MarioP

I had my list of subjects I was hoping to see in the letter. What wasn't in it : Why we invested in Snowflake, Why we invested in Japan, Why we didn't buy in march (btw I didn't neither), What is the long term impact of Covid. My reflexion after finishing the reading and before coming to see what other has to tell here : Warren told me that all this stuff is noise, not very important in the long term. Focus on the four main businesses and what will happen to them, the rest is not really important. I think the timeline of when the jewells where added is interesting : Insurance 1967 BHE 1999 BNSF 2010 Apple 2016. Geico 1996 Gen Re 1998 were important milestone. So there is many years between each jewell acquisition. Everything's else was just noise. So the 100B+ available will be reserved for a new jewell when the opportunity will be there. In the mean time almost all the operating earnings will be return to the shareholder. For now it is via buybacks. If the price of the share made it not accretive to do buyback we will see what will happen. My take on the value of Berkshire with the clue we have : Around 4 times the value of Apple (not the price which is Higher than then value because he sold 11 billions). What will move the value in the future? Look at BHE because it have enormous opportunity.

In the ‘90 he invested in General Dynamics

I was telling to my friend yesterday that Melvin and Citron were toast like LTCM. It’s not just WSB any more. Others hedge funds smelt blood and they won’t let them recover just like what was the final blow to LTCM

A potential catalyst might be Snowflake. It is the subject that I’m eager to read about in the annual report. If it is a success like Apple is the market sentiment that Berkshire is just about old economy might change Just like when the market realised that Apple wasn’t just a hardware company. There is also Stone and Byd. At some point you have to realize that Berkshire is changing under the influence of Ted and Todd

From the proxy : Warren E. Buffett, whose address is 3555 Farnam Street, Omaha, NE 68131, is a nominee for director and the only person known to the Corporation to be the beneficial owner of more than 5% of the Corporation’s Class A Stock.

They also stay because they love what they do. Money is not the only motivation in life

That is what I said at the begining : traders would have a short term profit, decades holder will loose. Ask yourself which one Warren wants to be happy and you know what he will do.

If you keeps the shares of the 3 you will have the same asset, same cash-flow and more overhead and less flexibility. I can’t see how it will create value. Market price can go up for a moment but as a decade holder it will not matter.

Very interesting Thank you Still, former executives at trading houses said the hardest challenge will be achieving potential synergies between the firms and other parts of Berkshire’s sprawling portfolio./i] “But the CEOs must perform better by making use of those intangible assets, hopefully with positive pressure from Buffett,” he said./i] These two phrases seem to come from people that don't know how Buffett works. But I like the part describing the trading house. And this is very interesting if true “It will fuel rivalry among the CEOs and they will scramble to clinch a flagship deal with Berkshire. As a result, only the best assets will be presented to Berkshire by each of the trading houses,” Mr Kikkawa said./i]

François Rochon is still in charge there. He introduced David Poppe as a new partner at the last annuel meeting. With Valeant he just managed the portfolio prudently, selling shares to not let it become a too big part of the portfolio contrarly to Sequoia. The more debt they took the more he reduced it.

Lol, speaking of "the incident" eh. I didn't know he started another shop. Why do you say that? I think you make reference to Valeant but Giverny got out not so bad because they sold a lot at high valuation. I'm a client of Giverny since 2004. They had some worst positions in the past like irish banks and WP Stewart but had enough big winners to have a great record over time. http://www.givernycapital.com/en/doc/105/Rendements-Rochon-global-english.pdf And they underperformed in 1999 ;)

https://books.google.ca/books?id=ieLS_WwUmmwC&pg=PA93&lpg=PA93&dq=how+much+buffett+charge+for+capital+to+his+subsidiaries&source=bl&ots=4gfzGfisJg&sig=ACfU3U3vKBT6P8--I_YNKpf5DZMd8be7Qg&hl=fr&sa=X&ved=2ahUKEwigh_fgmrnpAhXhmeAKHWvzA5MQ6AEwAHoECAoQAQ#v=onepage&q=how%20much%20buffett%20charge%20for%20capital%20to%20his%20subsidiaries&f=false P. 93 if it doesn’t open there. Around 15%.

From the memo It’s possible that one or more of the journalists that we listed on page A-2 of the 2019 annual report will be present to ask some of the questions submitted to them. We are deferring a decision on this matter, but encourage you to continue to send your questions to them. That implies somethings can change

Usually the question period is before the formal meeting From the memo It’s possible that one or more of the journalists that we listed on page A-2 of the 2019 annual report will be present to ask some of the questions submitted to them. We are deferring a decision on this matter, but encourage you to continue to send your questions to them. I hope we'll have more detail soon

Simple put : we are in a health crisis after we’ll be in an economic crisis and after we’ll be in a public finance crisis. We are not oui of the wood for at least a year

If the dividend is 2% a year you have 50 years before selling all your shares...

