Buffett/Berkshire - general news

[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.

[John Hjorth]

Good. I bet Mr. Buffett is really grumpy about this situation, if not straight out furious. Such allways make one think : "Is there more similar [in a broad sense] laying around / going on somewhere in the business?"

[Munger_Disciple]

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

Edited December 13, 2023 by Munger_Disciple

[bargainman]

On 12/13/2023 at 12:52 PM, Munger_Disciple said:

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

Who knows, maybe SpaceX and OpenAI will want a private buy out one day

[DooDiligence]

the Squishmallow Wars

[Eldad]

On 12/13/2023 at 2:52 PM, Munger_Disciple said:

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

[CassiusKing1]

Nice price movement for the first couple trading days of the year.

[John Hjorth]

3 minutes ago, CassiusKing1 said:

Nice price movement for the first couple trading days of the year.

 

Is it yet to an extent so we need to have a separate topic to show off our bulging belly buttons?

[keegomaster]

On 12/29/2023 at 7:29 AM, Eldad said:

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

WEB won't change one bit (let alone at his age). He will pull the trigger only when the big elephant is in sight. 

[Eldad]

26 minutes ago, keegomaster said:

WEB won't change one bit (let alone at his age). He will pull the trigger only when the big elephant is in sight. 

I know. Here is hoping for a massive elephant in 2024. 

[xo 1]

On 12/29/2023 at 10:29 AM, Eldad said:

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

Agreed.  I have long hoped that the Wrigley financing was a toehold into a Mars acquisition, but I haven't seen much evidence to justify that hope over the past decade.

[alpha]

 

Another Flying J in Kansas received federal funding to install EV chargers. It will be interesting to see how many of the stops qualify for the federal grants and how their electrification strategy develops.

 

https://governor.kansas.gov/governor-kelly-announces-more-than-4-6m-for-six-fast-charging-ev-locations/

[MCR]

No trial on Monday...

 

https://www.reuters.com/sustainability/boards-policy-regulation/court-cancels-warren-buffett-jimmy-haslam-trial-over-pilot-2024-01-07/

[ValueMaven]

Wow ... Berkshire likely settled.  Honestly Pilot was never going to win.  

We should see a press release on Monday AM

[gfp]

4 minutes ago, ValueMaven said:

Honestly Pilot was never going to win.  

Remember that this trial was narrowly focused on the application of push-down acquisition accounting that inflated depreciation and amortization and not any of the "illicit incentive" payments.  

 

If a settlement pushes the Haslam's put exercise out a year, it gives Berkshire's side a change to put up a "clean" year of EBIT to plug into their formula.  Alternatively they could have just agreed on a number to part ways permanently with the Haslams.

[ValueMaven]

This is a decent asset for Berkshire.  Not an amazing one.  I hope they have just settled and push out the Haslams.  

The more I learn about 'Big Jim' - the more I'd rather Berkshire not have done this.