Buffett/Berkshire - general news

[LearningMachine]

1 hour ago, bluedevil said:

I was not sure I fully got the point Buffett was hinting at on oil.  He seemed to be saying that oil was not a bad business now because while it was dependent on the market price of oil, the odds were the price of oil would stay reasonably high.  Because if prices dip, then 5m barrels a day of US shale, which has very short lived production, will roll off the market, causing prices to recover.   Did others take away the same point?  

 

Yes, that was part of my take-away as well.  You can see the snippet at https://www.cnbc.com/video/2023/05/06/warren-buffett-on-oil-we-like-occidentals-position-in-the-permian-basin.html .

 

Beyond that, Buffett and Munger also said other positive things about oil:

• Shale is a not a long term source of oil.
  • "If you like quick death in your oil wells, we have them for you."
• "Just imagine taking 5 mb/d out of production in the world and then we are also taking down our strategic petroleum reserve"
  • He was making this point to highlight possibility of oil price shooting through the roof after 5 mb/d production from shale runs out. 
• Changing the official target for inflation rate from 0% to 2% is sending a message that you're going to depreciate the currency over time.
• There is lot more oil under Permian if you can figure out how to take it out.

 

Buffett also accepted the risks he is taking with oil price going up or down, but is saying those are acceptable risks. 

 

 

He didn't go into on this talk but Munger has shared recently about the cartel's pricing power being part of their decision making.  Also, even if the oil price doesn't shoot through the roof, if the price of the rights to receive cash from oil at today's price is so low that he is going to get his cash back in some years, he is happy with that and doesn't find the need to explain it to everyone. 

 

When Buffett is giving a muddled message, i.e. talking about both pros and cons, it usually means he has been thinking about it a lot to decide to buy more if he could.   For example, at the 2020 Annual Meeting, when asked about why he was not buying BRK stock when it was trading at about $160 for B-Shares, he gave a similar muddled message that BRK was worth less compared to when he had bought before the pandemic, and ended with something like "we'll see."   Right after saying that, he bought a lot of BRK.

 

 

 

That said, I still find it surprising BRK is not buying oil sands with much higher reserve lives, no exploration costs, and lower cash operating costs than shale. 

 

'

Edited May 8, 2023 by LearningMachine

[John Hjorth]

6 hours ago, yesman182 said:

I think it was 50-60 not 500-600. But I too cringed when I heard that. At some point they had one system, then 2…… I don’t understand how places just keep adding disjointed systems on top of each other, especially at a place like Berkshire. Really disappointing. In my past life I would come across so many SAP systems that had all these weird layers of software cobbles together half talking with either other. 

 

I actually heard the same as what @ValueMaven posted, meaning 500-600, again meaning 10 x dreadful, wich equals totally dreadful.

[John Hjorth]

And by the way : Congrats to my fellow board member who actually managed to get a question pass the quality, relevance and interest filter put in place by Becky Quick and thereby given priority to be asked.

 

That was very well deserved, I would say.

 

For those who may be nosy about it, it was the question about the economic effects for Berkshires about changes in the US tax code, which actually caused Mr. Buffett to elaborate on the matter at length. Just great stuff, triggered by a high quality question. At approx. 6:16:00 of the full CNBC video on Youtube, 7:44:00 long.

[gfp]

https://di.hkex.com.hk/di/NSAllFormList.aspx?sa2=an&sid=2508&corpn=BYD+Co.+Ltd.++-+H+Shares&sd=08/05/2022&ed=08/05/2023&cid=2&sa1=cl&scsd=08%2f05%2f2022&sced=08%2f05%2f2023&sc=1211&src=MAIN&lang=EN&g_lang=en&

 

Berkshire Hathaway Energy sold out another 11.3895 million BYD shares as of May 2nd (around $334 million dollars)

[Gamecock-YT]

8 hours ago, LearningMachine said:

 

Yes, that was part of my take-away as well.  You can see the snippet at https://www.cnbc.com/video/2023/05/06/warren-buffett-on-oil-we-like-occidentals-position-in-the-permian-basin.html .

