Buffett/Berkshire - general news

[73 Reds]

Just now, gfp said:

 

I'm describing him taking 2/3 of the "cash" and extending duration into lower yielding "notes."  There would be less "cash" and a completely conventional bond portfolio for an insurance business this size.  Not more cash.  Fewer complainers

@gfp I get it.  But remember, this is a tough crowd.   Fairfax gets away with it because they don't have the same history as does BRK and because its still so damn cheap.

[gfp]

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

[Eldad]

1 minute ago, gfp said:

 

I think he likes having the cash vs. what is available in the market to him presently.  Are you crazy bullish at the moment or what?  Sure he would love to buy stuff, but there is nothing for sale at a price he is willing to pay.  And lowering his standards just to do a deal is the worst type of precedent to set right before you hand over the reigns.  

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

[73 Reds]

1 minute ago, gfp said:

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

Yep, and that's the reason why Fairfax remains do damn cheap and Berkshire is Berkshire.  An incredible investment for Fairfax would be universally slammed by BRK shareholders as a collosal failure by Buffett.  Interesting phenomena.  

[gfp]

3 minutes ago, Eldad said:

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

[Viking]

6 minutes ago, gfp said:

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

+1

[73 Reds]

5 minutes ago, Eldad said:

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

I didn't have an issue with it either way.  Personally, I own AAPL for some of the same reasons as BRK (optionality on the future).

[Eldad]

7 minutes ago, gfp said:

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

Then that just means they make 100 billion with almost no capital requirements. ROE can be distorted but ROIC cannot as easily. Is 33x expensive for a 60 ROIC company? I don’t really think so. I wouldn’t buy it, but I sure wouldn’t sell it. I especially wouldn’t sell it if I had 100 million a day coming into my office and I had nothing else to buy with the proceeds but treasuries.

[Eldad]

But stocks at 470. He has an almost impossible job. I will shut up now. 

[Munger_Disciple]

4 minutes ago, Eldad said:

I will shut up now. 

 

That's an excellent idea!

[Xerxes]

3 hours ago, gfp said:

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

GFP

Unrelated to this thread, do you believe that changing of the guard in the CFO office at Apple’, is signalling new era on capital return policy  … 

[gfp]

6 minutes ago, Xerxes said:

GFP

Unrelated to this thread, do you believe that changing of the guard in the CFO office at Apple’, is signalling new era on capital return policy  … 

 

No, not at all.  

[UK]

So congratulations for all BRK holders (me too still). I will need to update my Excel on BRK for this milestone, but I think the last time BRK was valued so generously by the market was pre GFC in 2007. I have no idea why this is happening and hope it is something more than just simple momentum, but in my understanding, currently I own BRK fairly valued for the first time:). This is not a tragedy and I would still expect it to return long term 6-8 or even a tad more (with some extra luck) from this valuation level, but I also think at this level it is getting exposed to some 'revert to mean' risk more, especially if it will go up so quickly even further. If it does indeed, a new trick, copied from dealraker, I am trying to learn (not to sell everything only because of valuation) will be tested:)

 

Edited August 31 by UK

[Charlie]

20 hours ago, UK said:

So congratulations for all BRK holders (me too still). I will need to update my Excel on BRK for this milestone, but I think the last time BRK was valued so generously by the market was pre GFC in 2007. I have no idea why this is happening and hope it is something more than just simple momentum, but in my understanding, currently I own BRK fairly valued for the first time:). This is not a tragedy and I would still expect it to return long term 6-8 or even a tad more (with some extra luck) from this valuation level, but I also think at this level it is a getting exposed to some 'revert to mean' risk more, especially if it will go up so quickly even further. If it does indeed, a new trick, copied from dealraker, I am trying to learn (not to sell everything only because of valuation) will be tested:)

 

Yeah, we should be so lucky!!!  Not complaining all the time.

I thought about some theories last night. Some pretty idiotic, but you have to be creative:

 

1. Tech people/AI people (e. g. Apple) are finally discovering that tech could be overpriced and shifting to safe heaven (Berkshire).

2. Cryptocurrency people finally acknowledge that Munger was right (... is worthless) and shifting to safe heaven (Berkshire). 

