alwaysinvert
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Posts posted by alwaysinvert
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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.
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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.
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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)
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7 hours ago, dwy000 said:
I have no problem either way but if you put up a paywall, the number of posters (and new registrants) will likely plummet. The value here is from the open exchange.
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.
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On 3/31/2021 at 7:18 AM, Parsad said:
So we have a base of some 3,500+ members using the site. For new users, the fee will be $4.99 a month or $49.99 a year. I think over the years, from the experiences everyone has shared, both mentally and financially, that's pretty darn cheap!
I hear COBF is already negotiating with numerous spacs. Murmurs of a valuation north of $2b for this SaaSy name.
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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.
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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.
well...
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I don't think it's comfortably below. If it was comfortably below then they would be buying ooodles of stock but they're not. They weren't buying ooodles around the 200 level either. So I'd say that they're probably not overly excited the discount.
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:
Recently, when the A shares fell below $45,000, we considered making repurchases. We decided, however, todelay buying, if indeed we elect to do any, until shareholders have had the chance to review this report. If we do find
that repurchases make sense, we will only rarely place bids on the New York Stock Exchange (“NYSE”). Instead, we
will respond to offers made directly to us at or below the NYSE bid. If you wish to offer stock, have your broker call
Mark Millard at 402-346-1400. When a trade occurs, the broker can either record it in the “third market” or on the
NYSE. We will favor purchase of the B shares if they are selling at more than a 2% discount to the A. We will not
engage in transactions involving fewer than 10 shares of A or 50 shares of B.
Please be clear about one point: We will never make purchases with the intention of stemming a decline in
Berkshire’s price. Rather we will make them if and when we believe that they represent an attractive use of the
Company’s money. At best, repurchases are likely to have only a very minor effect on the future rate of gain in our
stock’s intrinsic value.
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:
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I don't think it's comfortably below. If it was comfortably below then they would be buying ooodles of stock but they're not. They weren't buying ooodles around the 200 level either. So I'd say that they're probably not overly excited the discount.
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:
Recently, when the A shares fell below $45,000, we considered making repurchases. We decided, however, todelay buying, if indeed we elect to do any, until shareholders have had the chance to review this report. If we do find
that repurchases make sense, we will only rarely place bids on the New York Stock Exchange (“NYSE”). Instead, we
will respond to offers made directly to us at or below the NYSE bid. If you wish to offer stock, have your broker call
Mark Millard at 402-346-1400. When a trade occurs, the broker can either record it in the “third market” or on the
NYSE. We will favor purchase of the B shares if they are selling at more than a 2% discount to the A. We will not
engage in transactions involving fewer than 10 shares of A or 50 shares of B.
Please be clear about one point: We will never make purchases with the intention of stemming a decline in
Berkshire’s price. Rather we will make them if and when we believe that they represent an attractive use of the
Company’s money. At best, repurchases are likely to have only a very minor effect on the future rate of gain in our
stock’s intrinsic value.
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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).
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There are a number of benefits to block transactions.
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.
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After a few reads I actually thought the letter helpful in addressing, or at least, maybe being a little more transparent on the future. We can all do the run down on the financials, but I think thats a waste of time here in the same sense it was a waste of time getting too granular on Apple a year or so ago(and no one was more guilty of this than I). Berkshire will make lots of money regardless of where the economy or the world go. I think addressing the future gives clarity, and the buybacks, while minimal, are creeping up and setting a floor that should continue to shift supply/demand skews and thus risk/reward profile. Performance wise, who the heck knows but at worst this is kind of an index fund proxy with a world class active manager(s) overseeing it. If $226 was a price they were willing to pay, you can only imagine that turret starts firing more rapidly at 21X, 20X, and definitely 1XX. Again, stacking the deck in the favor of outperformance.
Regardless IMO this was somewhat better/more than I had hoped for, with the operating results, good enough. I'll probably add a bit to my position in the coming weeks if its still under 230.
Oh yea, and anyone who thinks this has any shot and going down 50% from here is crazy. No way this ever trades at 50% cash. If it even gets remotely close, I'll eat my foot. Mortgage my house. Open up, and take cash advances on Synchrony cards at 26% interest rates, etc. Because as its heading towards those decline levels, I take it they'll be taking action in ways that is substantially increasing the IV. Whereas many fund managers have underperformed and blamed it on lack of opportunity, Ive seen enough here(especially note the "any holder of $20m who wants to sell" quip), that the team here will hit that opportunity out of the park if they get it. They've been waiting waaayyyy tooo long not to.
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.
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Could WEB's donated shares to the Gates Foundation be "tendered" back to Berkshire Hathaway?
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.
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$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.
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really horrible write-up on Berkshire in Barrons this weekend as a cover story. Basically calling for a breakup and a dividend...one of the worst piece I've seen on Buffett and Berkshire for sometime.
What did others thing who read it?
Can't read it, but at what point does it become anything but "horrible" to call for some action? $200b in cash? $300b? $400b? Obviously he will do whatever he wants but the option value of the next billion at this point is probably pretty close to 0.
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When was Buffett's last televised interview? Googling tells me he was on CNBC on May 3 but I can't find anything after that and I don't remember anything after the annual meeting rounds. Has he ever stayed out of the media for that long in the last 10 years or so?
