Buffett/Berkshire - general news

[charlieruane]

And as a followup, here's one of the most bizarre Buffett anecdotes I've encountered, from an Atlantic article on Howard: 

Edited March 16 by charlieruane

[charlieruane]

Trump approached Berkshire Hathaway in hopes of getting an appellate bond: 

[Blugolds]

I'm sure everyone already has seen it, but just incase someone missed it over the weekend.

 

 

 

Yahoo: Berkshire Hathaway speeds up stock buybacks

 

In its proxy filing on Friday, Berkshire said it repurchased the equivalent of 3,808 Class A shares this year through March 6, spending approximately $2.2 billion to $2.4 billion depending on the dates of the buybacks.

Nearly three-quarters of the repurchases took place after Feb. 12.

Berkshire repurchased $2.2 billion of its own stock in last year's fourth quarter, and $9.2 billion in all of 2023.

Its peak year for buybacks was 2021, when they totaled $27 billion.

 

Through Friday, Berkshire's share price was up 14% this year, about twice the gain for the Standard & Poor's 500.

 

 

 

 

 

 

https://finance.yahoo.com/news/berkshire-hathaway-speeds-stock-buybacks-185257424.html

 

[longterminvestor]

18 hours ago, charlieruane said:

Trump approached Berkshire Hathaway in hopes of getting an appellate bond: 

Mr. Trump has until March 25 to post an additional bond for $456M.  The dollar amount is approaching a record size.  For example in 2009, Zurich wrote a surety bond for Panama Canal for $450M - believed to be one of the largest deals ever done in surety. 

 

I would like to highlight Chubb previously issued a $91.6M bond with brokerage account as collateral allowing Mr. Trump an appeal.  When the news broke of Chubb issuing the $91.6M bond, there was a ton of blow back to Chubb.  CEO Evan Greenberg (son of Hank Greenberg - formerly of AIG now Starr) wrote a letter addressing the $91.6M bond (letter attached).  I really liked reading the letter from Mr. Evan Greenberg - showed some leadership and belief in our system of government.  One could argue the other side saying Greenberg/Chubb is favoring Mr. Trump and bring in all the politics however I want to believe Mr. Greenberg's words in his letter "we support the rule of law and our role in it".  I just liked the letter a lot especially in this political climate where we need leadership.  

 

As a shareholder, I trust Berkshire made a sound decision.  With a juicy premium and liquid collateral/margin of safety could be a good risk.  However the political nature probably just makes it a too hard pile issue so I get it.  Berkshire could have easily declined on same basis of Chubb - lack of collateral or size.  As Mr. Buffett says, cash/liquidity is like oxygen.  

 

 

chubb-letter-on-trump-bond-3132024.pdf

Edited March 19 by longterminvestor

[nwoodman]

3 hours ago, longterminvestor said:

As a shareholder, I trust Berkshire made a sound decision.  With a juicy premium and liquid collateral/margin of safety could be a good risk.  However the political nature probably just makes it a too hard pile issue so I get it.  Berkshire could have easily declined on same basis of Chubb - lack of collateral or size.  As Mr. Buffet says, cash/liquidity is like oxygen.  

 

 

chubb-letter-on-trump-bond-3132024.pdf 126.98 kB · 6 downloads

Thanks for the post.  I agree, not sure there is a number that could offset the political optics.  The irony is obviously Berkshire could do it in a heartbeat, so it is a potential snub anyway.  Good thing there was 30 insurers who came to the same conclusion.  Safety in numbers

[bizaro86]

Republicans buy insurance to.

 

Charging high fees for bespoke insurance that no one else can write is what I want Berkshire to do. If they didn't feel his collateral was good then fine, but I hope they aren't giving up lucrative opportunities for political/optics reasons.

 

 

[Intelligent_Investor]

29 minutes ago, bizaro86 said:

Republicans buy insurance to.

