alwaysinvert

Thanks to S&P for informing us all that the barn door is open and the horse left last year

It's unknown exactly how levered Selin is privately, but there aren't any bonds in the structure, which is a major part of the issues that Batljan and Arnhult have. He also previously (?) held 3 million shares in Evolution (+4B) and got about 700 million from the buyout of SWMA. He also holds about 800 million of Sagax stock which should be quite liquid and which he has cut down in the last few years. There is a bunch of other less liquid holdings, among them the private stake in Collector (+1B), Kfast (1.5B), SLP (700m). His Balder stake is worth 16B at market. There is 7B of short-term debt in the mother company per 2021. All in all, it doesn't seem totally outlandish. From what I can tell, his issue is Balder and not his holdco.

This is an equity and bond market crisis so far. I doubt that even in SBB -- which has been on the blow-up radar at least since the Viceroy short report in Feb 2022 -- the banks will incur any great losses. All the big RE companies were pushed out into first the domestic bond market and then later the Eurobond market after the financial crisis. By increasing the risk-weighting for commercial real estate for the banks, the RE owners were pushed towards bond financing. This move then went into overdrive when QE accelerated and made unsecured bonds, with the help of the central banks, significantly *cheaper* financing than asset-backed bank loans. Meaning, the companies with *more* bond financing and an IG rating had a cost advantage against those who were more conservative and stayed with banks. The IG rating put some limits on the borrowings measured as LTV and also some kind of ICR restriction, but these have been skirted by JV deals, class D shares and hybrid bonds in some cases. The large bond proportion is now the major source of the woes of the larger entities, since rolling the bonds now is either impossible (SBB) or prohibitively expensive (Castellum, Balder). Castellum just addressed the issue with a giant rights offering, and thus will keep their IG rating. They are now backed by the super-liquid mogul Roger Akelius, who top-ticked the market in late 2021 when he sold all his European resis in a giant deal. State-backed RE companies such as Vasakronan, Hemsö, etc, also still have smooth access to bond market financing and are readying themselves to buy. Anyway, unless vacancies start rising badly, I don't think this will even touch the banking system much. And that's by design. In the 90s a lot of the RE wasn't really cash-flowing, and rates went to 18%. This time, the issue is mainly that the yield gap has closed for the lowest yielding assets. As long as rates don't move up substantially more, things will be handled with equity infusions or unsecured debt-to-equity swaps. Also, if we compare the underlying CRE market in Sweden vs say NYC, it couldn't be more different. The vacancy levels are in different universes and they have thus far barely budged upwards from ultra-low levels. The resi market also by and large (while I certainly am not keen on it for other reasons) has capped rents, meaning that except for not yet fully-let new stock which come out at significantly higher rent levels, there won't be any issues with vacancies there either. Especially since immigration of 1% per year, mostly from low-income countries, keeps up demand for the dilapidated stock. Also, remember that only just shy of 30% rent and that a huge proportion of that stock is publicly owned and rent-regulated, while large subsets of the people who live there also get their income from... government handouts. So there isn't even a major cash-flow risk from employment going down. So, while there is major trouble on the financing side across the different subsectors, a lot of foreigners come in with preconceptions that might not exactly gel with the reality on the ground. As for the mortgage length, this is another one of those things that are less crazy from a financial stability POV than you might think. Just look at how low the ultimate credit losses were in the 90s and even more so in 2008. Why? It's almost impossible to default on a private loan and it follows the individual, not the asset. Even unsecured consumer loans have relatively low default rates in the Nordics. The system is just completely different than the US. Have we had a housing/RE bubble? Sure. Will it cause major credit losses? Not likely, unless rates keep moving higher quickly.

He mentioned in passing that "he knows a guy" that produces as many smartphones as Apple. AFAIK, the only one that really fits that description is Jay Y Lee. I didn't know that they were personally familiar with each other. BRK had a small investment in Samsung a few years back, which he sold for a quick double or so. Maybe he's back in again. BRK would be a pretty logical taker of block trades associated with sales of Samsung stock in order to meet inheritance tax obligations. Samsung owner family is 3 trillion won short in inheritance tax payment (koreatimes.co.kr)

Agreed. I also feel compelled to answer here since the risk is that you will get responses disproportionately on the sycophantic side. It would be a short-term cash grab in exchange for the longevity of the site, as new blood is always needed to keep it going. There is no cachet associated with being a member here, as opposed to something like VIC, so ease of access is important. To be fair, the site has already been heading downwards in quantity of posts so it could be a good trade-off for the owner if we are looking at the inevitable anyways (not saying that's definitely the case). Sadly, the new forum design is worse than the old one without seemingly adding any relevant functionality from the member's POV. You did a donation drive a couple of years ago and I think I gave a couple of hundred bucks in that one, but tbh I'm not really up for being a customer of a message board. Having 20+ years of experience from all kinds of different niche forums, I strongly doubt that I'm alone in this. It doesn't matter what the hardcore "social" users say here - think about the ones who are going to provide new fresh stock pitches continuously, which is ultimately the life blood of the site. Maybe high monetization can be done, who knows. But be too aggressive and you *will* kill the golden goose.

