Buffett/Berkshire - general news

[Guest longinvestor]

https://www.bizjournals.com/dallas/news/2018/10/24/bnsf-ge-develop-battery-electric-locomotive.html?ana=yahoo&yptr=yahoo

 

Battery powered locomotive. Wondering if Duracell/BYD are in play? It would be super awesome if somehow solar charging of batteries is in play. Use NV/CA/AZ sun potential to run the entire fleet? Or IA/TX wind charging stations. BNSF spends >$3 Billion on energy. Choo choo train can keep on chugging.

[rb]

That would truly be a sight to be seen. That locomotive would have to have a big, huge, giant battery.

[John Hjorth]

It could be one or several separate battery wagons electrical and pullingwise connected to the pulling [electrical] locomotive. Somewhat like in the first days of the NA railroad, where the first wagon after the steam driven locomotive was a wagon containing and carrying the "fuel" [coal]. Instead of doing a recharging stop somewhere, you "swap batteries" at a charging station, thereby time saved.

 

I remember somebody here on CoBF years ago called Berkshire "old economy", but innovation sure isen't dead at Berkshire.

[gfp]

It’s too bad they can’t safely electrify something in the rail. Carrying many tons of batteries around is less than ideal and probably not close to cost effective. More likely that for now these battery locomotives are used to reposition cars locally to cut down on emissions in a local area. Ultimately...  the trains are already electric so maybe some type of fuel cell or clever safe electrified rail will work out. I don’t see them adding wires above like i’ve seen in Asia.

[Jurgis]

It’s too bad they can’t safely electrify something in the rail. Carrying many tons of batteries around is less than ideal and probably not close to cost effective. More likely that for now these battery locomotives are used to reposition cars locally to cut down on emissions in a local area. Ultimately...  the trains are already electric so maybe some type of fuel cell or clever safe electrified rail will work out. I don’t see them adding wires above like i’ve seen in Asia.

 

Slap solar panels on tops of all these railcars and use the electricity to power the locomotive.

 

I know this is a bit SciFi, but maybe Musk can do it.  8)

[gfp]

This article is an update on the ballot item in Nevada to open up NV Energy's regulated monopoly to more choice.  Obviously NV Energy would still own the distribution infrastructure.  BHE has been spending a lot of money on lobbying / advertising.  Some large individual casinos had already won the right to pay a termination fee and buy their power from an independent producer. 

 

https://www.politico.com/story/2018/10/27/adelson-buffett-nevada-890190

[gfp]

WSJ running an article this morning on Todd's recent investments in early stage Financial Technology firms globally

 

https://www.wsj.com/articles/warren-buffetts-firm-invests-millions-in-fintech-1540807200?mod=hp_lead_pos5

 

For reference, StoneCo Ltd trades on the nasdaq under the ticker STNE

[Cigarbutt]

This article is an update on the ballot item in Nevada to open up NV Energy's regulated monopoly to more choice.  Obviously NV Energy would still own the distribution infrastructure.  BHE has been spending a lot of money on lobbying / advertising.  Some large individual casinos had already won the right to pay a termination fee and buy their power from an independent producer. 

 

https://www.politico.com/story/2018/10/27/adelson-buffett-nevada-890190

Thanks for the link.

The question is limited to one state but may represent a larger current.

 

I live in a place where electricity is essentially a vertically-integrated regulated monopoly (wholesale and retail) with hydro responsible for more than 90% of electricity needs and with policies in place favoring low and uniform prices and in a relatively steady place versus the socio-political sphere. But I really like what has been going on in the US considering the experiments with various deregulation plans. It's noisy and sometimes disruptive and inelegant but it seems like it's the best way to go IMO.

 

What is happening in Nevada (it seems like the ballot item will pass?) may be part of more to come at the national level and underlines the risks of transition costs and partial recovery of the value of stranded assets and I guess BH can manage transitions but investments in regulated utilities does rely on trust versus potential regulatory harm.

 

The context in Nevada is fascinating with the recent residential solar issues and the ballot question does not go along traditional political divisions.

 

I've looked into the issue, from a Nevada perspective, and come to the conclusion that it is very hard to decide what is best on a net basis for "society". In terms of consumer costs, I wonder if the Nevada experience would look more like California or more like Texas. I would tend to vote against the trend and for BH (bias here) because of the traditional reasons that it has used to justify the venture into regulated utilities (efficient operations, low cost of capital, reasonable rates of return, long-term outlook with stable and low retail prices and flexibility for alternative sources of energy and environmental concerns).

 

Found the following to be useful:

https://guinncenter.org/wp-content/uploads/2018/07/Guinn-Center-Q3-2018.pdf

https://guinncenter.org/wp-content/uploads/2018/07/Guinn-Center-Q3-Voter-Guide-2018.pdf

 

But this is not simply a story about two billionaires.

