Buffett/Berkshire - general news

[adesigar]

https://www.jain-foundation.org/about/our-mission/

[73 Reds]

1 minute ago, adesigar said:

Probably making a $100 million donation to a charity that he supports.

But then why sell the stock and pay CG taxes rather than donate the shares directly?

[Munger_Disciple]

15 minutes ago, sleepydragon said:

It’s almost exactly $100m after tax. Is there a possiblity that Ajain is buying a huge house?   The most expensive house in CT is around $50m, but there are a lot of big houses in Florida

 

 

Perhaps Ajit is planning to move insurance HQ to FL ? He sure would save a few million in taxes every year!

[Munger_Disciple]

8 minutes ago, 73 Reds said:

My guess this is part of an estate plan.  

 

Why would estate planning involve selling stock? That makes no sense. 

[73 Reds]

7 minutes ago, Munger_Disciple said:

 

Why would estate planning involve selling stock? That makes no sense. 

Selling stock to then give the proceeds away to charities makes no sense.  He may want to start giving away his fortune to individuals/non-charities in increments less than the equivalent of an A share.   Does he have a large family or non-charitable (501c) causes that he supports?  Estate planning = reducing the size of your taxable estate.

Edited September 12 by 73 Reds
missed line

[Munger_Disciple]

7 minutes ago, 73 Reds said:

Selling stock to then give the proceeds away to charities makes no sense.  He may want to start giving away his fortune to individuals/non-charities in increments less than the equivalent of an A share.   Does he have a large family or non-charitable (501c) causes that he supports?  

 

Ajit's sale is not related to charitable giving (he could have gifted shares to avoid capital gains taxes), but it is highly unlikely that it is related to estate planning.

 

My own guess is that Ajit (the best odds maker in the world) sees future capital gains taxes (especially under a democratic administration) going up significantly so he is taking some chips off the table at a high end of Berkshire's intrinsic value if not higher. This thinking is in line with Warren's own stated thinking on higher future corporate tax rates which is one of the reasons he sold Apple stock. 

Edited September 12 by Munger_Disciple

[73 Reds]

Just now, Munger_Disciple said:

 

Ajit's sale is not related to charitable giving (he could have gifted shares to avoid capital gains taxes), but it is highly unlikely that it is related to estate planning.

 

My own guess is that Ajit (the best odds maker in the world) sees future capital gains taxes (especially under a democratic administration) going up significantly so he is taking some chips off the table at a high end of Berkshire's intrinsic value if not higher. 

I'd take the other side of that bet.  He knows Berkshire as well as anyone and unless he is planning on retiring (or even if he is), doesn't believe that Berkshire will not be more valuable in the future.

[Munger_Disciple]

FT had a funny screenshot of Ajit Jain:

[Munger_Disciple]

They corrected it:

[Xerxes]

Maybe Ajit is pissed that Buffett sold half of Apple. 
 

So he is getting back by selling half of Berkshire and re-deploying to Apple. 

[Xerxes]

59 minutes ago, Munger_Disciple said:

FT had a funny screenshot of Ajit Jain:

I wonder what stocks does Zelenskyy has in his retirement portfolio. 
 

All-in Rheinemetall

[thowed]

Obviously they don't have to, but personally for extra tight corporate governance, I'd like to see a note issued explaining why he's made such a big sale.  Otherwise it just creates speculation that something is wrong.  Not ideal.

[adesigar]

1 hour ago, 73 Reds said:

But then why sell the stock and pay CG taxes rather than donate the shares directly?

 

You are right. 

[janusdr]

4 hours ago, thowed said:

Obviously they don't have to, but personally for extra tight corporate governance, I'd like to see a note issued explaining why he's made such a big sale. 

It can't be personal and company specific (planned retirement in the short term, etc.) because then Buffett would want to have that disclosed first to avoid a perception of frontrunning the news.
It can't be charity related or shares would have been gifted.

It can't be estate related or shares would just have been gifted/pledged.

 

It could be to buy something expensive like a house.

But he could just have mentioned this in 1 short sentence ('proceeds are to finance a personal outlay') , and nobody would care and speculation would stop.

Secondly I don't think Ajit is a guy who buys trophy houses or jets for half his net worth at 73 years old, after not having done that for 40 years.

 

The only reason left is that Berkshire is very overvalued.

