Dynamic

I think you're right, Spekulatius, that Berkshire has the will to invest in the right circumstances, and can put a compelling case that they'd be a highly responsible and cost-efficient operator, willing to invest substantial sums and to reinvest profits and additional capital too right back into grid improvements, renewables and much more beneficial in California as they are in other states, given the right regulatory environment that would not leave them on the hook for the sorts of liabilities that brought down PG&E. This might be enough to persuade California to amend its constitution, or perhaps to invent some form of structure where the state in some way relieves Berkshire/BHE of this liability or compensates Berkshire/BHE adequately for taking it on. I imagine there could be many ways to do it, with varying difficulty in getting them done, if the trade-off seems favorable over the alternatives including: [*]amending the state constitution to remove or modify the inverse condemnation doctrine, at least in circumstances relevant to a utility company (I guess this needs a public vote, but the PG&E bankruptcy might provide the impetus to get it passed even if it's a lengthy, difficult process), [*]forming some form of partnership between a state-owned entity that somehow takes on the excess liability and BHE to run the operations and reinvest at a reasonable return on equity, or [*]with Berkshire's risk-appetite as an insurer (and its ability to pay enormous claims), to come up with a price regulation method that effectively pays a sufficient insurance premium for Berkshire to accept the liability caused by the inverse condemnation doctrine. I think Berkshire's flexibility over innovative deal structures and in insuring unusual risks would allow it to act decisively and to take on more risk than anyone else, but only if properly compensated. And they're also willing to accept enormously lumpy returns if the overall return is sufficient, and to reinvest enormous amounts of capital if the regulated return is adequate. This could be a win-win-win for California, Berkshire and the utility customers. But, I'm very confident that Berkshire will only take this on if the compensation arrangements are adequate. They're not THAT desperate to find a place to invest enormous amounts of capital that they would ever lower the bar on adequate compensation. I don't think there is any other entity to match Berkshire in these respects.

I believe the 25th July filing in relation to BAC was in response to an event on 17th July, which appears to be on the last page of the Press Release included in BAC's 8K filing where it states "Ending common shares issued and outstanding" to be 9,342.6 million, taking Berkshire's 950 million already held prior at 30th June (though not known to us at that time) over 10%. Also in the 8K supplemental information it states with full precision: Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares; issued and outstanding – 9,342,601,750, 9,568,389,268 and 10,012,719,225 shares in addition to re-stating the 9,342.6 million rounded figure. WFC's 8K on 15th Oct, first Exhibit shows: Common shares outstanding 4,269.1 million at 30th Sep 2019. I'd imagine that, being an 8-K filed with SEC, it's probably considered a sufficiently official regulatory disclosure, even if it's packaged with press releases, but I guess we'll find out if Berkshire file within the next couple of days.

It seems that I was wrong about the filing deadlines, which appear to be 10 days from the event, so with WFC's new share count becoming known on 15th October, then Berkshire, by the close of Friday 25th October would presumably need to file Form 3 (or possibly 13D or 13G) if the ownership has crept over 10% of WFC. Form 3, 4, 5: If the issuer is already registered under Section 12, the insider must file a Form 3 within ten days of becoming an officer, director, or beneficial owner. (beneficial owner meaning 10%+) Changes in ownership are reported on Form 4 and must be reported to the SEC within two business days. You can find the limited categories of transactions not subject to the two-day reporting requirement in the new rule. (I think this is only after you've filed the initial Form 3 and any subsequent changes in ownership occur - e.g. acquiring or disposing of shares. I don't think Form 4 is necessary if you keep the same number of shares and the issuer repurchases shares or issues new shares.) Schedule 13: Schedule 13D reports the acquisition and other information within ten days after the purchase.

It's everyone's thread, gfp, and probably the best place to put news like this - I just happen to own and edit the spreadsheet. You've made enormously valuable input to it and to my understanding of the filing rules and things like New England Asset Management's 13F, and encouraged me to look deeper into these arcane rules. I've now modified the BAC look-through holding based on this Form 4 by way of the adjustment column (as the change won't be shown on a form 13F-HR until 14 Feb 2020, reflecting the portfolio at 31 Dec 2019). Now the new BAC share count of 9,079.3 million shares at Sep 30th is known, Berkshire, with 947,760,000 shares, owns a fraction under 10.44% of BAC.