[gfp]

"one that got away" - Bloomberg article on Berkshire's interest in acquiring WPP Group in 2012

 

https://www.bloombergquint.com/business/buffett-sorrell-chatted-about-potential-wpp-deal-six-years-ago

[dcollon]

Discussion about Health Care and Malpractice

 

https://www.valuewalk.com/2018/11/malpractice-insurance-warren-buffett/

[John Hjorth]

dcollon,

 

Thank you for sharing. Please also repost this interview in this topic - It certainly seems worth it, despite I haven't been listening to the whole thing yet.

[captkerosene]

It could be one or several separate battery wagons electrical and pullingwise connected to the pulling [electrical] locomotive. Somewhat like in the first days of the NA railroad, where the first wagon after the steam driven locomotive was a wagon containing and carrying the "fuel" [coal]. Instead of doing a recharging stop somewhere, you "swap batteries" at a charging station, thereby time saved.

 

I remember somebody here on CoBF years ago called Berkshire "old economy", but innovation sure isen't dead at Berkshire.

 

I would say that innovation is very dead at BRK. WEB targets industries that don't change. GE makes locomotive engines ... not BNSF.

[Guest longinvestor]

It could be one or several separate battery wagons electrical and pullingwise connected to the pulling [electrical] locomotive. Somewhat like in the first days of the NA railroad, where the first wagon after the steam driven locomotive was a wagon containing and carrying the "fuel" [coal]. Instead of doing a recharging stop somewhere, you "swap batteries" at a charging station, thereby time saved.

 

I remember somebody here on CoBF years ago called Berkshire "old economy", but innovation sure isen't dead at Berkshire.

 

I would say that innovation is very dead at BRK. WEB targets industries that don't change. GE makes locomotive engines ... not BNSF.

 

I would let GE do the innovating. At least it’s just innovation that’s dead at Berkshire.

[gfp]

Is anyone else coming up with numbers that suggest Berkshire added 200 million BAC shares in the quarter?  As in, used to own 700 million, now owns 900 million?

 

That would account for over $6 billion of the $15 Billion increase to cost basis in the category "Banks, insurance and finance."  I have long speculated that he would add JPM, but with Todd on the board I would think he would have to file.  Still a lot of "Banks Insurance and finance" that he bought during the quarter beyond just the BAC stock I am thinking he added.

 

I guess the other likely suspects would be USB, BK, and GS.

 

[Munger_Disciple]

Is anyone else coming up with numbers that suggest Berkshire added 200 million BAC shares in the quarter?  As in, used to own 700 million, now owns 900 million?

 

That would account for over $6 billion of the $15 Billion increase to cost basis in the category "Banks, insurance and finance."  I have long speculated that he would add JPM, but with Todd on the board I would think he would have to file.  Still a lot of "Banks Insurance and finance" that he bought during the quarter beyond just the BAC stock I am thinking he added.

 

I guess the other likely suspects would be USB, BK, and GS.

 

 

My math agrees with yours. I got slightly above 200M BAC shares purchased during Q3 for 6B. They seem to have added a net $15B to financials during Q3 (there were some minor sales of WFC to stay under 10% cap). Pretty big move I think.

[Munger_Disciple]

Actually there appears to be sales of approximately 2.85B worth of financials during Q3 and $17.85B of purchases for a net purchases of $15B in the "Banks, insurance and finance" category.

[John Hjorth]

Great observations about BAC for Berkshire, gents,

 

The next questions are, as at least partly already mentioned by globalfinancepartners, because it's a lot capital allocated during 2018Q3 to financials etc.:

• ~USD 15 B in financials etc., with ~USD 6 allocated to BAC, what's the rest allocated to? -Personally I speculate that it would at least include an allocation to JPM - alone because of the size of the rest - time will tell [mid this month].
  
• If ~USD 6 B has been allocated to BAC during 2018Q3, why should continued buying not take place during "Red October", where BAC has tanked some, and daily volume has gone materially up?
  

[gfp]

You would hope if he liked something in September he would still like it at much lower prices in October.  I have thought he would buy JPM for a long time, but I gave up on that hope when Todd joined the board of directors of JPM.  I am unclear if Todd being on the BoD at JPM would require Berkshire Hathaway to file with the SEC, but it might.  Which would rule out JPM.

 

Too bad, because he's going to want a certain allocation to the banking business and its going to get harder for $1 trillion, 2 trillion, etc,  Berkshire to do that if they are forced to keep selling most of them above 10%.  9% of JPM would have been a pretty good solution and you know he loves the management, loves the business, etc...  Plus JPM was available at great prices for a really long time. 

 

Since he was buying USB, BK and GS before the quarter, it seems logical he continued.  But there could be new positions as well.