 

Charging high fees for bespoke insurance that no one else can write is what I want Berkshire to do. If they didn't feel his collateral was good then fine, but I hope they aren't giving up lucrative opportunities for political/optics reasons.

 

 

I feel like they always have, Warren once he got big enough knew one of the biggest risks to Berkshire was political risk so he wants no part in that at all

[John Hjorth]

@longterminvestor,

 

What is your souce for the letter from Chubb attached to your last post? -Thank you in advance.

Edited March 19 by John Hjorth

[Spooky]

14 hours ago, Blugolds11 said:

I'm sure everyone already has seen it, but just incase someone missed it over the weekend.

 

 

 

Yahoo: Berkshire Hathaway speeds up stock buybacks

 

In its proxy filing on Friday, Berkshire said it repurchased the equivalent of 3,808 Class A shares this year through March 6, spending approximately $2.2 billion to $2.4 billion depending on the dates of the buybacks.

Nearly three-quarters of the repurchases took place after Feb. 12.

Berkshire repurchased $2.2 billion of its own stock in last year's fourth quarter, and $9.2 billion in all of 2023.

Its peak year for buybacks was 2021, when they totaled $27 billion.

 

Through Friday, Berkshire's share price was up 14% this year, about twice the gain for the Standard & Poor's 500.

 

 

 

 

 

 

https://finance.yahoo.com/news/berkshire-hathaway-speeds-stock-buybacks-185257424.html

 

 

Thanks for sharing. I find it interesting that Buffett is buying back stock so heavily given his pessimistic statements about Berkshire's future prospects. Maybe one of the few companies capable of moving the needle is Berkshire itself.

[gfp]

12 minutes ago, Spooky said:

 

Thanks for sharing. I find it interesting that Buffett is buying back stock so heavily given his pessimistic statements about Berkshire's future prospects. Maybe one of the few companies capable of moving the needle is Berkshire itself.

 

I wouldn't say this repurchase pace is "heavy."  It will be interesting to see the split between A-shares and B-shares repurchased in the 10-Q.  I think it is quite possible that Warren was offered a block of A-shares and he has shown a preference for retiring A-shares before he leaves the scene.

[sleepydragon]

21 hours ago, charlieruane said:

Trump approached Berkshire Hathaway in hopes of getting an appellate bond: 

 

I have nothing valuable to add. But if it's me, there's no upside doing this. If Trump win, his personality is he's going to declare bankruptcy before he's going to pay back those money. If he lost, he will definitely not going to pay. 

[LC]

36 minutes ago, Spooky said:

Thanks for sharing. I find it interesting that Buffett is buying back stock so heavily given his pessimistic statements about Berkshire's future prospects. Maybe one of the few companies capable of moving the needle is Berkshire itself.

10+ years ago the line was, "watch what WB does, not necessarily what he says"

[Spooky]

20 minutes ago, gfp said:

 

I wouldn't say this repurchase pace is "heavy."  It will be interesting to see the split between A-shares and B-shares repurchased in the 10-Q.  I think it is quite possible that Warren was offered a block of A-shares and he has shown a preference for retiring A-shares before he leaves the scene.

 

Fair enough but if you look at the total amount of Berkshire stock he repurchased in 2023, $9.2 billion, and then the approximately $2.2-$2.4 billion up to March 6th then the aggregate amount is pretty significant. It would exceed the value of Berkshire's Moody's holding as of the last 13-F and that is a top 8 public holding.

 

Just seems like his actions are somewhat inconsistent with the points raised in the annual letter. Maybe he is trying to talk down the share price so he can buy back more at a better price?

[longterminvestor]

5 hours ago, John Hjorth said:

@longterminvestor,

 

What is your souce for the letter from Chubb attached to your last post? -Thank you in advance.

Letter was forwarded to me, didn't question it because its on Chubb Letterhead, with personal Greenberg letterhead as Chairman and CEO, and signed by Greenberg.  Didnt occur to me to check signature against annual report.  I did just now and I'm no handwriting expert, but they match.  The letter has also been quoted by multiple news sources referencing passages contained here in.  Looked real to me, do you think its fake?  

