AGM Updates

[woodstove]

A couple of macro comments re the AGM:

- It was really positive to have all four people at the table for the Q&A - the heart of the meeting.  The discussion at some points showed the open sharing of differing views which is characteristic of healthy organizations.  Also the Ron Olson interview prior to meeting was reassuring.  Nice to know that such good discussions go on at Berkshire.

- The formal part of the meeting was a disappointment.  I see one of the risks to the businesss as the elbow-jostling of people with a social agenda.  Berkshire is working on real tasks of stabilizing and improving society (energy distribution and reliability, health care access and quality, honest provision of goods and services instead of extortion).  It is frightening to think that agenda-driven smoothies or hare-brained flamboyants can muster 25 percent of votes.

[Gregmal]

^I actually kind of had the opposite thought yesterday. You are correct that 25% is a big deal...but its also not crazy given the pull ISS and those shops have. Theres no shortage of lazy institutional money that just blindly follow their recommendations. Its also trendy so say you're fighting for those initiatives even though theyre stupid. 

Separately, I was marveling at how Buffett and Berkshire have basically been cool with every administration Ive been alive for. The guy is, to quote Stuart Scott from his 90s SportsCenter days, "As cool as the other side of the pillow". They have no diversity whatsoever, they're nepotistic, they basically said "fuck ESG" in a very high class way....but its all very polished and gets the job done and I expect that to continue. They are world class operators and that seems to be the overriding theme with everything they do. Its very reassuring. 

[backtothebeach]

I thought it was hilarious how WEB was searching for his little newspaper clipping of interest rates for an entire minute, seemingly giving up at times and then starting searching again, and was happy as a kid when he found it

At 2:46:00

 

Edited May 3, 2021 by backtothebeach

[Every Banana Counts]

In a past annual meeting, I forgot which one, Warren said that he thought BRK would do very well in an economy with a much higher rate of inflation. It’ll be interesting to see what happens. In that same meeting I believe he said that greater regulation, and possibly even nationalization, of the insurance industry could be a risk to BRK in a hyper-inflationary environment. This seems unlikely to me, but if people can not afford the insurance the government requires something has to give. 

[Xerxes]

Some thoughts on the AGM:

- Airlines:  the point that he made that maybe BRK would have been the one doing the bailout of the Big Four if he did not divest the shares, is an important point and not considered in the past. I could imagine the discussion within the Treasury when BRK dropped the shares that "damn, the BRK option is now out of reach", so as steward of Berkshire capital, I think Buffet was more concerned about those things and the right calls were made. The reality is that in 2008-09 he chose the type of institutions where he wanted to be the one doing the bailouts. Whereas in 2020, he would have been forced to be involved in the Big Four. 

I never appreciated the level of care he takes with company's capital, as the steward of capital, until now. The Big Four airlines simply did not have the permanence that he looks for in a business and he would never want to be pass the 10% ownership. The pandemic drove that point home for him. I also see the shedding of hodge-podge collection of banks as a good thing as well.

With that, and the importance in today's working from home world, it is no surprise that he sees that permanency in the like of Verizon, and its dumb digital pipelines.  Also, in an interview few years ago in Texas, he made the comment how Apple has that permanency and that it along with BRK and perhaps one or two other companies, have that permanency (paraphrasing).

- Alibaba : would have loved to hear more. But i think given that (1) Munger bought in and (2) sees no clamp down and no major reversal from Deng Xiapong era, it must be enough for me i think.

- Apple:  so he trimmed some. Find it cute that he would make sure that at per share level, we still have the same exposure to Apple even as he trimmed due to buyback. BNSF was said to have an implied value of well over $120 billion or so (given the bidding war between CP and CN). Imagine if BNSF was not wholly owned, would he trim at this peak valuation slightly ? in his mind BNSF and Apple are about the same size, i think there is a tug of war in his mind:

- Buffet the value investor:  I need to trim some at these crazy multiples

- Buffet the portfolio manager:   suppose you do, and then what ?

- Buffer the conglomerate CEO:   this is a critical piece of digital infrastructure that we own, that is no different that BNSF, just happens to trade publicly. Diamond hands.

- Japanese Trading Companies: would have been interesting if someone had asked/pushed for more on that to see what nugget he drops. I dont think he was referring to these companies when he said buying something he wasn't to clear on the business model.

 

** Bloomstran must have been getting pissed, during the pre-show when the Yahoo Finance folks kept talking about the $150 billion cash pile.

** no tweet yet from Elon Musk commenting on the AGM

[LearningMachine]

On 5/2/2021 at 7:47 PM, Xerxes said:

- Alibaba : would have loved to hear more. But i think given that (1) Munger bought in and (2) sees no clamp down and no major reversal from Deng Xiapong era, it must be enough for me i think.

Thanks @Xerxes for sharing. 

On Alibaba, when Buffett put up the top 20 list of companies, which contained Alibaba, and helped attendees realize that the list won't be the same 30 years from now, to me it felt like an internal conversation that Buffett might have had with Munger as well to not get too excited as we cannot even say with certainty that Alibaba will stay on the top 20 list. 

I had a similar feeling when he made the audience realize that even if "you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States, everything about it and had realized 'Well, this is pretty easy. It's going to be cars. It can be autos.", investors would have still failed by trying to pick one of the auto-manufacturers or even all of the auto manufacturers in all the excitement. 

Felt like he must have had a conversation with Munger that even we can see the vision that Chinese economy is going to be much bigger than the U.S. economy, you can still fail by trying to pick one of the Chinese companies at a high multiple based on the assumption that it will stay on the list for a while. 

