Buffett/Berkshire - general news

[UK]

https://www.bloomberg.com/news/articles/2023-09-08/pacificorp-loses-bid-to-delay-trial-over-final-payout-for-fires?srnd=all

 

Berkshire Hathaway Energy Co.’s PacifiCorp failed to postpone the final phase of a trial over catastrophic Oregon wildfire damages that will determine how much the utility will have to pay — an amount it had estimated to be as much as $11 billion. A state court judge in Portland ordered the trial over the potential payouts to start Jan. 8. The ruling Friday follows a June verdict when the judge ordered PacifiCorp to pay 17 owners of properties destroyed by a series of 2020 fires an average of $5 million each. Those 17 plaintiffs were awarded about $90 million, but Judge Steffan Alexander’s ruling means that calculating damages for as many as 5,000 other residents and business owners will move forward — setting up total potential liability in the billions of dollars. PacifiCorp wanted the proceeding delayed while it appeals the original verdict, and has said it’s confident it will prevail on appeal.

...

At trial, Portland-based PacifiCorp estimated its potential liability at $11 billion. In a more recent regulatory filing, the company reported in August that it faces damages claims of more than $7 billion from all lawsuits over the 2020 Oregon fires and estimated its pre-tax losses through June of this year at $608 million after accounting for probable insurance recoveries.

[gfp]

Berkshire hit $800 Billion market cap today *rocketshipemoji*

[Spekulatius]

How do people here about tail risk for Berkshire

 

BHE - utilities have huge tail risk if they cause fires now.

Apple - risk of China syndrome

 

Then we have the catastrophe risk from the insurance business.

 

Something to think about if you have a huge position.

 

Edited September 12, 2023 by Spekulatius

[bizaro86]

42 minutes ago, Spekulatius said:

How do people here about tail risk for Berkshire

 

BHE - utilities have huge tail risk if they cause fires now.

Apple - risk of China syndrome

 

Then we have the catastrophe risk from the insurance business.

 

Something to think about if you have a huge position.

 

 

The apple one is interesting. In the last week or so (in round numbers) the market price of their Apple stake is down about $12B. 

 

Now, that takes it down to levels it first achieved like 3 months ago, so not exactly a huge deal, but still, definitely a large position.

[longlake95]

47 minutes ago, Spekulatius said:

How do people here about tail risk for Berkshire

 

BHE - utilities have huge tail risk if they cause fires now.

Apple - risk of China syndrome

 

Then we have the catastrophe risk from the insurance business.

 

Something to think about if you have a huge position.

 

 

i worry more about tail risk at subs than tail risks in their marketable securities - like Apple. I don't think you can own something like BHE and not have the occasional - pardon the pun - flare up. Likewise, you can't own a re-insurer and not have some really bad hurricane years. While not fun to endure, I think BRK takes on water over the gunnels, but the ship doesn't sink. The earnings power is just so large. If there's anyone who would increase capex to fix the issues - it's BRK. We'll see what they do at Pacific Corp. Certainly no expert here - but there are now utilities installing fire prevention wrapped utility poles and using a gizmo on the pole that de-energizes the line if something touch it - to prevent fires. Burying lines is just too expensive.

[UK]

1 hour ago, Spekulatius said:

How do people here about tail risk for Berkshire

 

BHE - utilities have huge tail risk if they cause fires now.

Apple - risk of China syndrome

 

Then we have the catastrophe risk from the insurance business.

 

Something to think about if you have a huge position.

 

 

Even if AAPL was cut in half, it would be only some 10 per cent loss to BRK value, but than you end up with them owning somewhat undervalued position:)

 

Re catastrophes, I expect, that it is more of a opportunity, than a threat for them (and other well run insurers). More risks, more oportunities. 

 

Edited September 12, 2023 by UK

[xo 1]

1 hour ago, UK said:

 

Even if AAPL was cut in half, it would be only some 10 per cent loss to BRK value, but than you end up with them owning somewhat undervalued position:)

 

Re catastrophes, I expect, that it is more of a opportunity, than a threat for them (and other well run insurers). More risks, more oportunities. 

 

And further to AAPL, if AAPL's stock price were cut in half, the power of AAPL's buybacks would become even more fearsome.  As a serial buyer of stocks, BRK hopes the price of AAPL is cut in half (so long as the intrinsic value of the business isn't likewise cut in half, which China does not seem to so threaten).

