Charlie

Thank you, netnet.

Of course. That's a very good question. :)

Next Wednesday the Daily Journal Annual Meeting will take place. So i think it´s a good idea to think about good questions for the meeting, not to bore Munger with dumb questions about Bitcoin. ;) Last year Munger was in particular good shape, eating See´s Candy after the meeting. :) Here are two questions from the Motley Fool board: 1. What book need to be written that would interest you very much? 2. Buffett always talk about your 30 second mind – could you roughly walk us through how you think when facing an issue? I will add 3 more questions: 3. Could you talk about the tax cut effects to Berkshire Hathaway and the economy? 4. Do you have some advice how to include mental model thinking in your everyday life? 5. What advice would you give parents to raise their kids? Additions to the list and asking these questions at the meeting are welcomed. :)

I would say that the tax cut has different effects and the different effects lead to the Lollapalooza. ;)

I think the tax reduction is a Lollapalooza Effect: Munger: "When 3, 4 or 5 factors are working in the same direction, you often get Lollapalooza Effects. And Lollapalooza Effects can make you rich or kill you." And this one will make us richer. :) Some sentences from the CNBC Transcript: "BUFFETT: THEY'RE NOT RICHLY VALUED RELATIVE TO INTEREST RATES, YOU KNOW. STOCKS ARE – INTEREST RATES ARE THE LONG-TERM RATE. IT'S 3%, AND WE'RE QUITE A BIT LESS THAN EXIT. THE LONG-TERM RATE IS 7%. THERE'S PANIC MANY IN STOCKS IF THE LONG-TERM RATE IS 15% LIKE IT WAS IN 1982. SO INTEREST RATES ARE THE GRAVITY TO VALUE BASICALLY. AND EVERYTHING IS WORTH IN AN INVESTMENT SENSE THE PRESENT VALUE OF WHAT IT'S GOING TO -- CASH IS GOING TO DELIVER IN THE FUTURE. AND OBVIOUSLY, IF RATES GO UP, THAT PRESENT VALUE BRINGS THE NUMBER TODAY DOWN. SO, WE'VE HAD LOW INTEREST RATES NOW FOR A VERY LONG PERIOD, AND WE'VE HAD A BULL MARKET SINCE – WELL, REALLY SINCE MARCH OF 2009. WHEN I WAS ON, AND JOE ASKED WHY I WASN'T BUYING MORE AMERICA EXPRESS AT 12, AND I TOLD HIM THAT I WAS BUYING THINGS THAT WE WEREN'T ALLOWED TO. SO, IT'S – WHAT HAS HAPPENED IN THE MARKET HAS BEEN VERY SENSIBLE. I MEAN, NOBODY THOUGHT WE WOULD HAVE THESE KIND OF INTEREST RATES FOR A LONG TIME. NOW, ADDITIONALLY, YOU HAD THE TAX ACT, WHICH IS A HUGE FACTOR IN VALUATION. I MEAN, IF YOU HAD BOUGHT – WE'RE IN OMAHA, LET'S SAY YOU HAD BOUGHT THE UNION PACIFIC RAILROAD YOURSELF, LIKE WE BOUGHT THE BNSF, AND IF YOU HAD BOUGHT IT A YEAR OR TWO AGO, YOU COULD HAVE BOUGHT 100% OF THE STOCK, BUT THE U.S. GOVERNMENT WOULD HAVE HAD A SUPER STOCK THAT WAS ENTITLED TO 35% OF THE EARNINGS. AND THEY HAD JUST CHANGED THAT WITHOUT YOU PAYING THEM A PENNY TO WHERE THERE'S – THEY NOW HAVE 21% OF THE STOCK. IN EFFECT, YOU BOUGHT IN THEIR 14%, 40% OF WHAT THEY HAD FOR NOTHING. I MEAN, IT'D BE LIKE I GAVE 14% OF BERKSHIRE BACK TO BERKSHIRE FOR NOTHING. WOULD THAT MAKE THE REMAINING SHARES MORE VALUABLE? OF COURSE IT WOULD. AND SO YOU'VE HAD THIS MAJOR CHANGE IN THE SILENT STOCKHOLDER IN AMERICAN BUSINESS WHO HAS BEEN CONTENT WITH 35% -- NOW THERE'S VARIOUS THINGS ABOUT FOREIGN EARNINGS AND ALL THAT, BUT 35% OF A BASIC – OUR BASIC BUSINESSES. AND NOW INSTEAD OF GETTING A 35% INTEREST ON THEIR EARNINGS THEY GET A 21%, AND THAT MAKES THE REMAINING STOCK MORE VALUABLE. QUICK: I HAVE