Buffett/Berkshire - general news

[Guest]

I wonder how much I should read into things when Buffett isn't saying that he's buying right now. He said he isn't selling but I've not heard a peep about buying either (perhaps he has though?).

[sleepydragon]

I wonder how much I should read into things when Buffett isn't saying that he's buying right now. He said he isn't selling but I've not heard a peep about buying either (perhaps he has though?).

 

He did say he didn’t think this would go away by summer.

And he did say things are very different now from the time he did the CNBC interview.

And he did say we have past the best windows to control the situation.

And he said he listen to bill gates about this. And Gates now resigned from this board seats , likely fully focus on this.

He also said he mentioned epidemics in his annual letter. And we know he also said stock could go down 50%.

He did say it could be not a big deal

[ValueMaven]

Was able to pick up some Berk at $180.40 on Thursday ... I think I got lucky

[wescobrk]

Was able to pick up some Berk at $180.40 on Thursday ... I think I got lucky

 

Should have more opportunities this week. Futures are limit down.

[Guest]

I wonder how much I should read into things when Buffett isn't saying that he's buying right now. He said he isn't selling but I've not heard a peep about buying either (perhaps he has though?).

 

He did say he didn’t think this would go away by summer.

And he did say things are very different now from the time he did the CNBC interview.

And he did say we have past the best windows to control the situation.

And he said he listen to bill gates about this. And Gates now resigned from this board seats , likely fully focus on this.

He also said he mentioned epidemics in his annual letter. And we know he also said stock could go down 50%.

He did say it could be not a big deal

 

Good information. thanks.

[Castanza]

[Guest]

speculating here...but I wonder if the market will keep dropping until Berkshire has better performance than the S&P 500 since March 2009.

[wescobrk]

I'm so glad he started streaming the annual meeting.

The irony is this will be the best annual meeting Berkshire from his first one in the 60's and no one (physically) will be there.

 

I'm going to have the popcorn ready for that 1st Sat in May!

[gfp]

Berkshire going about their regular business - with a Yen note offering, size unknown - probably small, routine refinancing

 

https://www.sec.gov/Archives/edgar/data/1067983/000119312520084148/d861445d424b5.htm

[LC]

https://www.cnbc.com/2020/03/20/private-jet-industry-asks-for-bailout-funding.html

 

The private-jet industry is asking Congress for bailout money, even as many private jet companies say sales are strong as wealthy flyers avoid commercial flights.

 

The National Business Aviation Association, or NBAA, which represents private-jet companies and corporate jets, sent a joint letter with other industry groups to congressional leaders saying the industry is facing “increasing financial uncertainty” and that private-jet companies should be included in any airline or aviation bailout.

 

 

[warrior]

I just wonder, where is Warren Buffet.

No op-ed this time...

[Simple Investor]

Agree.  Be great to hear his thoughts.

[Dynamic]

https://www.autocar.co.uk/car-news/new-cars/new-byd-blade-ev-battery-stands-extreme-durability-tests

 

Some coverage in the UK automotive press of BYD's Blade battery and it's extreme testing including high temperature, nail punctures and extreme overcharging.

 

It remains to be seen whether the capacity, energy density, charge and discharge rate and cost are advantageous for mass adoption or whether this will make it preferable for certain niches only such as aero or rugged use cases. I suspect production capacity will be a limiting factor as demand is so high, so unless they licence it to others it's unlikely to dominate

[redskin]

https://bankingjournal.aba.com/2020/03/fed-to-delay-implementation-of-revised-bank-control-framework/

 

The new control regulations are delayed for 6 months.  I was thinking we'd start to see BRK increase its bank holdings after this was implemented.

[wescobrk]

I'm going out on a limb and predicting a preferred deal with warrants by Berkshire in the next 30-60 days. Not a controversial comment. The interesting question is which sector? Airlines is probably near the top.

[aws]

Well hopefully it works out better than the Oxy deal.  I wonder what the market price would be of the preferreds if they traded - probably well below par at this point.  And the warrants have to be considered pretty worthless as well, especially if Oxy starts diluting by paying the preferred dividend in shares.  I'd certainly take another BAC or GS deal.

[rb]

I'm going out on a limb and predicting a preferred deal with warrants by Berkshire in the next 30-60 days. Not a controversial comment. The interesting question is which sector? Airlines is probably near the top.

