Munger_Disciple

Thanks DooDiligence!

I am still getting used to the new site. Have we lost the ability to modify/edit a previously posted message?

Page K-85 of the 10-K also shows the Apple position was worth $120.4B on Dec 31, 2020.

At 29th minute mark: "When the music is on you have to be dancing" Hmm.... who said almost the same thing in 2007-2008???

God help us if Chamath is viewed as the next Buffett.

Another article on Rentech: https://markets.businessinsider.com/news/stocks/jim-simons-renaissance-technologies-rentech-5-billion-client-redemptions-2021-2-1030055185 <i>RenTech's investors are pulling their money after the firm's international equities fund lost 19% in 2020, its institutional diversified alpha fund tumbled 32% over the same period, and its institutional diversified global equities fund slumped 31%. ....... In contrast, the firm's flagship Medallion fund - which is only open to owners, employees, and their families - gained 76% last year, Institutional Investor reported last month.</i>

https://www.bloomberg.com/news/articles/2021-02-08/renaissance-clients-pull-out-after-firm-s-rotten-run-of-results According to the article, outside funds performed poorly.

Thanks, this post made my day!

If SpaceX's Starlink succeeds (quite likely based on beta customer tests), VSAT consumer internet business is going to be in serious trouble. Low earth orbit (LEO) satellite constellation based internet is far superior to VSAT's system based on geo stationary satellite. Advantages of LEO include higher data rate, lower latency, lower jitter, lower rain fade losses, smaller dish, and easier installation of CPE. In addition, Blue Origin funded by Jeff Bezos is also working on putting up a LEO constellation. Musk & Bezos are the last guys on planet earth you want to compete with. I think Mr. Market is rightly discounting a significant impairment to Viasat's core business. VSAT is a value trap.

Looks like Jeff Graham had some interesting interactions with Rick Guerin:

Thanks wabuffo for such a lucid explanation of the interconnection between the treasury department and the fed. So it seems the only thing fed can do independently of the treasury dept is to set interest rate on bank reserves and treasuries and control what assets can the private sector can own. By purchasing MBS, treasuries, munis and corporate bonds, the fed is effectively taking them off the private sector hands, thus forcing the private sector into riskier assets to get any return.

wabuffo, By this do you mean that the Federal Reserve is a subsidiary of the US treasury? I thought the Fed set the interest rates (used to be ST only, now possibly the whole yield curve). -MD

I wonder what "margin of safety" Todd sees in Snowflake. I don't like Combs/Berkshire chasing IPO pricing on this one. Seems like a radical departure from the past.

First of all, the asset base of FFH is not that small (though much smaller than BRK). FFH also faces competition from PE and others for deals in the $1-5 billion range. Second being smaller in no way guarantees success; the lackluster investment performance of FFH over the last 15 years is a prime example of that.

There is really no comparison between FFH & Berkshire. Berkshire is so much better in every aspect than FFH that it is like comparing Roger Federer to a club player. In this interest rate environment it is crazy to have a 15% compound return target for intrinsic value with tons of leverage. That just won't happen. I prefer companies that under-promise and over-deliver.

Looks like 100 million more shares of WFC sold after June 30, 2020: https://www.sec.gov/Archives/edgar/data/72971/000119312520240131/d84250dsc13ga.htm

In the video (around 22:40 min mark) Pabrai actually says that he is "fighting to get 50.1% odds vs 49.9%" which makes me wonder even more.

Thanks for the detailed response wabuffo. It is clear that Buffett moved most of BCS's portfolio to common stocks after he took over. We also know (now) that inflation was raging in the 70s. One side effect of it was rapid erosion of the real value of stamp liabilities so it is possible that Buffett was more aggressive on the asset side by moving capital to "safer" common stocks in addition to selling fixed income instruments. Obviously we don't know for sure what was on Buffett's mind at that time, but it is a reasonable guess. Still common stocks were much more volatile than cash/short term bonds and it is hard to argue that Buffett was covering 100% of the liabilities with "safe" assets. We also have Buffett on record repeatedly saying he needs to keep only $20B cash on hand for covering insurance needs and he could use the rest for acquisitions/investments. Though I agree that Buffett's actions during the last decade seem to belie this. In any case the current interest rate environment is almost diametrically opposite to that of the 70s though it could change at any moment without warning. Perhaps this is the reason Buffett has been covering 100% of insurance float with cash + ST treasuries for the last 10 years. -MD

Great post CB. I didn't look closely at "Investments" held by BSC in the 70s until your post. You are 100% correct that most of BSC's "Investments" were common and preferred stocks and are not comparable to cash and very short term treasuries held by Berkshire today. Your finding actually makes me more optimistic that Berkshire will use its large cash holdings to buy a really attractive business in the future (if they find one).

Wabuffo, Excellent analysis of BCS float! Do you think the banks that gave loans to BCS for purchase of businesses like See's and Wesco ignored the stamp liabilities and just looked at metrics like EBITDA? It appears Buffett mostly funded the purchase of businesses in the 70s with debt without touching the marketable securities which were earmarked for stamp redemptions. But it seems he did get the (perhaps indirect) benefit of float because the reason he was able to fund 100% of purchase price in some cases (ex. Buffalo News) with debt was due to the highly liquid balance sheet. If the reasoning is correct, then the main advantages of zero cost float are: (1) income that can be generated with (mostly short term, highly rated) bonds, and (2) the ability to raise funds for large acquisitions via new debt issuance. Given the zero interest rate/MMT environment we live in, the first advantage goes away. But the second advantage remains. * (see below) If interest rates turn negative, (1) becomes a liability. Interestingly BNSF purchase was partly funded with Berkshire stock and debt (rather than dipping into liquid funds for earmarked for insurance liabilities). *Interest rates were much higher in the 70s so the cash equivalents on BCS balance sheet were generating significant income which was used to raise debt for purchases of wholly owned businesses. Given the zero interest rates, this is no longer the case. -MD

IIRC (at one of Wesco shareholder meetings) Munger said something to the effect of: Warren should have resigned from KO board in the nineties and sold the stock.

2020 Form ADV: https://reports.adviserinfo.sec.gov/reports/ADV/157594/PDF/157594.pdf $13.9 billion AUM

One thing I found interesting is that Berkshire's equity portfolio returned approximately -12% (vs. total return of -3.1% for the S&P 500 index) during the first half of 2020 despite heavy allocation to AAPL. Result of the carnage in financials and airlines this year.

As we know, Fed is also purchasing securities other than govt bonds; corporates (including junk), short term muni debt and mortgage backed securities. It seems to me that this activity has the potential to create asset inflation/bubbles by reducing the spread between US treasuries and such securities due to an implied "fed put". I am especially bothered by the purchase of munis: suppose a municipality defaults. What recourse does the Fed have in that case to recoup the funds?

wabuffo, Thanks for the Meta example; it is very helpful in understanding how the Fed operates. Your posts and Bill Dudley's op-ed pieces have been quite educational to me. Does this mean that the main risk to inflation comes from US government spending as opposed to the large Fed balance sheet? MD