If the buybacks become truly significant, the IV/BV ratio would narrow somewhat, but otherwise (as is likely to persist for some years) I'd imagine that there are still quite a lot of people willing to pay 120% of BV, and probably also 125% of BV in normal circumstances, which acts as something of a backstop. They might adjust last-reported BV down a little in the event of a market crash. Certainly, if markets plummet, Berkshire is likely to fall too, by a somewhat similar amount, such that the perceived risk-adjusted returns are commensurate for all stocks. However, 'somewhat similar' may still be less than the general market, which could be pegged to a few reasons: 1. If it was trading at the bottom of its range before the crash (e.g. P/BV < 1.30) as it is now, it likely to fall a little less . 2. It is seen as more defensive (i.e. lower risk, meaning lower business risk as well as lower 'beta' for those who subscribe to EMH or CAPM), hence on a risk-adjusted basis it ought to fall a little less. Some of the optionality of Berkshire's assumed ability to invest its excess cash profitably when markets are down is then priced in when markets fall markedly, reducing how much it falls compared to the wider market. 3. The stock portfolio of Berkshire might well fall less than the market because it's also relatively defensive. And even if the Berkshire portfolio experiences a 20% pre-tax decline, this $42 billion reduction in market value is only about 10.6% of Berkshire's Book Value, and after applying 21% deferred tax reduction to the unrealized capital loss, BV would only reduce by 8.4%. This would be partially offset by operating earnings too. I would expect most things to decline in market panics, Berkshire included, and for Berkshire to gain IV and increase leverage by spending that float-funded cash hoard at such times if it can deploy capital, even if it that value might be hidden for a few years. I would not expect Berkshire to fall more than the general market, but not an awful lot less than it either (unless it was highly priced going prior to the crash, of course) I don't try to side-step market crashes, aiming to remain fully invested as I would expect the compounding I'd miss out on by predicting the crash too often and too early to exceed the losses I'd avoid by going to cash.

Thanks for posting this, gfp. I hadn't got round to checking. The filing deadline for Form 3 or similar would be 3 days, wouldn't it? If so we should know around Friday evening after the closing bell, I imagine, and we'll find out if they happened to add to their WFC position this quarter (which is unlikely but possible). I suspect various news outlets will report it incorrectly as an add, because they never include the 22,580,200 shares held for Berkshire via New England Asset Management's 13F-HR. Assuming it has to remain passive once it exceeds 10% through buybacks, we can probably assume that they won't add to the position once they know it has exceeded 10% (as they did with Delta Air Lines DAL during the three days before filing, causing 2 filings within days).