 

If a reporter calls me, my source is Deep Throat.  ha.  

[bizaro86]

3 hours ago, John Hjorth said:

 

 

@bizaro86 & MIke [ @cubsfan ],

 

We need let politics out of it, and let it [politics] go in this topic.

 

 

I'm not an American and have no political affiliation in that country. I avoid their politics whenever anyone talks about them. 

But as a shareholder, my strong preference is that Berkshire not consider politics when writing insurance contracts, only premium and risk. I think that's reasonable and relevant to the conversation here. If you've been appointed moderator of the board without me being aware of it then I apologize. 

[gfp]

I think no firm was willing to assist with the bond because of its size, the fact that surety bonding is not very profitable at all, and the lack of suitable collateral by the defendant.  He had some brokerage collateral but pledged it to Chubb for the earlier bond.  I think Greenberg was very clear that he would be willing to write the bond and ignore politics if there was suitable collateral posted.  We know he wasn't just talking because he had just done it.  We know Buffett would want very good collateral - T-bills to maybe a 2 year note but I would be shocked if Buffett accepted anything less secure than that for a barely profitable surety bond for a customer who has a reputation for not paying.

[Maverick47]

I’m not an expert on surety bonds, but it can help to understand that these are probably quite different from a typical insurance risk transaction.  I believe the provider of the appeal bond has to guarantee payment of the cash amount of the bond plus any accrued interest in the event that the appeal is lost.  Generally  speaking, the insurer wants a source of liquid collateral from the client at least equal to the amount they might have to pay.  
 

They basically just provide guaranteed liquidity to a client.  It is the appellant who is supposed to pay the amount of any financial judgement, and an insurance company isn’t interested in providing coverage for the full amount of the award in exchange for a premium smaller than that.  This is different from catastrophe reinsurance where the insurer accepts a relatively small premium compared to the total payout required against the risk of a catastrophe and so has to have an opinion on the probability of the event.  As Greenberg’s letter noted, the surety bond provider does not actually assess the likelihood of the success of the appeal.

 

Unfortunately, commercial real estate, which may or may not be unencumbered, is not viewed by surety providers as a desirable source of collateral.  If an appeal fails, and the insurer has to pay the face value and accrued interest on the bond immediately, then they are stuck with having to collect on the collateral.  Foreclosure on real estate is not high on the list of things that insurance companies want to deal with. 
 

The Chubb bond by contrast was secured with readily liquidated brokerage investments.  
 

 

[longterminvestor]

More to mechanics of risk.  Surety acts like insurance but its not insurance.  Its much more of a financial transaction/credit facility than insurance.  Its a big dance of 3 parties saying "I trust you, but not really, so to earn my trust you gotta pay me so I trust you a little more than I want to".  Surety requirements take any situation from single A ball to the Major Leagues quickly.  Surety basics: 3 players and I'll name them in reference to this case.  Principal (Mr. Trump), Obligee (NY Court) and Surety (easiest one to understand as insurance company, and no market stepped up).  The financial incentive for a Surety to enter a transaction is extracting the most money possible from the Principal in form of premium AND to be sure the Principal is money good for collateral sum in event of payment demand from Obligee to Principal and enjoined Surety. The Principal's incentives are the inverse of Surety, wanting to pay the smallest premium and post the least amount of collateral. Principal may achieve reduction in collateral by explaining to Surety winning in appeal is fait accompli because ect ect.  The Surety Company eliminates the risk of non-pay to Obligee and ultimately the Plaintiff.  Important to note in Surety underwriting, there's an old saying called the 3 C's - Character, Capacity, and Capital - Principal has to embody all 3 to qualify as a good risk.  

