Buffett/Berkshire - general news

[John Hjorth]

52 minutes ago, Eldad said:

... He basically said himself 5 or 6 years ago it would be criminal to have that cash on the BS for this long. Follow your own rules dude or hand the keys over to Greg. 

 

@Eldad,

 

True, in the meaning he said at an AGM that 'he couldn't sit here in front of the shareholders with 150 B of cash on the balance sheet and at the same time consider himself a success'.

 

But : Focus on studying what he does in stead of what he says. [This also includes that I personally think that about every person can be 'caught' in inconsistencies over time spans of several years.]

 

Another way of expressing it could also be that his investment style over time still evolves.

[73 Reds]

1 hour ago, Eldad said:

Adapt, you know? It’s not the 1970s. No one is going to call and offer you a 200 Billion business over the phone.
 

Implement a keep your capital scheme where the business managers can get a bigger bonus if they keep and deploy their own capital at a set ROTC. Set all the great Berkshire employees loose on the cash pile. Have Ted, Todd, and Greg oversee it with the Berkshire values as the framework. 

I dunno, people complain he is behind the times and then he goes and buys AAPL which is by far his best equity investment and then they complain when it gets too big and now they complain about the sales proceeds and excess cash.  Tough crowd if you ask me.  If you'd like to place a side bet that the cash hoard never gets invested in anything but T-Bills, please feel free to DM me!

[Hektor]

Fortunately, people can complain all they want, but WEB decides what to do

[Eldad]

35 minutes ago, 73 Reds said:

I dunno, people complain he is behind the times and then he goes and buys AAPL which is by far his best equity investment and then they complain when it gets too big and now they complain about the sales proceeds and excess cash.  Tough crowd if you ask me.  If you'd like to place a side bet that the cash hoard never gets invested in anything but T-Bills, please feel free to DM me!

Haha you are rolling all the complainers into one. I did not complain that Apple was too big or about buying Apple. Apple basically saved BRK from its conservatism over the last 7-8 years. 
 

I went back and did the % of cash to total assets on the balance sheet going back to 1995. So if you take the average in 10 year periods it is:

1995-2004: 8%
2005-2014: 13%
2015-2024 First Half: 16%
 

We are now sitting at 25% (and growing) which is the highest in that 30 year stretch. We had 23% in both 2004 & 2005.

 

Just some objective numbers. 

 

 

[Malmqky]

2 hours ago, Eldad said:

I love the stock. I love the collection of businesses. I love the values (when followed). He is handicapping himself and all of us in my opinion buy holding so much cash for this long and then he goes and makes the cash pile outrageous. He has not meaningfully bought a panic since the GFC that I can remember. He basically said himself 5 or 6 years ago it would be criminal to have that cash on the BS for this long. Follow your own rules dude or hand the keys over to Greg. 

What would you have him do with the cash?

 

Not too many elephants out there at the moment.

[Eldad]

1 minute ago, Malmqky said:

What would you have him do with the cash?

 

Not too many elephants out there at the moment.

Not sell the Apple when you already have cash problem. 

[73 Reds]

5 minutes ago, Eldad said:

Haha you are rolling all the complainers into one. I did not complain that Apple was too big or about buying Apple. Apple basically saved BRK from its conservatism over the last 7-8 years. 
 

I went back and did the % of cash to total assets on the balance sheet going back to 1995. So if you take the average in 10 year periods it is:

1995-2004: 8%
2005-2014: 13%
2015-2024 First Half: 16%
 

We are now sitting at 25% (and growing) which is the highest in that 30 year stretch. We had 23% in both 2004 & 2005.

 

Just some objective numbers. 

 

 

More cash = more investment opportunities.  I understand your point but the real test of any investment is whether you are satisfied with your results.  Just a guess but there are many more former BRK owners who are unhappy they sold the stock than there are current shareholders who are unhappy with their results.  

[gfp]

9 minutes ago, Eldad said:

Haha you are rolling all the complainers into one. I did not complain that Apple was too big or about buying Apple. Apple basically saved BRK from its conservatism over the last 7-8 years. 
 

I went back and did the % of cash to total assets on the balance sheet going back to 1995. So if you take the average in 10 year periods it is:

1995-2004: 8%
2005-2014: 13%
2015-2024 First Half: 16%
 

We are now sitting at 25% (and growing) which is the highest in that 30 year stretch. We had 23% in both 2004 & 2005.

 

Just some objective numbers. 

 

 

 

What if he put $200 Billion in bonds slightly longer than the t-bills so they weren't classified as cash (like Fairfax) and reminded everybody that Berkshire was one of the largest insurance companies in the world - would that quiet the cash issue down?

[73 Reds]

4 minutes ago, gfp said:

 

What if he put $200 Billion in bonds slightly longer than the t-bills so they weren't classified as cash (like Fairfax) and reminded everybody that Berkshire was one of the largest insurance companies in the world - would that quiet the cash issue down?

LOL, they'd complain that he has even MORE cash.