But even then it is strange, because neither Buffett nor Abel have sold a substantial amount of Berkshire shares, not now and not in the past when it was fully valued. But Buffett is the personification of Berkshire, and Abel is the next CEO so for them it is probably not done to start market timing their own stock.
Ajit may have less of a problem in that respect. He is also a lot less rich. (didn't have the MidAmerican stake).

 

Berkshire did stop buying back Berkshire shares in the last 2,5 months, even at prices in the low 400's, where he was buying in q1 and q2. 

I still think Buffett sees something coming in the economy. And Ajit sees it as well, and pushed the button when Berkshire ran up almost 20% in the past 2 months.

 

Edited September 12 by janusdr

[Munger_Disciple]

It is possible that Ajit is making a private personal investment (for example in India) that would be too small to move the needle for Berkshire. And being the best odds maker in the world, he sees a strong likelihood of capital gains taxes going up in the near future (especially under KH). So he might be selling now at a very attractive valuation for Berkshire. 

If one thinks about it, the above scenario is not that different from Buffett's rationale for selling Apple. 

Edited September 12 by Munger_Disciple

[gfp]

6 minutes ago, janusdr said:

And secondly I don't think Ajit is a guy who buys trophy houses or jets for half his net worth at 73 years old, after not having done that for 40 years.

 

Your points are all good and I don't disagree at all but I will mention that Ajit has spent a lot of money on real estate over the years.  Not half his net worth but a couple $15 million apartments (NYC and Florida), the NYC apt next door for $8.3m back in 2009, plus wherever he actually lives most of the time near Connecticut - I believe it is still a waterfront house in Rye, NY he has owned since the mid 90's (which was very inexpensive when he purchased it).

 

But he has a $20m annual salary so I don't think a need for spending cash is behind his sale.  He is in a very high tax bracket, could be in a class of people targeted by future tax increases, and Berkshire became pretty pricey.

[janusdr]

59 minutes ago, gfp said:

But he has a $20m annual salary so I don't think a need for spending cash is behind his sale.  

He is in a very high tax bracket, could be in a class of people targeted by future tax increases, and Berkshire became pretty pricey.

Indeed, his real estate purchases were all less than his annual salary. Would be strange to splurge half his net worth now, without a word. (A Bloomberg journalist got him on the phone, but he refused to give an explanation.)

 

Not a US tax specialist, but with regards to the taxes, it is for sure a federal long term capital gain, so taxed at 20% max. Which Harris wants to put at 28%.

Not to sniff at 8%, but I don't think these decade long Berkshire holders would time their stock transactions around a (potential) 8% extra tax?

It seems to me that a big overvaluation is the most important reason.

 

But since Buffett was still buying at 420 in recent quarters (before he stopped in the beginning of June), that means that 465 was around intrinsic value at that time.

Something must have happened that Buffett stopped buying afterwards (even at 400-405), and Ajit is even a major seller now at 463.

Maybe his realtime reports of some of the subsidiaries foreshadow trouble incoming for the economy.

 

Don't forget he is the master market timer
1969 closure of his fund, 1974 oversexed man in a whorehouse, 1987 fully in bonds just before the crash, 1999 november Fortune warning, 2008 october 'buy American', etc.

Now stopped to buy Berkshire while he bought it higher before; selling his top 2 positions Apple and Bank of America like a maniac; No more Oxy buys while he bought until last june at higher prices; Ajit selling a major stake.

I think Berkshire could be at more than 50% cash in the public portfolio by now. That is a really a lot by Berkshire standards.

 

All this does feel... signally.

 

Edited September 12 by janusdr

[villainx]

Sounds more like need money to invest in project for himself or his family.

[janusdr]

No idea why the Bloomstran guy on twitter is talking about a gift.

 

On all previous small stock gifts, this was specifically mentioned in the sec form.

Now it says explicitly that it's a sale on 1 date at a specific average stock price.

[Munger_Disciple]

1 hour ago, janusdr said:

No idea why the Bloomstran guy on twitter is talking about a gift.

 

He tends to shoot first and ask questions later. You are correct of course, Jain would have disclosed if he gifted the shares. Not only that it wasn't a gift, but Bloomstran got the sale price wrong. 

[UK]

4 hours ago, janusdr said:

But even then it is strange, because neither Buffett nor Abel have sold a substantial amount of Berkshire shares, not now and not in the past when it was fully valued. But Buffett is the personification of Berkshire, and Abel is the next CEO so for them it is probably not done to start market timing their own stock.
Ajit may have less of a problem in that respect. He is also a lot less rich. (didn't have the MidAmerican stake).

