one year (for example R = Fed Funds Rate + Agreed Upon Spread)

Schwab automatically renews the agreement every year for me. They send me a letter once a year reiterating the margin rates that were agreed to.

+1

I use Interactive Brokers & Schwab. Overall I prefer Schwab. The back-office support at Interactive Brokers is virtually non-existent. If have questions or you believe there are errors on an Interactive 1099, good luck getting any one to help you especially during tax time. The only advantage of of Interactive is foreign stock and forex trading IMO. You can pretty much negotiate the same/better margin rates at Schwab assuming your account is of significant size. And back office support at Schwab is outstanding.

It has been awhile since I looked at LSXMA closely. 5% FCF for SIRI sounds about right. It is clearly not super cheap. I am not sure what is SIRI's terminal value in 5-10 year time frame. Also (LSXMA's stake in) Live Nation is trading at a significant over-valuation IMO. So while the discount to NAV is attractive, I worry that NAV is overstated.

+1 Long term sustainability of the underlying business is a huge concern for me. The Stitcher acquisition (Podcasts) is a bust in addition to Pandora. I really worry that Sirius will be an also ran in audio with no real advantage in any segment (music, podcasts, live etc.) in the long run. However it does generate significant cashflow today so it will be interesting to see what Malone & Maffei do with it. It eerily reminds me of Qurate.