 

Beyond that, Buffett and Munger also said other positive things about oil:

• Shale is a not a long term source of oil.
  • "If you like quick death in your oil wells, we have them for you."
• "Just imagine taking 5 mb/d out of production in the world and then we are also taking down our strategic petroleum reserve"
  • He was making this point to highlight possibility of oil price shooting through the roof after 5 mb/d production from shale runs out. 
• Changing the official target for inflation rate from 0% to 2% is sending a message that you're going to depreciate the currency over time.
• There is lot more oil under Permian if you can figure out how to take it out.

 

Buffett also accepted the risks he is taking with oil price going up or down, but is saying those are acceptable risks. 

 

 

He didn't go into on this talk but Munger has shared recently about the cartel's pricing power being part of their decision making.  Also, even if the oil price doesn't shoot through the roof, if the price of the rights to receive cash from oil at today's price is so low that he is going to get his cash back in some years, he is happy with that and doesn't find the need to explain it to everyone. 

 

When Buffett is giving a muddled message, i.e. talking about both pros and cons, it usually means he has been thinking about it a lot to decide to buy more if he could.   For example, at the 2020 Annual Meeting, when asked about why he was not buying BRK stock when it was trading at about $160 for B-Shares, he gave a similar muddled message that BRK was worth less compared to when he had bought before the pandemic, and ended with something like "we'll see."   Right after saying that, he bought a lot of BRK.

 

 

 

That said, I still find it surprising BRK is not buying oil sands with much higher reserve lives, no exploration costs, and lower cash operating costs than shale. 

 

'

 

 

2 things that stood out to me was he was kind of hinting at the oil being an inflation hedge and he thought that the SPR was being used as a political tool instead of its intended use

 

 

[ValueMaven]

The more I read and study Alleghany - the more I realize this was an awesome acquisition inside of Berkshire.  Were any questions about Y raised during the AGM?  I cant seem to find any 

[gfp]

2 minutes ago, ValueMaven said:

The more I read and study Alleghany - the more I realize this was an awesome acquisition inside of Berkshire.  Were any questions about Y raised during the AGM?  I cant seem to find any 

 

Ajit mentioned them in passing - that TransRe would be run independently the same way they have been successfully run for many years.  Warren mentioned in passing that Allegheny's subsidiary was building the big chip plants in Arizona for Taiwan Semiconductor (as they did the Sphere and many other large building projects).  There were a bunch of Squishmallows (jazzwares) on the convention floor.  I had personally missed that Berkshire acquired Squishmallows in this deal.

[Spekulatius]

On 5/7/2023 at 9:46 PM, yesman182 said:

I think it was 50-60 not 500-600. But I too cringed when I heard that. At some point they had one system, then 2…… I don’t understand how places just keep adding disjointed systems on top of each other, especially at a place like Berkshire. Really disappointing. In my past life I would come across so many SAP systems that had all these weird layers of software cobbles together half talking with either other. 

Pretty much any company that is a few decades old has ~50 system different IT applications that the company runs on. Most are probably not mission critical, they are just legacy systems that have not been retired, mostly because there is one or two applications somewhere that are not easy to replace.

Other applications are the result of acquisitions but that's probably not the case for GEICO since they never acquired other companies as far as I know.

 

FWIW, the company I work still has Lotus Notes running for some use cases...

 

(Edited per @John Hjorth request )

Edited May 9, 2023 by Spekulatius

[John Hjorth]

@Spekulatius,

 

Please fullfill your post above by editing it, thank you.

[MCR]

18 hours ago, bluedevil said:

I was not sure I fully got the point Buffett was hinting at on oil.  He seemed to be saying that oil was not a bad business now because while it was dependent on the market price of oil, the odds were the price of oil would stay reasonably high.  Because if prices dip, then 5m barrels a day of US shale, which has very short lived production, will roll off the market, causing prices to recover.   Did others take away the same point?  

 

Hi, All. I was the one who submitted the question that Becky Quick asked about OXY, CVX and the Permian. While it was great to sit in the arena on Saturday and hear my question asked, honestly I don't feel like I got a direct answer. The WSJ reported in March that Permian production may have reached its peak. So, as a shareholder it would be helpful to hear the reasoning behind the position. IMO, Buffett and Munger's response to the question didn't entirely line up with this reporting -- either challenging or affirming it. I didn't gain a clearer understanding of what they see or know that others may not see or understand.

