Buffett/Berkshire - general news

[gfp]

"the Insurer" put out a short interview and article on BHSI - a wonderful business that Berkshire started from nothing instead of acquiring.  Imagine how much goodwill would be on the balance sheet it Berkshire were to buy an identical operation performing like BHSI today.

 

https://www.theinsurertv.com/news-in-focus/godhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view/?utm_source=listrak&utm_medium=email&utm_term=https%3a%2f%2fwww.theinsurertv.com%2fnews-in-focus%2fgodhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view%2f&utm_campaign=Godhwani%3a+BHSI+benefits+from+Berkshire+balance+sheet+and+long-term+view

[xo 1]

On 9/19/2023 at 2:34 PM, gfp said:

"the Insurer" put out a short interview and article on BHSI - a wonderful business that Berkshire started from nothing instead of acquiring.  Imagine how much goodwill would be on the balance sheet it Berkshire were to buy an identical operation performing like BHSI today.

 

https://www.theinsurertv.com/news-in-focus/godhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view/?utm_source=listrak&utm_medium=email&utm_term=https%3a%2f%2fwww.theinsurertv.com%2fnews-in-focus%2fgodhwani-bhsi-benefits-from-berkshire-balance-sheet-and-long-term-view%2f&utm_campaign=Godhwani%3a+BHSI+benefits+from+Berkshire+balance+sheet+and+long-term+view

Amazing story.  Crazy growth starting from scratch with plenty of room to continue to pursue Lloyd's.  

[UK]

https://www.ft.com/content/f1518d40-b065-44a6-ada2-7ee4a074d839

 

But first he had to warn the group’s largest shareholder about the potential losses and get him on board. “I called Warren Buffett and said, ‘We’re probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we’ll have long-term viability for our shareholders.’” Buffett, who bought most of Berkshire Hathaway’s Amex shares in the 1990s and now owns a 20 per cent stake, was sold. “‘The most important thing to take care of is your customers and your brand,’ he replied. ‘It’s hard to get customers back. And once you damage the brand, it’s damaged.’”

...

Squeri has restructured rewards across the company, eliminating ratings for business units and dramatically expanding the bonus programme. Now the entire 77,000-person workforce is eligible for a chunky annual payment based on their individual performance and the company-wide results. Before the change, “you had a load of people [whose] motivation was that the company just stay in business,” Squeri says. “Now, their motivation is, how can we make it better?”

[sleepydragon]

15 hours ago, UK said:

https://www.ft.com/content/f1518d40-b065-44a6-ada2-7ee4a074d839

 

But first he had to warn the group’s largest shareholder about the potential losses and get him on board. “I called Warren Buffett and said, ‘We’re probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we’ll have long-term viability for our shareholders.’” Buffett, who bought most of Berkshire Hathaway’s Amex shares in the 1990s and now owns a 20 per cent stake, was sold. “‘The most important thing to take care of is your customers and your brand,’ he replied. ‘It’s hard to get customers back. And once you damage the brand, it’s damaged.’”

...

Squeri has restructured rewards across the company, eliminating ratings for business units and dramatically expanding the bonus programme. Now the entire 77,000-person workforce is eligible for a chunky annual payment based on their individual performance and the company-wide results. Before the change, “you had a load of people [whose] motivation was that the company just stay in business,” Squeri says. “Now, their motivation is, how can we make it better?”

feel like he’s a micromanager though. Won’t be pleasant working for him

[gfp]

here is the article without the FT or Fortune magazine paywall - https://finance.yahoo.com/news/american-express-ceo-called-warren-152037387.html

[gfp]

With various articles coming out on the 25th anniversary of the collapse of Long Term Capital Management, I was reminded of Warren's offer to purchase the fund for $250 million while on vacation in Yellowstone.  One book I read claimed that Buffett only gave Meriwether one hour to accept the offer and a deal couldn't be negotiated in time.  The Fed ultimately forced the banks to rescue the fund in exchange for 90% of the equity of LTCM.  These were the same banks that were creditors to LTCM, so they were really just "bailing out themselves."  The birth of the Fed put for contagion fears...

 

This page from Berkshire's 50th anniversary book has Warren's comments on the attempt and some of the original documents.  The idea was that Berkshire would put up most of the capital but the fund would be wound down over time inside Goldman's trading desk.  LTCM's equity was around $400m at the time of this offer, but rapidly heading to zero.  Just about all of the spreads that had widened out to extremes returned to normal over time so Berkshire's capital and staying power would have produced a decent, although far from remarkable, profit.

 

Meriwether started another fund doing the same stuff with lower leverage after LTCM.  It imploded in 2009.  Then he started another fund doing the same thing after that.  Most of these guys were from the Solomon Brothers arbitrage desk and of course there were some nobel prize winners in there.

