Buffett/Berkshire - general news

[gfp]

55 minutes ago, scorpioncapital said:

it is possible currency movements should be treated similar to the investment gain/loss in every quarter. Somewhat similar if you consider the USBUCK as an actual investment. Cash is an asset class In a way. And foreign cash is also an investment.

 

It's not so much the asset side that distorts things.  Berkshire borrows in Euro and Yen and those changes get put into Berkshire's operating earnings.   We over-reported earnings for a while and now there is a tiny pullback in the dollar.  Doesn't seem fair to omit it the minute it starts being a headwind instead of a huge operating earnings tailwind.

[Whensthepaintdry?]

Didn’t he wipe both years off of currency swings Showing growth in earnings?

Edited August 3, 2025 by Whensthepaintdry?

[mengan]

1 hour ago, scorpioncapital said:

it is possible currency movements should be treated similar to the investment gain/loss in every quarter. Somewhat similar if you consider the USBUCK as an actual investment. Cash is an asset class In a way. And foreign cash is also an investment.

 

The currency movement is spread out across various line items. They are all consolidated under Comprehensive Income where losses are "added back" (positive) and gains are "reduced" (negative).

 

 

Under Management Discussion, a component of "Foreign Currency Translation" under Comprehensive Income is broken out for the senior notes. 

 

 

 

Similarly, under Retroactive Reinsurance and Periodic Payment Annuity

 

 

 

What is missing is another 56M (1,108 - 877 - 88 -87 = 56) which I assume is hidden amongst Manufacturing, Services and Retail units.

 

Also, non-USD denominated investments are also affected by currency movement and is baked into the quarterly Investment Gains & Losses line item automatically and is not part of the comprehensive income adjustments.

 

Bloomstran only considered the currency adjustments from the senior notes, not from the insurance operations and others. (12,370 - 4,970 +3,760 + 877 = 12,037), so he is off by 231M.  

 

[gfp]

Quote

Didn’t he wipe both years off of currency swings Showing growth in earnings?

 

 

Yes he did (although he got the math wrong for the first 6 months).  My point was that nobody was writing 1000 word twitter threads harping on the over-reporting of Berkshire's earnings last year.  They wait until this year when the adjustment helps make a bullish case to make their point.

 

Bloomstran, below:

 

Long story short, properly excluding currency changes on foreign-denominated debt, operating earnings rose 7.9% in the second quarter and 3.1% for the first half, where most are reporting a 3.8% decline in the quarter and 8.9% decline in the first half.

Edited August 3, 2025 by gfp

[John Hjorth]

20 minutes ago, gfp said:

... My point was that nobody was writing 1000 word twitter threads harping on the over-reporting of Berkshire's earnings last year.  ...

 

Having some fun at about anything as dull as Berkshire is simply an art! -Awesome! 

[scorpioncapital]

"Also, non-USD denominated investments are also affected by currency movement and is baked into the quarterly Investment Gains & Losses line item automatically and is not part of the comprehensive income adjustments."

 

So these fx translations are essentially non-usd denominated operating company currency movements? The notes wouldn't appear in investment gain/losses? I'm not saying it isn't done this way in the US under accounting standards, just wondering since BRK has made a disclaimer to largely ignore investment swings through earnings each quarter if we cannot do the same thing for fx currency movements?

[gfp]

I noticed Pilot was paying down their debt fairly quickly (it is now owed to National Indemnity instead of high priced bank money).  Hat tip to kingswell newsletter who pointed out this article mentioning that Pilot may be further pruning non-core businesses (there were quite a few!) by selling their water pipeline / management unit ->

https://www.ttnews.com/articles/pilot-sale-explore-water?utm_source=substack&utm_medium=email

[LC]

46 minutes ago, gfp said:

I noticed Pilot was paying down their debt fairly quickly (it is now owed to National Indemnity instead of high priced bank money).  Hat tip to kingswell newsletter who pointed out this article mentioning that Pilot may be further pruning non-core businesses (there were quite a few!) by selling their water pipeline / management unit ->

https://www.ttnews.com/articles/pilot-sale-explore-water?utm_source=substack&utm_medium=email

 

Interesting business they're getting out of. Does it remind anyone else of Landbridge? I wonder why they're looking to exit.

[Hsmpanl]

10 minutes ago, LC said:

 

Interesting business they're getting out of. Does it remind anyone else of Landbridge? I wonder why they're looking to exit.

I don’t think Pilot owns surface, they just operate pipelines and disposal wells and likely have to pay royalties to companies like LB. In the Eagle Ford Pilot only has a fleet of water hauling trucks and it’s a highly competitive, low margin, people intensive business. Just about every water hauling company I’ve worked with has run into financial distress. Definitely non-core to their truck stop business and probably not worth their time.

