Buffett/Berkshire - general news

[yesman182]

4 hours ago, Munger_Disciple said:

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.

wouldn't he need to disclose his sale?

[Munger_Disciple]

2 hours ago, yesman182 said:

wouldn't he need to disclose his sale?

 

Only if BRK ownership exceeds 10% (sale to be reported within a couple of days). Otherwise around May15th when they file 13F for Q1 2023. 

Edited April 14, 2023 by Munger_Disciple

[Munger_Disciple]

3 hours ago, LearningMachine said:

 

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. 

 

 

Thanks for pointing it out. Looks like BAC hedged at least a portion of their HTM securities' exposure to rising rates.

[gfp]

12 hours ago, LearningMachine said:

 

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. 

 

*****

 

I took that line item on page 52, table 11 - the one referenced in footnote 2 - as being a loss on hedging not a gain.  Is that not correct?

[gfp]

Yen bond sale results -

https://www.bnnbloomberg.ca/warren-buffett-s-berkshire-sells-1-2-billion-of-yen-debt-after-big-japan-bets-1.1907592

[backtothebeach]

All 3 hours of the recent CNBC interview are now on Squawkpod.

Edited April 15, 2023 by backtothebeach

[Saluki]

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

 

Transcript of the interview now online. 

[dcollon]

Thanks Backtothebeach and Saluki. 

[Munger_Disciple]

3 hours ago, gfp said:

 

I took that line item on page 52, table 11 - the one referenced in footnote 2 - as being a loss on hedging not a gain.  Is that not correct?

 

You are correct @gfp. Negative number would have been a gain (regulatory capital is calculated assuming assets are HTM without taking into account mark-to-market gains or losses), so BAC hedges cost them $10 billion in 22. 

Edited April 14, 2023 by Munger_Disciple

[CassiusKing1]

4 hours ago, backtothebeach said:

All 4 hours of the recent CNBC interview are now on Squawkpod.

Thanks for posting.

 

WEB- "And we'll never run out of money!"  

 

[Spekulatius]

6 hours ago, Munger_Disciple said:

 

You are correct @gfp. Negative number would have been a gain (regulatory capital is calculated assuming assets are HTM without taking into account mark-to-market gains or losses), so BAC hedges cost them $10 billion in 22. 

Losses in HTM don’t have any regulatory capital impact for banks. That’s not because anything special was done by BAC, it’s because that’s how the regulator set the rules this way.

(Losses in AFM only impact systemically important banks like VAC, JPM, C etc  that are above ~$700B in size. For smaller banks, losses in AFS don’t have any regulatory capital impact either).

 

I also think it’s correct that BAC has a $11.9B hedging loss not a gain. I guess they better on interest rates staying low. BAC isn’t as well managed than JPM, at least in terms of liability management that’s for sure. I think their earnings won’t look as good either, but we will see on 4/18 how it plays out.

In my opinion, it is likely that Buffett kept VAC,  it because it is necessarily better than other banks,  he kept it simply because it is his largest position and selling it would have been difficult, so he just decided to do away with his smaller positions to reduce his sector exposure.

 

 

Edited April 14, 2023 by Spekulatius

[Munger_Disciple]

1 hour ago, Spekulatius said:

Losses in HTM don’t have any regulatory capital impact for banks. That’s not because anything special was done by BAC, it’s because that’s how the regulator set the rules this way.

(Losses in AFM only impact systemically important banks like VAC, JPM, C etc  that are above ~$700B in size. For smaller banks, losses in AFS don’t have any regulatory capital impact either).

 

I also think it’s correct that BAC has a $11.9B hedging loss not a gain. I guess they better on interest rates staying low. BAC isn’t as well managed than JPM, at least in terms of liability management that’s for sure. I think their earnings won’t look as good either, but we will see on 4/18 how it plays out.

In my opinion, it is likely that Buffett kept VAC,  it because it is necessarily better than other banks,  he kept it simply because it is his largest position and selling it would have been difficult, so he just decided to do away with his smaller positions to reduce his sector exposure.