 

So lets say we wanted to write this appeal bond or supersedeas bond.  We could charge lets say 2.5% of $450M ($11.25M due at inception from Principal) and also as part of agreement we require $300M in cash to be wired immediately to us, and lastly we might add something for a margin of safety like "if the principal wins appeal, we will return collateral 2 years after last court doc is finalized" - lengthening the use of collateral float.  We have use of $310M (gotta pay broker commission) for an undetermined period of time + 2 years if Principal "wins" or in event of Principal "losing" immediate payment at any point.  The bet is how long will the money stay on our side of the fence - will this take years or days?  Cause if its years, then maybe $310M is enough against $450M guarantee.  Or if its months, in an unfavorable judicial venue for Principal, we need more premium paid/collateral posted. 

 

This is more about amount and type of accepted collateral.  With the right amount of collateral and an understanding of the facts in the case - like serious legal understanding of ultimate outcome and when it will occur, there is a perfect price of risk on this deal for a surety company - similar to a discounted cash flow from judgement day backwards on the perfect price on a business, gauged against interest rates.  Both are unknown so that's why the game is fun.  

 

I believe the entire reason why the 30 carriers declined, 4 brokers engaged, got put in front of the judge was court room theater to show $450M bond is an unreasonable amount and plea to reduce the bond amount to $100M.  I personally believe the judge kinda knew the $450M amount was impossible to get from the beginning and the large size was done intentionally, more theater.

 

And with that, from the vault of Mr. Buffett's lessons on this type of topic directly/indirectly:

 

 

Edited March 20 by longterminvestor

[Gamecock-YT]

7 hours ago, cubsfan said:

You can easily read the last dozen or so posts here. The politics is relevant, much to the dismay of some.  All the speculating of why NO one would risk their bond capital backing a Presidential candidate that the State of NY is trying to eliminate by bankrupting him and stopping his campaign.

Some might call it "election interference"...
 

 

Some might call it "reputational risk"

 

Having sat on investment committees, it's a real thing. 

Edited March 20 by Gamecock-YT

[cubsfan]

^^^ With no comment of course, on the brazen corruption of the NY AG and Judge.

 

Now THAT is the real reputational risk NY state will have to live with as far as investors are concerned. Selective, malicious, and punitive prosecution when no victim is harmed - investors beware.

 

And thanks for your great comments @gfp, @Maverick47, @longterminvestor 

I stand corrected.

[KPO]

14 hours ago, longterminvestor said:

More to mechanics of risk.  Surety acts like insurance but its not insurance.  Its much more of a financial transaction/credit facility than insurance.  Its a big dance of 3 parties saying "I trust you, but not really, so to earn my trust you gotta pay me so I trust you a little more than I want to".  Surety requirements take any situation from single A ball to the Major Leagues quickly.  Surety basics: 3 players and I'll name them in reference to this case.  Principal (Mr. Trump), Obligee (NY Court) and Surety (easiest one to understand as insurance company, and no market stepped up).  The financial incentive for a Surety to enter a transaction is extracting the most money possible from the Principal in form of premium AND to be sure the Principal is money good for collateral sum in event of payment demand from Obligee to Principal and enjoined Surety. The Principal's incentives are the inverse of Surety, wanting to pay the smallest premium and post the least amount of collateral. Principal may achieve reduction in collateral by explaining to Surety winning in appeal is fait accompli because ect ect.  The Surety Company eliminates the risk of non-pay to Obligee and ultimately the Plaintiff.  Important to note in Surety underwriting, there's an old saying called the 3 C's - Character, Capacity, and Capital - Principal has to embody all 3 to qualify as a good risk.  

 

So lets say we wanted to write this appeal bond or supersedeas bond.  We could charge lets say 2.5% of $450M ($11.25M due at inception from Principal) and also as part of agreement we require $300M in cash to be wired immediately to us, and lastly we might add something for a margin of safety like "if the principal wins appeal, we will return collateral 2 years after last court doc is finalized" - lengthening the use of collateral float.  We have use of $310M (gotta pay broker commission) for an undetermined period of time + 2 years if Principal "wins" or in event of Principal "losing" immediate payment at any point.  The bet is how long will the money stay on our side of the fence - will this take years or days?  Cause if its years, then maybe $310M is enough against $450M guarantee.  Or if its months, in an unfavorable judicial venue for Principal, we need more premium paid/collateral posted. 

