Buffett/Berkshire - general news

[John Hjorth]

What I meant with mentioning my feeling of confusion was related to the fact that the acquisition agreement appears [by the fact that there is an existing dispute] 'non-water proof', thereby leaving loopholes for interpretation and disputes about the understanding of the agreement.

 

Or the filed complaint has no basis or is unreasonable.

 

Mr. Buffett isen't exactly known for playing games with sellers, 'Arnault-style' [think Tiffany], to save a dollar, or more, ref. what @gfp has already said upstream about Mr. Buffetts word and his integrity.

[gfp]

1 hour ago, Cigarbutt said:

 

It looks like BRK 'found' evidence that some kind of material impairment was present AND had been present at least since the time of change of control.

It looks like this goes further than simply an intent to question an 'accounting' principle.

 

 

Just to be clear, this isn't an impairment or a write down, this is a write UP to the acquisition price (a big premium to the carrying value of the net assets of the company under their historical basis - a very normal situation for an acquired company that sells above book value).

 

The write UP results in increased depreciation and amortization which depresses reported earnings but has no effect on "owner earnings" or cash earnings or whatever you want to call them.

 

The only reason there was a 1 month delay in adopting the acquisition method of accounting was that it takes time to assign values to the various categories like identifiable assets, intangibles, goodwill, etc..

[John Hjorth]

Exactly, @gfp,

 

For the unexperienced in accouting, this may perhaps appear complicated, perhaps even counterintuitive.

 

From the complaint itself :

 

Quote

... 7. Pushdown accounting does nothing to change the value or performance of PTC’s business. But the application of pushdown accounting, and the various subsidiary changes in accounting policies that necessarily result, artificially depress the reported earnings of PTC by, among other things, increasing depreciation and amortization expenses and by preventing the recognition of gains on derivative instruments and other hedges in the income statement. ...

 

I personally read it as if this may be about depreciations on the building element of gas stations, some of them built when King of Clubs was Jack and over the years well maintained by Pilot. It must have been among the largest identifiable tangible assets in the acquisition, if not the largest.

Edited November 5, 2023 by John Hjorth

[Gamecock-YT]

1 hour ago, gfp said:

There isn't any problem with Berkshire's method of accounting, which Berkshire uses on their other acquisitions and understates profitability in a way that is consistent with Berkshire's conservative accounting style and rejection of earnings "optics." 

 

There is no reason Pilot can't keep two sets of books, or simply adjust the Berkshire-kept figures for the excess depreciation and amortization and include derivative hedging gain/loss.  Companies do this all the time.  Hell, a lot of companies keep three sets of parallel books.  That's why I think they will just negotiate an adjustment to the computation of earnings before taxes and settle the matter.  Since it impacts Berkshire's reputation as an acquirer that "does right by their seller partners," I feel like there is more to the story when you consider the other changes Pilot and Berkshire made.  Pilot brought in a commodity trader CEO and started trading a lot more around energy commodities (a business Berkshire exited), Berkshire fired that CEO and the CFO immediately after assuming control, Berkshire exited the more trading-related businesses and focused back on the plain vanilla lines of business Pilot was in at the time of the original deal. 

 

makes sense they were probably juicing short term earnings via the trading business that was probably a short term gain and a long term loss. Haslams get more for their shares and stick it to the old man. Berkshire takes control and now taking the chance to stick it to the Haslams.

[gfp]

Berkshire described the big jump in depreciation and amortization at Pilot in the first quarter 10Q:

"

a significant portion of which derived from depreciation of property, plant and equipment assets and amortization of intangible assets that were remeasured to fair value in connection with the application of the acquisition accounting method in 2023"

 

The acquisition premium resulted in a huge amount of goodwill and other intangibles as well as writing up the property & equipment where they could justify it:

 

[Cigarbutt]

^Ok ok, you guys (@gfp and @JohnHjorth) are technically correct.

But my humble (and naive?) interpretation then is that the aimed objective (for BRK) is to pay less for the remaining minority interest ie to effectively transfer less value from the acquiree to the acquired.

The issue (conceptual) is that, if the above (as described) is technically correct, BRK then is trying to oppress minority shareholders. Somehow, this elicits some kind of gut reaction looking for a rational explanation and, on some occasions, economic substance is more important than the accounting language?

At the very least, a key piece is missing (opinion), if previously held fundamental assumptions about the BRK culture continue to apply.

[Munger_Disciple]

I think we are just hearing one side of the story regarding the Pilot lawsuit. It is hard to believe that Berkshire is not abiding by the contract. It is also clear that Berkshire was very unhappy with the way Pilot was being run before gaining 80% control and Abel moved quickly after getting control to replace Pilot's management. I suggest we all wait for the Berkshire side of the story to emerge before speculating too much. 