Called me delusional, but I really like how Berkshire is positioned. The cash balance is offset by float, so the portfolio is essentially unleveraged and the 2% earned on that cash is essentially free money. If things get REALLY cheap, Berkshire can spend $100bn or probably $150-$200 bn if they take on modest debt, which they could pay down in 2-4 years. We don't have a clue when the next recession or bear market will come - 12 months or 4-5 years, who knows, or whether the economu will start to overheat and see interests rise to cool it off, but either way Berkshire will benefit. When it does crash, Berkshire will be ready for large investment deals with virtually no downside risk and with large upside potential, leveraged by $125bn in float capital that comes with zero-to-negative interest cost and is not callable. In the meantime, the stock portfolio is essentially matching the S&P500 even in a bull market, while the companies within it are probably much lower risk and much less debt-leveraged than the S&P500 as a whole and trading a lower mutiples. I can imagine that a lot of the recession deals will start out as 6-8% preferred stock with warrants attached, like BAC and OXY, so they don't appear to be egregiously gouging by extracting excessive rates, but are a source of instant capital to the investee and simply benefiting from long term growth of the investee when they exercise the warrants (as with BAC), making the annualised return rise into the low-to-mid teens percent over 5-10 year horizons. But right now, everyone's fearing a recession around the corner, and everyone's also complaining about Buffett sitting on his hands. Essentially they're shouting "swing, you bum!" at the baseball batsman mainly because the stock price has barely budged in 2 years. The patience will pay off, I believe, but it exceeds the patience of many investors looking on from the sidelines and seeing their BRK stock price going nowhere for 2 years. Large surprises at Berkshire tend to be positive, when they make a giant acquisition, not negative like most companies missing earnings. Sure this is not Berkshire of the 1980s or 90s earning way more than the index, but it's still a fair low-risk, adequate return investment at the right price. I think the fundamentals have not stagnated like the stock price has stagnated since Dec 2017, and that in a quarter or two, (early November or late February), short of a bear market, metrics like Price-to-Book-Value will probably see the 'soft floor' of 120%-125% of BVPS start to force even the pessimistic price upwards at a reasonable compound rate. I think 130% of BVPS is still towards the low end, and I wouldn't be surprised to see that exceed $210 per BRK.B on 2nd Nov 2019's Q3 results release, and that 120-125% soft floor would be about $195-$203 or so type of range unless markets plummet. To me, Berkshire is a good place to park capital awaiting a fat pitch, earning a respectable long-term return with very modest risk of even short-term loss. If I find a fat pitch at 50% of IV that I want to put 25-50% of my money in to earn 25%+ for a few years, I won't mind if I lose 5% or so if I find that fat pitch when Berkshire drops to 120% of IV, while earning a fairly certain 8-10% compound over the long run, if my wait exceeds a year or two. And if I don't find the fat pitch, Berkshire's compounding rate should still meet my goals and needs for many years to come.

I agree with gfp's interpretation of this. The top equity positions listed in the latest Berkshire 10-Q filing (coupled with the quarter-end closing price of BAC and a lucky break on how this affected rounding to the nearest $0.1bn) and then the 13F-HR filings from Berkshire and New England Asset Management, confirmed that the BAC purchases had all been made by 30th June 2019. Various well regarded news sites get this wrong because they forget to include NEAM's 13F-HR and have reported, in error, that Berkshire must have continued buying BAC in July to hit 950,000,000 shares. The reduction in share count revealed in July caused Berkshire to issue the Form 3 filing later amended to also mention the 354 shares of Series T 6% Non-Cumulative Perpetual Preferred Stock that Berkshire still holds but accidentally omitted on the original Form 3 filing. As to Wells Fargo, the WFC holdings at 30th June 2019 was known to be 432,383,973 shares, so if the total WFC share count drops to 4,323,839,730 they'll hold 10% of the class. It will be interesting to see if they're permitted to let this happen passively as they did with BAC, following that precedent. At 24th July per its 10-Q cover page, WFC had 4,406,107,022 shares of common stock outstanding, so only a 1.867% buyback is required for Berkshire to reach 10% assuming it doesn't sell. With over 8% of WFC's shares retired in 12 months, rather more than the rate in most years, it might only be October or November before a new filing tips Berkshire over the 10% threshold if they have continued to retire shares rather aggressively, so we might soon have our answer. I guess it's even plausible, though perhaps unlikely, that Berkshire could have bought more WFC on recent dips to nudge up against the 10% limit already such that any subsequently published reduction in WFC share count would trigger a Form 3 from Berkshire. A permanent change to 25% regarding the bank holding company status would potentially allow Berkshire to own a lot more of these banks, perhaps by way of private transactions rather than open market trades. As we are aware, the SEC rules on owning 10%+ of any listed company require rather prompt filing, and once Berkshire crosses that threshold, as with Delta Airlines, they tend to stop buying more in the public markets within a few days as the rapid reporting requirement is likely to thwart their attempts to keep buying at good prices without moving the market. So I'd imagine that increases in ownership of these banks much above 10% would almost certainly only come as a result of continual buybacks, so it might take decades to approach 25% and then face the need to sell some of their shares (and presumably to report these sales within a few days).

And for those unable to read the story thanks to GDPR, it's also on archive.org here.

Maybe you're right, Mephistopheles. Perhaps there's a counterpoint. I think the rapid rise of Ajit Jain, despite not being experienced in the insurance business may be a parallel for someone like Tracy Britt Cool. Perhaps Tracy Britt Cool is just a person with the right stuff to really make a positive difference and impressed right from the start.

