Buffett/Berkshire - general news

[Masterofnone]

19 minutes ago, gfp said:

Who ever knows but my guess would be that the major indices are being pulled higher on short covering capitulation as the S&P500 threatens to make a new high for the year and Berkshire isn't really a stock that gets a lot of short sellers. 

 

I doubt the Haslam stuff or a potential OXY financing deal has much to do with it.

gfp seems correct again. (He usually is.) The companies I own which have had significant short interest have all risen substantially this week.

[crs223]

On 11/29/2023 at 1:47 PM, Parsad said:

 

Yeah, Bucee's is one we want, alongside In & Out and Chik-Fil-A!  Cheers!

 

... and IKEA

[bizaro86]

4 hours ago, crs223 said:

 

... and IKEA

 

If we're adding Scandinavian private firms I'd much prefer Lego.

[Cigarbutt]

Judge offers Berkshire possible speedy trial over Pilot dispute | Reuters

Way to go (opinion) and now is a time for a 'negotiated' settlement.

From a noob's scan point of view, Honorable Judge Zurn is a balanced, rational and fair judge.

So two opposing views:

-BRK's use of pushdown accounting is questionable

-Minority holders' behavior is perhaps less than honorable

Conclusion (opinion): the negotiated settlement should be close to the 'fair' value determined by pushdown accounting.

Unknown: the price Mr. Buffett is willing to pay to put this noise 'issue' behind him and away from public eyes.

[rkbabang]

On 11/29/2023 at 4:47 PM, Parsad said:

 

Yeah, Bucee's is one we want, alongside In & Out and Chik-Fil-A!  Cheers!

This is the one we want.

 

Chick-fil-A, Buc-ee's, Hobby Lobby Merge To Form Most Popular Store Of All Time

 

https://babylonbee.com/news/chick-fil-a-buc-ees-hobby-lobby-merge-to-form-most-popular-store-of-all-time

 

[gfp]

Some might be interested in reading Berkshire's counter claim in its original form instead of relying on press accounts.  Attached here as a pdf

counterclaim.pdf

 

Quote

Berkshire and the Individual Defendants admit that Greg Abel informed James Haslam III that Berkshire will address Pilot’s position on the calculation of the Put

26

  

Right price in the context of the dispute resolution procedures provided for in the Investor Rights Agreement when Pilot exercises its Put Right

 

Quote

Berkshire and the Individual Defendants admit that the Investor Rights Agreement provides for the resolution procedure regarding disputes concerning the Put Right price, which procedure Plaintiff seems intent on avoiding.

 

Quote

In a telephone call with Warren Buffett on October 13, 2023, James Haslam II sought Buffett’s agreement with the Haslam family’s position concerning pushdown accounting and its effect on the Put Right price. In

response, Warren Buffett said that he could not in any way discuss accounting, that 29

   

Berkshire complies with contracts, and, when and if the Haslam family decided to exit, Berkshire would do exactly what the contract says. Haslam II wrote Buffett on October 18, 2023 and misleadingly sought to “confirm” that Berkshire would not use pushdown accounting in connection with an exercise by the Haslams of the Put Right. Buffett wrote back the same day and set the record straight.

 

Edited December 5, 2023 by gfp

[gfp]

I'll put the original Haslam suit against Berkshire / Abel here as well (attached)

pilotvberkshire.pdf

 

 

Quote

After Berkshire’s Chairman, Warren Buffett, informed the elder Haslam in an October 13, 2023 phone call that Berkshire would abide by the LLC Agreement, the elder Haslam sent Buffett a letter seeking confirmation that Berkshire would not apply pushdown accounting in calculating the value of Pilot’s Put Right. Buffett refused to provide a straight answer to Haslam’s simple question. Instead, Buffett repeated: “I said that Berkshire will comply with the terms of the contract. That’s exactly what will happen,” and that “when and if the Haslam family decides to exit, we will do exactly what the contract says.”

 

Edited December 5, 2023 by gfp

[John Hjorth]

Thanks, @gfp,

 

Geez, what a mess.