 

This is more about amount and type of accepted collateral.  With the right amount of collateral and an understanding of the facts in the case - like serious legal understanding of ultimate outcome and when it will occur, there is a perfect price of risk on this deal for a surety company - similar to a discounted cash flow from judgement day backwards on the perfect price on a business, gauged against interest rates.  Both are unknown so that's why the game is fun.  

 

I believe the entire reason why the 30 carriers declined, 4 brokers engaged, got put in front of the judge was court room theater to show $450M bond is an unreasonable amount and plea to reduce the bond amount to $100M.  I personally believe the judge kinda knew the $450M amount was impossible to get from the beginning and the large size was done intentionally, more theater.

 

And with that, from the vault of Mr. Buffett's lessons on this type of topic directly/indirectly:

 

 

This is a fantastic post. Thanks for explaining this so clearly. 

[Parsad]

On 3/19/2024 at 3:25 PM, Maverick47 said:

I’m not an expert on surety bonds, but it can help to understand that these are probably quite different from a typical insurance risk transaction.  I believe the provider of the appeal bond has to guarantee payment of the cash amount of the bond plus any accrued interest in the event that the appeal is lost.  Generally  speaking, the insurer wants a source of liquid collateral from the client at least equal to the amount they might have to pay.  
 

They basically just provide guaranteed liquidity to a client.  It is the appellant who is supposed to pay the amount of any financial judgement, and an insurance company isn’t interested in providing coverage for the full amount of the award in exchange for a premium smaller than that.  This is different from catastrophe reinsurance where the insurer accepts a relatively small premium compared to the total payout required against the risk of a catastrophe and so has to have an opinion on the probability of the event.  As Greenberg’s letter noted, the surety bond provider does not actually assess the likelihood of the success of the appeal.

 

Unfortunately, commercial real estate, which may or may not be unencumbered, is not viewed by surety providers as a desirable source of collateral.  If an appeal fails, and the insurer has to pay the face value and accrued interest on the bond immediately, then they are stuck with having to collect on the collateral.  Foreclosure on real estate is not high on the list of things that insurance companies want to deal with. 
 

The Chubb bond by contrast was secured with readily liquidated brokerage investments.  
 

 

 

+1!  We also don't know what the debt to equity on the pledged assets is.  There could be massive borrowings that would be first in line as well.  Cheers!

[Parsad]

11 hours ago, cubsfan said:

^^^ With no comment of course, on the brazen corruption of the NY AG and Judge.

 

Now THAT is the real reputational risk NY state will have to live with as far as investors are concerned. Selective, malicious, and punitive prosecution when no victim is harmed - investors beware.

 

And thanks for your great comments @gfp, @Maverick47, @longterminvestor 

I stand corrected.

 

Fraud is a crime...regardless of who or how many did or didn't get hurt.  That's why people are always so pissed off when white collar criminals get a pass.  BCSC has $500M in fines outstanding and has only collected on $11M.  The U.S. is much better at collecting!  Cheers!

[Eldad]

4 hours ago, Parsad said:

 

Fraud is a crime...regardless of who or how many did or didn't get hurt.  That's why people are always so pissed off when white collar criminals get a pass.  BCSC has $500M in fines outstanding and has only collected on $11M.  The U.S. is much better at collecting!  Cheers!

Legal concept of Standing disagrees with you. 
 

His lenders said they did not materially disagree with his personal financial statements and would make the loans again. The decision was horrible, whatever you think of Trump. 

[scorpioncapital]

anybody know on what date the mystery non 13-f disclosed investment(s) brk has made is coming out?