 

Here's a link to Buffett telling the story to some college kids - 

https://novelinvestor.com/buffetts-lessons-long-term-capital-management/

Edited September 24, 2023 by gfp

[giulio]

Love the napkin math, fantastic! Thanks for sharing @gfp

[longterminvestor]

On 9/24/2023 at 9:23 AM, gfp said:

With various articles coming out on the 25th anniversary of the collapse of Long Term Capital Management, I was reminded of Warren's offer to purchase the fund for $250 million while on vacation in Yellowstone.  One book I read claimed that Buffett only gave Meriwether one hour to accept the offer and a deal couldn't be negotiated in time.  The Fed ultimately forced the banks to rescue the fund in exchange for 90% of the equity of LTCM.  These were the same banks that were creditors to LTCM, so they were really just "bailing out themselves."  The birth of the Fed put for contagion fears...

 

This page from Berkshire's 50th anniversary book has Warren's comments on the attempt and some of the original documents.  The idea was that Berkshire would put up most of the capital but the fund would be wound down over time inside Goldman's trading desk.  LTCM's equity was around $400m at the time of this offer, but rapidly heading to zero.  Just about all of the spreads that had widened out to extremes returned to normal over time so Berkshire's capital and staying power would have produced a decent, although far from remarkable, profit.

 

Meriwether started another fund doing the same stuff with lower leverage after LTCM.  It imploded in 2009.  Then he started another fund doing the same thing after that.  Most of these guys were from the Solomon Brothers arbitrage desk and of course there were some nobel prize winners in there.

 

Here's a link to Buffett telling the story to some college kids - 

https://novelinvestor.com/buffetts-lessons-long-term-capital-management/

I would so enjoy readying more of things like this.  these are just gold.  

[John Hjorth]

On 9/24/2023 at 3:23 PM, gfp said:

With various articles coming out on the 25th anniversary of the collapse of Long Term Capital Management, I was reminded of Warren's offer to purchase the fund for $250 million while on vacation in Yellowstone.  One book I read claimed that Buffett only gave Meriwether one hour to accept the offer and a deal couldn't be negotiated in time.  The Fed ultimately forced the banks to rescue the fund in exchange for 90% of the equity of LTCM.  These were the same banks that were creditors to LTCM, so they were really just "bailing out themselves."  The birth of the Fed put for contagion fears...

 

This page from Berkshire's 50th anniversary book has Warren's comments on the attempt and some of the original documents.  The idea was that Berkshire would put up most of the capital but the fund would be wound down over time inside Goldman's trading desk.  LTCM's equity was around $400m at the time of this offer, but rapidly heading to zero.  Just about all of the spreads that had widened out to extremes returned to normal over time so Berkshire's capital and staying power would have produced a decent, although far from remarkable, profit.

 

Meriwether started another fund doing the same stuff with lower leverage after LTCM.  It imploded in 2009.  Then he started another fund doing the same thing after that.  Most of these guys were from the Solomon Brothers arbitrage desk and of course there were some nobel prize winners in there.

 

I'm reading Roger Lowenstein : 'When genius failed - The rise and fall of Long-Term Capital Management" as leisure reading right now.

 

I have to say, that it's just awesome! Very entertaining!  - Basically, it about what do you get when you combine academia and Wall Street [, here, please note with a label / goods declaration : Guarantied without / free of "reason" / "sound judgement" [for the sake of the climate, it would be called to day, I think]].

 

It is about when extreme ambitions and greed, combined with being delusional about the circle of competence creates, karma, hubris and nemesis.

 

I recommend the book if you want a dose of this.

[gfp]

On 9/25/2023 at 10:07 PM, longterminvestor said:

I would so enjoy readying more of things like this.  these are just gold.  

 

I don't know where this came from, but I happened across this letter between Buffett and George Young, of National Indemnity, while cleaning up an old stack of papers in my office.  The letter is from July 22nd, 1976 and might be interesting to some because it offers a glimpse into Warren's decision making in a letter that was never intended for public disclosure.  I thought it was interesting anyway.  PDF attached.

geicoletter.pdf

[mjm]

2 hours ago, gfp said:

 

I don't know where this came from, but I happened across this letter between Buffett and George Young, of National Indemnity, while cleaning up an old stack of papers in my office.  The letter is from July 22nd, 1976 and might be interesting to some because it offers a glimpse into Warren's decision making in a letter that was never intended for public disclosure.  I thought it was interesting anyway.  PDF attached.

geicoletter.pdf 241.91 kB · 35 downloads

thanks for sharing.  do you think he wanted the business to kind of keep tabs on GEICO and how they operated, looking to buy shares and eventually the company?

[bathtime]

Are we around 1.4x BV near $350 on the B shares? Thanks. 

[Malmqky]

7 minutes ago, bathtime said:

Are we around 1.4x BV near $350 on the B shares? Thanks. 

