Munger_Disciple

Does anyone else think it's strange to see no follow-up from Berkshire about the WSJ article on Ajit's successor? It's not like WSJ is a tabloid or something.

I think in Ajit's case health seems to be a factor. I hope he stays as long as he can. A true rock star and a treasure for Berkshire!! It will be a big loss for Berkshire when he departs.

+1 I think Buffett's way of saying to Berkshire faithful, "Don't worry; things will work out ok from here."

Actually no! That's one big risk with regulated capital intensive businesses. The rate increases have to be approved by regulators in each state who are political appointees. So they will delay the rate increases as long as they can. That's a disadvantage in an inflationary environment unfortunately. Berkshire is "partially" hedged due to the focus on wind and solar power but no, I wouldn't say that regulated utilities perform well under inflationary conditions.

Buffett said many times that BNSF earns a pittance on replacement value but then they paid a tiny fraction of the replacement value when they bought BNSF, so return-on-Berkshire's equity is pretty decent. I think this blogger completely misses the big picture of Berkshire. It's not that Buffett doesn't love businesses that produce great earnings w/o requiring any capital. Of course he does; but there aren't that many that are in his comfort zone (where he can see how the business looks 10 years from now), that are available for a reasonable price. When he found one (apple), he loaded up. Meanwhile they need an outlet for reinvestment for all the cash being generated where they can earn a decent if unspectacular returns on capital that involves huge capex dollars. Therefore the pivot to relatively safe, capital intensive businesses like BHE, BNSF & other industrial companies. The whole idea is to keep the reinvestment engine going as long as they can. At some point they will reach a plateau (I hope that day is far off) but I consider it a sad day for Berkshire shareholders.

Sure size matters. Main issue is that the collateral posting obligations of TRS are pro-cyclical. As an owner of FFH stock for the long term, I wouldn't mind at all if they undo it at >= 1.5x Book. I suspect HW crew is watching it closely & likely unwinds it during the next run up in the stock. Let's say hypothetically the stock market drops 50% and FFH stock drops $1,000 along with it. The collateral requirement would be $1.7 Billion; not a small number even for Fairfax.

Exactly! It's similar to getting margin called (which is why margin debt is so dangerous); happens at the worst possible time when everything else is going in the wrong direction.

Yeah basically they might be required to post collateral at the worst possible time which is why they should have closed it out in Q4 last year at higher prices. I agree with others it might not be the right time do so now. That's also why I think TRS position is very different from a share buyback which is done with excess cash on hand.

Duracell in the news: https://www.reuters.com/legal/litigation/berkshires-duracell-must-face-basf-lawsuit-over-battery-secrets-us-judge-rules-2026-04-28/

Tokio Marine deal was done by Ajit (I am sure he ran it by Greg & Warren); from press reports Ajit was discussing the deal with TM CEO since mid-2025. And there was a precedent to this deal: Ajit did almost an identical deal with IAG in the past.

That's a fair criticism, Buffett could have bought back a ton of stock cheaply especially during 2011-2014 time period. I would cut him a bit of slack though; he (like most people) underestimated how long the zero interest rate environment would last, and hence might have misjudged reinvestment possibilities. But certainly he was reluctant with buybacks post GFC when the stock was very cheap during the 2010-2015 time period. His acquisition record post-BNSF deal was not also great (except for Allegheny). Abel on the other hand will be very decisive with buybacks IMO; he pretty much said that in the annual letter & the following interview. That bodes well for Berkshire shareholders. I think Berkshire 's no dividend policy (as long as > $1 of market value is created for each retained $1) is the correct one for shareholders unlike Fairfax's. But I agree that Fairfax executed buybacks far better than Berkshire to-date.

As I pointed out, dividends is a terrible use of capital given that Prem's goal is to internally compound book value @15%. I would rather Fairfax buys back stock with all the excess capital that can't be invested internally as long it trades below intrinsic value. My previous post referred to "return on incremental dollar" which you seem to have missed. So we are on the same page. However I would note that Prem's stated goal is 15% return on incremental dollars retained. I think you give too little credit to Berkshire & Buffett. I don't believe Buffett ever wanted to grow Berkshire's asset base at the expense of growing per share intrinsic value. If you even causally read past Berkshire annual reports, you would notice that Buffett almost always referred to maximizing per share intrinsic value. Finally, the focus should not be on getting big or small, but incremental returns on reinvested capital, and the comparison to alternatives.

