Why Has Warren Been So Quiet?

[Cigarbutt]

^This looks like adjustments to the 10% ownership level:

https://www.sec.gov/Archives/edgar/data/315090/000120919120024066/xslF345X03/doc4.xml

Is there more?

why?

you dont have section 16b liability when the issuer buys back shares putting you over 10%, so there was no need to get under 10%.  I just think warren has lost his good sense and munger cant hear any more

I was under the impression that BRK had not bought BK shares in the last 6 months so the short-swing profit rule would not apply and that shares were sold as a way to bring the ownership below 10% (I think the Fed rule hasn't changed yet) given that BK kept the buyback going up to recently.

no, this refers to potential 16b liability for BRK re selling shares of a portfolio company when you are a >10% holder...which is not triggered when you go over 10% without having made a buy (ie due to portfolio company repurchases shrinking the outstanding)

my point is that warren cant justify any sales to get under 10% ownership of a portfolio company to avoid 16b liability, so it is a head scratcher why he would be selling anything now, given depressed portfolio company share prices and no shortage of cash on hand at BRK

I agree that the 16b liability issue does not apply here and the control determination rules have been relaxed

https://bankingjournal.aba.com/2020/01/fed-finalizes-rule-to-clarify-bank-control-determinations/

but i doubt that the move was not motivated.

A very clear reason to do this has to do with SEC rules about reporting requirements: holders above 10% need to disclose trades in the shares within two business days. But who knows what the real plan is?

[Guest cherzeca]

"holders above 10% need to disclose trades in the shares within two business days."

 

ok, fair enough.  just seems like a radical departure from warren's MO

[mcliu]

Maybe he's selling BK to buy shares in another bank. BK probably under more NIM pressure with lower rates than other money center banks.

[rb]

Maybe he's selling BK to buy shares in another bank. BK probably under more NIM pressure with lower rates than other money center banks.

Yeah. But they also have much lower NIM than other banks so it doesn't matter as much.

[Cigarbutt]

I think this is an authentic quote from the Master:

"I think you have to report within to or three business days every purchase you make once you're over that 10% factor. So, you're advertising to the world, but the world tends to follow us some, so it really...it has a huge execution cost attached to it."

It would be nice to see a PET scan of Mr. Buffett's brain activity at this point. It may be that he is unusually focused now.

[jeffsreng]

BRK can delay public filings/announcements with SEC approval not to move markets.  They done it before.

[BRK7]

^This looks like adjustments to the 10% ownership level:

https://www.sec.gov/Archives/edgar/data/315090/000120919120024066/xslF345X03/doc4.xml

Is there more?

wh

you dont have section 16b liability when the issuer buys back shares putting you over 10%, so there was no need to get under 10%.  I just think warren has lost his good sense and munger cant hear any more

I was under the impression that BRK had not bought BK shares in the last 6 months so the short-swing profit rule would not apply and that shares were sold as a way to bring the ownership below 10% (I think the Fed rule hasn't changed yet) given that BK kept the buyback going up to recently.

 

no, this refers to potential 16b liability for BRK re selling shares of a portfolio company when you are a >10% holder...which is not triggered when you go over 10% without having made a buy (ie due to portfolio company repurchases shrinking the outstanding)

 

my point is that warren cant justify any sales to get under 10% ownership of a portfolio company to avoid 16b liability, so it is a head scratcher why he would be selling anything now, given depressed portfolio company share prices and no shortage of cash on hand at BRK

 

Unless I am mistaken the 16b short-swing profit liability exemption is applicable to the ISSUER (in this case BK), not outside investors like BRK.

 

Regardless, banks are a special case.  I believe that any investor owning more than 10% of a BANK, becomes a de facto "bank holding company" in the eyes of regulators.  Warren would never want BRK to become a bank holding company for various reasons, including becoming subject to more regulations, restrictions, and oversight on its  business activities.

 

So, if not for reason #1 than certainly for reason #2, BRK would have incentive to remain under the 10% ownership threshold. 