NOT HEARD ANYBODY EXPLAIN IT JUST LIKE THAT. WHEN YOU SAY SOMETHING LIKE THAT, YOU KNOW, WE'RE CONSTANTLY ASKING IS THIS BAKED INTO THE MARKET? IS THIS REFLECTED IN THE MARKET? WHEN YOU SAY SOMETHING LIKE THAT, THAT MAKES ME THINK NO, THAT THIS IS A MUCH LONGER TERM, MUCH BIGGER DEAL THAN THE RUN-UP THAT WE'VE SEEN IN THE LAST MONTH OR SO. BUFFETT: WELL, IT'S A BIG DEAL. HOW MUCH OF IT HAS BEEN BAKED IN AS PEOPLE STARTED THINKING MAYBE THERE WOULD BE THE TAX BILL AND HOW BIG WOULD IT BE. I THINK THAT – 21% WAS NOT BAKED IN, THAT'S A HUGE, HUGE REDUCTION. IF YOU AND I WERE PARTNERS IN A BUSINESS AND YOU OWNED 35% OF IT AND I OWN 65% AND THEN YOU SHOWED UP ONE DAY AND SAID I'M GIVING YOU 14 OF MY 35 POINTS, NOW MY INTEREST HAS GONE FROM 65% TO 79%. THAT'S MORE THAN A 20% INCREASE IN THE EARNING POWER, AND YOU'VE JUST GIVEN IT TO ME. NOTHING HAS CHANGED IN THE BUSINESS THAT'S -- IT'S A BIG FACTOR. NOW, THEY CAN TAKE IT AWAY TOO. GO THE OTHER DIRECTION. QUICK: THEY – LOOK, WE'RE LOOKING AT THIS NEW CHANGE. IT'S JUST BEEN ON A CASE BY CASE BASIS THAT INVESTORS ARE TRYING TO FIGURE OUT WHAT THIS MEANS FOR COMPANIES. AND WE ARE JUST BEGINNING TO HEAR THE VERY EARLY PIECES OF THIS. YOU'RE BASICALLY SAYING THAT THIS IS GOOD NEWS FOR SHAREHOLDERS ACROSS THE BOARD BECAUSE SOMETIMES THIS IS PAINTED AS SOMETHING THAT'S A GIVE-AWAY TO CEOS OR CORPORATE EXECUTIVES, THINGS ALONG THOSE LINES. BUFFETT: PEOPLE WHO OWN THE BUSINESSES HAVE JUST OWNED -- THEY NOW OWN 20% MORE OF THE DOMESTIC EARNINGS. I MEAN THE FOREIGN STUFF GETS MORE COMPLICATED, BUT IT'S GOOD IF YOU OWN THE FOREIGN STUFF, TOO. FOREIGN EARNINGS. WE HAPPEN TO BE OVERWHELMING U.S. ORIENTED AT BERKSHIRE. BUT IT'S AN INTERESTING POINT. THE GOVERNMENT DOESN'T OWN THE ASSETS OF THE BUSINESS, WE OWN 100% OF THE ASSETS OF BNSF, BUT WE DON'T OWN 100% OF THE PROFITS. AND WE WENT FROM 65% TO 79 PERCENT OF THE PROFITS AT BNSF, AND THAT IS A – MORE THAN A 20% INCREASE. YOU KNOW, THAT'S 14 POINTS ON 65. SO, IT'S A BIG DEAL. QUICK: WHAT DOES IT MEAN SPECIFICALLY FOR BERKSHIRE HATHAWAY? THERE WAS AN ANALYST WHO JUST PUT OUT A NOTE, JAY GELB, THAT SAID THAT IT'S A $37 BILLION BOOK VALUE INCREASE FOR BERKSHIRE INSTANTANEOUSLY. BUFFETT: YEAH, WELL, IT DOESN'T MEAN A DIME OF CASH TODAY. BUT WE HAVE A HUGE OF AMOUNT OF DEFERRED TAX LIABILITIES. FOR EXAMPLE, YOU PROBABLY – I'M PULLING THESE FIGURES OUT. DON'T FILE A SUIT IF I'M OFF A LITTLE BIT. BUT WE HAVE PERHAPS $100 BILLION OF UNREALIZED APPRECIATION IN THE SECURITIES WE OWN. AND IF YOU OWN SECURITIES THAT HAVE GONE UP, YOU DON'T HAVE TO PAY A TAX JUST BECAUSE THEY'VE GONE UP, BUT IF YOU SAW THEM, YOU DO, AND IF YOU KEPT YOUR BOOKS ON AN ACCOUNTING BASIS, YOU SET UP A LIABILITY FOR THE TAX ON YOUR UNREALIZED GAIN. WELL, OUR TAX ON THE UNREALIZED GAIN ON $100 BILLION WOULD BE $35 BILLION, AND THEN THAT GOES DOWN TO $21 BILLION UNDER THE NEW TAX LAW. SO, ANYBODY THAT HAS A LOT OF DEFERRED TAX LIABILITIES GETS A BIG KICK UP IN BOOK VALUE. A COMPANY LIKE CITIGROUP HAS A BIG DEFERRED TAX ASSET. THE REVERSE IS TRUE THERE, BECAUSE THAT TAX ASSET IS NOT WORTH AS MUCH. WHAT IT DOES IS IT REDUCES THEIR TAXES IN IT FUTURE YEARS, AND THAT REDUCTION IS WORTH 21 CENTS ON THE DOLLAR INSTEAD OF 35 CENTS ON THE DOLLAR. SO, IT DEPENDS WHETHER YOU HAVE A LOT OF DEFERRED TAX LIABILITIES OR DEFERRED TAX ASSETS, AMONG OTHER THINGS, BUT THAT'S A BIG ONE WITH US."