[Munger_Disciple]

Great observations about BAC for Berkshire, gents,

 

The next questions are, as at least partly already mentioned by globalfinancepartners, because it's a lot capital allocated during 2018Q3 to financials etc.:

• ~USD 15 B in financials etc., with ~USD 6 allocated to BAC, what's the rest allocated to? -Personally I speculate that it would at least include an allocation to JPM - alone because of the size of the rest - time will tell [mid this month].
  
• If ~USD 6 B has been allocated to BAC during 2018Q3, why should continued buying not take place during "Red October", where BAC has tanked some, and daily volume has gone materially up?
  

 

I agree with GFP that it is unlikely that Berkshire bought JPM, given Todd's board position.

 

With respect to BAC, Berkshire will not go above 10% of BAC's total shares. That means that Berkshire might possibly add almost another 80M shares after Sept 30th, which would bring the total to 980M, about 10% of BAC.

[gfp]

Bloomberg finally picked up on the BAC purchase.  I was surprised that nobody reported it.  CNBC would rather tweet about Mark Cuban recommending that you should buy a years' worth of toothpaste at a time..

 

https://www.bloomberg.com/news/articles/2018-11-03/buffett-s-buying-shows-appetite-for-stocks-including-his-own?srnd=premium

[DooDiligence]

Bloomberg finally picked up on the BAC purchase.  I was surprised that nobody reported it.  CNBC would rather tweet about Mark Cuban recommending that you should buy a years' worth of toothpaste at a time..

 

https://www.bloomberg.com/news/articles/2018-11-03/buffett-s-buying-shows-appetite-for-stocks-including-his-own?srnd=premium

 

Short squeeze on toothpaste next week  ;D

[sleepydragon]

Great observations about BAC for Berkshire, gents,

 

The next questions are, as at least partly already mentioned by globalfinancepartners, because it's a lot capital allocated during 2018Q3 to financials etc.:

• ~USD 15 B in financials etc., with ~USD 6 allocated to BAC, what's the rest allocated to? -Personally I speculate that it would at least include an allocation to JPM - alone because of the size of the rest - time will tell [mid this month].
  
• If ~USD 6 B has been allocated to BAC during 2018Q3, why should continued buying not take place during "Red October", where BAC has tanked some, and daily volume has gone materially up?
  

 

I bet it’s BK. He has been buying in previous 13fs

(I am biased because I have some BK)

[gfp]

BK, USB and GS were all being accumulated the previous quarter and are logiical bets. Maybe something new. It’s funny the headlines saying stuff like this Rolfe quote from the WSJ:

 

What the buybacks signal, in a very big way, is that [Mr. Buffett’s] short list of putting prospective billions to work, either in private businesses or equities, outside of Apple, are nil,” said David Rolfe, chief investment officer of Wedgewood Partners Inc. in St. Louis, which owns Berkshire shares.

 

No mention of the huge purchases of equities in the quarter or explanation of why the cash balance is declining and didn’t print $120 billion this quarter like it would have, absent massive buying of investments...

 

Just look at the equity portfolio’s growth in the past 12 months. They have been buying a lot to keep cash at $100 Billion

-----------

in other news, BNSF continues to roll over debt at extremely attractive rates.  Look at this 30 year issuance from Q3 -

BNSF’s borrowings are primarily senior unsecured debentures. In the first nine months of 2018, BNSF issued $1.5 billion of senior unsecured debentures due in 2048, including $750 million in the third quarter. These debentures have a weighted average interest rate of 4.1%.

 

Seems like all the borrowing lately is 2048-49 stuff -

In August 2018, BHFC issued $2.35 million of 4.2% senior notes due in 2048. Such borrowings are fully and unconditionally guaranteed by Berkshire

 

In July 2018, BHE issued $1.0 billion of 4.45% senior unsecured debt that matures in 2049.  BHE subsidiaries also issued debt in July 2018, aggregating $1.05 billion and due in 2049.

 

And the entire bond portfolio for a company with $736 Billion in invested assets is $17.8 billion at cost ($18.3 at market).  An insurance company with a 2.5% allocation to fixed income.

[Cigarbutt]

^"And the entire bond portfolio for a company with $736 Billion in invested assets is $17.8 billion at cost ($18.3 at market).  An insurance company with a 2.5% allocation to fixed income."

 

And within that fixed income category, 40% is due in less than 1 year and 50% in 1-5 years.

[gfp]

Who knows.  I doubt any of the equities are actually thought of as permanent holdings.  He's tried to clarify that through updates to the 'owners manual' over the years.  It's all available for sale if the business changes or the opportunity outweighs the benefit of the interest free loan from the government on the unrealized gains.  The bar would be even lower now under current tax rates

 

Any idea does he see crApple as one of the Berkshires permanent  investment like Amex/KO/WFC?