xboojum

From a comment on the sports blog Defector: * JJ Redick is in college: LeBron 27/7/7 * JJ Redick, NBA rookie: LeBron 27/7/6 * JJ Redick, NBA starter: LeBron 27/7/6 * JJ Redick, 15 year vet, LeBron 25/8/8 * JJ Redick analyst/podcaster: LeBron 26/8/7 * JJ Redick is LeBron's coach: LeBron 25/9/8 Just a machine.

https://www.geico.com/driveeasy/ GEICO has created their own version of telematics. They were just late to the game and aren't using it effectively yet, as far as I can tell. (If Todd can improve things, there's no shame in GEICO running second-best behind Progressive, which seems to be shooting the lights out right now; a lot of the complaints about a less pleasant culture at the GEICO home offices sound like the sorts of things that happen when a company is underperforming and the CEO wants to trim deadwood.) And say what you will about BNSF, they didn't just wake up and realize, "Oh, precision scheduling is a thing!"; there has been a conscious management decision, going back years, that they don't want it (whether due to the fact that it pisses off customers—which it does—or a desire for better relations with their unions or concerns about regulation, I don't know, or maybe something internal; you'll note that even with Harris parachuting in as an operations consultant, they're not talking about implementing it). The Ben Simmons comparison is funny, not because anything important at Berkshire has collapsed as thoroughly as The Process, but because I think there's something to the idea that the Buffett of 2024 is afraid to shoot! Things have repeatedly worked out poorly to suboptimally for him over the past decade, offset by the enormous success of Apple and the solid performance at size of the sogo shosha investments.

I think you're misreading the statement, which says "relative to". So if their margins were five points better than Norfolk's and now they're four points better, that's relative slipping.

I think it's fair to say that we may have reached the limits of the strategy Buffett has been running for the last fifteen-plus years of sending money from the subsidiaries to BH and then from BH to the utilities for investment. If Western utilities are truly permanently a worse business due to wildfire risk (I have my doubts, but it's certainly possible) despite all the tax benefits of investing in renewables and BNSF is going to be hobbled either relatively because they don't do precision scheduling—or absolutely because of labor disputes or repricing in the industry (which, again, I have my doubts); there are no elephant-sized private businesses on the scale of a Mars or even, IDK, Sheetz that Berkshire can buy at a reasonable price (this one I buy); and there aren't outlets where Buffett is willing to make purchases in the public markets (there certainly don't seem to be many currently), where does the money go? Japan? South Korea? Fighting regulators to buy Chubb? Opening up a Flying J on every corner? The secondary reason that the Apple purchase was so good is that it's one of the few places where Buffett could pour essentially an unlimited amount of money without personally distorting the market, and it's a little frustrating if unsurprising that he didn't choose a second tech titan that could also support $30-50 billion of investment back when they were priced less breathtakingly. I think this is the top strategic problem Abel is going to have to tackle, because I don't think repurchases at $700,000 an A share make sense. I think personally there's still juice to be squeezed from utilities because I think a lot of the current issues are transient and utility boards are going to start offering incentives to bury lines and install monitoring, but even that only gets you so far (although it would be a big help), and it became pretty clear years ago that Marmon is not going to turn into a mini-Danaher the way I once thought it might. Having a subsidiary that supports large amounts of reinvestment at reasonable returns would be hugely beneficial as T-bill rates slowly come down. [Edit to add] And this is why Buffett was so excited to work with 3G! A turnkey LBO shop with a reproducible set of behaviors that can be used to turn a pile of cash into a lean, mean consumer goods company gushing cash flow would have been incredibly valuable for Berkshire to partner with, possibly even more valuable (to Buffett) than having one in house because of the distance for avoiding reputational hit. But it didn't work out, because it didn't scale well and 3G had to target companies like Kraft that were a worse fit and/or everyone else caught up and/or all of the improvements that 3G brought were temporary and required increasingly-large acquisitions to keep the numbers going up as the sugar rush wore off. There's a reason that TerraVest, Constellation, Danaher, etc. get valued so highly.