I think about this differently. In your simplistic example, both companies A & B are growing their IV at the same rate; one is buying back stock at discount to IV, so naturally it's going to do better. But this doesn't imply your conclusion: "because Fairfax pays a dividend and is aggressively shrinking the share count when the stock is cheap, the per-share compounding path could end up looking meaningfully better than many investors expect" is correct. At the end of the day, book value is the owners' capital base of the company. If the incremental dollar of earnings can be reinvested within the company at a very attractive rate of return, that is almost always the best use of capital, not share buybacks (assuming stock trades at a premium to book) or dividends. If the dollar is used for buybacks instead, it will result in shareholders owning < $1 of additional book value as opposed to owning $1 of (very attractive) book value if the capital is reinvested. Thus the CEO should compare the return from buyback to return from reinvestment of the same dollar inside the company & only do buybacks if there are really no better alternatives for reinvestment inside the company. Dividends are even worse use of capital than buybacks for obvious reasons (taxes, reinvestment etc.) and should only be considered if (1) there are no internal reinvestment opportunities and (2) stock is trading at or above intrinsic value, conservatively calculated. Prem used to be against dividends until he did a 180 degree conversion due to his personal cash flow needs. He has a mental block against selling a small portion of his shareholding (even the subordinate voting shares it seems) every year for his personal needs, which I would imagine is a better outcome for him. Even great founders have mental blocks, for example Buffett's lifelong love affair with airlines, and his angst about buybacks for a long time. Given that FFH can't possibly allocate more capital to insurance business since the u/w cycle has turned for worse (not including buying out minorities here), buybacks are probably a good and safe use of excess capital.

I echo this terrific comment by @Parsad as a 25+ year shareholder of Berkshire. Warren & Charlie taught me everything I know about business and investing & I am forever grateful to them.

Abel has spent the past year giving priority to learning Berkshire’s insurance business and visiting with Ajit Jain, the brains behind the operation. Jain is expected to continue heading insurance at Berkshire, though the company has developed a succession plan for him, too. “He’s probably going to be at the company for as long as he can,” Buffett said in an interview. The word "probably" concerns me a bit. I would have liked better if Buffett used "almost certainly" or something to that effect. Me hoping Jain stays as long as Buffett running insurance at Berkshire. I am also hoping I am reading too much into this.

I highly doubt Sokol said that about Berkshire. He was very complementary of Abel & Berkshire's future under him at last year's shareholder dinner.

+1

The more difficult problem (at least for me) is finding something that's reasonably priced that's in your sweet spot.

I don't have a dog in this fight but I do feel sorry for LT shareholders of FIH based on the thorough analysis done by @CoGreenwich&Laight. It's true that fees were disclosed when they IPOed this thing. However the right thing for Prem to do is to reduce the GP fees at this point. I am aware of at least one very well known VC firm on Sand Hill Road which had done this (after the fund closed, mid-way thru' the life of the fund). Just my 2c

That's exactly the playbook as the article quotes Watsa. Whether it succeeds or not, who knows?

FT article on Fairfax's MW Eat subsidiary (Indian restaurants): https://archive.ph/IHWQS From the artilce: The group made a £4.4mn pre-tax profit on sales of £32mn last year and paid a £4.7mn dividend. It looks like Veeraswamy is about to lose its lease.

I think most people are better off staying fully invested with a decent size cash buffer for unforeseen expenses that happen in life, and ride out the inevitable ups and downs of the market. Besides large scale changes to one's equity allocation is very expensive tax-wise, and selling & buying back involves two timing decisions which increases the probability of an overall erroneous decision.

It seems more complex than that. This podcast discusses war related cover for ocean shipping: https://podcasts.apple.com/ky/podcast/lots-more-on-the-seaborne-chaos-around-the-strait-of-hormuz/id1056200096?i=1000753530408