[sleepydragon]

16 minutes ago, MCR said:

 

Hi, All. I was the one who submitted the question that Becky Quick asked about OXY, CVX and the Permian. While it was great to sit in the arena on Saturday and hear my question asked, honestly I don't feel like I got a direct answer. The WSJ reported in March that Permian production may have reached its peak. So, as a shareholder it would be helpful to hear the reasoning behind the position. IMO, Buffett and Munger's response to the question didn't entirely line up with this reporting -- either challenging or affirming it. I didn't gain a clearer understanding of what they see or know that others may not see or understand.

 

not expert in oil, but the way I heard it, I think WEB is saying the shale oil can add pressure to oil price only in the short term, because each well's life is short, but in longer term, the technology is quite sophisticated (drill horizontally etc) to get more oils - so in essence in the longer term it's capital intensive and needs a lot of special technologies for the shale to add more oil to the market in a stable fashion.  

[AlwaysDay1]

@MCR was their implication perhaps that the lack of production (along with the decrease in strategic reserves) may keep oil prices higher for longer, resulting in higher cash returns to shareholders via buybacks/dividends?  

[Spooky]

I made this since I found the juxtaposition of the two events Saturday fascinating. Love how low key and humble these two remain. All hail king Charlie!

 

[Xerxes]

[Xerxes]

40 minutes ago, Spooky said:

I made this since I found the juxtaposition of the two events Saturday fascinating. Love how low key and humble these two remain. All hail king Charlie!

 

 

Charles III is doing his job. His job requires him to wear these things and participate in the pomp and ceremony. That is literally part of his job description, the moment he was born in that family. 
 

These are not comparable, despite Buffett’ attempt at humour. 
 

Compare Munger low-keyless to other business titans and not reigning sovereigns.  

Edited May 9, 2023 by Xerxes

[CanadianMunger]

2 hours ago, MCR said:

 

Hi, All. I was the one who submitted the question that Becky Quick asked about OXY, CVX and the Permian. While it was great to sit in the arena on Saturday and hear my question asked, honestly I don't feel like I got a direct answer. The WSJ reported in March that Permian production may have reached its peak. So, as a shareholder it would be helpful to hear the reasoning behind the position. IMO, Buffett and Munger's response to the question didn't entirely line up with this reporting -- either challenging or affirming it. I didn't gain a clearer understanding of what they see or know that others may not see or understand.

 

I'm pretty sure Buffett wants to keep on buying Oxy, so it's no surprise he didn't give a straight answer on it. 

 

Also, I'm pretty sure he intentionally telegraphed that Berkshire will not be purchasing Oxy outright to front run the arb's that would come in as the stake goes up.  

 

We'll see what happens.

[Stuart D]

I just re-listened to Buffett discussing OXY. I understand the part about 5mm bbl's going offline supporting the price of oil, but (like other's) I don't understand why that would entice him to invest in the Permian. Perhaps he'll explain the investment in e.g. 5-yrs from now, or perhaps by then the answer will be self-evident. 
 

edit:

The other point I didn’t understand was him “not liking” the preferred’s being redeemed. What’s not to like? In a world of 5.9% T-bills, an 8% pref with zero upside isn’t that appealing. He’s receiving a 10% premium as they’re being redeemed. And most importantly, if he really didn’t like it, I’m sure he could negotiate terms and increase the mandatory pay back threshold from $4/share/yr to say $8/sh/yr.

Edited May 9, 2023 by Stuart D

[Spooky]

https://www.ft.com/content/6289bb84-01dd-4260-8b70-c9c455a159e7

 

Any Berkshire sleuths figure out what Buffett has been selling?

[gfp]

5 minutes ago, Spooky said:

https://www.ft.com/content/6289bb84-01dd-4260-8b70-c9c455a159e7

 

Any Berkshire sleuths figure out what Buffett has been selling?

Well the obvious two are Chevron ($6 Billion) and BYD.  The rest will be disclosed in the 13F and insurance filings.