GEICO has never been the largest auto insurer—I believe they were the fifth largest American auto insurer when they became a wholly-owned subsidiary, and a torrent of advertising money grew them all the way to second place (before they fell back to third), but they've at not time have they had more policies in force than State Farm.

9.4 billion dollars in yen-denominated debt, per the 10-Q.

https://www.seattletimes.com/seattle-news/climate-lab/judge-orders-bnsf-to-pay-wa-tribe-400m-for-trespass/ BNSF found to have violated terms of an easement regarding access to Snohomish tribal land, fined $400 million. (BNSF apparently admitted the violation but didn't think they should pay that much.)

It got thrown out by the initial trial judge; this is an appeal of that initial ruling, so you're hoping it's not reversed. (IANAL but I presume that the fact that the district court judge didn't buy it is a good sign that GEICO's contract is not so sloppily written.)

I think this is 100% correct and one of the reasons that the annual letter this year was somewhat distressing; if Buffett is down on BNSF on labor concerns and utilities for a multiplicity of reasons, where's does the money go? There's a New Mexico-based utility, PNM, that is at multiyear lows after a blocked acquisition, and on geographic grounds it seems like it would slot so nicely into BHE, but it sounds like Buffett isn't interested in expanding his utility holdings. I had hoped that Marmon would turn out to be something like a mini-ITW or (pre-biotech) -Danaher, but that doesn't seem to have been the case. The realtor rollup is maybe secularly threatened, and I don't even know if the car dealership acquisitions are still ongoing. The "platform business" idea that got Valeant's stink all over it, that a company was vastly more valuable if it could reproducibly grow through acquisition, would be well suited to just this sort of circumstance, but unless you're Constellation it's hard to see how you could scale it to tens of billions of dollars a year, every year. Genuinely a tough problem, even though Berkshire (juiced by the Apple grand slam) has performed really well all things considered over the past ten years. Like a lot of you, I think there are going to be significant capital returns at some point after Abel takes over, if not a carveout of some of the businesses.

Welp! (To be fair, that was three whole months ago.)

Buffett had people for that -- Harry Bottle was the fixer at Dempster Mill, for instance.

I had hoped that Marmon would turn into this for small/midsized industrials. It's not clear if it hasn't, really, or if the acquisitions are just not sizable enough, even in aggregate, to be really noticeable.

In this otherwise rather grim story about declining toy sales in the UK, it's noted that the bestselling toy in the UK last year was Jazwares' Squishmallows: https://www.theguardian.com/business/2024/jan/23/squishmallows-uk-toy-sales-games-action-figures

This whole post seems about right to me. Berkshire's batting average in large acquisitions has gone down, even if nothing has been as bad as Dexter Shoe (the Precision Castparts acquisition in particular seems to gone terribly, although as a PCP shareholder at the time it bailed me out), showing the importance of BHE; if there's nothing tempting in the market, they always have the backup option of bunting for a single by building more solar/wind at reasonable, predictable returns, and while I think Pilot is a perfectly fine business . Between that and tuck-ins at Lubrizol, MiTek, etc., they have consistent options. It really shows the franchise value of Constellation Software, though, in their ability to swallow all sorts of plankton-scale companies at a rate meaningful at what's now a $70 billion company (in addition to their recent pivot to buying large companies from forced sellers).

How many have we seen in the last decade? Pilot and Van Tuyl are it, right? The rise of private offices and private equity funds playing in the mom-and-pop buyout space means there's a lot more competition in the smaller side of the market (which isn't going to be sizable enough for Berkshire at this point). If Larson-Juhl wanted to sell but keep its management in place, they'd have probably have dozens of specialists to choose from that didn't exist in 2002. And the true whales of family-controlled privates entities, like a Mars or S. C. Johnson, are big enough that it's not apparent that selling to Berkshire makes any sense for them; they can bring in professional managers if they don't have a next generation of family, and it would be easy for them to monetize a slice of the company without giving up family control or involving Berkshire. Oriental Trading Company was a busted private equity deal—it feels like that sort of things, or buying divisions from other large companies, and purchases of whole public companies—is going to be where Berkshire has to look, compared to the handshake deals Buffett used to pride himself on.