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Buffett/Berkshire - general news


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He said the American commercial banks he owns still earn good ROE even in low interest rates and they're earning better returns with lower leverage compared to European or Japanese banks

So there is a distinction there

It is not a macro call on rates - he has no view on that

 

Link is here:

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Thanks benny. IMHO that answer is unsatisfying as he doesn't address zero or neg. rates.

 

Lets look at some of the large banks that Brk holds:

 

Bank / Net Interest Income / Non Interest Income

 

WFC / 47.2 / 44.5

BAC / 45.3 / 42.3

JPM / 50.0 / 53.9

 

Zero or negative rates will wipe out pretty much 50% of these banks income. ROEs will come down to the 5-7% (being generous) range.

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Don't think it'll wipe out half of revenue. Even in Japan, NIM is around 1%. US banks also have more room to increase lending and cut costs than Japan/Europe. Negative rate policy in Europe/Japan is designed to keep heavily indebted/insolvent countries and companies afloat whereas US has done a better job de-levering and restructuring following 07/08 financial crisis.

 

Impact to life insurance, and maybe float returns. But I think insurance companies will re-price policies to achieve targeted ROE through underwriting.

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you can find banks in Europe earning a nice ROE and not being particularly levered

well, at least in nordic countries

in sweden, for example, rates stand at 0%, today - had been negative for several years - and you can definately find some good banks here

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An unusual denial by Berkshire - they must really not want people thinking they are blessing this investment -

https://www.berkshirehathaway.com/news/mar0420.pdf

 

In other news, the annual meeting will go ahead as scheduled - possibly with curtailed events.  Lets keep the old folks away from the germs though please...

 

And - Berkshire is about to sell bonds in Dollars and Euros again.  Preliminary prospectus-es (prospecti?) filed.  Could just be refinance of maturing debt but will be interesting to watch size.

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The way DAL is trading ( static share price around $46) while other airline stocks are falling, Warren‘s bid put a floor under its price for the tone being. I bet he buys a ton of DAL as I type this.

 

Delta has a presentation out today fwiw -

https://www.sec.gov/Archives/edgar/data/27904/000119312520061029/d887033dfwp.htm

 

Interesting, secured credit AA- rated collateralized by a couple year old aircrafts in front of a major disruption in air travel potentially. Who the hell would buy this and what is the interest rate?

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as of 12/31/19.  Outstanding Shares are 2.436B (Converting 700K A share and adding 1.385B B share) with BV of $428.563B equates to BV per share price of $176.

 

1.2X BV would be $211/share however portfolio is down so actual BV is also down since 12/31. 

 

Wonder if WEB actually does the realtime math on that?

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I remember WEB saying one-time, that the time to take credit is when you don't need it. Cuz, when you need it, your on the wrong side of the "trade" - you're paying big time....

 

Amazing to see him raise 1B with a YTM of 0.04%... like you say, for fun...

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It looks like this has not made it to global news yet and underlying reasons may vary according to interpretation but it seems Mr. Buffett has pulled out (4B CDN) from an infrastructure project on this side of the border.

https://theprovince.com/business/saguenay-lng-project-financing-in-doubt-as-buffett-pulls-out/wcm/40d8f36d-83f9-4927-858c-b7c274ed0ac2

 

This week, I've had my share of vertical volatility (ski week) and have not spent much time on financial news but I just saw the downhill slope of the 10-yr and 30-yr Treasuries. Some slopes can be challenging.

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I saw that on my Google feed, but it seems to have too many "reportedly" and statements with qualifiers that express that's it's mostly hearsay not confirmed by the Company. No immediate confirmation from Marc Hamburg either, though it's not necessarily a decision made at Omaha, so he might be unable to confirm or deny. It just sounds too short of being adequately fact-checked to publish widely. It's also potentially non-news, i.e. some part of Berkshire was expressing potential interest in investing in a pipeline and decided not to go ahead prior to signing on the dotted line.

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I believe it to be true.  It was a Berkshire Hathaway Energy deal. 

 

"The investment giant was going to provide C$4 billion ($3 billion) for GNL Quebec’s proposed liquefied natural gas plant 290 miles northeast of Montreal, according to Michel Potvin, a city councilor who heads the promotion agency in Saguenay, where the project is based."

 

Bloomberg journalists are usually pretty good at confirming a story with at least one source with direct knowledge of their subject -

https://www.bloomberg.com/news/articles/2020-03-05/buffett-drops-3-billion-lng-investment-in-quebec-reports-say

 

The "why" is probably guessing.  And of course BHE could come back to the table at any point. 

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Guest longinvestor

I remember WEB saying one-time, that the time to take credit is when you don't need it. Cuz, when you need it, your on the wrong side of the "trade" - you're paying big time....

 

Amazing to see him raise 1B with a YTM of 0.04%... like you say, for fun...

 

Yes, being on the right side of trades indeed!!

 

There could be a time in 5 to 10 years when others may be looking for credit. Berkshire will be there, on the right side of that trade as well. Funny how this sort of thing happens over and over again. Simply because they can.

 

 

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Sad to see Bill G leave the board. Perhaps Berkshire can now buy back stock from Gates Foundation w/o any insider conflict of interest issues. 

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