[xo 1]

45 minutes ago, gfp said:

Well the obvious two are Chevron ($6 Billion) and BYD.  The rest will be disclosed in the 13F and insurance filings.

Chevron is the interesting one to me.  I am puzzled that BRK is jumping in and out of Chevron and TSMC.  Obviously Chevron remains a very, very large holding, but I don't remember BRK churning ideas like this in the past - particularly with little evident change.  

[Jaygo]

These guys should just buy CNQ and forget about shale and exploration all together. I'm sure they have looked at Canada but our government is suspect so I get the hesitation. 

 

Long lived assets, tons of sunk capex and room for more, seems like a pure buffet play.

[Xerxes]

51 minutes ago, xo 1 said:

Chevron is the interesting one to me.  I am puzzled that BRK is jumping in and out of Chevron and TSMC.  Obviously Chevron remains a very, very large holding, but I don't remember BRK churning ideas like this in the past - particularly with little evident change.  

my own unsubstantiated explanation is that the ramp-up in the purchase of Chevron stake around the time of Russian invasion was a temporary plug because it was a liquid stock, just in case he could not get his fill Occidental. Both purchases ramped up heavily as Russian tanks crossed into Ukraine. 
 

my belief is that as Occidental’ stake goes up that of Chevron will go down. A reduced Chevron stake may stay as part of stock portfolio (trade in/out), but a large uncontrolled passive stake in Occidental may become part of the longer term holdings.  

[John Hjorth]

I do not consider myself a Berkshire sleuth, but anyway - here goes for my guess : He has continued to reduce bank positions : C and BK, simply just because Mr. Buffett has been souring on banks as of late.

 

I'm not in any way sure C is Buffett position, I may add. Comments from fellow CoBF members to that part would appreciated for my part, thank you.

 

With gross additions during the first quarter of 2023 of USD 2,873 B and gross sales of USD 12,283, net disposals of USD 9,410, it is to me a bit puzzling.

 

Soon, we'll see.

 

- - - o 0 o - - -

 

Furthermore, I'm puzzled by the comments above about the positions in OXY and Chevron, but stay un-opinionated on the matter, while still thinking "Berkshire in a ressource investment for the long term?" You gents may eventually end up being right.

[John Hjorth]

23 hours ago, Spekulatius said:

Pretty much any company that is a few decades old has ~50 system different IT applications that the company runs on. Most are probably not mission critical, they are just legacy systems that have not been retired, mostly because there is one or two applications somewhere that are not easy to replace.

Other applications are the result of acquisitions but that's probably not the case for GEICO since they never acquired other companies as far as I know.

 

FWIW, the company I work still has Lotus Notes running for some use cases...

 

(Edited per @John Hjorth request )

 

Thank you, @Spekulatius! ,

 

As always, based on sincere interest in reading your thoughts and considerations.

 

- - - o 0 o - - -

 

@yesman182 mentioned SAP here, for that sake, it could be an ERP solution provided by Microsoft or some other company. Lots of external software companies making a business out of providing socalled "Add-on modules" for certain specific purposes, paid dearly, containing breaches of database integrity, by providing redundant database tables [, so one can actually run a database query more than one way, and get different results, depending on approach for the query].

 

I have seen this so many times in my earlier life.

 

 

[xo 1]

4 hours ago, Xerxes said:

my own unsubstantiated explanation is that the ramp-up in the purchase of Chevron stake around the time of Russian invasion was a temporary plug because it was a liquid stock, just in case he could not get his fill Occidental. Both purchases ramped up heavily as Russian tanks crossed into Ukraine. 
 

my belief is that as Occidental’ stake goes up that of Chevron will go down. A reduced Chevron stake may stay as part of stock portfolio (trade in/out), but a large uncontrolled passive stake in Occidental may become part of the longer term holdings.  

Interesting thesis.  To put your explanation in my words, Chevron was a liquid option that turned out to be a modest money market (better than costless!) but that hasn't proven to be a windfall, and WEB is ready to unwind (potentially to shift to Oxy, although with some of the preferreds being called, total exposure in oil is currently being lightened)?