A money mind & $400 Billion

[Guest longinvestor]

During the 2017 meeting, as usual, questions on succession came up multiple times. During one of those, Buffett talked about the key quality in the guy, one who already has a money mind. The board would not pick someone who does not have this key strength. It would be like handing a piano to a violin virtuoso when she gets to Carnegie Hall. Buffett estimates that over the next 10 or so years, some $400 B will have to be allocated. That sum is more than the total allocated over the past 50. Big job indeed. Based on recent track record, one can see $100 B plus going to BHE, BNSF, PCC et al. Maybe $50 B plus to tuck-in's at subsidiaries, another $50 B in the hands of Todd/Ted? Then, some elephants. Munger pointed out  that it is not some hopeless problem given that stock buy-in's could well be a big sponge. Something intelligent will come up, according to Munger. All that said, mistake avoidance takes front seat!

 

Thoughts?

[John Hjorth]

Thanks, longinvestor,

 

I like the topics, that you start. They are always food for thought.

 

Please don't take this post too seriously, but where do you find the person [in North America], that is used to, and comfortable with, allocating this kind of capital going forward, based on, where Berkshire is right now? [Think double digits USD B, per year - going forward] - To me, not inside Berkshire, right now.

 

In another Berkshire topic here there is a deep and longlasting discussion of "Buying Berkshire, cash position etc." from several angles. One of the things that was speculated about was, if Mr. Buffett's telephone actually rings about deals.

 

Cigarbutt mentioned that he thought it rang a lot. I'm in the same camp with regard to speculation on this.

 

 

Edit:

 

 

Fixed Cigarbutt's handle! - Apology ... lol

[Cigarbutt]

I think that is not exactly what gigglebutt meant. :)

 

No insight about the number of incoming calls.

Just an impression about the overall supply/demand of deals.

 

We understand that Mr. Buffett does not contribute to demand.

 

My understanding of the supply side, looking at mergers and acquisitions activity, is that the trend is up.

https://imaa-institute.org/m-and-a-us-united-states/

 

Also, on the supply side, there is simply more competition and buyers, including private equity, increase the supply of capital and (ultra?) cheap debt which converts into higher EV/EBITDA and Purchase price/Revenue multiples.

https://www.theventurealley.com/wp-content/uploads/sites/5/2017/03/PitchBook_2017_Global_PE_Deal_Multiples_Report_Part_I.pdf

 

For all I know, Mr. Buffett may buy Nike, 3M, Hershey and John Deere tomorrow.

But he hasn't done so at this point.

I bet eventually something intelligent would/will come up.