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Nobody has mentioned him yet so I'm going to say that in the last few years writser has been the best contributor, hands down. There are a couple very smart people here, but he stands out in terms of idea generation and willingness to share.
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That interview is from earlier this year. Not new.
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The shares outstanding on July 25th was exactly the same as June 30th, so they didn't repurchase any in the interim either. That's not too surprising since it was only below $210 for a few days toward the end of that period.
His average repurchase this year has been at about $201 per share, so it seems like the price would need to be considerably under $200 for a reasonably long period of time for repurchases to be substantial. I've definitely overestimated the degree to which he wants to repurchase shares and the price at which he was willing to do so. This was mostly based on the initial data points in Q3 2018 and all of the talk since that day, but if anything it seems like he is less willing to do buybacks now by any metric than he was a year ago, despite all the talk to the contrary and the continual building of cash.
If this were not the case then:
1. His aggressive buyback range would have crept up higher by now, so we'd see repurchases at higher prices
2. That more shares per day would be purchased when it was in that range, especially on the cheapest days
In Q3 2018, when he only had the authority to buyback shares for a few weeks, resulted in him repurchasing $927mm of shares over 14 trading days, an average of $66mm/day, at an average price of $207/sh. Nine months later, the book value has finally increased beyond the Q3 18 level. It's now about 2% higher, so you would think that if his appetite to repurchase shares were the same now as it was in Q3 2018, then his aggressive range would be about $211.
But he didn't buy any in May until the 28th, forgoing buybacks on days when the price ranged $200-205. When it did break $200 he was buying, but over those four days he only spent $205mm or $51mm/day. Considering Berkshire generates enough cash to do about $100mm in buybacks per trading day over the course a year, this is a paltry amount that would only slow the cash build rather than put excess cash to work.
It is disappointing in the sense that it seems like opportunities are being missed, but it's only clear in hindsight that he wouldn't find a better use for the cash, and even then I probably overestimate the impact of the missed repurchases. I certainly hope he picks up the pace of repurchases, but I think I can live it and sleep relatively easy knowing that the cash will eventually go to quite a good use.
I still think the main complication is that he can't get size and this was tested a bit in Q3 2018, with the result being that the stock gained pretty much every day for a month. If he could get $10b worth of stock at $200, I'm sure he wouldn't mind. But the issue is that if he ratcheted up buybacks fast in any one period, the market would be informed before he could gain much ground. He needs to somehow convince the market that he won't backstop the stock price and has failed to do so thus far. Hence the tepid buybacks.
This makes it sound like buybacks is the only thing on his mind, which obviously is not true. However, any feasible strategy for long-term use of funds without dividending out portions must necessarily include sizable buybacks.
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Mainly it's because of this: https://www.forbes.com/sites/robertwood/2019/07/09/warren-buffett-gives-3-6-billion-to-charity-how-to-supersize-your-donations-too/
My first guess would be that the non-Buffett shares are also somehow charity related.
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Barron's from today: https://www.barrons.com/articles/berkshire-hathaways-earnings-are-saturday-heres-what-to-watch-51564481706
Select quotes:
It’s hard to handicap the Berkshire buybacks because Buffett gives no guidance, but bulls may be disappointed. Barclays analyst Jay Gelb , one of only a handful of people covering the stock, expects the second-quarter buyback figure to come in at $1.5 billion, in line with the $1.6 billion in the first quarter, according to a client note.Another limiting factor is that Berkshire shares are less liquid than those of most megacap stocks. The average daily trading volume in the Class A and Class B shares totals about $1 billion, about a quarter of the dollar volume in Facebook (FB), which has a similar market value.Berkshire has a much higher proportion of long-term, buy-and-hold investors than the average large company, resulting in lower trading volume. That makes it harder to repurchase shares without moving the price.
If Berkshire is serious about repurchasing shares, it could make a tender offer to buy a large amount of stock. That isn’t likely, but it would demonstrate Buffett and Munger think the stock is cheap.
Seems like maybe Andrew has been reading COBF.
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Ok, so according to Rule 10b-18 the ADTV of As and Bs are lumped together.
However, you don't necessarily have to abide by the stricter repurchasing rules (volume limit, time restrictions, etc) if you aren't outsourcing the repurchasing to a third party. Which we assume that BRK has not been doing lately, as they seem not to have been repurchasing during the quiet periods since last fall. Then it falls under more general rules about market manipulation and insider trading. Is this correctly concluded?
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This is an observation from SwedishValue. 675 A-shares traded over the market between February 26 and 28 according to nyse.com. Despite that Berkshire bought back as many as 293 shares. Which raised the following questions:
1. Is the 25% of daily volume limit divided up on the different share classes or is it total traded volume in all common stock?*
2. Is there a rule that you have to report private transactions or has this only been a general assumption due to the last estate repurchase (when they also announced a higher buyback limit)?
*The average purchase price level compared to the market prices on said dates seems to indicate that they could not feasibly have been bought over the market.
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Yes, it really stuck out. Parkinson's would seem like a strong possiblity paired with the earlier rumours.
The Swedish Corporate Real Estate Crisis [2022 to ?]
in General Discussion
Posted
Thanks to S&P for informing us all that the barn door is open and the horse left last year