 

 

 

Yeah, BAC had $12B cumulative losses on hedges so far with most of it ($10B) coming in 22. I agree with you that their hedging sucks. I don't understand why they bet on interest rates staying low when they were already very low when they placed such a bet. JPM seems to have managed interest rate risk better than BAC but then JPM has a massive derivative book so one should be cautious with JPM as well.  

Edited April 15, 2023 by Munger_Disciple

[crs223]

12 hours ago, backtothebeach said:

All 4 hours of the recent CNBC interview are now on Squawkpod.

 

That was great, thank you.

 

I loved hearing so much from Greg.  Nice to know he's the "enforcer" for WEB.  WEB had a great point: where else do you have an officer buying $100M of stock with his own money and no discount/grants/options.  I love being a shareholder in BRK.

 

This one surprised me, particularly given the conversation around this site a year ago (which came from BRK letters from the early 80s): inflation is not that bad for auto insurers.  BRK is not going to write a 20 year auto policy.  They write 6 month policies and they can crank up the price pretty quickly.  They'd write 15 day policies if inflation got up high enough!  Inflation is not special risk to insurers... they just adjust the price as needed.  "I don't wish it on anyone, but you could argue inflation is good for insurance because you get much bigger premiums on much bigger coverages".  "over time, autos have gotten safer, accidents per 100 miles driven has gone down, but price for auto insurance has gone up 30-40x".

[LearningMachine]

16 hours ago, Munger_Disciple said:

 

Yeah, BAC had $12B cumulative losses on hedges so far with most of it ($10B) coming in 22. I agree with you that their hedging sucks. I don't understand why they bet on interest rates staying low when they were already very low when they placed such a bet. JPM seems to have managed interest rate risk better than BAC but then JPM has a massive derivative book so one should be cautious with JPM as well.  

 

 

I know I myself started the speculation that Footnote 2 in Table 11 might be related to interest rate hedges on HTM, but we don't know for certain.  All the footnote says is "Includes amounts in accumulated other comprehensive income related to the hedging of items that are not recognized at fair value on the Consolidated Balance Sheet."

 

What we do know with certainty is what we have them on the record saying on Jan 13, 2023:

Quote

It’s mainly the treasuries that are in there, they’re swapped to floating. That way, we don’t have any capital impact from rising rates. And so, you’re going to see the securities yield just continue to pick up. Number one, based off of the treasuries swap to floating as floating rates go higher. And number two, as the securities come due, there’ll be fewer and fewer of them at lower rates. And so, you’re going to see the pickup over time.

 

Because they are talking about treasuries above and HTM doesn't impact capital, I understand they are likely referring to only AFS. BAC provides more details on cash flow hedges on pages 107 and 108, but they don't distinguish between AFS and HTM. https://www.sec.gov/ix?doc=/Archives/edgar/data/70858/000007085823000092/bac-20221231.htm .

 

Overall, though, we can't claim that they bet on interest rates staying low especially given that at least for AFS, they are saying that treasures are "swapped to floating" and that "we don't have any capital impact from rising rates.".

 

If that had the foresight or received guidance to do that for AFS, you could argue they might have at least given thought to doing something like that for HTM.

Edited April 15, 2023 by LearningMachine

[DooDiligence]

On 4/14/2023 at 11:01 PM, crs223 said:

 

That was great, thank you.

 

I loved hearing so much from Greg.  Nice to know he's the "enforcer" for WEB.  WEB had a great point: where else do you have an officer buying $100M of stock with his own money and no discount/grants/options.  I love being a shareholder in BRK.

 

This one surprised me, particularly given the conversation around this site a year ago (which came from BRK letters from the early 80s): inflation is not that bad for auto insurers.  BRK is not going to write a 20 year auto policy.  They write 6 month policies and they can crank up the price pretty quickly.  They'd write 15 day policies if inflation got up high enough!  Inflation is not special risk to insurers... they just adjust the price as needed.  "I don't wish it on anyone, but you could argue inflation is good for insurance because you get much bigger premiums on much bigger coverages".  "over time, autos have gotten safer, accidents per 100 miles driven has gone down, but price for auto insurance has gone up 30-40x".

