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gfp

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    Fairfax 2023

    in Fairfax Financial

    Posted

    Berkshire has $122k Billion in T-bills, $22.3 Billion in bonds with average maturity of something less than 2 years and $25 billion in cash earning whatever cash earns on corporate Gov. MM sweep accounts.

     

    So outside of equities, Berkshire's very large pool of float is invested almost entirely in T-bill like instruments.  Berkshire will make something like $8 Billion in government interest this year.

     

    I don't know of any other insurance company, except maybe Global Indemnity recently as they shop the company for sale, that kept their entire fixed maturity portfolio at around 6 months.

     

    Just the absurdity of a Trillion dollar asset company holding only $22.3 in bonds is remarkable enough, but even those bonds are less than 2 year duration.

    Fairfax 2023

    in Fairfax Financial

    Posted · Edited by gfp

    I wonder what the losses will be on their poorly timed forward purchases of 3 year bond futures.

    edit: I guess most of the losses would have already been reflected in the Q2 figures?

     

    spacer.png

     

    V. Watsa

    [indiscernible] portfolio, right, it's only the bond portfolio. And the important point that is all on 80% of our bond portfolio is government treasuries mainly, but government wherever we operate, Canada -- Canadian governments and other countries. And only 14%, I think. we said was corporate, something like that. And that's all very short term that's coming due relatively soon. And what we have done, Tom, is because these are coming due in the next 3 months, 6 months, we like the rates in the first quarter. So we locked in 3.7% -- 3.75% for U.S. government treasuries for 3 years. So we locked it in ahead of the maturity. We are happy with 3.75, could go to 4.25%, 4.5%, I don't know. It could go to 2.5, 3.75 was good. We locked it in, and that's ahead of the maturities in the next 3 months, 6 months.

    Buffett/Berkshire - general news

    in Berkshire Hathaway

    Posted

    5 minutes ago, LC said:

    Thank you for sharing. Two interesting tidbits, WB had almost 20k to his name in 1951, which (if online inflation estimates are to be trusted) amounts to about 23MM in today's dollars. 

     

    Perhaps more impressively, he had almost 70% of this concentrated in one stock (Geico).

     

    I think that's more like a quarter million bucks in today's money but still impressive for a youngster.

    Buffett/Berkshire - general news

    in Berkshire Hathaway

    Posted

    On 9/25/2023 at 10:07 PM, longterminvestor said:

    I would so enjoy readying more of things like this.  these are just gold.  

     

    I don't know where this came from, but I happened across this letter between Buffett and George Young, of National Indemnity, while cleaning up an old stack of papers in my office.  The letter is from July 22nd, 1976 and might be interesting to some because it offers a glimpse into Warren's decision making in a letter that was never intended for public disclosure.  I thought it was interesting anyway.  PDF attached.

    geicoletter.pdf

    US Regional bank stocks - PNC Financial, TFS - Truist, USB- USB Bank, MTB - M&T Bank etc

    in General Discussion

    Posted · Edited by gfp

    So my local bank, HancockWhitney emailed out an 11-month CD offer at 5.4% this morning.  I realize that's where the market is for CDs and this isn't exceptional but it's not exactly an encouraging sign that they are clamoring for 5.4% deposits.  Then I read this article in the journal that JPM (of all places!) is offering 6% on $5 million min. on 6-month CDs!  Why does JPM want 6% deposits?  Just to expand relationships at the private bank?

     

    I guess if deposits are fleeing the private bank to T-bills they can offer this to try to match the after-tax return of a t-bill for someone who would pay state income tax on bank interest but not t-bill income.

     

    https://www.wsj.com/finance/banking/jpmorgan-6-percent-cd-fe862850?mod=hp_lead_pos2

     

    Also, if the banking crisis is behind us - why hasn't the BTFP balance declined at all?  Instead it keeps going up...

    https://fred.stlouisfed.org/series/H41RESPPALDKNWW

    Fish where the fish are

    in General Discussion

    Posted

    2 minutes ago, no_free_lunch said:

    Berkshire has a stake in them.