[Munger_Disciple]

BNSF Logistics selling brokerage business to JB Hunt:

https://www.wsj.com/articles/j-b-hunt-transport-will-acquire-bnsf-brokerage-business-a7598c10

[Xerxes]

Berkshire seems to be on a “stealth” bull run. Just noticed that it hit $370 USD. 
 

On a related note Bloomstran did an interview with William Green recently.  
 

 

[UK]

https://www.bloomberg.com/news/articles/2023-09-19/berkshire-shows-unusual-risk-appetite-in-wildfire-court-fight?srnd=premium-europe#xj4y7vzkg

[gfp]

"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

[xo 1]

On 9/19/2023 at 2:34 PM, gfp said:

"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

Amazing story.  Crazy growth starting from scratch with plenty of room to continue to pursue Lloyd's.  

[UK]

https://www.ft.com/content/f1518d40-b065-44a6-ada2-7ee4a074d839

 

But first he had to warn the group’s largest shareholder about the potential losses and get him on board. “I called Warren Buffett and said, ‘We’re probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we’ll have long-term viability for our shareholders.’” Buffett, who bought most of Berkshire Hathaway’s Amex shares in the 1990s and now owns a 20 per cent stake, was sold. “‘The most important thing to take care of is your customers and your brand,’ he replied. ‘It’s hard to get customers back. And once you damage the brand, it’s damaged.’”

...

Squeri has restructured rewards across the company, eliminating ratings for business units and dramatically expanding the bonus programme. Now the entire 77,000-person workforce is eligible for a chunky annual payment based on their individual performance and the company-wide results. Before the change, “you had a load of people [whose] motivation was that the company just stay in business,” Squeri says. “Now, their motivation is, how can we make it better?”

[sleepydragon]

15 hours ago, UK said:

https://www.ft.com/content/f1518d40-b065-44a6-ada2-7ee4a074d839

 

But first he had to warn the group’s largest shareholder about the potential losses and get him on board. “I called Warren Buffett and said, ‘We’re probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we’ll have long-term viability for our shareholders.’” Buffett, who bought most of Berkshire Hathaway’s Amex shares in the 1990s and now owns a 20 per cent stake, was sold. “‘The most important thing to take care of is your customers and your brand,’ he replied. ‘It’s hard to get customers back. And once you damage the brand, it’s damaged.’”

...

Squeri has restructured rewards across the company, eliminating ratings for business units and dramatically expanding the bonus programme. Now the entire 77,000-person workforce is eligible for a chunky annual payment based on their individual performance and the company-wide results. Before the change, “you had a load of people [whose] motivation was that the company just stay in business,” Squeri says. “Now, their motivation is, how can we make it better?”

feel like he’s a micromanager though. Won’t be pleasant working for him

[gfp]

here is the article without the FT or Fortune magazine paywall - https://finance.yahoo.com/news/american-express-ceo-called-warren-152037387.html

[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/

Edited September 24, 2023 by gfp

[giulio]

Love the napkin math, fantastic! Thanks for sharing @gfp

[longterminvestor]

On 9/24/2023 at 9:23 AM, gfp said:

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/

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

[John Hjorth]

On 9/24/2023 at 3:23 PM, gfp said:

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.

 

I'm reading Roger Lowenstein : 'When genius failed - The rise and fall of Long-Term Capital Management" as leisure reading right now.

 

I have to say, that it's just awesome! Very entertaining!  - Basically, it about what do you get when you combine academia and Wall Street [, here, please note with a label / goods declaration : Guarantied without / free of "reason" / "sound judgement" [for the sake of the climate, it would be called to day, I think]].

 

It is about when extreme ambitions and greed, combined with being delusional about the circle of competence creates, karma, hubris and nemesis.

 

I recommend the book if you want a dose of this.

[gfp]

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

[mjm]

2 hours ago, gfp said:

 

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 241.91 kB · 35 downloads

thanks for sharing.  do you think he wanted the business to kind of keep tabs on GEICO and how they operated, looking to buy shares and eventually the company?

[bathtime]

Are we around 1.4x BV near $350 on the B shares? Thanks. 

[Malmqky]

7 minutes ago, bathtime said:

Are we around 1.4x BV near $350 on the B shares? Thanks. 

Book was like $248 in June so most likely $350 is about 1.4x

[LC]

6 hours ago, gfp said:

 

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 241.91 kB · 54 downloads

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).

[gfp]

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.