 

It's probably not that hard to win back business either. We'll see if Progressive is underpricing and has to hike bigly.

[Munger_Disciple]

News item tangentially related to Berkshire. I believe Malcolm "Kim" Chace used to be a Berkshire board member. His family was the only one of the large original "Berkshire Hathaway" shareholders who didn't sell stock when Buffett took control and rode it all the way. 

 

https://www.golocalprov.com/news/billionaire-chaces-will-was-changed-in-final-days-of-his-life-he-was-comple

[Munger_Disciple]

I found this blurb in Buffett's 1991 letter to shareholders:

 

Malcolm G. Chace, Jr., now 88, has decided not to stand for election as a director this year. But the association of the Chace family with Berkshire will not end: Malcolm III (Kim), Malcolm's son, will be nominated to replace him.

 

In 1931, Malcolm went to work for Berkshire Fine Spinning Associates, which merged with Hathaway Manufacturing Co. in 1955 to form our present company. Two years later, Malcolm became Berkshire Hathaway's Chairman, a position he held as well in early 1965 when he made it possible for Buffett Partnership, Ltd. to buy a key block of Berkshire stock owned by some of his relatives. This purchase gave our partnership effective control of the company. Malcolm's immediate family meanwhile kept its Berkshire stock and for the last 27 years has had the second-largest holding in the company, trailing only the Buffett family. Malcolm has been a joy to work with and we are delighted that the long-running relationship between the Chace family and Berkshire is continuing to a new generation.

Edited April 27, 2023 by Munger_Disciple

[John Hjorth]

Berkshire Hathaway Press Release [April 27^th 2023].

 

It reads a bit weird to me, any information about the supplementary background information about this would be appreciated, if you have any to share, thank you.

[gfp]

1 hour ago, John Hjorth said:

Berkshire Hathaway Press Release [April 27^th 2023].

 

It reads a bit weird to me, any information about the supplementary background information about this would be appreciated, if you have any to share, thank you.

https://www.bnnbloomberg.ca/talc-supplier-to-cosmetics-firms-files-bankruptcy-after-lawsuits-1.1913164

[sleepydragon]

Where is everyone watching the Annual Meeting 2023 online today?

CNBC has it but it doesn't start until 9:45am. 

Yahoo Finance no longer has the video/pre-show etc..?

 

[spartansaver]

It’s not until next weekend.

[sleepydragon]

4 minutes ago, spartansaver said:

It’s not until next weekend.

[Xerxes]

2 hours ago, sleepydragon said:

Where is everyone watching the Annual Meeting 2023 online today?

CNBC has it but it doesn't start until 9:45am. 

Yahoo Finance no longer has the video/pre-show etc..?

 

 On CNBC directly. 
the live portion is no longer on YouTube. 
 

[John Hjorth]

@Xerxes,

 

Please see the - likely intentional - smiley used by @sleepydragon in the exchange with @spartansaver above [  ]. This is actually quite funny! [  ].

 

- - - o 0 o - - -

 

Edit :

 

@Xerxes,

 

If my above posts to you seemed patronizing  and condecending, I hereby apologize.

 

Here is a more specific angle :

 

The 2023 Annual Meeting will be on May 6, 2023 [, which means next weekend].

Edited April 29, 2023 by John Hjorth

[sleepydragon]

4 hours ago, John Hjorth said:

@Xerxes,

 

Please see the - likely intentional - smiley used by @sleepydragon in the exchange with @spartansaver above [  ]. This is actually quite funny! [  ].

 

- - - o 0 o - - -

 

Edit :

 

@Xerxes,

 

If my above posts to you seemed patronizing  and condecending, I hereby apologize.

 

Here is a more specific angle :

 

The 2023 Annual Meeting will be on May 6, 2023 [, which means next weekend].

 

I decided to watch the 2022 video as a warm up instead