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

4. Buffett wants to do something big and it is easier to do something big in an overpriced world with an overpriced Berkshire stock (like General Re in 1998).

5. There is a big acquisition going on.

If there is a big acquisition, Buffett could be repurchasing shares. That could be the reason why he stopped buying Occidental shares at lower prices.

Thomas Gayner (Markel) in a recent interview: "About Berkshire’s eventual sale of the 3.5% position in his company, Gayner added cryptically, “There are other things going on that I’m not at liberty to talk about.” Your guess is as good as mine on that one.

https://www.kingswell.io/p/markel-ceo-tom-gayner-talks-berkshire

6. The P/B valuation method gets less and less relevant.

7. Buffett wants highest flexibility for him and his successor. He doesn´t want Greg to do all the hard capital allocation decisions (+ tax reasons).

Cash has the highest flexibility and has a good risk-free yield.

8. Statistically we are closer to the next recession and in a recession Cash is king.

 

Any comments?

Edited August 31 by Charlie

[UK]

1 hour ago, Charlie said:

 

Yeah, we should be so lucky!!!  Not complaining all the time.

I thought about some theories last night. Some pretty idiotic, but you have to be creative:

 

1. Tech people/AI people (e. g. Apple) are finally discovering that tech could be overpriced and shifting to safe heaven (Berkshire).

2. Cryptocurrency people finally acknowledge that Munger is right (... is worthless) and shifting to safe heaven (Berkshire). 

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

4. Buffett wants to do something big and it is easier to do something big in an overpriced world with an overpriced Berkshire stock (like General Re in 1998).

5. There is a big acquisition going on.

6. The P/B valuation method gets less and less relevant.

7. Buffett wants highest flexibility for him and his successor. He doesn´t want Greg to do all the hard capital allocation decisions (+ tax reasons).

Cash has the highest flexibility.

8. Statistically we are closer to the next recession and in a recession Cash is king.

 

Some good possible reasons. I would add one more, though I admit this is more likely >95 percent just a rationalisation and wishfull thinking, but perhaps this revaluation could be insurance related? After long 'ZIRP winter' insurance float is finally an asset and not an almost liability again, all this constant noise about global warming and end of the world catastrophes (which in reality is like good publicity for business, like for Coke participating in Olympics, only usualy for free:)), WB himself still buying insurance, while selling Apple/BAC? I would also appreciate this hypothesis, lets call it an 'insurance supercycle':), because it would also bode very well for one another good and even more purer insurance company:)

 

Edited August 31 by UK

[73 Reds]

7 hours ago, Charlie said:

 

Yeah, we should be so lucky!!!  Not complaining all the time.

I thought about some theories last night. Some pretty idiotic, but you have to be creative:

 

1. Tech people/AI people (e. g. Apple) are finally discovering that tech could be overpriced and shifting to safe heaven (Berkshire).

2. Cryptocurrency people finally acknowledge that Munger was right (... is worthless) and shifting to safe heaven (Berkshire). 

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

4. Buffett wants to do something big and it is easier to do something big in an overpriced world with an overpriced Berkshire stock (like General Re in 1998).

5. There is a big acquisition going on.

If there is a big acquisition, he could be repurchasing shares. That could be the reason why he stopped buying Occidental shares at lower prices.

Thomas Gayner (Markel) in a recent interview: "About Berkshire’s eventual sale of the 3.5% position in his company, Gayner added cryptically, “There are other things going on that I’m not at liberty to talk about.” Your guess is as good as mine on that one.

https://www.kingswell.io/p/markel-ceo-tom-gayner-talks-berkshire

6. The P/B valuation method gets less and less relevant.

7. Buffett wants highest flexibility for him and his successor. He doesn´t want Greg to do all the hard capital allocation decisions (+ tax reasons).

Cash has the highest flexibility and has a good risk-free yield.

8. Statistically we are closer to the next recession and in a recession Cash is king.

 

Any comments?

That's an interesting list.  On more possibility:  Buffett, either independently or in collaboration with 3rd parties and/or government entities is creating a for-profit solution to one or more of the problems identified in this year's annual letter.

[sleepydragon]

7 hours ago, Charlie said:

 

Yeah, we should be so lucky!!!  Not complaining all the time.

