DooDiligence Posted February 24 Share Posted February 24 "All in all, we have no possibility of eye-popping performance." Link to comment Share on other sites More sharing options...
RadMan24 Posted February 24 Share Posted February 24 On the BHE thread, we were discussing the wildfire mitigation and impact, but I have to be honest, this letter was a sobering point of view, and one that really makes sense if this is how the regulatory bodies in certain states are going to proceed. Underground electrical wires are extensively expensive, forest management is also expensive, more and more people and property are in fire prone areas, and if "convective storms" do arise more often in the future, forest fires will simply be more intense given the growing biomass from more c02 in the atomosphere (the amount of plant biomass in most of the US is up 30% over the last 3-4 decades). It is refreshing to see however, Buffett state that he will not throw good money into bad. Link to comment Share on other sites More sharing options...
MCR Posted February 24 Share Posted February 24 2 hours ago, John Hjorth said: I personally like this shareholder letter very much. Reading it made me think and gave the feeling : 'This is the Mr. Buffett I know and can recognize from earlier shareholder Letters!'. [ Honestly, to me personally, some of the last ones have given me a feeling of a man running out of steam, but that's just me. And that would actually and cetainly be all okay with me after this performance in more than a half century, based on actual age by now.] Candid and honest expressions based on factual and critical thinking about the 'social contracts' between non-public owned regulated businesses and the US society as a whole. Personally I hope for the best for all my US fellow CoBF board members in that regard, because it's important for economic future development of USA. - - - o 0 o - - - A bit like asking a farmer i Western Jutland, Denmark at the end of October in a given record year for the harvest : 'How was the harvest this year?' Answer <With no excitement> : 'Not shabby, not shappy ...' - - - o 0 o - - - USD 96 Billon after tax and minorities. I just say : 'Not shabby.' But unlike the West Jutland farmer, I can't move the pipe from one corner of my mouth to the other while I say it. Isen't this the worlds second largest profit for any company on the planet, only surpassed by Saudi Aramco? I felt exactly the same about this year's letter. It feels like a return to form. There are a few years' letters (or portions of letters) that I've shared with my kids and others. This one merits sharing in its entirety. Link to comment Share on other sites More sharing options...
RadMan24 Posted February 24 Share Posted February 24 5 minutes ago, MCR said: I felt exactly the same about this year's letter. It feels like a return to form. There are a few years' letters (or portions of letters) that I've shared with my kids and others. This one merits sharing in its entirety. Agreed. Link to comment Share on other sites More sharing options...
thowed Posted February 24 Share Posted February 24 46 minutes ago, RadMan24 said: Agreed. Yes - this one was good. I can't really say why, but the past few were a little underwhelming. Maybe expecting the long brilliance of the earlier letters? And now a reset in expectations? Some of it reminded me of that old Jason Zweig line that it's so hard being a financial journalist, as there's only one sensible thing to say, and he has to find a different way of saying it once a week. But I certainly need constant reminders about filtering out the 'casino noise', remembering the importance of incentivisation, and also how distorted accounting can be (lies, damned lies, and accounting...). Link to comment Share on other sites More sharing options...
anony208 Posted February 24 Share Posted February 24 Looks like a divestiture of energy assets is coming up. Link to comment Share on other sites More sharing options...
MarioP Posted February 24 Share Posted February 24 3 hours ago, DooDiligence said: "All in all, we have no possibility of eye-popping performance." He said that a year where operational earnings are up 20%…Bring me more boring performance like that Link to comment Share on other sites More sharing options...
schin Posted February 24 Share Posted February 24 6 hours ago, Xerxes said: I don’t even know why people ever thought he would buy the whole thing (OXY). When he bought 30% of the company at no premium. He has been clear in 2020 letter that broadly speaking he won’t pay control premium. And he is happy to be a large minority shareholder when it suits him. The question would be, what he would gain from being a full owner of Occidental (that he does not get by being just a major shareholder). And is that aspect worth the control premium. @Spekulatius @Xerxes - If he is wiling to invest 20%+ percent, why wouldn't he buy the whole thing? He did that for BNSF, See's, etc. I mean.... if he is buying on the open market, why not open up the possibility of buying it? I know he didn't want to buy all of Washington Post and be seen as aggressive to Katherine Graham... But, other than SEC reporting requirements... if OXY being the same company it is today, but trades at a P/E of 1-2.... and he can take it private at that price... he should do it.... I don't know why he has to be so vocal about it.... Link to comment Share on other sites More sharing options...
schin Posted February 24 Share Posted February 24 6 hours ago, sleepydragon said: Her attractive daughters should be around 50-60 years old.. @sleepydragon - I'm going to do the reverse Leonard DiCarpo and date 50-60 year olds that have bad hearts, but a lot of money... Link to comment Share on other sites More sharing options...
