Buffett/Berkshire - general news

[Xerxes]

9 minutes ago, gfp said:

I thought it was pretty funny when she asked him about Paramount, which from his answer is clearly his position and not Ted or Todd's.  He went on to list a bunch of reasons why streaming wasn't a good business and why Paramount and the industry in general wasn't a good business to invest in.  Then she said something like, "well that was a lot of reasons NOT to buy Paramount, but why did you buy it?" and he basically said, "well, we'll see how it works out."  As in, "this company is going to be sold."

I think he likes Yellowstone the TV show. 
it is an emotional investment. 

[CorpRaider]

41 minutes ago, gfp said:

I thought it was pretty funny when she asked him about Paramount, which from his answer is clearly his position and not Ted or Todd's.  He went on to list a bunch of reasons why streaming wasn't a good business and why Paramount and the industry in general wasn't a good business to invest in.  Then she said something like, "well that was a lot of reasons NOT to buy Paramount, but why did you buy it?" and he basically said, "well, we'll see how it works out."  As in, "this company is going to be sold."

 Becky, have you not seen TopGun Maverick?

[Xerxes]

I should add that they guy who wrote the book GE Power Failure (william Cohen) has argued in several podcasts that once “reverse morris” deadline/lockout passes there would further consolidation in the media industry. He named I think Paramount, Warner and Comcast. 

apologies, as I am not verse in the whole “reverse morris” thing and who is impacted by the lockout. So cannot describes it in better detail. 

 

[yesman182]

3 hours ago, gfp said:

Also, "why did you keep BAC but sell almost every other bank holding?"  Well, I got a special deal back when I bought the majority of the position and I really like Brian Moynihan.

I interpolated his answer to be " I wanted to sell, but I didn't because I asked to join BAC years ago, so I will stick it out"

Edited April 12, 2023 by yesman182

[ValueMaven]

Has the full interview been posted yet?

[gfp]

The first hour is available as a free podcast called "Squawk Pod" and I'm sure the next two parts are coming there soon.  (edit: no video on the podcast and the content starts at the 5 min. mark)

Edited April 12, 2023 by gfp

[Stuart D]

44 minutes ago, gfp said:

 

The first hour is available as a free podcast called "Squawk Pod" and I'm sure the next two parts are coming there soon.  (edit: no video on the podcast and the content starts at the 5 min. mark)

Edited 34 minutes ago by gfp

 

Thank you!

[yesman182]

11 hours ago, Xerxes said:

I should add that they guy who wrote the book GE Power Failure (william Cohen) has argued in several podcasts that once “reverse morris” deadline/lockout passes there would further consolidation in the media industry. He named I think Paramount, Warner and Comcast. 

apologies, as I am not verse in the whole “reverse morris” thing and who is impacted by the lockout. So cannot describes it in better detail. 

 

Do you have a link? I would be interested in listening.

[Xerxes]

1 hour ago, yesman182 said:

Do you have a link? I would be interested in listening.

 

There you go:

The back end of the episode on GE, starting mark 42 minute, where he talks about Zaslov and Brian Roberts. Something to do Reverse Morris Trust requirement that ends in April 2024.

 

The World According To Boyar Podcast - Value Investing Podcast (boyarvaluegroup.com)

 

 

Edited April 13, 2023 by Xerxes

[bennycx]

He would still like to own 100% of a bank though so the economics are quite good except for the tail risk of mismanagement

[Charlie]

Full transcript of the interview:

 

https://www.cnbc.com/2023/04/12/full-transcript-berkshire-hathaway-chairman-ceo-warren-buffett-speaks-with-cnbcs-becky-quick-on-squawk-box-today-.html

 

 

Cheers!

[benchmark]

13 hours ago, yesman182 said:

I interpolated his answer to be " I wanted to sell, but I didn't because I asked to join BAC years ago, so I will stick it out"

I think that he also like Brian and probably thinks that he is more conservative and won't have as much a risk as other banks? 

[oscarazocar]

9 hours ago, Xerxes said:

 

There you go:

The back end of the episode on GE, starting mark 42 minute, where he talks about Zaslov and Brian Roberts. Something to do Reverse Morris Trust requirement that ends in April 2024.

 

The World According To Boyar Podcast - Value Investing Podcast (boyarvaluegroup.com)

 

 

 

Warner Brothers and Discovery merged in a Reverse Morris Trust transaction in April 2022 and there is basically a two year period until they can do another tax-free merger.  As I recall, a  Reverse Morris Trust transaction is one in which a public company spins off a division and merges it with another company, with the spun-off piece owning greater than 50% of the new entity.  Liberty has used these type of transaction a few times over the years.

 

https://www.hollywoodreporter.com/business/business-news/discovery-warnermedia-merger-favorable-tax-ruling-irs-1235068056/

[Luke]

Interesting, we know Buffett liked TSMC enough to buy 4b of it, he also thinks its a phenomenal business but he doesnt feel comfortable with China. Fair enough! The seismic point was a bit odd, they all know the deal about that in Taiwan and built accordingly...