[gfp]

So my take on this is that the Haslams sued Berkshire when no harm had been done to them because they want to know the exact number they will receive if they exercise their put contract before they commit to exercising it.  Berkshire's 10-Q shows the redeemable interest at approximately the correct amount the Haslam's want and they can just use that figure to decide when to Put the remaining 20% to BRK.  The LLC agreement and the investor rights agreement and associated dispute resolution procedures govern any disagreements over the calculation of the payment Haslams would receive for their remaining 20%.

 

In bringing this un-needed lawsuit they have poked the bear and are now likely in trouble for what Berkshire has discovered.

 

The Haslams messed up here as previously Berkshire was just annoyed that they had been gamed by the incentives imbedded in their contract by counterparts less honorable than themselves.  Berkshire is now "more than annoyed."

 

The Haslams were not going to be screwed over by BRK on their final payment.  They just wanted PTC to keep two sets of books so they could know the exact figure the formula spit out before they made their decision.  

[gfp]

As I mentioned on another board previously - Haslam fully admits that he incentivized his top executives to game the 2022 EBIT to maximize the price Berkshire would pay for their early 2022 equity purchase.  They called it "Special Distribution Growth Units" under their "Growth Partners Plan."  A bunch of decisions resulting in maximized reported EBIT to feed into their formula and then payment of cash bonuses - "Special Distribution" awards based on the price Berkshire was forced to pay.  These types of short term decisions at the expense of both Berkshire and PTC's long term profitability are why Berkshire was so annoyed to begin with and immediately fired the CEO and CFO and exited several newer lines of business.  

Quote

Haslam said that, assuming Pilot exercised its Put Option in 2024, he would reward the assembled executives with large, one-time bonuses. Specifically, Haslam said that he would reward them in the same manner that they had been rewarded upon the 2023 Sale pursuant to PTC’s then-existing bonus program, known as the Growth Partners Plan (“GPP”). Under the GPP, as discussed in more detail below, executives received one-time “Special Distribution” awards upon the 2023 Sale calculated based on PTC’s 2022 EBIT. The Haslam family, which controls Pilot, funded those bonuses through a capital contribution to PTC, and the bonuses far exceeded the typical bonus compensation awarded to similarly situated executives in the market.

 

Quote

PTC’s 2022 EBIT was the highest in its history, exceeding its earnings projections by approximately 50%. As a result, the Special Distribution awards also were record-setting. In total, they exceeded ---

 

Edited December 5, 2023 by gfp

[giulio]

@gfp THANK YOU! Great posts as always. 

This whole Haslam's machination is complete nonsense. Pure greed, I guess they will have the reputation they deserve.

Can't wait for it to be over and for brk to liquidate this "poor" guy.

[alpha]

https://cstoredecisions.com/2023/12/05/pilot-opens-first-stations-in-coast-to-coast-ev-charging-network/

 

 

[gfp]

Partial settlement of some Pacificorp wildfire liabilities (far from all of it)

https://finance.yahoo.com/news/berkshire-utility-reaches-299-million-223219342.html

[Munger_Disciple]

During Collison's interview, Charlie recommends evaluating investment managers using per dollar-year returns & to avoid using time weighted returns. Does anyone know what Munger meant? 

[gfp]

3 minutes ago, Munger_Disciple said:

During Collison's interview, Charlie recommends evaluating investment managers using per dollar-year returns & to avoid using time weighted returns. Does anyone know what Munger meant? 

 

He's talking about Money-weighted rate of return, you can google it.  I actually think he was calling out his friend Mohnish in that segment! 

[Munger_Disciple]

3 minutes ago, gfp said:

 

He's talking about Money-weighted rate of return, you can google it.  I actually think he was calling out his friend Mohnish in that segment! 

 

I thought so too. That's basically what IRR is I think. His use of per dollar year threw me off since that is not a common term that's used to describe money weighted returns. 

Edited December 7, 2023 by Munger_Disciple

[Munger_Disciple]

5 minutes ago, gfp said:

I actually think he was calling out his friend Mohnish in that segment! 

 

That's a good point. 

[Munger_Disciple]

From Investopedia:

 

The money-weighted rate of return (MWRR) is a measure of the performance of an investment. The MWRR is calculated by finding the rate of return that will set the present values (PV) of all cash flows equal to the value of the initial investment. The MWRR is equivalent to the internal rate of return (IRR).