Thanks for this very useful post, Cigarbutt

This is somewhat tangential to Berkshire's Insurance as it stands - I found no mention of silicosis in the latest 10-K, for example. I was listening to an episode of the podcast "Shirtloads of Science" hosted by Australian science communicator Dr Karl Kruszelnicki and featuring Kate Cole, all about silicosis, particularly from workers grinding and cutting concrete, stone and granite etc. This is particularly worrying in construction and demolition which are pretty huge industries employing a lot of young adults, mainly young men. Some evidence even suggests that smoking and silica dust exposure compound the damage of each exposure alone, and anecdotally, I'd say that smokers are over-represented among construction workers. Those working in dust in confined spaces would seem to be especially at risk, while those wetting the surfaces being cut would mitigate the concentration of airborne particles being inhaled but not eliminate the risk. This seems like another of these long-tail workers compensation exposures that might come to haunt ill-prepared insurers, just like asbestos did, given that its most serious symptoms are often evident decades after exposure. It also sounds superficially as though there still isn't adequate risk awareness training in training courses or on-the-job Health and Safety. If other insurers and reinsurers eventually get into trouble over the emergence of this type of compensation exposure, they may need limit their losses and hand off retroactive/long-tail/run-off exposure to insurers with an appetite for large long-tail risks due to their ability and appetite to invest the float at good long-term returns. Just as with the asbestos exposures that various Lloyds syndicates couldn't cope with, Berkshire may have further opportunities to grow long-duration float in future and ensure that these affected workers receive the compensation they're due in the decades to come, while being able to earn an adequate return over the time they expect to wait for the claims to come in and be paid. The rock-solid financial stability of Berkshire should satisfy all stakeholders and regulators that claims will be paid out in due course, more than for practically any other firm, so it should be the case that Berkshire would be able to negotiate a premium that would deliver an adequate discounted return.

Seconded. Thanks pupil

I think the last post was only quoting the previous one, with no additional words. I would point out that if some of the investments in equity securities were converted to wholly owned subsidiaries they would be replaced with subsidiaries that still produce a commensurate or better return. If they are taken out of the insurance basket at that point we just decrease the value of the insurance business at that time and increase the value of wholly owned subsidiaries at the same time by a similar amount, possibly increasing net value as Berkshire tends to buy things that have higher IV than what they're giving up although it's not always immediately apparent.

If they can't remotely match the audio levels for interviewer (very quiet) and interviewee, I don't think they'll be filtering out his breath sounds. I very nearly switched to my noise-cancelling headphones while listening to this while doing my chores. Still, though, it's abundantly clear that Warren and Charlie are both very mentally acute and capable and happy to play the hand they're dealt to the best of their abilities, not at all swayed by what other people do or think. I imagine it could still be a while, but I can't wait for their next great insight, such as that one that brought BNSF into Berkshire.

Although it does not appear to be a Total Return S&P500 Index adjusted for inflation, this one of many charts on the same site (including Shiller PE and many more), may help somewhat: https://www.multpl.com/inflation-adjusted-s-p-500 It's plotted on a logarithmic vertical axis, so the same slope represents the same percentage capital growth in 'real terms'. The late 1980s up to Black Monday (1987) are about as steep as anywhere on the graph, including the late 1950s boom, though you can see that, ignoring dividends, by 1987 the S&P had only almost regained the purchasing power it had at the peak around 1969-1970. Today in late Aug 2019 it has about 4x the purchasing power of the Black Monday peak. Of course, interest rates go hand in hand with inflation rates and stock prices tend to go inversely with interest rates, so one might link some of the rise in various periods to interest rate reductions when those occurred, which is not plotted on that graph..