 

Someone correct me if I am wrong here.  It's been a while since I looked up these regulations.

[Guest cherzeca]

you are mistaken

[Spekulatius]

My theory for the reason for selling his airline stocks is that it makes it easier for the airlines to get good bailout conditions . Otherwise this would get  politically charged as supporting a billionaire with $128B in dry powder taxpayers money. It looks better if you are poor and in clothed in a cheap suit rather than look like someone who has a rich uncle.

WEB clearly doesn’t want to go all in with the airlines and I think the recent events have led  his to change his view on the industry again.

[BRK7]

you are mistaken

 

 

Regarding the “bank holding company” issue, the threshold was indeed 10%:

 

http://www.klgates.com/non-controlling-investments-in-banking-institutions-and-their-holding-companies-10-07-2008/

 

https://www.omaha.com/money/warren-buffett-says-relax-he-s-just-buying-and-selling/article_2caf0c38-1f09-576a-b4d5-75843c8cc1e3.html

 

Do you have evidence that the bank holding company threshold has changed from 10%?

 

=======

 

Regarding your assertion that 16b “is not triggered when you go over 10% without having made a buy (ie due to portfolio company repurchases shrinking the outstanding)”, can you provide a link to a credible source?

 

[Cigarbutt]

you are mistaken

Regarding the “bank holding company” issue, the threshold was indeed 10%:

http://www.klgates.com/non-controlling-investments-in-banking-institutions-and-their-holding-companies-10-07-2008/

https://www.omaha.com/money/warren-buffett-says-relax-he-s-just-buying-and-selling/article_2caf0c38-1f09-576a-b4d5-75843c8cc1e3.html

Do you have evidence that the bank holding company threshold has changed from 10%?

=======

Regarding your assertion that 16b “is not triggered when you go over 10% without having made a buy (ie due to portfolio company repurchases shrinking the outstanding)”, can you provide a link to a credible source?

For the bank holding rule, see reply #50.

For the 16b trigger, this was fairly easy to locate:

https://codes.findlaw.com/us/title-15-commerce-and-trade/15-usc-sect-78p.html

See section 78p(b)

In English, for the rule to apply, the beneficial owner has to be above the 10% threshold when both the purchase and the sale were made.

[BRK7]

 

For the bank holding rule, see reply #50.

For the 16b trigger, this was fairly easy to locate:

https://codes.findlaw.com/us/title-15-commerce-and-trade/15-usc-sect-78p.html

See section 78p(b)

In English, for the rule to apply, the beneficial owner has to be above the 10% threshold when both the purchase and the sale were made.

 

Thanks, Cigarbutt

[valueinvesting101]

Latest from Buffett

[spartansaver]

Latest from Buffett

 

That's awesome

[Guest longinvestor]

Latest from Buffett

 

Now we know why he’s been quiet. Sounds funny through face mask.

[Jurgis]

He's alive!

[UK]

https://www.vanityfair.com/news/2020/04/warren-buffett-is-lying-low-and-ackman-stepping-up

[ander]

Latest from Buffett

 

that's awesome...where did you see that? or was that photoshopped?

[NeverLoseMoney]

Latest from Buffett

 

that's awesome...where did you see that? or was that photoshopped?

I think it was originally posted on Li Lu's facebook page: https://www.facebook.com/li.lu.376043

[DocSnowball]

https://www.wsj.com/articles/charlie-munger-the-phone-is-not-ringing-off-the-hook-11587132006?mod=hp_lead_pos10

Quoted excerpt below:

 

Will Berkshire step up now to buy businesses on the same scale?

 

“Well, I would say basically we’re like the captain of a ship when the worst typhoon that’s ever happened comes,” Mr. Munger told me. “We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing, ‘Oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves [into buying businesses].’”

 

He added, “Warren wants to keep Berkshire safe for people who have 90% of their net worth invested in it. We’re always going to be on the safe side. That doesn’t mean we couldn’t do something pretty aggressive or seize some opportunity. But basically we will be fairly conservative. And we’ll emerge on the other side very strong.”