[sleepydragon]

11 minutes ago, Luca said:

Interesting, we know Buffett liked TSMC enough to buy 4b of it, he also thinks its a phenomenal business but he doesnt feel comfortable with China. Fair enough! The seismic point was a bit odd, they all know the deal about that in Taiwan and built accordingly...

I suspect when he says “geo political” risk he is worrying TSM is forced to build factories in US which are much more costly and the huge capx on sensitive equipments and also the infrastructure support like electricity needed. It’s not just the war will actual happen, it’s whole new Cold War thing both governments are doing that will add costs to TSM’s business 

[Luke]

9 minutes ago, sleepydragon said:

I suspect when he says “geo political” risk he is worrying TSM is forced to build factories in US which are much more costly and the huge capx on sensitive equipments and also the infrastructure support like electricity needed. It’s not just the war will actual happen, it’s whole new Cold War thing both governments are doing that will add costs to TSM’s business 

So we have two major high NA foundries, TSMC and Samsung. Both can produce cheaper in Asia.

 

1. Who will "force" TSMC to build factories in the US? 

 

2. They do need a lot of electricity but why would that be a problem? Its not like there is not enough?

 

3. That they are not an asset light business is clear but ASML has many locations in taiwan, close cooperation etc? Why would there be problems with the equipment?

 

4.  This whole new cold war will affect every technology business, it all start with TSMC. The iphone, the Nvidia AI, the AMD chip for Teslas etc. Intel wont produce as efficient as TSMC and certainly not in the US. 

Edited April 13, 2023 by Luca

[sleepydragon]

58 minutes ago, Luca said:

So we have two major high NA foundries, TSMC and Samsung. Both can produce cheaper in Asia.

 

1. Who will "force" TSMC to build factories in the US? 

- Biden. The US labor cost is just too high compare to Taiwanese. 

 

2. They do need a lot of electricity but why would that be a problem? Its not like there is not enough?

- Actually not. TSMC consumes a huge percentage of Taiwan's electricity. They had shortage. I read it somewhere before. 

 

3. That they are not an asset light business is clear but ASML has many locations in taiwan, close cooperation etc? Why would there be problems with the equipment?

- A small earthquake or an accident from war (despite both sides won't want to damage) would be very costly, as some of the equipments and fabs can't be rebuilt for years.  

 

4.  This whole new cold war will affect every technology business, it all start with TSMC. The iphone, the Nvidia AI, the AMD chip for Teslas etc. Intel wont produce as efficient as TSMC and certainly not in the US. 

- That's true for all the chip companies. Though people will still use iPhone even if it's running on a decade old chip. I mean nobody else will have it too.

 

 

[Luke]

1 hour ago, sleepydragon said:

- That's true for all the chip companies. Though people will still use iPhone even if it's running on a decade old chip. I mean nobody else will have it too.

 

 

Its true for all chip companies but TSMC owns this market which relies on hundres of billions of dollars of capex, lots of machines from ASML with long waiting and production times, an amount of talent and educated engineers non existant after the taiwan war, no earnings for many businesses for the forseeable future etc...

[Whensthepaintdry?]

Did I hear correctly that Buffett said they were building for TSMC?

[gfp]

1 hour ago, Whensthepaintdry? said:

Did I hear correctly that Buffett said they were building for TSMC?

 

He may be referring the the new subsidiary that they got as part of Alleghany, which also built the structure for the Sphere in Las Vegas

 

https://www.wwafcosteel.com

 

(edit: by the way, I checked this site under projects and this new BRK subsidiary is building TSM and Intel's new factories, Tesla giga, and basically everything else on a huge scale that gets built from steel)

Edited April 13, 2023 by gfp

[Spooky]

4 hours ago, sleepydragon said:

I suspect when he says “geo political” risk he is worrying TSM is forced to build factories in US which are much more costly and the huge capx on sensitive equipments and also the infrastructure support like electricity needed. It’s not just the war will actual happen, it’s whole new Cold War thing both governments are doing that will add costs to TSM’s business 

 

I think this is right and is related to the CHIPS act passing.

[Munger_Disciple]

My impressions after seeing the interview:

On Banks: Buffett saw that all the banks were reaching for yield as they got massive deposits during COVID and sold all of them that BRK owned last year except BAC. He would have also sold BAC if he weren't knee deep into it (> 10% position) with a very low tax basis. Looking at BAC balance sheet, they owned a boatload of agency RMBS at low yields.  Of course BAC's deposit franchise is bullet proof, Moynihan is a good guy and they are too big to fail so there is no LT risk there but their SH equity will take a hit from higher interest rates.   

Ajit & Greg's Relationship: To me this is the most interesting part of the interview when Becky asked Greg about his relationship with Ajit. It is clear that they now have a closer relationship than before after they both were appointed Vice Chairmen & Board members. And it seems to be a very respectful mutual relationship. I came away thinking: Ajit=New Charlie, Greg=New Warren. We are in safe hands. 

 

Paramount: Clearly it was a Buffett position. The funny thing is that he talked about all the reasons not to own it or other media companies including the fact that he thinks streaming is a really shitty business. My guess is that he sold it in Q1.