Thanks gfp. For now, it's fixed-width text using Tt and it works OK, though it ran over to two rows on mobile view at least on my phone. I have an idea to encode the formatting as a table using forum code that I can copy and paste from the spreadsheet to the forum posts. A few notes on the latest update. I've been very busy with work, so I'm a few days late in posting here. I had already changed the non-publicly-editable version on 15th Aug but have now got both done. A bit of a format change is planned so that I'll have an alphabetical list then a sortable table based on that with a simpler, clearer layout, but it's not ready yet. I might also make some kind of graphical representation - any suggestions welcome. I'm thinking perhaps a pie chart, area chart or bar graph showing different holdings. Could potentially also group together certain holdings that share characteristics - (e.g. airlines, banks, insurance & other financial, etc...) or in another plot the categories might be (near permanent holdings, merger arbitrage, other mergers agreed, etc.). The question then is also, do we include KHC or exclude it as it's carried under the Equity Method, as a Control Position. In some way it would be go to show it alongside the 100% at an equivalent scale. I could also show the look-through earnings from various holdings. A bar chart would be good here, as negative earnings are usually going to feature. Torchmark TMK has changed ticker to GL and changed name to Globe Life Inc since the end of Q2, so I've already reflected that name change even though the 13F-HR has to report it by its official name at the time. USG was taken over by Knauf during the quarter, so is no longer in the portfolio. As the cash is shown elsewhere on the balance sheet, the proceeds are no longer shown in my portfolio. RHT was presumably a merger arbitrage (purchased by IBM) and the merger closed, I believe at $190 per share, after the end of the quarter. So I've put in $190 as the market price now so that the cash proceeds (pre-tax) are reflected in the portfolio value, although it closed the quarter a little lower. I guess its EPS should really be stripped out of the look-through EPS, which I haven't done yet. It's worth remembering that Anadarko voted to be taken over by OXY, so Berkshire's $10bn 8% preferred stock investment in OXY was probably the most significant capital allocation of the quarter, although the capital hadn't actually left the building until about 8th August. AMZN increased +11.20% to 537,300 shares worth around $1 billion at market value, so still seems to be a Ted or Todd position. BAC increased +3.40% to 950,000,000 shares market value $27.55 bn on 30th June. Since then they found that with the share count reduction they held more than 10% and there have been no filings since indicating whether the holding had to be reduced or was allowed to remain while new bank holding company rules are being considered by the authorities. CHTR decreased -5.00% to 5,426,609 shares (approx $2.1bn) continuing the gradual disposal. RHT increased +1.20% to 5,171,890 shares (approx $1.0 bn) which was taken over by IBM since 30th June. USB increased +2.20% to 149,497,786 shares (approx $7.8 bn to $7.9 bn) The current and old versions of 13F-HR worksheets (right hand group of tabs on the sheet) on the non-publicly-editable version of the sheet now combine Berkshire's own 13F (figures in black) with any of the rightmost figures in bold and blue being those holdings that belong to Berkshire but are reported within the New England Asset Management (NEAM) 13F-HR (Other Manager 01 02 denotes these holdings). This will allow you to check my work, but I'm pretty sure it's accurate. These 13F tabs are now labelled not by the date the 13F was published but by the quarter-end date that the snapshot represents, as in 13F 2019-06-30 meaning the snapshot at 30th June 2019. The links to Google Finance page and the code to grab prices now explicitly includes the exchange, such as NYSE:USG. For cases such as USG, or RHT where a takeover has taken place, this means you'll usually get the correct security not some random obscure security that uses a similar ticker on a difference exchange. I've also put in a Takeover Price override, so for example, Red Hat and USG have $190 and $43.50 entered there, respectively. This is part of some general improvements I'm including. The COMBINED HOLDINGS Q2 tab is changed slightly, in that it no longer splits out the Berkshire and NEAM holdings plus or minus the adjustments but reports the combined total only in column D. If you want to see the holdings on Berkshire's 13F and NEAM's 13F, you can go to the 13F tabs over to the right. I still show the Adjustments that have been applied and the URLs to the SEC filings or news articles that justify each. I'm putting these on the Ticker List tab in their original form as part of my improvement to the sheet, and a lot of the negative adjustments show their working if you look at the formula. I even sometimes show values I have removed as new filings