[Munger_Disciple]

15 hours ago, gfp said:

 

 

I don't think Berkshire would be allowed to "write it up again" once an equity method investment is written down because it was deemed to be 'other than temporarily impaired.'  The equity method investment (OXY in this example) would be written up by Berkshire's share of undistributed profits or the primary way it would be "written up" in the future would be on a sale or merger that resulted in discontinuing the equity method (all stock deal with Chevron, BRK's position could become mark to market for example - less than 20% of CVX).  Sale for cash obviously would become whatever cash showed up.

 

That was one of the reasons short sellers saw red flags at Fairfax - their minority interest deals allowed them to "write up" the value of certain subsidiaries when that is extremely rare in corporate accounting.  Especially since they were selling de-facto fixed income preferred stock and not plain vanilla equity at the claimed valuation.  It wasn't a scam at Fairfax, and it may have been an IFRS quirk that wouldn't fly in the US - but it raised red flags for a reason.  Berkshire can't write up the value of GEICO even though it is held on the books for much less than it is worth today.

 

You have to dig yourself out of the new impaired value with your share of undistributed earnings or a sale if you want to recover the accounting value.

 

 

Here is a snippet from the Oracle himself from the 2016 AR:

 

By the early 1990s, however, our focus was changing to the outright ownership of businesses, a shift that materially diminished the relevance of balance sheet figures. That disconnect occurred because the accounting rules (commonly referred to as “GAAP”) that apply to companies we control differ in important ways from those used to value marketable securities. Specifically, the accounting for businesses we own requires that the carrying value of “losers” be written down when their failures become apparent. “Winners,” conversely, are never revalued upwards.

Edited August 4, 2025 by Munger_Disciple

[jbwent63]

19 hours ago, mengan said:

 

The currency movement is spread out across various line items. They are all consolidated under Comprehensive Income where losses are "added back" (positive) and gains are "reduced" (negative).

 

 

Under Management Discussion, a component of "Foreign Currency Translation" under Comprehensive Income is broken out for the senior notes. 

 

 

 

Similarly, under Retroactive Reinsurance and Periodic Payment Annuity

 

 

 

What is missing is another 56M (1,108 - 877 - 88 -87 = 56) which I assume is hidden amongst Manufacturing, Services and Retail units.

 

Also, non-USD denominated investments are also affected by currency movement and is baked into the quarterly Investment Gains & Losses line item automatically and is not part of the comprehensive income adjustments.

 

Bloomstran only considered the currency adjustments from the senior notes, not from the insurance operations and others. (12,370 - 4,970 +3,760 + 877 = 12,037), so he is off by 231M.  

 

The items shown as Comprehensive income do not flow through the income statement, it is a separate statement altogether. The $877 loss vs $446 gain q over q is what Chris is referring to when he is trying to compare operating earnings only. The other exchange gains and losses in operating earnings are immaterial to BRK. The headlines were "BRK Operating Earnings drop 4%". Chris' point is without the f/x gain loss on the debt the operating earnings are actually up. Note also that the loss on the Yen bonds would be offset in the investment gains on the Yen denominated common shares owned.

[Munger_Disciple]

It's crazy but BRK is nearly flat YTD, now trails the S&P 500 index by 7%. It doesn't make any sense to me. AI party is back on!

Edited August 4, 2025 by Munger_Disciple

[gfp]

I'm not super bulled up on Berkshire but I had to buy a tiny amount this afternoon on general principle.  Hey big spender!

 

[Malmqky]

I think we’re below 1.5x book, no?

 

I’d be happy to pick up some more Berkshire around 1.3x

 

I know it’s not the best measure these days, but I’ve been conditioned.

[gfp]

1 minute ago, Malmqky said:

I think we’re below 1.5x book, no?

 

I’d be happy to pick up some more Berkshire around 1.3x

 

I know it’s not the best measure these days, but I’ve been conditioned.

 

Yes.  Last quarter's book value per b-share is $309.64 so we traded below 1.5x today

[Munger_Disciple]

19 minutes ago, gfp said:

I'm not super bulled up on Berkshire but I had to buy a tiny amount this afternoon on general principle.  Hey big spender!

 

 

 

I bought a tiny bit too today, but not as tiny as your trade . It's my small way of supporting & encouraging Greg!

Edited August 4, 2025 by Munger_Disciple

[Masterofnone]

1 hour ago, gfp said:

I'm not super bulled up on Berkshire but I had to buy a tiny amount this afternoon on general principle.  Hey big spender!

 

 

Y'all quit your bottom tick buying. Let it drop some more please. When I sold out of my non-taxable accounts my plan was to start buying back if it traded under 450. I'mma stick with it, so kindly sit on your hands a bit.

[Hektor]

3 minutes ago, Masterofnone said:

Y'all quit your bottom tick buying. Let it drop some more please.