[gfp]

Warren is addicted to Yen borrowing!   Back at the trough with another prospectus today

https://www.sec.gov/Archives/edgar/data/1067983/000119312523272880/d532609d424b5.htm

[John Hjorth]

He is likely addicted to buying more sogo shosha for the borrowed money, too!

[gfp]

ProPublica article out this morning: 

 

https://www.propublica.org/article/warren-buffett-privately-traded-stocks-berkshire-hathaway-ethics-irs?taid=654cafb069a63b000142e9d4&utm_campaign=trueanthem&utm_medium=social&utm_source=twitter

 

edit: I read the article and there doesn't seem to be a whole lot there.  I was actually confused when the article ended so abruptly.  

Edited November 9, 2023 by gfp

[sleepydragon]

1 hour ago, gfp said:

ProPublica article out this morning: 

 

https://www.propublica.org/article/warren-buffett-privately-traded-stocks-berkshire-hathaway-ethics-irs?taid=654cafb069a63b000142e9d4&utm_campaign=trueanthem&utm_medium=social&utm_source=twitter

 

edit: I read the article and there doesn't seem to be a whole lot there.  I was actually confused when the article ended so abruptly.  

even for Congress man , institutional money managers or perhaps SEC staff, you are allowed to trade stocks for your personal account. It’s only a conflict of interest if your personal trade is in the opposite direction of your firm trade, for example if you are buying for your clients and you are selling your own at the same time or shortly after (not before) your firm trade.

 

If it’s the same direction, there’s no problem at all , unless the personal trade is unwinded shortly after the firm trade 

[LC]

Anyone have access to the IRS data leak they use to source this information?

[Blugolds]

I think the article is making mountains out of mole hills. Chastises him for potentially violating his own policy? Gimme a break. 

 

He said he doesn’t want to even provide a hint of front running BRK moves in his personal account. So it would make sense that he would exit WMT if BRK took or increased position in a security he held. 

 

Honestly, I think WB is a lighthouse of integrity in rough seas of deceit that is Wall Street. Is he perfect? Nope, does he get it right 99% of the time. Yup. Does he go above and beyond to maintain trust and integrity, absolutely. His reputation is better than anyone else on Wall Street, without a doubt, and a significant reason that Omaha gets calls that others dont. I think some people just have such a hard time acknowledging that he is the real deal that they look for chinks in the armor. 

 

If he knew BRK was gonna double WMT it’s reasonable to assume he would exit in his personal account. Not to mention I think they said like a half billion in his personal account as an estimate and they are critical of $25M, thats insignificant percentage holding, to insinuate there is some kind of shady or questionable behavior is a joke.

 

There are so many LEGIT liars/cheats on Wall Street that are actually worthy of scrutiny they would be better off spending time on those. For instance, insider trading via politicians on both sides of the aisle. There is enough there to keep them busy writing articles for decades LOL. No sense in even wasting time in Omaha, Washington has all they could handle. 

 

 

They lost me with:

 

in August 2009, Buffett appeared to move, in his personal portfolio, in the opposite direction of Berkshire’s portfolio. He sold $25 million of Walmart stock in his personal account, even as Berkshire almost doubled its stake (which had previously held steady for 15 quarters) during the same quarter. It’s unclear which transaction came first, but no matter the order of events, it raises the question of why Buffett made one choice for his own portfolio and the opposite choice for Berkshire’s investors. And if he knew Berkshire had or was considering making a move, and still traded, Buffett again risked violating his own insider trading policy.

 

 

[gfp]

To quote Charlie Munger at the 2012 AGM:

 

"And I don’t think you need to worry about Warren’s side investments. His investments in Berkshire are so huge and those are so small, relevantly, that if that’s your main problem in life, you have a very favored life."

[NnnnotSoSmart]

Hasn't WEB said on many occasions that he has never sold a share of Berkshire stock?

 

We should take him at his word until proven otherwise.

[ValueMaven]

Total BS and I am sure there is a logical answer here re: personal trading.  

[ValueMaven]

 

[sleepydragon]

13F is out. Any guesses what the secret stock(s) is/are?

 

[Xerxes]

Certainly this must be a blow to Markel fanboys. Position cut by 66%. 
 

At the end of the day, while Berkshire might be a cornerstone foundational investment for Markel, the latter is just a security/tracking stock for Berkshire. They come and go. 
 

Ping me, when there is a +$15 billion position. 
 

 

Edited November 15, 2023 by Xerxes

[UK]

26 minutes ago, Xerxes said:

Certainly this must be a blow to Markel fanboys. Position cut by 66%. 
 