come out by putting 0*234567 within the formula to zero-out former pension fund holdings that are no longer reported. The idea is to make it easier to check my working. These Adjustments are typically one of two kinds: 1. Negative Adjustments to account for holdings that belong to Pension Funds of Berkshire or its Subsidiaries, that are not beneficially owned by Berkshire Shareholders. Berkshire has to report the positions it or its managers have control to buy or sell or voting rights upon in form 13F-HR, not only positions owned for the benefit of shareholders. I usually link to the most SEC filing (often on form 13D or 13G) from which I've derived this information by adding up all the positions held by the various pensions funds. In one of two cases where perhaps there is no 13D or 13G filing, Berkshire has indicated in its 10-K exactly how many shares are beneficially owned by Berkshire Shareholders, and the difference between that and the 13F to 31st December that year is then used as an Adjustment. The details are mostly on the Ticker List, which I'll be using more in future as a helper sheet. AAL and GM are examples where the pension fund holdings are a truly significant proportion of the total holding. 2. Positive Adjustments are usually there to account for foreign positions or any other positions that are not subject to rule 13F that are known or strongly suspected to be held by Berkshire. Here I usually link to the relevant source of this information, but I might as well re-cap here: a. Sanofi. Back in 2016's 10-K this was one of the top 15 positions listed, with a note explaining that the majority of the holding was on Euronext Paris, and a minority was held via ADRs. Only the ADRs are 13F securities. The ADRs were eventually sold, but the Euronext holdings would have fallen just outside the top-15 holdings by year-end market value since then and appear to be necessary to match the portfolio value in Holdings in equity securities reported in the annual and quarterly filings (which excludes KHC and pension fund holdings). b. BYD Company Ltd. 225 million shares held by Berkshire Hathaway Energy. I have switched this to the Hong Kong listing (not the Shenzhen listing) as I've seen tables showing Berkshire's holding being on that exchange, and I understand that Shenzhen listed shares cannot be held by non-Chinese entities. The prices, converted to USD, don't seem to be especially close very often, but it seems that the HKG:1211 listing more closely matches Berkshire's reported valuation. This holding is still reported in Berkshire Hathaway Energy's filing at $1,358 million which matches my quarter end valuation when converted from HKD to USD currency to the nearest million. I also see a small holding in Rabbi trusts is mentioned there, which I am ignoring. There is also some "Other" which I'm also ignoring. c. Società Cattolica di Assicurazione - Società Cooperativa - this was an estimated holding based on news reports at the time. The exact share count is unknown, so it's probably correct to about 3 significant figures at best, assuming it's still held. d. Home Capital Group (CANADA) - Not a 13F holding, and reports indicated that Berkshire had planned to 'substantially exit' its position, so I've assumed the position is now zero. e. Lanxess AG (Germany) - I had seen a record of a stake disclosure from a few years ago and briefly included it, but my quarter end valuation was within 0.01% of Berkshire's 10-Q valuation if I excluded it, so I have excluded it and removed it from the Look-Through portfolio. Checking my total market value against Berkshire's 10-Q At Quarter-end prices with currency conversion to USD at quarter-end rates, my portfolio market value (excluding KHC, as is correct) came to $200,490,678,602, which is -$25,321,398 less than the 10-Q's Investments in Equity Securities at $200,516,000,000 (a -0.01% shortfall), so I'm pretty happy I'm roughly right with these foreign company adjustments and the pension fund adjustments. It could be luck that my omissions and errors in part cancel others on this occasion, but the difference is probably immaterial given that we have most things accurate and many stocks will move up and down with the general market by similar proportions. It's probable that the look-through earnings (always trailing twelve months data as provided by Google) and the look-through holdings are pretty close to correct. Some stocks such as certain Liberty tracker stocks don't return EPS figures, but I think their impact is fairly immaterial. And as always, reported EPS can be somewhat misleading. Semper Augustus was saying that about 15% of reported EPS over time tends to be wiped out by write-offs etc. and perhaps pension shortfalls too according to their analysis. Edit: Just corrected an error with RHT and sorted by holding size. I now report the takeover price and date if there is one and zero the EPS if there has been a takeover. So RHT shows as $190 per share = 982.66 million USD with zero earnings (rather than negative earnings contribution).