I'll go ahead and say no. Compared to other times, the Fed is really aggressive. The Fed offers better terms than Berkshire.

 

Pref + warrants make no sense for airlines now. They can't pay the div. So the pref is automatically common now. Why would you do that? It's all in. Buy an airline, use your financial muscle to basically do bridge financing for a year or two? That makes more sense. But if some combo of Fed/Treasury rescues the other airlines you're the biggest moron that God ever let through the door for doing that cause your competition has a lower cost structure than you do.

 

So if you're looking for a pref deal you're probably looking somewhere that really just needs a bridge loan that's not that highly visible that the government would give a shit about. Airlines ain't it. Aercap would be a more likely candidate. But then why would they do a pref deal? Why wouldn't they just do a Berkadia type deal where they just buy the planes and lease them after they start to fly again?

 

I will add that while the pref+warrant deals are shiny because they're high IRR, they're not so attractive from a shareholder perspective. Once markets calm and the storm passes these guys refinance and cash returns to Berkshire at a time when there redeployment opportunities are less. Think about it. They did a ton of pref+ deals during 08/09. How many of those companies are in the Berkshire portfolio today?

[Gregmal]

IDK but given the previous interest in SRG, and the current concerns in the market, I wouldn't be shocked to see something done with a company like Simon. At the end of the day though, no one has a clue what the old man will do.

[UK]

https://www.wsj.com/articles/after-the-coronavirus-shareholders-will-have-to-share-their-crown-11585829466

 

"As companies of all sizes shut their doors and make claims against their business interruption policies, insurers are coming under the spotlight. Unsurprisingly, few documents explicitly detail how they will deal with this unprecedented pandemic, creating gray areas that insurers and the policyholder will view differently. Claims will be in the “many billions of dollars, if not trillions,” according to Ben Lenhart of law firm Covington. Over the coming months and years these claims will work their way through settlements, arbitration or the courts. But governments are already getting involved. Four U.S. state legislators—insurance is regulated on a state-by-state basis—and a U.K. government committee are all considering both what type of financial support to offer insurers and how to compel or force the companies to be generous with their customers. Insurance, usually considered an economically defensive industry, has underperformed in the current crisis. On both sides of the Atlantic the sector is down about a third this year, compared with 24% for the S&P 500 index and 25% for the Stoxx Europe 600."

 

https://www.wsj.com/articles/pressure-mounts-on-insurance-companies-to-pay-out-for-coronavirus-11585573938

 

"In at least three states, lawmakers have proposed legislation to force insurers to pay billions of dollars for business losses tied to government-ordered shutdowns. In other states, regulators are pushing insurers to expand coverage under personal-car policies to also cover certain commercial activity, such as delivery of takeout meals by owners and employees of restaurants that are struggling to survive bans on dine-in eating. Some regulators have declared moratoriums on cancellations and nonrenewals of policies. And some are urging car insurers to lower people’s bills. These states note that policyholders now working from home don’t have the commutes they used to and thus aren’t on the roads as much. This push comes despite specific contractual exclusions in most standard policies for claims stemming from viruses. As a result, some insurers are threatening court challenges over these efforts to rewrite policies and provide benefits that weren’t priced in. “If elected officials or courts require payment for perils that were excluded and for which no premium was ever collected, catastrophic results are likely to occur and we may deal with a second crisis: insurance insolvencies and impairments,” said Charles Chamness, president of trade group National Association of Mutual Insurance Companies."

 

[Cigarbutt]

https://www.wsj.com/articles/after-the-coronavirus-shareholders-will-have-to-share-their-crown-11585829466

 

"As companies of all sizes shut their doors and make claims against their business interruption policies, insurers are coming under the spotlight. Unsurprisingly, few documents explicitly detail how they will deal with this unprecedented pandemic, creating gray areas that insurers and the policyholder will view differently. Claims will be in the “many billions of dollars, if not trillions,” according to Ben Lenhart of law firm Covington. Over the coming months and years these claims will work their way through settlements, arbitration or the courts. But governments are already getting involved. Four U.S. state legislators—insurance is regulated on a state-by-state basis—and a U.K. government committee are all considering both what type of financial support to offer insurers and how to compel or force the companies to be generous with their customers. Insurance, usually considered an economically defensive industry, has underperformed in the current crisis. On both sides of the Atlantic the sector is down about a third this year, compared with 24% for the S&P 500 index and 25% for the Stoxx Europe 600."