LearningMachine Posted February 24 Share Posted February 24 (edited) On 2/24/2024 at 2:43 PM, schin said: @Spekulatius @Xerxes - If he is wiling to invest 20%+ percent, why wouldn't he buy the whole thing? He did that for BNSF, See's, etc. I mean.... if he is buying on the open market, why not open up the possibility of buying it? I know he didn't want to buy all of Washington Post and be seen as aggressive to Katherine Graham... But, other than SEC reporting requirements... if OXY being the same company it is today, but trades at a P/E of 1-2.... and he can take it private at that price... he should do it.... I don't know why he has to be so vocal about it.... Because owning it fully exposes to potentially severe liability risk, e.g. a spill in the deep water operations of Gulf of Mexico. I've mentioned this a few times before. Remember the BP oil spill. Buffett wouldn't want to expose the mothership to that type of liability risk even if it is low probability. Edited March 13 by LearningMachine Link to comment Share on other sites More sharing options...
ValueMaven Posted February 24 Share Posted February 24 (edited) WEB sounded almost depressed. I get BNSF and BHE weakness - but these are super valuable assets. In some ways I think he is really trying to talk down how special these are. Nothing on MSR which is seeing really solid results. I dunno - I was left wanting more ... Also - why does he not publish the top 10 equity positions anymore?? Edited February 24 by ValueMaven Link to comment Share on other sites More sharing options...
scorpioncapital Posted February 24 Share Posted February 24 (edited) 7 hours ago, Xerxes said: The boosters for years were saying BHE is where you could just park that excess surplus get that 10% regulated return. Amazing etc. look at that negative tax rate. At the end of nothing is guaranteed with government and regulatory environment. I am not even sure I understand the full picture. I guess Greg did do the right thing to liquidate his BHE and redeploy into the greater Berkshire. in any case, I trust the management to continue navigating the headwinds. Read Viktor Shvets of Macquire and Russell Napier. Interest rates zero or negative, technological deflation, demographic challenges , all lead to governments in desperate mode to control and regulate more and more, financial repression, etc.. Basically 'you will own nothing and be happy'. Viktor especially talks about the death of capitalism under this new model, but almost out of necessity, even if it was bungled up over many decades. The global economy is no match for a self-contained system. China flooding global markets, rules at home that give them advantages at the expense of citizenry, etc..all this requires massive government regulation, even expropriation to prevent civil war imho. Edited February 24 by scorpioncapital Link to comment Share on other sites More sharing options...
gfp Posted February 24 Share Posted February 24 10 minutes ago, ValueMaven said: WEB sounded almost depressed. I get BNSF and BHE weakness - but these are super valuable assets. In some ways I think he is really trying to talk down how special these are. Nothing on MSR which is seeing really solid results. I dunno - I was left wanting more ... Also - why does he not publish the top 10 equity positions anymore?? It's not every Berkshire annual letter that goes into graphic descriptions of suicide. Link to comment Share on other sites More sharing options...
Parsad Posted February 24 Share Posted February 24 7 hours ago, John Hjorth said: I personally like this shareholder letter very much. Reading it made me think and gave the feeling : 'This is the Mr. Buffett I know and can recognize from earlier shareholder Letters!'. [ Honestly, to me personally, some of the last ones have given me a feeling of a man running out of steam, but that's just me. And that would actually and certainly be all okay with me after this performance in more than a half century, based on actual age by now.] Candid and honest expressions based on factual and critical thinking about the 'social contracts' between non-public owned regulated businesses and the US society as a whole. Personally I hope for the best for all my US fellow CoBF board members in that regard, because it's important for economic future development of USA. - - - o 0 o - - - A bit like asking a farmer i Western Jutland, Denmark at the end of October in a given record year for the harvest : 'How was the harvest this year?' Answer <With no excitement> : 'Not shabby, not shappy ...' - - - o 0 o - - - USD 96 Billon after tax and minorities. I just say : 'Not shabby.' But unlike the West Jutland farmer, I can't move the pipe from one corner of my mouth to the other while I say it. Isen't this the worlds second largest profit for any company on the planet, only surpassed by Saudi Aramco? Yes this letter was a throwback to the older letters. I’m sure Charlie would have liked it! Cheers! Link to comment Share on other sites More sharing options...
yesman182 Posted February 25 Share Posted February 25 15 minutes ago, gfp said: It's not every Berkshire annual letter that goes into graphic descriptions of suicide. 15 minutes ago, gfp said: It's not every Berkshire annual letter that goes into graphic descriptions of suicide. It was interesting hearing him be thankful for the men and woman working outside on the railroad in Montana and ND. Link to comment Share on other sites More sharing options...