AAL_________ American Airlin…Group Inc ____unch _unchanged count AAPL________ Apple Inc._______________ ____unch _unchanged count AMZN________ Amazon Com Inc___________ __11.20% _________537,300 AXP_________ American Express Co______ ____unch _unchanged count AXTA________ Axalta Coating …stems Ltd ____unch _unchanged count BAC_________ Bank of America…rporation ___3.40% _____950,000,000 BK__________ Bank of New Yor…llon Corp ____unch _unchanged count CASS________ Società Cattoli…operativa ____unch _unchanged count CHTR________ Charter Communi…tions Inc __-5.00% _______5,426,609 COST________ Costco Wholesale Corp____ ____unch _unchanged count DAL_________ Delta Air Lines, Inc_____ ____unch _unchanged count DEO_________ Diageo P L C Spon ADR New ____unch _unchanged count DVA_________ DaVita HealthCa…tners Inc ____unch _unchanged count GL__________ Globe Life Inc …ark Corp) ____unch _unchanged count GM__________ General Motors Co________ ____unch _unchanged count GS__________ Goldman Sachs Group Inc__ ____unch _unchanged count HCG_________ Home Capital Gr… (CANADA) ____unch _unchanged count HKG:1211____ BYD Company Lim… Listing) ____unch _unchanged count JNJ_________ Johnson & Johnson________ ____unch _unchanged count JPM_________ JPMorgan Chase & Co______ ____unch _unchanged count KHC_________ Kraft Heinz Co___________ ____unch _unchanged count KO__________ Coca-Cola Co_____________ ____unch _unchanged count LBTYA_______ Liberty Global …c Class A ____unch _unchanged count LBTYK_______ Liberty Global …c Class C ____unch _unchanged count LILA________ Liberty LiLAC Group A____ ____unch _unchanged count LILAK_______ Liberty LiLAC Group C____ ____unch _unchanged count LSXMA_______ Liberty Sirius … Series A ____unch _unchanged count LSXMK_______ Liberty Sirius … Series C ____unch _unchanged count LUV_________ Southwest Airls Co_______ ____unch _unchanged count LXS_________ Lanxess AG_______________ ____unch _unchanged count MA__________ MasterCard Inc___________ ____unch _unchanged count MCO_________ Moody's Corporation______ ____unch _unchanged count MDLZ________ Mondelez Intern…ional Inc ____unch _unchanged count MTB_________ M&T Bank Corp____________ ____unch _unchanged count PG__________ Proctor and Gamble_______ ____unch _unchanged count PNC_________ PNC Financial S…Group Inc ____unch _unchanged count PSX_________ Phillips 66______________ ____unch _unchanged count QSR_________ Restaurant Bran…ional Inc ____unch _unchanged count RHT_________ Red Hat Inc______________ ___1.20% _______5,171,890 SAN_________ Sanofi Euronext Paris____ ____unch _unchanged count SIRI________ Sirius XM Hldgs Inc______ ____unch _unchanged count STNE________ StoneCo Ltd._____________ ____unch _unchanged count STOR________ Store Capital Corp_______ ____unch _unchanged count SU__________ Suncor Energy Inc New____ ____unch _unchanged count SYF_________ Synchrony Financial______ ____unch _unchanged count TEVA________ Teva Pharmaceut…Ltd (ADR) ____unch _unchanged count TRV_________ Travelers Companies Inc__ ____unch _unchanged count UAL_________ United Continen…dings Inc ____unch _unchanged count UPS_________ United Parcel S…Inc (UPS) ____unch _unchanged count USB_________ U.S. Bancorp_____________ ___2.20% _____149,497,786 USG_________ USG Corp_________________ -100.00% ________________ V___________ Visa Inc_________________ ____unch _unchanged count VRSN________ VeriSign Inc_____________ ____unch _unchanged count WFC_________ Wells Fargo & Co New_____ ____unch _unchanged count