     

    After many many years of owning Torchmark (now Globe Life), Berkshire has just started selling down their position, selling more than half of their longtime position in the last reported quarter.  Knowing Warren, he isn't going to just trim a small holding like this - so expect Globe Life to quietly dissapear entirely from Berkshire's holdings in the next 13-F.  

    Fairfax 2023

    in Fairfax Financial

    Posted

    Not sure I understand your question.  Commercial property values have already reset down 20-30%.  The replacement cost of the buildings hasn't gone down.  I don't think the price of commercial insurance is closely linked to the market value of the properties except to the extent that the size of the loan on a building will set a floor on the amount of coverage a lender will let you get away with.

    Have We Hit The Top?

    in General Discussion

    Posted

    15 minutes ago, Dinar said:

    No way this is early 2008 in the US.  There like 5 bids for every home that comes on the market, half from cash only buyers.   There was very strict mortgage underwriting in the US over the past decade.  

     

    Commercial real estate, not conforming 30 year residential.

    Buffett/Berkshire - general news

    in Berkshire Hathaway

    Posted · Edited by gfp

    With various articles coming out on the 25th anniversary of the collapse of Long Term Capital Management, I was reminded of Warren's offer to purchase the fund for $250 million while on vacation in Yellowstone.  One book I read claimed that Buffett only gave Meriwether one hour to accept the offer and a deal couldn't be negotiated in time.  The Fed ultimately forced the banks to rescue the fund in exchange for 90% of the equity of LTCM.  These were the same banks that were creditors to LTCM, so they were really just "bailing out themselves."  The birth of the Fed put for contagion fears...

     

    This page from Berkshire's 50th anniversary book has Warren's comments on the attempt and some of the original documents.  The idea was that Berkshire would put up most of the capital but the fund would be wound down over time inside Goldman's trading desk.  LTCM's equity was around $400m at the time of this offer, but rapidly heading to zero.  Just about all of the spreads that had widened out to extremes returned to normal over time so Berkshire's capital and staying power would have produced a decent, although far from remarkable, profit.

     

    Meriwether started another fund doing the same stuff with lower leverage after LTCM.  It imploded in 2009.  Then he started another fund doing the same thing after that.  Most of these guys were from the Solomon Brothers arbitrage desk and of course there were some nobel prize winners in there.

     

    Here's a link to Buffett telling the story to some college kids - 

    https://novelinvestor.com/buffetts-lessons-long-term-capital-management/

    IMG_2114.jpg

    Fairfax 2023

    in Fairfax Financial

    Posted · Edited by gfp

    36 minutes ago, newtovalue said:

    So we're past peak hurricane season and so far no major storms. 

     

    Fingers crossed but looks like this season may be milder than in the past. This will be a huge windfall for all the insurance companies that wrote CAT insurance in Florida. I remember BRK had done it - but not sure if FFH - any insight from the board?

     

    Fairfax certainly has exposure to hurricane risk and profit but is much more diversified in their cat exposure.  Berkshire this year is extremely unbalanced in their cat exposure with unusual concentration in Florida hurricane risk.  Fingers crossed, there is still plenty of Hurricane season left.

     

    Quote from Peter Clarke on the most recent (august) conference call -

    Quote

    Peter Clarke

    Yes. Thanks, Nik. You're exactly right. The markets continue to harden, but especially on the property side and the property cat side. To date, we've grown marginally on property cat. We're taking advantages. We're seeing rate in excess of 30%. And our net exposure has been going up as we reduced the amount of reinsurance we bought. But generally speaking, we're evaluating that as we speak. It continues to be a very good market, the property cat market. And we'll look at it again on the 1/1 renewals.

     

    Buffett/Berkshire - general news

    in Berkshire Hathaway

    Posted

    "the Insurer" put out a short interview and article on BHSI - a wonderful business that Berkshire started from nothing instead of acquiring.  Imagine how much goodwill would be on the balance sheet it Berkshire were to buy an identical operation performing like BHSI today.

     

    https://www.theinsurertv.com/news-in-focus/godhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view/?utm_source=listrak&utm_medium=email&utm_term=https%3a%2f%2fwww.theinsurertv.com%2fnews-in-focus%2fgodhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view%2f&utm_campaign=Godhwani%3a+BHSI+benefits+from+Berkshire+balance+sheet+and+long-term+view

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