At the end of the day, while Berkshire might be a cornerstone foundational investment for Markel, the latter is just a security/tracking stock for Berkshire. They come and go. 
 

Ping me, when there is a +$15 billion position. 
 

 

 

Obviously, they switched to FFH, we just can not see this:)

[Xerxes]

1 hour ago, UK said:

 

Obviously, they switched to FFH, we just can not see this:)

yeah. That would be a fatal blow to Markel’ Berkshire aura. 
 

That said I would think that Berkshire investment team’ bandwidth is better spend looking at stand alone operating businesses, where they can bring to bear their expertise. Than opaque conglomerate-like creatures like Markel and/or Fairfax. 

[Parsad]

John Malone believes Buffett is expecting opportunities due to massive cash pile.  Cheers!

 

https://finance.yahoo.com/news/warren-buffett-sitting-monstrous-pile-193107202.html

[Xerxes]

I wonder if that Business Insider article (shown on Yahoo) was written by AI. 
 

Prompt AI :  write me an article about Buffett. Focus on cash pile. Extract and include recent Mungerism references (if any). 

[John Hjorth]

5 minutes ago, Xerxes said:

write me an article about Buffett. Focus on cash pile. Extract and include recent Mungerism references (if any)

ChatGPT :

 

Quote

Title: "Buffett's Cash Pile: Navigating the Markets with Munger Wisdom"

Introduction:

Warren Buffett, the Oracle of Omaha, is a name synonymous with value investing and financial acumen. As the chairman and CEO of Berkshire Hathaway, Buffett has built a reputation for making savvy investment decisions that have stood the test of time. One intriguing aspect of Buffett's investment strategy in recent years has been the substantial cash pile that Berkshire has amassed. This cash hoard has become a subject of much speculation and analysis within the financial community, drawing attention to Buffett's approach in navigating the ever-changing landscape of the markets.

The Enigmatic Cash Pile:

Berkshire Hathaway's cash pile, often referred to as "cash hoard" or "war chest," has been a focal point of discussions among investors and analysts. As of the latest available data, Berkshire held a significant amount of cash and cash equivalents, leading many to wonder about Buffett's intentions for this liquidity.

Buffett's rationale for maintaining a substantial cash position has roots in his value investing philosophy. He believes in having ample reserves to seize opportunities during market downturns when attractive investments become available at discounted prices. This approach aligns with the famous Buffett adage: "Be fearful when others are greedy and greedy when others are fearful."

Mungerism and the Power of Patience:

Charlie Munger, Buffett's longtime business partner and Vice Chairman of Berkshire Hathaway, is known for his straightforward and often witty remarks, which are now commonly referred to as "Mungerisms." Munger's wisdom complements Buffett's investment principles, emphasizing the importance of patience, discipline, and a long-term perspective.

In a recent interview, Munger addressed the issue of Berkshire's cash pile, stating, "The fact that we've got more cash than usual doesn't mean we intend to deploy it. We're just waiting. We're not waiting because we like having a big pile of cash. We're waiting because it's hard to find things that we like."

This Mungerism encapsulates the duo's approach of patiently waiting for the right opportunities, even if it means holding onto a significant amount of cash. Munger's emphasis on discipline in decision-making resonates with Berkshire's strategy of not rushing into investments simply for the sake of deploying capital.

Buffett's Market Timing Dilemma:

Buffett's cash position has led to debates about whether the market conditions and valuation levels have made finding attractive investments more challenging. During Berkshire's annual shareholder meeting, Buffett acknowledged the difficulty of finding suitable acquisitions, stating, "Prices are sky-high for businesses possessing decent long-term prospects."

This admission reflects the cautious approach Buffett is taking in deploying Berkshire's cash. It also underscores the influence of market conditions on the timing of investment decisions. In a market where valuations are stretched, Buffett and Munger's dedication to disciplined investing is showcased by their willingness to bide their time.

Conclusion:

Warren Buffett's cash pile, coupled with Charlie Munger's insightful remarks, provides a fascinating glimpse into the minds of two legendary investors. As the financial world eagerly awaits Berkshire Hathaway's next move, the duo's commitment to patience, discipline, and a long-term perspective serves as a guiding light for investors navigating the complexities of the market. In the words of Munger, "It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities." Buffett and Munger's enduring success lies in their ability to discern exceptional opportunities amidst the noise of the market, even if it means holding onto a substantial cash pile until the right moment arrives.

 

[John, Odense, Denmark, posting!]

[Xerxes]

Lol thank you @John Hjorth

 

the reason why i made the comment is because the Business Insider article referenced John Malone. I figured only AI would randomly pull “recent” cross references (in this case Malone) on a Berkshire related article.