 

Buffett did this signaling once with a B share IPO. Not sure the stock was so ahead of itself this time though. But if a price is near fair value and both of them see this, why would it be a problem for Ajit to sell some, without any explanation? Valuation is at the highest level of the last 15 year (and not adjusted for size) and high probability of negative tax changes seems more than enough to explain this action? I personally doubt this is some kind if statement about economy or its future.

 

Edited September 13 by UK

[UK]

3 hours ago, janusdr said:

Don't forget he is the master market timer
1969 closure of his fund, 1974 oversexed man in a whorehouse, 1987 fully in bonds just before the crash, 1999 november Fortune warning, 2008 october 'buy American', etc.

Now stopped to buy Berkshire while he bought it higher before; selling his top 2 positions Apple and Bank of America like a maniac; No more Oxy buys while he bought until last june at higher prices; Ajit selling a major stake.

I think Berkshire could be at more than 50% cash in the public portfolio by now. That is a really a lot by Berkshire standards.

 

All this does feel... signally.

 

Not sure if I feel this way, but obviously recently there were many action (and non action) somewhat supporting such hyphothesis of yours. Now, would not be it ironic for most (but perhaps especially M7 type investors) being catched sleeping at the wheel again big time, just to find out that Warren at 84 was driving smartly with his eyes wide open:)))

 

Edited September 13 by UK

[Eldad]

5 hours ago, janusdr said:

Indeed, his real estate purchases were all less than his annual salary. Would be strange to splurge half his net worth now, without a word. (A Bloomberg journalist got him on the phone, but he refused to give an explanation.)

 

Not a US tax specialist, but with regards to the taxes, it is for sure a federal long term capital gain, so taxed at 20% max. Which Harris wants to put at 28%.

Not to sniff at 8%, but I don't think these decade long Berkshire holders would time their stock transactions around a (potential) 8% extra tax?

It seems to me that a big overvaluation is the most important reason.

 

But since Buffett was still buying at 420 in recent quarters (before he stopped in the beginning of June), that means that 465 was around intrinsic value at that time.

Something must have happened that Buffett stopped buying afterwards (even at 400-405), and Ajit is even a major seller now at 463.

Maybe his realtime reports of some of the subsidiaries foreshadow trouble incoming for the economy.

 

Don't forget he is the master market timer
1969 closure of his fund, 1974 oversexed man in a whorehouse, 1987 fully in bonds just before the crash, 1999 november Fortune warning, 2008 october 'buy American', etc.

Now stopped to buy Berkshire while he bought it higher before; selling his top 2 positions Apple and Bank of America like a maniac; No more Oxy buys while he bought until last june at higher prices; Ajit selling a major stake.

I think Berkshire could be at more than 50% cash in the public portfolio by now. That is a really a lot by Berkshire standards.

 

All this does feel... signally.

 

Plus since he is the best odds maker in the world he would know that the GOP are almost guaranteed to win the senate this year (70+% odds) with Tester of MT finally getting the boot and Joe Manchin WV seat going GOP. So tax hikes are not happening.
 

WB tax talk on Aapl was BS, let’s be honest. 

[ander]

Is Ajit selling really a concern given that he's had a long history of selling / gifting? It is of course not a positive signal, and I understand it is a large proportion of what is remaining, but I do not believe it is necessarily a suggestion of impending doom at Berkshire (remember if there is impending doom in the broader market, that is where Berkshire often does the best so one would not want to be a seller of shares right into it).

[73 Reds]

7 hours ago, Eldad said:

Plus since he is the best odds maker in the world he would know that the GOP are almost guaranteed to win the senate this year (70+% odds) with Tester of MT finally getting the boot and Joe Manchin WV seat going GOP. So tax hikes are not happening.
 

WB tax talk on Aapl was BS, let’s be honest. 

Agreed.  Not sure why so many folks pay so little attention to the legislative branch when it comes to new tax legislation.  Odds are slim to none unless one party sweeps Executive and Legislative branches of Congress.  And it really doesn't take the geniuses on this board to recognize that Berkshire is trading at a price above its historical valuation.  So what?  Ajit Jain sold a block of Berkshire - capital gains taxes and all - that represents a significant portion of his net worth for one or more purposes that he chooses to remain private.  Personally, I believe that this does have something to do with estate planning, i.e., ultimately reducing the size of his taxable estate but otherwise, it really doesn't matter and it says nothing whatsoever about the long term prospects of Berkshire going forward.