Apple: Looks like Apple has become a sacrosanct position in Buffett's mind on par with Berkshire. These are the only two securities he kept in Allegheny's portfolio and blew out everything else. And he loves Tim Cook. Mr. B thinks he made a dumb mistake when he sold 10% of Apple position at $115. Mumbled something about taxes.  

Greg's BRK Ownership: Will continue to accumulate more shares in the future with his own capital freed up from BHE sale. Good news for BRK shareholders. 

 

 

 

[aceskc]

2 hours ago, Munger_Disciple said:

My impressions after seeing the interview:

On Banks: Buffett saw that all the banks were reaching for yield as they got massive deposits during COVID and sold all of them that BRK owned last year except BAC. He would have also sold BAC if he weren't knee deep into it (> 10% position) with a very low tax basis. Looking at BAC balance sheet, they owned a boatload of agency RMBS at low yields.  Of course BAC's deposit franchise is bullet proof, Moynihan is a good guy and they are too big to fail so there is no LT risk there but their SH equity will take a hit from higher interest rates.   

Ajit & Greg's Relationship: To me this is the most interesting part of the interview when Becky asked Greg about his relationship with Ajit. It is clear that they now have a closer relationship than before after they both were appointed Vice Chairmen & Board members. And it seems to be a very respectful mutual relationship. I came away thinking: Ajit=New Charlie, Greg=New Warren. We are in safe hands. 

 

Paramount: Clearly it was a Buffett position. The funny thing is that he talked about all the reasons not to own it or other media companies including the fact that he thinks streaming is a really shitty business. My guess is that he sold it in Q1.

Apple: Looks like Apple has become a sacrosanct position in Buffett's mind on par with Berkshire. These are the only two securities he kept in Allegheny's portfolio and blew out everything else. And he loves Tim Cook. Mr. B thinks he made a dumb mistake when he sold 10% of Apple position at $115. Mumbled something about taxes.  

Greg's BRK Ownership: Will continue to accumulate more shares in the future with his own capital freed up from BHE sale. Good news for BRK shareholders. 

 

 

 

The apple /taiwan thought process seemed interesting....he seemed uncomfortable with geopolitical tail risk with taiwan...but was okay bearing it with Apple because of the customer stickiness that withstood the 10k replacement test ....found that interesting because it seems to me that Taiwanese chips are probably even more essential and irreplaceable to its customers than iPhone is to its fanbase.

[LearningMachine]

1 hour ago, aceskc said:

The apple /taiwan thought process seemed interesting....he seemed uncomfortable with geopolitical tail risk with taiwan...but was okay bearing it with Apple because of the customer stickiness that withstood the 10k replacement test ....found that interesting because it seems to me that Taiwanese chips are probably even more essential and irreplaceable to its customers than iPhone is to its fanbase.

 

The 10k replacement test is interesting.

 

What other companies would you not be willing to switch away from for life even if someone offered you $10K?  AMZN comes to mind, but capex there is a different matter. 

 

Also, for AAPL, getting out and then getting back in after probability of China taking over Taiwan materializes would cost a lot in taxes, and given the probability is not 100% anyway, he is saying he doesn't want to get out.  However, for someone not in AAPL currently, it might be worth to wait to see if that entry point comes especially at current prices. 

[LearningMachine]

4 hours ago, Munger_Disciple said:

My impressions after seeing the interview:

On Banks: Buffett saw that all the banks were reaching for yield as they got massive deposits during COVID and sold all of them that BRK owned last year except BAC. He would have also sold BAC if he weren't knee deep into it (> 10% position) with a very low tax basis. Looking at BAC balance sheet, they owned a boatload of agency RMBS at low yields.  Of course BAC's deposit franchise is bullet proof, Moynihan is a good guy and they are too big to fail so there is no LT risk there but their SH equity will take a hit from higher interest rates.   

 

I posted the below earlier why he didn't get out of BAC that a lot of folks have been missing and that he didn't want to get into at the meeting, but he alluded to it with his love for Moynihan and by his comments about wanting to own a bank 100%.  He owns 12.9% of BAC and that continues to go up, while staying under the limits. 

 

 

*****

If you can get out of other banks, you can then help your own bank (BAC) and Moynihan plan for this at the expense of other banks potentially being counterparty to these hedges:

• Hedges on held-to-maturity:  "hedging of items that are not recognized at fair value on the Consolidated Balance Sheet". See footnote 2 to table 11 on page 52:  https://www.sec.gov/ix?doc=/Archives/edgar/data/0000070858/000007085823000092/bac-20221231.htm . Thanks to someone on the group for sharing privately. 
• Hedges on Available for Sale: "we don't have any capital impact from rising rates."  See https://app.tikr.com/stock/transcript?cid=19049&tid=2592914&e=1784038192&ts=2718283&ref=u8yosp .  So far resulting in about ~$800M quarterly floating interest income. 

 

If you have the patience for securites/loans to mature and get lent out at much higher rates, interest income will be much much higher than what it is today. 

 

*****