I thought about some theories last night. Some pretty idiotic, but you have to be creative:

 

1. Tech people/AI people (e. g. Apple) are finally discovering that tech could be overpriced and shifting to safe heaven (Berkshire).

2. Cryptocurrency people finally acknowledge that Munger was right (... is worthless) and shifting to safe heaven (Berkshire). 

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

4. Buffett wants to do something big and it is easier to do something big in an overpriced world with an overpriced Berkshire stock (like General Re in 1998).

5. There is a big acquisition going on.

If there is a big acquisition, he could be repurchasing shares. That could be the reason why he stopped buying Occidental shares at lower prices.

Thomas Gayner (Markel) in a recent interview: "About Berkshire’s eventual sale of the 3.5% position in his company, Gayner added cryptically, “There are other things going on that I’m not at liberty to talk about.” Your guess is as good as mine on that one.

https://www.kingswell.io/p/markel-ceo-tom-gayner-talks-berkshire

6. The P/B valuation method gets less and less relevant.

7. Buffett wants highest flexibility for him and his successor. He doesn´t want Greg to do all the hard capital allocation decisions (+ tax reasons).

Cash has the highest flexibility and has a good risk-free yield.

8. Statistically we are closer to the next recession and in a recession Cash is king.

 

Any comments?

 

I think it’s really just the trillion dollar mktcap attracting more index flows. And people rebalancing into value stocks such as XLFs

[Charlie]

6 hours ago, UK said:

I would add one more, though I admit this is more likely >95 percent just a rationalisation and wishfull thinking, but perhaps this revaluation could be insurance related? After long 'ZIRP winter' insurance float is finally an asset and not an almost liability again, all this constant noise about global warming and end of the world catastrophes (which in reality is like good publicity for business, like for Coke participating in Olympics, only usualy for free:)), WB himself still buying insurance, while selling Apple/BAC? I would also appreciate this hypothesis, lets call it an 'insurance supercycle':), because it would also bode very well for one another good and even more purer insurance company:)

 

The Thomas Gayner comment is pretty interesting and smells like a possible acquisition or it´s wishful thinking from me. 

 

8 hours ago, Charlie said:

Thomas Gayner (Markel) in a recent interview: "About Berkshire’s eventual sale of the 3.5% position in his company, Gayner added cryptically, “There are other things going on that I’m not at liberty to talk about.” Your guess is as good as mine on that one.

https://www.kingswell.io/p/markel-ceo-tom-gayner-talks-berkshire

 

19 minutes ago, sleepydragon said:

I think it’s really just the trillion dollar mktcap attracting more index flows. And people rebalancing into value stocks such as XLFs

 

That´s probably true.

Edited August 31 by Charlie

[Hektor]

8 hours ago, Charlie said:

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

My understanding is that the Gates foundation is required to sell the shares from WEB within a year of receipt, and this requirement has not changed .

[Hektor]

Could WEB be selling some of his holdings to lighten up the insurance subs that has those holdings and mitigate the risk of large penalties awarded by juries against insurance cos?

[gfp]

23 minutes ago, Hektor said:

Could WEB be selling some of his holdings to lighten up the insurance subs that has those holdings and mitigate the risk of large penalties awarded by juries against insurance cos?

no, not likely

[John Hjorth]

52 minutes ago, Hektor said:

Could WEB be selling some of his holdings to lighten up the insurance subs that has those holdings and mitigate the risk of large penalties awarded by juries against insurance cos?

 

28 minutes ago, gfp said:

no, not likely

 

This is imperative to understand about Berkshire structure :

 

Annual report 2023, p. K-92, note 15, top of page paragraph [there is no avaiable information about it on quarterly basis in the 10-Qs]:

 

Quote

(15) Dividend restrictions– Insurance subsidiaries

 

Payments of dividends by our insurance subsidiaries are restricted by insurance statutes and regulations. Without prior regulatory approval, our principal insurance subsidiaries may declare up to approximately $31 billion as ordinary dividends during 2024. ...

 

So the sale of some securities in the insurance subsidiaries may generate some cash [in the insurance subsidiaries, that is], but that cash may still 'be on the hook' [and thereby restricted for dividend purposes], based on claims from ongoing or finished litigation etc., taking the actual dividend restrictions into consideration.