[Eldad]

2 minutes ago, gfp said:

 

What if he put $200 Billion in bonds slightly longer than the t-bills so they weren't classified as cash (like Fairfax) and reminded everybody that Berkshire was one of the largest insurance companies in the world - would that quiet the cash issue down?

That might be worse for me personally. I holding out hope that he has something in the works. If we get to next years meeting and he says “well the cash was less of a problem at 5% but now at 3% it’s a real problem so we are hopeful the phone will ring.” I think I would have to swallow hard and prepare to pay a lot of capital gains taxes. 

[gfp]

1 minute ago, 73 Reds said:

LOL, they'd complain that he has even MORE cash.

 

I'm describing him taking 2/3 of the "cash" and extending duration into lower yielding "notes."  There would be less "cash" and a completely conventional bond portfolio for an insurance business this size.  Not more cash.  Fewer complainers

[gfp]

Just now, Eldad said:

That might be worse for me personally. I holding out hope that he has something in the works. If we get to next years meeting and he says “well the cash was less of a problem at 5% but now at 3% it’s a real problem so we are hopeful the phone will ring.” I think I would have to swallow hard and prepare to pay a lot of capital gains taxes. 

 

I think he likes having the cash vs. what is available in the market to him presently.  Are you crazy bullish at the moment or what?  Sure he would love to buy stuff, but there is nothing for sale at a price he is willing to pay.  And lowering his standards just to do a deal is the worst type of precedent to set right before you hand over the reigns.  

[73 Reds]

Just now, gfp said:

 

I'm describing him taking 2/3 of the "cash" and extending duration into lower yielding "notes."  There would be less "cash" and a completely conventional bond portfolio for an insurance business this size.  Not more cash.  Fewer complainers

@gfp I get it.  But remember, this is a tough crowd.   Fairfax gets away with it because they don't have the same history as does BRK and because its still so damn cheap.

[gfp]

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

[Eldad]

1 minute ago, gfp said:

 

I think he likes having the cash vs. what is available in the market to him presently.  Are you crazy bullish at the moment or what?  Sure he would love to buy stuff, but there is nothing for sale at a price he is willing to pay.  And lowering his standards just to do a deal is the worst type of precedent to set right before you hand over the reigns.  

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

[73 Reds]

1 minute ago, gfp said:

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

Yep, and that's the reason why Fairfax remains do damn cheap and Berkshire is Berkshire.  An incredible investment for Fairfax would be universally slammed by BRK shareholders as a collosal failure by Buffett.  Interesting phenomena.  

[gfp]

3 minutes ago, Eldad said:

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

[Viking]

6 minutes ago, gfp said:

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES!  Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! "  Woo Hoo!

+1

[73 Reds]

5 minutes ago, Eldad said:

No not bullish. Just think why would he exacerbate the cash drag problem by selling half his stake in arguably the best business in the world. Apples ROIC is now over 60%. 
 

His Ben Graham angel was fighting with his Charlie angel and I think he may have made a big mistake. We will see. 

I didn't have an issue with it either way.  Personally, I own AAPL for some of the same reasons as BRK (optionality on the future).

[Eldad]

7 minutes ago, gfp said:

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

Then that just means they make 100 billion with almost no capital requirements. ROE can be distorted but ROIC cannot as easily. Is 33x expensive for a 60 ROIC company? I don’t really think so. I wouldn’t buy it, but I sure wouldn’t sell it. I especially wouldn’t sell it if I had 100 million a day coming into my office and I had nothing else to buy with the proceeds but treasuries.

[Eldad]

But stocks at 470. He has an almost impossible job. I will shut up now. 

[Munger_Disciple]

4 minutes ago, Eldad said:

I will shut up now. 

 

That's an excellent idea!

[Xerxes]

3 hours ago, gfp said:

 

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future).  

 

Apple is great - they make $100 Billion every year that they don't need to reinvest.  That figure has been pretty stable.  But $3.5 Trillion is a lot.

GFP

Unrelated to this thread, do you believe that changing of the guard in the CFO office at Apple’, is signalling new era on capital return policy  … 

[gfp]

6 minutes ago, Xerxes said:

GFP

Unrelated to this thread, do you believe that changing of the guard in the CFO office at Apple’, is signalling new era on capital return policy  … 

 

No, not at all.  

[UK]

So congratulations for all BRK holders (me too still). I will need to update my Excel on BRK for this milestone, but I think the last time BRK was valued so generously by the market was pre GFC in 2007. I have no idea why this is happening and hope it is something more than just simple momentum, but in my understanding, currently I own BRK fairly valued for the first time:). This is not a tragedy and I would still expect it to return long term 6-8 or even a tad more (with some extra luck) from this valuation level, but I also think at this level it is getting exposed to some 'revert to mean' risk more, especially if it will go up so quickly even further. If it does indeed, a new trick, copied from dealraker, I am trying to learn (not to sell everything only because of valuation) will be tested:)

 

Edited August 31, 2024 by UK