I hear COBF is already negotiating with numerous spacs. Murmurs of a valuation north of $2b for this SaaSy name.

If there are multiple hedge funds going under from "infinite" squeezes here it seems logical that there could be a role for BRK as a bailout provider once again? They need someone with pretty much unlimited capital to come in and save them from complete wipeout by giving them certain staying power. What could be more logical than Berkshire for this purpose? Buying hedge funds for 5 cents on the dollar seems like Buffett's kind of business and it was a somewhat close call with LTCM back in the day, so it's not like it would be unprecedented.

well...

This would be a foolproof argument if they *could* easily buy oodles of stock over the market. But they can't. I'm not saying that he thinks it's at 50% of IV, but probably - at most - something like 80%. There is room to be somewhat more aggressive with bids over the market, but likely not as much as people seem to believe. If suddenly buyback volumes in a quarter were ratcheted up 100% from these levels, the stock would take off, making further buybacks that much harder. There is both a volume problem and a serious front-running issue. Also, as Munger expresed recently, other opportunities are dwindling while cash is growing. He has every incentive to undersell the fact that they were doing buybacks all the way up until Dec 31 and that's what the overall effect of the letter was, while still, oh-so-galantly, offering to relieve people of large blocks of stock. Just like he last did in the 1999 letter, mind you: I'm sorry, but I'm with Viking on this one. I don't buy the it's hard to buy stock argument. You have to keep in mind that this is Buffett we're talking about. He may be a geezer but he's probably one of the savviest stock traders that ever walked the face of the Earth. He didn't have a problem buying huge amounts of stock in ANY company if it meant making money. And we're not talking here just large companies like Coke and Apple. We're talking obscure shit like Sanford Map and other stuff. The man know how to buy stock if he wants to. But all of a sudden it's hard for him to buy stock in the 5th largest corporation in America? Nah man. If he's not buying huge amounts of stock is because he doesn't want to, not because he can't or doesn't know how. I guess Buffett is just completely full of shit here then:

This would be a foolproof argument if they *could* easily buy oodles of stock over the market. But they can't. I'm not saying that he thinks it's at 50% of IV, but probably - at most - something like 80%. There is room to be somewhat more aggressive with bids over the market, but likely not as much as people seem to believe. If suddenly buyback volumes in a quarter were ratcheted up 100% from these levels, the stock would take off, making further buybacks that much harder. There is both a volume problem and a serious front-running issue. Also, as Munger expresed recently, other opportunities are dwindling while cash is growing. He has every incentive to undersell the fact that they were doing buybacks all the way up until Dec 31 and that's what the overall effect of the letter was, while still, oh-so-galantly, offering to relieve people of large blocks of stock. Just like he last did in the 1999 letter, mind you:

I see that people extract from the letter that Buffett is implying that Berkshire is trading at 95 cents on the dollar. This is a severe case of bad reading comprehension. He is saying the *exact opposite* of that. By juxtaposing that passage, which is a hypothetical, with the fact that he has been buying at current levels, he's emphatically signalling that in his view the stock is trading below 95% of IV (and likely comfortably below).

Right. There is a reason why block transactions between market participants customarily, in normal markets, go for a discount to market. Buffett offers the open-ended opportunity to trade large blocks at market. It's a great deal for high-volume sellers.

Avg daily volume is 80M+ on the As and 800M on the Bs. Why would you call? You can sell faster, with less brokerage costs and no risk of pushing down the market price if you are in a hurry. Let's say Ackman gives up his activism, is hit by large outflows or finds another cheap opportunity that he wants to reallocate to because it offers higher returns. What will he do, drip feed stock into the market or call up Berkshire and get stock taken off his hands immediately? The rational answer is obvious.

It surely would be a logical solution for Berkshire to directly take the 5 million Bs they sell into the market every quarter. But this has been discussed quite a bit and appearances may make it less than ideal. Also, why wouldn't they have made the arrangements for that already then? Maybe it can now more easily be done as part of a larger policy of buying back on demand outside the market.

$2.2b for the quarter. Adjusted for share issuance in Q4 but not in Q1 thus far (as we don't know those numbers), there should be additional repurchases for just shy of $400m up to Feb 13. Top price paid in Q4 per B of ~226 and probably a bit higher than that in Q1. The hotline number for selling back shares takes a proper tender offer off the table for at least the next couple of years imo. But maybe you can frame this as a form of "sneaky" tender offer which could potentially give extra large volumes from institutional owners if we ever see significant outflows from the market again. It will be interesting to hear if he touts this offer on CNBC on Monday, as the awareness of it from the letter alone may not be enough. A dividend will definitely not happen either before this method of buyback has been tested. Anyhow, it is finally something of an admission that the market just will not acommodate large enough volumes for repurchases, at least not until enough of Buffett's shares get out there.