Book was like $248 in June so most likely $350 is about 1.4x

[LC]

6 hours ago, gfp said:

 

I don't know where this came from, but I happened across this letter between Buffett and George Young, of National Indemnity, while cleaning up an old stack of papers in my office.  The letter is from July 22nd, 1976 and might be interesting to some because it offers a glimpse into Warren's decision making in a letter that was never intended for public disclosure.  I thought it was interesting anyway.  PDF attached.

geicoletter.pdf 241.91 kB · 54 downloads

Thank you for sharing. Two interesting tidbits, WB had almost 20k to his name in 1951, which (if online inflation estimates are to be trusted) amounts to about 23MM in today's dollars. 

 

Perhaps more impressively, he had almost 70% of this concentrated in one stock (Geico).

[gfp]

5 minutes ago, LC said:

Thank you for sharing. Two interesting tidbits, WB had almost 20k to his name in 1951, which (if online inflation estimates are to be trusted) amounts to about 23MM in today's dollars. 

 

Perhaps more impressively, he had almost 70% of this concentrated in one stock (Geico).

 

I think that's more like a quarter million bucks in today's money but still impressive for a youngster.

[Stuart D]

20k to $23m in 72 years assumes 10.28% inflation per year.

 

I was running the numbers and it’s incredible how much of a difference tiny changes in the compounding rate affect the final number.

 

eg. increasing from 10.28% to 11%, increases the total from $23m to $36m, and reducing from 10.28% to 10% takes it down to $19m.

 

Edited September 30, 2023 by Stuart D
Updated post with compounding table.

[LC]

Whoops my mistake - the website I used https://www.in2013dollars.com/us/inflation/1951 has the value per $100 of 1951 dollars, I used $1 So yes, about a quarter mil and very impressive for 21 y/o! 

[Cigarbutt]

8 hours ago, mjm said:

thanks for sharing.  do you think he wanted the business to kind of keep tabs on GEICO and how they operated, looking to buy shares and eventually the company?

It's been reported that Mr. Buffett met Jack Byrne, then recently appointed CEO in May of that year and immediately after (starting the next day) started to buy large blocks of shares in the open market. Mr. Buffett had also contacted and met a person named Wallach, a key boss (insurance commissioner) at a small but critical regulatory agency (it seems somehow that Mr. Buffett became convinced that Geico was not to be put in receivership). A key concurrent move was to contribute capital before visible improvements in the bottom line and any financial or operational moves that would support Geico.

[mjm]

9 hours ago, Cigarbutt said:

It's been reported that Mr. Buffett met Jack Byrne, then recently appointed CEO in May of that year and immediately after (starting the next day) started to buy large blocks of shares in the open market. Mr. Buffett had also contacted and met a person named Wallach, a key boss (insurance commissioner) at a small but critical regulatory agency (it seems somehow that Mr. Buffett became convinced that Geico was not to be put in receivership). A key concurrent move was to contribute capital before visible improvements in the bottom line and any financial or operational moves that would support Geico.

so he had a dog in the fight already. thanks. interesting

[gfp]

https://www.sec.gov/Archives/edgar/data/47217/000095017023051239/xslF345X05/ownership.xml

 

As expected, once Buffett starts selling something like this he usually sells it all.  He is about 2 million shares away from going under 10% so there may just be one more filing before he gets privacy on the rest of the sales.

[adesigar]

4 hours ago, gfp said:

https://www.sec.gov/Archives/edgar/data/47217/000095017023051239/xslF345X05/ownership.xml

 

As expected, once Buffett starts selling something like this he usually sells it all.  He is about 2 million shares away from going under 10% so there may just be one more filing before he gets privacy on the rest of the sales.

 

This one did not do well for Berkshire Hathaway.

[adesigar]

I couldn't find the Investments table in the 2022 annual report. Was it removed or did I just miss it?

[gfp]

Just now, adesigar said:

I couldn't find the Investments table in the 2022 annual report. Was it removed or did I just miss it?

 

It was removed this year.  We'll see if it returns next year.  

[UK]

https://markets.businessinsider.com/news/stocks/warren-buffett-forbes-400-stewart-horejsi-berkshire-hathaway-wealth-billionaires-2023-10

https://www.bloomberg.com/news/articles/2013-09-19/berkshire-shares-turned-a-buy-and-hold-buffett-fan-into-a-billionaire?leadSource=uverify wall

[KPO]

10 hours ago, UK said:

https://markets.businessinsider.com/news/stocks/warren-buffett-forbes-400-stewart-horejsi-berkshire-hathaway-wealth-billionaires-2023-10

https://www.bloomberg.com/news/articles/2013-09-19/berkshire-shares-turned-a-buy-and-hold-buffett-fan-into-a-billionaire?leadSource=uverify wall

I’ve met Stewart before at the Berkshire meeting years ago. Can you send a non-paywall link as I’d love to read the story?  Thanks for sharing.