 

That said, the above stated is in a way quite academic and hypothetical, because Berkshire and it's insurance subsidiaries will pay according to rulings and verdicts against them, at latest when there is no further possible alternative of appeal or trial.

 

I would personally be shocked to see a Berkshire insurance subsidiary go bankrupt, by Berkshire leaving its own subsidiary on its own, to swim in its own pond with whatever problems it may have.

 

- - - o 0 o - - -

 

So the whole premis and basis for your line of thinking as basis for your question, @Hektor , is void.

 

Berkshire will honor such claims untill the day it any longer can't, or untill the sun in its process of burning up has swollen so much that it has had the Earth for lunch, unless something else has hapened before that.

[gfp]

Yeah, Berkshire can dividend out a lot more than $31 Billion from the insurance companies but they would have to ask first.  They had to ask to take out BNSF and it was no issue.  There are some advantages to leaving capital in National Indemnity and having it absurdly over-capitalized.  National Indemnity is also a flexible capital provider to many of Berkshire's operating subsidiaries but a lot of that gets eliminated in consolidation in the filings.  National Indemnity just refinanced all of Pilot's expensive bank debt for instance.  They also provided the funding for the Dominion Energy deals that BHE did through a preferred stock.  They lend to Lubrizol, etc..

[gfp]

10 hours ago, Charlie said:

 

Yeah, we should be so lucky!!!  Not complaining all the time.

I thought about some theories last night. Some pretty idiotic, but you have to be creative:

 

1. Tech people/AI people (e. g. Apple) are finally discovering that tech could be overpriced and shifting to safe heaven (Berkshire).

2. Cryptocurrency people finally acknowledge that Munger was right (... is worthless) and shifting to safe heaven (Berkshire). 

3. The selling pressure of the Bill and Melinda Gates Foundation has stopped, because they are getting no Berkshire stocks anymore.

4. Buffett wants to do something big and it is easier to do something big in an overpriced world with an overpriced Berkshire stock (like General Re in 1998).

5. There is a big acquisition going on.

If there is a big acquisition, Buffett could be repurchasing shares. That could be the reason why he stopped buying Occidental shares at lower prices.

Thomas Gayner (Markel) in a recent interview: "About Berkshire’s eventual sale of the 3.5% position in his company, Gayner added cryptically, “There are other things going on that I’m not at liberty to talk about.” Your guess is as good as mine on that one.

https://www.kingswell.io/p/markel-ceo-tom-gayner-talks-berkshire

6. The P/B valuation method gets less and less relevant.

7. Buffett wants highest flexibility for him and his successor. He doesn´t want Greg to do all the hard capital allocation decisions (+ tax reasons).

Cash has the highest flexibility and has a good risk-free yield.

8. Statistically we are closer to the next recession and in a recession Cash is king.

 

Any comments?

 

 

The simple truth is that insurance companies are breaking out to new highs and Berkshire shareholders do not sell much stock.  In fact, because Berkshire shareholders by and large do not want to realize capital gains but sometimes sell covered calls you get an effective synthetic short squeeze in the stock around these options expirations (Friday was one).  Berkshire has traded like this for a long time.  Sideways for a while and then an abrupt adjustment that violates a bunch of sold call option strike prices.  Then sideways for a year or two.

 

Buffett is not repurchasing stock at these levels.  You can see him trail off on repurchases as the price rose last quarter.  I would bet the only stock he repurchased last quarter was incoming calls offering A-shares.  He repurchased nothing at all in June.

 

The Gates foundation is still receiving annual grants of Berkshire shares and is still selling in the same manner as they have been (basically every day).  Warren is still alive.  Even if Warren dies tomorrow they still have a lot of Berkshire shares to sell each day.

 

 

[gfp]

5 minutes ago, TB said:

Indian billionaire Raamdeo Agrawal on Berkshire one trillion and Buffett birthday

 

https://www.youtube.com/watch?v=ivWIXnYkGfk

 

I like the part where he explains how Berkshire will double every 5 years so we are only 5 years from $2 Trillion and 10 years from $4 Trillion.  Easy peasy!