"Life expectancy of Mr. Buffett: 5 years Life expectancy of Mr. Munger: 3.2 years." The life expectancy of very rich investors could be a little bit higher, because of good prevention, best medical care, using the best antidotes when ill and the "hard work" involved with investing. ;) Here is the CNBC transcript from today: https://www.cnbc.com/2018/01/10/full-transcript-billionaire-investor-warren-buffett-speaks-with-cnbcs-becky-quick-on-squawk-box-today.html

https://finance.yahoo.com/news/berkshire-may-37-billion-book-190553392.html "Barclays on Monday also raised its price target for Berkshire Class A shares to $357,000 from $322,500, three weeks after the shares reached $300,000 for the first time. It raised its target for Berkshire Class B shares to $238 from $215." Berkshire has now a market cap of 500 billions. Cheers! :)

Berkshire Hathaway Is Ending the Year With a Bang: https://www.barrons.com/articles/berkshire-hathaway-is-ending-the-year-with-a-bang-1514299999 Cheers! :)

Merry Christmas everyone and thanks to Parsad for this great Message Board! :)

Thank you! :)

"i was talking to my father over thanksgiving...and ive own some brk for a while now, since maybe 2010-2011ish....anyways i was taking to my dad about it and as we were talking i saw him come to the realization that he missed out on most of it while hes been alive...one of the most aqkward momemts with my father when he said basically "man i could have owned just that over my life"...i basically just said "yah." you could see his face change as he said it...and that basically ended the converation." I just finished reading "Where are the Customers Yachts" and my favourite sentence is the last sentence of the introduction: "Then a long time later it turns out that I should have just bought them, and thereafter I should have just sat on them like a fat, stupid peasant. A peasant however, who is rich beyond his limited dreams of avarice." :)

Berkshire Hathaway: Tax Reform´s Big Winner? https://www.barrons.com/articles/berkshire-hathaway-tax-reforms-big-winner-1512076594?mod=hp_highlight_1& Cheers! :)