Xerxes Posted February 25 Share Posted February 25 1 hour ago, LearningMachine said: Because owing it fully exposes to potentially severe liability risk, e.g. a spill in the deep water operations of Gulf of Mexico. I've mentioned this a few times before. Remember the BP oil spill. Buffett wouldn't want to expose the mothership to that type of liability risk even if it is low probability. I recall you mentioning that before. Yet insurance is also be a form of liability to the whole group. Even if the risk is right sized etc. I find it interesting that both this letter and last year’s letter, he shared fond memories of Coka Cola and American Express. Just cool brands. Not much to do. Unlike BNSF, BHE etc Link to comment Share on other sites More sharing options...
Eldad Posted February 25 Share Posted February 25 1 hour ago, gfp said: It's not every Berkshire annual letter that goes into graphic descriptions of suicide. Hahaha that was so weird. 1 a day but at least not as bad as Europe. I thought he sounded a little depressed/nihilistic too. All varnished with the usual charm. BRK basically a super safe 8%er. I not sure he is just being humble old WB. I think he might be saying get out if you want to get rich like Bertie (or marry one of her pretty daughters). I mean if BHE isn’t there to suck up capital and you have Greg instead of WB and Charlie, I’m not sure I don’t take his advice at some point. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted February 25 Share Posted February 25 1 minute ago, Xerxes said: I recall you mentioning that before. Yet insurance is also be a form of liability to the whole group. Even if the risk is right sized etc. I find it interesting that both this letter and last year’s letter, he shared fond memories of Coka Cola and American Express. Just cool brands. Not much to do. Unlike BNSF, BHE etc Perhaps Buffett has become more mindful of the advantages of long term holdings Coke & Amex which keep chugging along in light of new problems at BNSF & BHE. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted February 25 Share Posted February 25 (edited) I found the following comments from Buffett's letter noteworthy: Buffett basically declared that the days of acquiring large private businesses is over due to Berkshire's size & increased competition from PE. He said "Berkshire does not currently pay dividends". Perhaps preparing shareholders for the day they might have to given the potential issues facing BHE? He especially seemed negative about BHE's prospects (and perhaps a bit less so about BNSF though he pointed out labor wage increases driven by President & Congress). If Berkshire can't reinvest huge earnings into more capex at BHE at decent regulated returns, it would indeed be a negative for Berkshire. Buffett said Greg is ready to be CEO tomorrow in all aspects; not a surprise but perhaps preparing shareholders for the eventuality. Given the problems at BHE & BNSF, he seemed to appreciate the virtues of Coke & Amex holdings even more than he used to. He really seemed to have a high opinion of Vicki at OXY. I thought it was funny Buffett was trying to entice shareholders to attend the annual meeting by dangling the prospect of getting to meet his very rich & attractive nieces in Omaha. Edited February 25 by Munger_Disciple Link to comment Share on other sites More sharing options...
schin Posted February 25 Share Posted February 25 2 hours ago, LearningMachine said: Because owing it fully exposes to potentially severe liability risk, e.g. a spill in the deep water operations of Gulf of Mexico. I've mentioned this a few times before. Remember the BP oil spill. Buffett wouldn't want to expose the mothership to that type of liability risk even if it is low probability. @LearningMachine - Everyone of his businesses have risk. That's the whole point of margin of safety. That's part of your calculation. Whether you own 30% or 100% -- the risk is there... Link to comment Share on other sites More sharing options...
schin Posted February 25 Share Posted February 25 2 hours ago, ValueMaven said: WEB sounded almost depressed. I get BNSF and BHE weakness - but these are super valuable assets. In some ways I think he is really trying to talk down how special these are. Nothing on MSR which is seeing really solid results. I dunno - I was left wanting more ... Also - why does he not publish the top 10 equity positions anymore?? He says BNSF will be around forever... So, we're in a down cycle. It'll be okay. He didn't talk about his World Book investments or Dexter or newspaper investments.... Some industries will run it courses. I guess he's just sad that BSNF, BHE, and GEICO has needed re-investments lately. All have needed some TLC lately. Industry wise, technology wise, and personnel wise. He doesn't have shiny Iscar or Precision CastPart or Lukizol to rave about. Link to comment Share on other sites More sharing options...