 

https://www.wsj.com/articles/pressure-mounts-on-insurance-companies-to-pay-out-for-coronavirus-11585573938

 

"In at least three states, lawmakers have proposed legislation to force insurers to pay billions of dollars for business losses tied to government-ordered shutdowns. In other states, regulators are pushing insurers to expand coverage under personal-car policies to also cover certain commercial activity, such as delivery of takeout meals by owners and employees of restaurants that are struggling to survive bans on dine-in eating. Some regulators have declared moratoriums on cancellations and nonrenewals of policies. And some are urging car insurers to lower people’s bills. These states note that policyholders now working from home don’t have the commutes they used to and thus aren’t on the roads as much. This push comes despite specific contractual exclusions in most standard policies for claims stemming from viruses. As a result, some insurers are threatening court challenges over these efforts to rewrite policies and provide benefits that weren’t priced in. “If elected officials or courts require payment for perils that were excluded and for which no premium was ever collected, catastrophic results are likely to occur and we may deal with a second crisis: insurance insolvencies and impairments,” said Charles Chamness, president of trade group National Association of Mutual Insurance Companies."

The social inflation movement on this aspect is building up and it's hard to know the outcome. It's fascinating that this could end up as a form of retroactively imposed adverse selection.

Mr. Buffett has often mentioned that many large investments (utilities, insurance) are a bet that there will be a fair compromise between the end user and the private capital trying to earn a reasonable return.

In 1988 (annual report), when Geico was not wholly owned, Mr. Buffett had said the following:

"The antagonism that the public feels toward the industry can

have serious consequences: Proposition 103, a California

initiative passed last fall, threatens to push auto insurance

prices down sharply, even though costs have been soaring.  The

price cut has been suspended while the courts review the

initiative, but the resentment that brought on the vote has not

been suspended: Even if the initiative is overturned, insurers

are likely to find it tough to operate profitably in California.

(Thank heavens the citizenry isn’t mad at bonbons: If Proposition

103 applied to candy as well as insurance, See’s would be forced

to sell its product for $5.76 per pound. rather than the $7.60 we

charge - and would be losing money by the bucketful.)

 

    The immediate direct effects on Berkshire from the

initiative are minor, since we saw few opportunities for profit

in the rate structure that existed in California prior to the

vote.  However, the forcing down of prices would seriously affect

GEICO, our 44%-owned investee, which gets about 10% of its

premium volume from California.  Even more threatening to GEICO

is the possibility that similar pricing actions will be taken in

other states, through either initiatives or legislation.

 

    If voters insist that auto insurance be priced below cost,

it eventually must be sold by government.  Stockholders can

subsidize policyholders for a short period, but only taxpayers

can subsidize them over the long term.  At most property-casualty

companies, socialized auto insurance would be no disaster for

shareholders.  Because of the commodity characteristics of the

industry, most insurers earn mediocre returns and therefore have

little or no economic goodwill to lose if they are forced by

government to leave the auto insurance business.  But GEICO,

because it is a low-cost producer able to earn high returns on

equity, has a huge amount of economic goodwill at risk.  In turn,

so do we."

Then, there was the possibility that private players would be forced to underprice policies. Now, there's the possibility that policies written before may need to cover outcomes not intended to be covered initially. For those that think that bailouts for everyone, everywhere and everything don't come with moral hazard and unintended consequences, this is food for thought although a reasonable compromise should be maintained in the end but strong players may be punished more than zombie players which is not, typically, a winning strategy at the aggregate level.

 

[DooDiligence]

If I hear one single Republican mouthing off about socialism, I'm going to scream.

[rb]

If I hear one single Republican mouthing off about socialism, I'm going to scream.

Pace yourself young padawan. The road is long.

[Munger_Disciple]

Berkshire selling Delta & Southwest:

 

https://www.sec.gov/Archives/edgar/data/27904/000120919120023250/xslF345X03/doc4.xml

https://www.sec.gov/Archives/edgar/data/92380/000120919120023268/xslF345X03/doc4.xml

 

That was a quick roundtrip!

[undervalued]

That's going to crash the airlines even more. They both are the stronger out of the 4 big airlines.

[Gregmal]

On the flip side, didn't Buffett sell out of a rail company before buying BNSF?