In investing unlike Olympic diving you don't get added points for difficulty. An investment offering good value in plain sight is still a good investment that can outperform

I think this long view may be telling with regard to the evolution of the insurance side of Berkshire. I think the continual approximation of about $20bn needing to be kept available to pay for correlated risks (e.g catastrophe losses) that has remained at around that level for so long, despite Berkshire's admirable conservatism, reflects how much Berkshire has shifted its insurance business's relative focus away from megacatastrophe reinsurance, and reflects the increase in auto insurance and long-tail insurance exposures over time, along with specialty insurance, while the megacats remain roughly constant. I imagine that if the prices for catastrophe cover were to harden, which might well happen AFTER a major loss event where the industry suffers severe losses and needs to rebuild reserves and limit risks, Berkshire could easily write a LOT more profitable business (while still taking a good deal of care to limit correlated risks, e.g. exposure to single events to a manageable level), but it's now so much bigger, and with so much more income from subsidiaries, that it could easily raise that manageable level substantially to take advantage of adequate pricing and double or triple its megacat exposure. The great thing is that, as ever, the incentive structure maintained in Berkshire's insurance subs is all about maintaining conservative underwriting and rewarding that first and foremost, rather than rewarding volume of business written regardless of price.

I suspect it could be something where there's a new insight and something has significantly and materially changed. For example BNSF railroad - things had dramatically changed and permitted returns and tax treatment made it a great investment but it took others a while to recognize the value.

Thanks John. It sounds like big bath accounting writing down as much as possible to make the metrics look better in future. I get the impression that Kraft diluted the brand value per share compared to Heinz alone. Not do bad in the US and Canada but not all that great in the rest of the world. I think Berkshire will probably still do okay with KHC in the long run but people who bought at such high prices in ~2017 will suffer poor returns for quite some time.

Kraft Heinz (KHC) has released its earnings for Q1 and Q2 combined as H1 this morning. Earnings are about 50% down including impairment charges. Sales down 4.6% in USD, about half of that decline being currency-related. Net earnings for 2019H1 amounted to $854 mn. With 1,223 million diluted shares outstanding that's $0.6983 per share in fully diluted EPS. Berkshire's share of the H1 earnings, having 325,442,152 shares of KHC, is about $227.3 million I'm not sure if the same impairment charge was already included in Berkshire's 10-K based on KHC's initial year-end earnings release published the day before Berkshire 2018 report, but KHC then had a late-filed 10-K after making some restatements, so I'm not 100% sure how to account for it at first glance, and I'd welcome input. If we can simply add $227.3 million to Berkshire's 2019Q2 Book Value, we get $382,771 million. With 2,451,065,473 Class B equivalent shares outstanding that's $156.17 per BRK.B (or $234,248 per class A BRK.A share), an increase of about $139 per Class A share and $0.0927 per Class B share, so not enormously consequential, but worth having.

Yeah, that's what I did. I need to strip that out, as it's more long-term and more prone to variations in current market value. I should instead have used: Cash and cash equivalents (<3mth Treasuries)41,375,000,000 Short-term investments in US Treasury Bills77,745,000,000 Total Cash & Equivalents on hand119,120,000,000

Of course, although it hasn't left the building yet, the $10 billion 8% loan to Occidental Petroleum to assist them in taking over Anadarko is a substantial allocation of capital, so assuming I've interpreted the accounts properly, the cash balance after accounting for that would be $129 billion, still pretty much balancing insurance float. The shareholder vote on that takeover is on Thursday 8th August, coincidentally the same day KHC is due to report their first half year earnings (having missed the normal 10-Q timings after restating some of their previous annual financials). 26.7% of those earnings will accrue to Berkshire's earnings to be reported in Q3. My guess it that the main external capital allocation flows in the quarter have been: +$10.0 bn allocated to OXY loan at 8% with warrants but not yet paid until acquisition is approved. +$0.8 - $0.9 bn allocated to BAC purchase 31,081,000 shares bought at around $28 to $28.50 per share. -$1.9 bn cash received on USG takeover. (and perhaps $0.2-$0.3bn allocated to future tax payments on the gain) +$0.3 bn (very approximately) in other net equity additions to the 13F-HR portfolio I think in the context of the OXY preferred deal, it took the pressure of finding major investments in equities (including buybacks) when prices were OK, but not enormously attractive, yet still the cash levels that remain after deducting $10bn we're expecting to pay to OXY remains close to the insurance float, netting out any appreciable cash drag and keeping ample dry powder ready for any truly significant opportunities that may come up in the next year or three.