Jaygo Posted February 25 Share Posted February 25 I didn't find his tone to be overly dour. Perhaps just cautious and a bit nostalgic for the days of KO and AMEX, higher returns and possibly fewer headaches. Moreso I think he is making a statement on the juxtaposition of men and women working their asses off in freezing weather, scraping bodies off the tracks only to be manipulated by the Washington ( politicians, ESG dicks, WS ) elite with a stroke of a pen from the comfort of a taxpayer funded office. I think the same goes for the capital and ingenuity of BHE and the like. If you want to unfairly punish the utility sector for political points enjoy sitting in the the dark, we will take our new capital elsewhere. The utility is mandated to provide power even in the most remote places but when storms, or fires hit these hard to service remote places the utility is on the hook for damages. People bitch when the power is out, bitch when the bill comes due and now litigate for freak accidents in areas where power lines probably shouldn't have been in the first place. Link to comment Share on other sites More sharing options...
Xerxes Posted February 25 Share Posted February 25 2 hours ago, Munger_Disciple said: I found the following comments from Buffett's letter noteworthy: Buffett basically declared that the days of acquiring large private businesses is over due to Berkshire's size & increased competition from PE. He said "Berkshire does not currently pay dividends" If BHE and railroad needed some qualitative “kitchen-sinking” under the current incumbent CEO, rather than future CEO, perhaps the same can be said of the dividend. No one is going to argue with Buffett if he re-institute the dividend after 50 years or so of not having it. Or at least he can create a runway of expectations for it. But leave the final call to future management. Link to comment Share on other sites More sharing options...
scorpioncapital Posted February 25 Share Posted February 25 (edited) 4 hours ago, Eldad said: Hahaha that was so weird. 1 a day but at least not as bad as Europe. I thought he sounded a little depressed/nihilistic too. All varnished with the usual charm. BRK basically a super safe 8%er. I not sure he is just being humble old WB. I think he might be saying get out if you want to get rich like Bertie (or marry one of her pretty daughters). I mean if BHE isn’t there to suck up capital and you have Greg instead of WB and Charlie, I’m not sure I don’t take his advice at some point. He said Munger was the architect that taught him to buy great businesses at fair price rather than cheap (or cyclical) at a good price. The bnsf and bhe issues (and even the oil investments) suggest that due to size he chose to go into businesses that have *some* advantages but not nearly as good as truly great businesses. Large capex utilities with high regulatory risk are obviously one or two levels lower on the quality ladder. In other words, it was the next best thing to do with large amount of capital in the absence of finding the super great businesses. On the other hand, should he have specialized in technology, given tech firms are the largest market cap assets in the world today, he might have been able to do better. But do we really know if the FANGS themselves won't have big problems in the next generation too? He also talked about if Americans want to go the public utility model. I believe in countries like Canada it is such a model with a sole, highly subsidized Crown corporation providing all the power. Should this happen, he will have made a wrong bet on changing situation. It isn't even clear he could divest them or the gov would pay a fair price. Most likely they'd be profit restrained going forward. Edited February 25 by scorpioncapital Link to comment Share on other sites More sharing options...
LearningMachine Posted February 25 Share Posted February 25 (edited) 4 hours ago, Xerxes said: I recall you mentioning that before. Yet insurance is also be a form of liability to the whole group. Even if the risk is right sized etc. 4 hours ago, schin said: @LearningMachine - Everyone of his businesses have risk. That's the whole point of margin of safety. That's part of your calculation. Whether you own 30% or 100% -- the risk is there... The risk here is not about just losing 30% if only 30% is owned, but the risk here is about losing 500 to 1000% of the investment if 100% is owned. If BRK owns OXY as a subsidiary fully, in case of a deep oil spill, courts can pierce the corporate veil to reach BRK assets like they did in case of BP subsidiary to reach BP parent's assets. So, full $58B OXY purchase can create a $250B liability. Ajit explained how they make insurance bets at a recent annual meeting that they are willing to risk a certain percent of their capital. I think he said risking somewhere around 5% of capital on a bet. Risking $250B liability would be too much for BRK. When justifying BRK's purchase of BNSF, Buffett and Munger once explained how they looked at the highest damages that a BNSF accident had ever caused in the past, and had decided that they could live with that. However, they can't live with the highest damage that a deep water oil spill can cause. Edited February 25 by LearningMachine Link to comment Share on other sites More sharing options...
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