Munger_Disciple

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 .......

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.