+1  

[Viking]

2 hours ago, gfp said:

 

Yes.  Last quarter's book value per b-share is $309.64 so we traded below 1.5x today

 

@gfp and other BRK shareholders... I have a question. What do you think Abel will do with the cash pile at BRK in the next 2 or 3 years?

• Acquisitions? (including publicly traded stocks)
• Stock buybacks?
• Permanent dividend? 
• Large one time dividend?
• Nothing? (let it keep building)

IF Abel gets moderately more aggressive in redeploying the cash hoard we might have a catalyst for EPS. 

 

It really is a crazy set up when you think about it (how much cash that has built up on the balance sheet).  

Edited August 4, 2025 by Viking

[73 Reds]

5 minutes ago, Viking said:

 

@gfp and other BRK shareholders... I have a question. What do you think Abel will do with the cash pile at BRK in the next 2 or 3 years?

• Acquisitions?
• Stock buybacks?
• Permanent dividend? 
• Large one time dividend?

IF Abel gets moderately more aggressive in redeploying the cash hard we might have a catalyst for EPS. 

 

It really is a crazy set up when you think about it (how much cash that has built up on the balance sheet).  

My guess is (1) and/or (2) but only as opportunities arise for each.  I assume acquisitions also include equity investments.  Greg will have a Honeymoon period when he'll be free to keep accumulating cash if everything remains expensive but over time I believe BRK's investment universe will broaden well beyond that of Buffett.  As a long time shareholder I'm not concerned with the next couple of years.

Edited August 4, 2025 by 73 Reds
word

[charlieruane]

Based on prior comments from Chris Davis, I bet mega-acquisitions will be even less frequent post-Buffett. Buybacks below intrinsic value will probably be the most attractive option in Greg's eyes after organic growth and bolt-ons. Sue Decker has also mentioned a fondness for special dividends, for what that's worth.

 

Buffett also clearly thinks transmission/green energy generation is a multi-hundred-billion-dollar opportunity in the US—one to which Berkshire is uniquely suited—and I bet that was a big reason he tapped Abel. Unfortunately, that avenue has been diminished in the short- and medium-terms by the wildfire liability and Trump bill issues. 

[Viking]

6 minutes ago, charlieruane said:

Based on prior comments from Chris Davis, I bet mega-acquisitions will be even less frequent post-Buffett. Buybacks below intrinsic value will probably be the most attractive option in Greg's eyes after organic growth and bolt-ons. Sue Decker has also mentioned a fondness for special dividends, for what that's worth.

 

Buffett also clearly thinks transmission/green energy generation is a multi-hundred-billion-dollar opportunity in the US—one to which Berkshire is uniquely suited—and I bet that was a big reason he tapped Abel. Unfortunately, that avenue has been diminished in the short- and medium-terms by the wildfire liability and Trump bill issues. 

 

@charlieruane, a large special dividend just makes so much sense to me (something like 4% or even 5%). But I am not sure how this impacts the many families who each own hundreds of millions in stock (from a tax perspective). In recent years, Buffett really seemed to be prioritizing the needs of this group in how he was managing the company. At least that is what it looked like to an outside observer of the company.   

Edited August 4, 2025 by Viking

[Munger_Disciple]

8 minutes ago, charlieruane said:

Based on prior comments from Chris Davis, I bet mega-acquisitions will be even less frequent post-Buffett.

 

Can you elaborate on this? What comments are you referring to? Thanks

[Munger_Disciple]

31 minutes ago, charlieruane said:

Sue Decker has also mentioned a fondness for special dividends, for what that's worth.

 

Decker owns the least amount of stock among board members approaching 0 dollars as well as 0% her net worth, so it's all well and good for her to imply a special (large) dividend. But it will be horrible tax-wise for LT owners who have a large % of their net worth in BRK stock. So I hope the board shoots it down. 

 

Ideally I prefer 100% retention of earnings where every $1 of retained earnings produces > $1 of market value. But if all such opportunities are exhausted and buybacks are not attractive due to high market price of the stock, then a small annual dividend that can be periodically increased is far better than a large special dividend. It also helps the LT owners to slowly adapt to the new reality if it is indeed the case, i.e., BRK can't retain & reinvest 100% of its earnings in a way passes the earnings retention test described above. 

Edited August 4, 2025 by Munger_Disciple

[dealraker]

39 minutes ago, 73 Reds said:

My guess is (1) and/or (2) but only as opportunities arise for each.  I assume acquisitions also include equity investments.  Greg will have a Honeymoon period when he'll be free to keep accumulating cash if everything remains expensive but over time I believe BRK's investment universe will broaden well beyond that of Buffett.  As a long time shareholder I'm not concerned with the next couple of years.

Agree.  And especially that the investment universe will broaden.