Amen! This is the mindset that you have to have to be happy to own Berkshire. And it is nothing new. Back in 1999 when there was a lot of crictism for not buying techno I told to my clients : « you don’t have bond in your portfolio, Berkshire is your bonds. Longterm it is as save and will produce a better return. Don’t expect anything more that a bond from it and you will be happy » Ouf I hope that it is understandable. I’m at the edge of my english.

What is a meaningful buyback for you? How many shares and up to what price? Mario, taking out 3 or 4% of outstanding shares would tell me he is serious about share buybacks. My view is anything under 1.5 x BV offers decent value; Buffett of course has a different opinion. We bought back 1% for 5 billions at around 1,3x book value. If we want to buy 4% at up to 1,5 that will cost near 24b$ which is all of the operating earnings. I don’t think we will see that soon. I hope more for 5b being a base that will grow at the same pace of op earnings. Naturally this hold only if the price remain in the range of 1,25 to 1,35 bv. If the capex follow the same growth the cash pile should stabilize around 125B : 25B for the insurance need and 100B for elephant hunting.

What is a meaningful buyback for you? How many shares and up to what price?

I came to say the exact same thing. He bought back for 5 billions of stock and peoples tell it is nothing. If he had bought that amount in any other stock everybody would be analysing the move and tons of copycat would buy. Just look at Kroger where Berkshire put 1/10th of this amount. And he is willing to buy a lot more at this price if it is not going to push the price higher (re: private transactions for at least 20M)

Funny to me. You are describing Brookfield businesses. And the why higher interest rate is the main risk they are facing Yes, I believe that low interest rates favor hard assets, especially those where cash flows keep increasing with inflation (real estate) or those that tend to their buying power (gold). For real estate, low interest rates atemlos, because you can lever them up cheaper and generate FCF. For gold, the opportunity cost to forgo interest payments on financial assets is lower. Assets similar to real estate with stable cash flow like utility stocks, airports, pipelines . These arenas business that borrow a lot, Sontheimern benefit twice with lower borrowing cost and increased multiples.

You forgot <0. I’m retired and usually have a 10% on margin . I know it is <10% but i think it is a different answer.

I think people were too emotional about "hyperinflation". It is always when people are too emotional that there is great opportunity. Those emotions make them act irrationally. Yes there is risks at those moment but they are not as big as people think nor it is widespread. You have to keep tour head cold and be greedy but not too much ;) What I learned is to buy sure things at those moments that can double in 3 years not the things that look the most profitables if every things goes the way I think it will...cause that never happen. The best examples of going for the sure things is the 2008 deals preferred share deal of Buffett. To make it profitable the company has only to survive no thrive. We don't have access to this kind of deal but the idea is there : try to protect your downside. Buy solid company that are less than 10X profit and hope they will go back to 15X. Don't buy (like I did in 87) companies losing money that you hope will turn around and make you 10 baggers. Be greedy when other are fearful Think by yourself Don't let emotion runs your portfolio All phrases that we hear often but that easier said than done.

You said :I'd also say that there was much, much higher risk in 2009 than in the early 80s. There wasn't much talk about a Great Depression. I was just saying that if you were in the market in 1980 there was a big risk. It wasn't a depression risk it was hyperinflation that can make your real return negative even if you made 15% on your stock. I just want to tell that when you were in the market in 1980 or in 2009 it was not easy to convince you that everything will work well in long term. Ten years after it is easy to tell how easy it should have been. For a great opportunity to exist you have to have a lots of peoples exiting the market. If this happen it is because the perception of a high risk is the sentiment of the majority. You have to be able to ignore it to invest heavily during these period.

Yes, if there ever was a time for no- brainer buys, it was at about the time when Sanjeev posted it. It literally was the best time to put money to work since I started investing (which was early 1980’s). I would have much rather started in the early 80s. You had S&P 500 returns for over 17% for around 1981-1999/2000 time frame. I don't think the returns from 2009-2029 will earn anywhere close to 17%. I'd also say that there was much, much higher risk in 2009 than in the early 80s. There wasn't much talk about a Great Depression. There was a very real chance we could have gone through a second Grand Depression in 2009. If you think that there is no risk when inflation is at 14% and interest rate at 16% then you wasn’t managing money at the begining of the 80. There is never a period with no risk.