In 1996 I began "investing": I bought and sold stocks I didn't understand. In 1998 discovered Peter Lynch and Warren Buffett. In 2000 bought and sold Berkshire. I think it was with a loss. From 2001 until 2008 I worked for a rich man as investment analyst. The strategy he followed that made the most sense to me was, that he bought one Berkshire A share per month. :) During the crisis I invested in some Berkshire positions and Berkshire. In 2011 when Berkshires fundamentals got better and better and the shares got cheaper and cheaper I shifted everything into Berkshire shares. :) Since then I have been buying a little Berkshire when money available and the price looked reasonable and since then I was very good at doing nothing. ;) Also looking at other stocks, but the opportunity cost is very high with Berkshire shares.

Here is the transcript: https://www.cnbc.com/2017/10/03/cnbc-transcript-chairman-ceo-of-berkshire-hathaway-warren-buffett-speaks-with-cnbcs-becky-quick-on-squawk-box-today.html I liked especially these parts: WARREN BUFFETT: Well-- a decrease in taxes would mean an increase in profits. It might-- it might not be totally the amount of the decrease in taxes. But it would-- it would increase earnings. There's no question about it. So the question is whether that's already built into the expectations. I doubt if it-- it fully is built into expectations.... WARREN BUFFETT: Well, anything that increases profits tends to push stocks. I mean, there can be 10 other variables happening, you know, for other-- but-- but as a single variable in the, in the equation-- for profits, and profits determine stock prices over time-- no, it's-- it is a plus for American business. And, you know, like I say, I've got a million-- I got a million shareholders at Berkshire Hathaway. And-- and they would all love to see a corporate tax cut. :)

I will miss his Berkshire analysis. It was always a nice read. :)

I think it´s a very good book. :) A good repeater of some key concepts of Berkshire and a lot of good quotes: Munger: "If your system is decentralization to the point of abdication, what difference does it make how many subsidiaries you have?" Munger repeated again and again that Berkshire in most industries simply have the best business or as Oscar Wilde said: "I'm a man of simple tastes. I'm always satisfied with the best." ;)

I bought more Berkshire b shares yesterday and today. Results this Friday should be very good and the surge in Apple shares doesn't hurt. ;)

"Full meeting transcription: http://www.slowappreciation.com/blog/2017/5/29/2017-berkshire-hathaway-shareholders-meeting-transcript" Thank you! :)

Here is the CNBC Transcript of Buffett, Munger and Gates: http://www.cnbc.com/2017/05/09/full-transcript-billionaire-investor-warren-buffett-speaks-with-cnbc-percent-u2019s-becky-quick-on-percent-u201csquawk-box-percent-u201d.html I hope I will live to 93 and will "slow down" like this. ;)

"It's hard. I've looked. Also, China is in early stages there are not many great companies. I just looked again they look overvalued ATM. In retrospect, I did miss a lot of opportunities back in 2013 to 2014 period when I look at a few hundred companies. But I was just young and ignorant back then so maybe next time.! Yeah, but they have Li Lu with a great track record. Probably for Berkshire the interesting companies are too small (except for Petro China which was a 10 bagger or so and BYD ;)).

Cool interview. Thank you! :) I don´t think he is annoyed. An interesting question would be what Buffett is thinking about these great Chinese companies. Is he afraid about fraud or the Chinese government? Why aren´t there more investments in China?

Sold all IBM shares of my parents and bought Berkshire Hathaway shares. ;)

https://twitter.com/hashtag/BRK2017?src=hash

As a warm-up for the annual meeting. Here is the transcript of the Becky Quick interview: http://www.cnbc.com/2017/05/05/cnbc-excerpts-billionaire-investor-warren-buffett-speaks-with-cnbcs-becky-quick-ahead-of-the-berkshire-hathaway-annual-meeting.html Cheers!

"... A lot of people in finance are like a sleazy used car salesman but at least with a used car salesman you get a car. Let the tomatoes fly." +2 ;D This reminds me of the saying, when people are very good at marketing or speaking, that´s the only thing they need to be good in.