[longlake95]

of course, Sir Charlie is not wrong. The financial industry here in Canada, was legislated to provide investors with money-weighted returns (MWR), not just time-weighted returns (TWR). Because money weight returns are more realistic, since most if not all investors have cashflows into and out of a portfolio. 

[Munger_Disciple]

4 minutes ago, longlake95 said:

of course, Sir Charlie is not wrong. The financial industry here in Canada, was legislated to provide investors with money-weighted returns (MWR), not just time-weighted returns (TWR). Because money weight returns are more realistic, since most if not all investors have cashflows into and out of a portfolio. 

 

 

Assuming he is referring to money weighted returns, that was exactly what Charlie was urging US Congress to do. He said even Liz Warren & Bernie Sanders can agree with his suggestion. 

Edited December 7, 2023 by Munger_Disciple

[longlake95]

3 minutes ago, Munger_Disciple said:

 

 

Assuming he is referring to money weighted returns, that was exactly what Charlie was advocating US Congress to do. He said even Liz Warren & Bernie Sanders can agree with his suggestion. 

He is also saying that you should adjust for absolute dollars. When you are managing a 'piddly' 100K and return 10% you created 10K. The same 10% return on 1000K is 100K. Same return bigger absolute dollar creation. 

Edited December 7, 2023 by longlake95

[Munger_Disciple]

7 minutes ago, longlake95 said:

He is also saying that you should adjust for absolute dollars. When you are managing a 'piddly' 100K and return 10% you created 10K. The same 10% return on 1000K is 100K. Same return bigger absolute dollar creation. 

 

That's exactly what money weighted return does. 

[Munger_Disciple]

1 hour ago, gfp said:

 

He's talking about Money-weighted rate of return, you can google it.  I actually think he was calling out his friend Mohnish in that segment! 

 

You are right as usual @gfp. I re-listened to this part of the podcast again and Charlie confirmed that he was talking about dollar weighted results. Here is the segment:

 

John: [01:10:15] And when you say per dollar year, you mean dollar weighted

results, basically?

Charlie: [01:10:17] Yes. How much return -- for every dollar year, what was your return?

And of course, that's a very different figure. I know of a case of a hedge fund where the

proprietor made a lot of money, but per dollar year, the net return was zero. Because when

he got a lot of money, he really made a lot of dumb mistakes.

He made a lot of money when this one didn't matter much.

And yet it looks like a wonderful

record. But in fact, it was terrible. And why wouldn't that be a fair thing to require? 

Edited December 7, 2023 by Munger_Disciple

[gfp]

WSJ has a brief article on the Haslam dust-up.  Not much new but a couple of quotes from outside observers on misaligned incentives

 

https://www.wsj.com/business/warren-buffett-berkshire-hathaway-jimmy-haslam-pilot-lawsuit-70ef0413?mod=hp_lead_pos8

 

The case illustrates the difficulty of crafting incentives in complex corporate structures so that everyone is rowing in the same direction, said Jordan Barry, a law professor at the University of Southern California. For instance, EBIT clauses, such as the one at PTC, can have a positive influence, by encouraging growth.

---

“But you do have this issue where, when you pay out based on a particular year’s EBIT, that encourages people to try and load that one year up with as much earnings as possible,” Barry said. “And if that comes at the expense of other years, that’s not good.”

Barry gave a hypothetical example of how getting paid based on a multiple of 10 times EBIT could incentivize a company being bought to accept lower prices on contracts just to get them booked in the current year.

“Let’s say this contract would make you $100,000 normally, but you close this year if you’re willing to do it at $80,000,” Barry said. “That’s not usually a great trade. You just lost $20,000.”

But, because the company is being sold, that contract is then worth $800,000. “That’s a great trade for you,” he said.

[gfp]

https://www.bloomberg.com/news/articles/2023-12-13/billionaire-haslam-under-investigation-over-pilot-payments-lawyer-says?srnd=premium

 

Billionaire Jimmy Haslam is under investigation by federal prosecutors looking into whether he offered illicit payments to executives at Pilot Travel Centers, a lawyer for the company said.