 

Surely hordes of corporate executives must be calling Berkshire begging for capital?

 

“No, they aren’t,” said Mr. Munger. “The typical reaction is that people are frozen. Take the airlines. They don’t know what the hell’s doing. They’re all negotiating with the government, but they’re not calling Warren. They’re frozen. They’ve never seen anything like it. Their playbook does not have this as a possibility.”

[John Hjorth]

Thank you for sharing, Doc,

 

Pretty striking read [at least to me].

[hasilp89]

one thought on his relative quietness compared to the great deals he got during GFC. He probably wouldn’t want to appear as taking advantage of other people’s misfortunes during this time. During GFC he was taking advantage of people’s stupidity which I’d assume he’s morally fine with. Based on his own test I don’t think he’d want the headline “Buffett takes advantage of pandemic stricken economy” out there. This along with our government backstopping everyone.

 

While I agree price movement has been quick and there is still a great deal of uncertainty I don’t fully buy the argument that things aren’t that cheap yet. Yes near term earnings will be down but well capitalized banks trading below book value seems to be just one example of businesses trading below LT intrinsic value.

[ak1979]

He's 89 years old

 

LOL I can see him in isolation at home, unable to get his FaceTime to work. Or maybe his router needs to be reset, and nobody there to help him.

 

Big Co CEO: "Why is Buffett not answering our offer? Should we raise pref rate from 9 to 10%? Should we add warrants? He said he'll answer in 10 minutes and it's been an hour already..."

 

<meanwhile>

 

Buffett: "Why is my computer not working? I need to answer that Big Co CEO and get my elephant! I think I need to do something to restart this computer! Maybe Bill knows! Where is my iPhone? Can anyone find my iPhone? Oh, nobody's here, I'm in self isolation... Where is my iPhone? Maybe Tim knows where it is."

 

 

There is an advantage in not being too smart in investing. if i know too much about tech, bio-tech, rail,oil.. etc.. i'm thinking i'm getting signal.. but the fact is : Nature mixes signal and noise well to make it look like signal. Only a few people like Buffet know what signal is most times when it's pitched.

[LC]

I wouldn't characterize that as being smart. For example, the exact opposite can also be true:

 

Buffett knows "so little" about tech and see a consistently high P/E of Microsoft as a signal - but really it is just noise as the company continues to outperform for decades.

 

In both cases the problem is myopia.

 

Of course, people have been incredibly successful despite a highly narrow vision, so maybe I am just playing devil's advocate.

[Cigarbutt]

I saw an interesting post by an esteemed member but it disappeared (?). i think it's worth looking at.

https://www.sec.gov/Archives/edgar/data/36104/000120919120025632/xslF345X02/doc3.xml

 

The filing (with the 10% rule in mind) implies an indirect ownership of 150.09M shares in USB.

 

The following is submitted as food for thought, with reported dates corresponding to date of 13F-HR filing.

https://www.cnbc.com/id/17162215

 

early 2006          6.11

Feb 15 2007      23.307

Feb 14 2008      23.307

Aug 14 2008      68.63

Feb 17 2009      67.551

May 14 2009      69.04

...

Feb 14 2017        85.06

Feb 14 2019      129.31

Feb 14 2020      132.46

Feb 15 2020      150.09

 

i've always liked USB to various degrees and have almost limitless financial respect for Mr. Buffett but, even if this needs to be seen from a long term point of view, with somebody's curse to move huge amounts of capital without moving the market, one needs to remember that the purchases made in 2006, 2007 and 2008 were made at about today's levels and purchases made in the last 3 years before the pandemic crunch were made at around 50$ per share.

 

Edit, given gfp's feedback.

From the 13f-HR

Feb 14 2019      129.31

May 14 2019      132.46

Aug 14 2019      132.46

Feb 14 2020      132.46

 

The ownership in the recently released form 3 includes an expanded ownership profile and it looks like direct ownership has remained unchanged at 149.50 since last summer.