It was also interesting to see Buffett talk about Google, Microsoft and Facebook: "So those are the kind of businesses -- they're the best businesses, but they command the best prices too. And there aren't that many of them, and they don't always stay that way."  I think Buffett is still opposed to paying best prices for businesses because the high multiple assumes the businesses will stay that way for a while, but "they don't always stay that way." 

Edited May 4, 2021 by LearningMachine

[LearningMachine]

17 minutes ago, Xerxes said:

- Japanese Trading Companies: would have been interesting if someone had asked/pushed for more on that to see what nugget he drops. I dont think he was referring to these companies when he said buying something he wasn't to clear on the business model.

@Xerxes, you are probably right.  Do I remember correctly that Buffett publicly committed to the Japanese companies that he will be a long term shareholder?

Which companies do you think he might have meant, given he started talking about them as "And they are as a group."  Maybe some of the pharma companies, e.g. BMY and ABBV? 

I think figuring out the answer to this question will help us figure out what he sold in Q1. 

[Xerxes]

55 minutes ago, LearningMachine said:

On Alibaba, when Buffett put up the top 20 list of companies, which contained Alibaba, and helped attendees realize that the list won't be the same 30 years from now, to me it felt like an internal conversation that Buffett might have had with Munger as well to not get too excited about Alibaba as it likely won't be on the list anymore in sometime. 

I had a similar feeling when he made the audience realize that even if "you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States, everything about it and had realized 'Well, this is pretty easy. It's going to be cars. It can be autos.", investors would have still failed by trying to pick one of the auto-manufacturers or even all of the auto manufacturers in all the excitement. 

Felt like he must have had a conversation with Munger that even we can see the vision that Chinese economy is going to be much bigger than the U.S. economy, you can still fail by trying to pick one of the Chinese companies at a high multiple based on the assumption that it will stay on the list for a while. 

It was also interesting to see Buffett talk about Google, Microsoft and Facebook: "So those are the kind of businesses -- they're the best businesses, but they command the best prices too. And there aren't that many of them, and they don't always stay that way."  I think Buffett is still opposed to paying best prices for businesses because the high multiple assumes the businesses will stay that way for a while, but "they don't always stay that way." 

I think the "you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States, everything about it and had realized 'Well, this is pretty easy. It's going to be cars. It can be autos.", was squarely aimed at the new herd of retail investors buying anything EV related. 

On the comment about 1989 vs 2020 vs 2050, who knows what will be there but i dont think it is unthinkable to think Alibaba wont be there. Propelled by the sheer macro-tailwind of Chinese economy, it will be there somewhere.

An interesting contrast is with that of Yukos and Michael Khodorkovsky, that Moscow took over in 2004 and subsequently merged its asset with Rosneft. That Russia could do given how tangible were the resources and the assets. If you were to give $700 billion (Alibaba' approx market cap) to the Chinese Communist Party to rebuild Alibaba from scratch, they probably couldn't do it. Same for Tencent.

It is interesting though, we went from Deng Xiapong era, to Ziang Zemin era, to Chairman Hu era and now Xi era. The latter is has been pushing the "state" to reclaim its commending heights, yet it was in 2006-07-ish (Hu era) that I recall seeing on the cover page of The Economist the world largest companies, among them Gazprom, Bank of China, Agriculture Bank of China, etc. etc. all/mostly stated-owned entities. So will we see in 2050 Chinese state owned companies, i doubt it. Chinese will be there in 2050 on the top 30, but it will be their private enterprises (Alibaba, Tencent of the world). Could these two be de-throned by another Chinese disruptor, possibly, but they will not be de-throned by the CCP.

 

[kiwing100]

Login free transcript

https://www.rev.com/blog/transcripts/warren-buffett-berkshire-hathaway-annual-meeting-transcript-2021

 

[Charlie]

I found this interesting:

"Warren Buffett: (03:58:52)
In that list of the 20 most valuable companies, three are Chinese. Now, if you’re looking out 30 years, probably things will be changing. My guess is more, but I don’t think it will top the United States, but who knows? It’s amazing what has been accomplished.

Charlie Munger: (03:59:13)
Yeah, really amazing.

Warren Buffett: (03:59:15)
They found what works. I mean, there’s nothing like finding something that works in order to sort of reinforce ideas over time. We’ll see what happens, but I would bet there will be more than three, but I will bet the United States has more than China has, too."

I also liked Mungers comment that he prefers Berkshire to the SP 500.

[Libs]

https://finance.yahoo.com/news/robinhood-response-to-buffett-and-munger-comments-132124035.html

Cramer is eviscerating Buffett and Munger just now for their Robinhoood and ESG comments. Note the pandering from Robinhood - as if Buffett / Munger are trying to thwart young investors. They're trying to SAVE them.

 

[Xerxes]

4 hours ago, Libs said:

https://finance.yahoo.com/news/robinhood-response-to-buffett-and-munger-comments-132124035.html

Cramer is eviscerating Buffett and Munger just now for their Robinhoood and ESG comments. Note the pandering from Robinhood - as if Buffett / Munger are trying to thwart young investors. They're trying to SAVE them.

 

While Munger + Buffett are not above criticism, it is also true that CNBC is a TV show, and the more critical they are the better they'll do. No one is going to click on YouTube to hear Cramer saying how right Buffett was about Robinhood.

Few quarters ago, Adam Jonas gave a really weird price target for Tesla (something like low two digit for a bear case), and Cramer toasted him for that, saying that the only reason that price target was made by Morgan Stanley was to generate discussion & a buzz about themselves .... i guess Cramer did the samething. In the next few days, we will probably have Chamath weigh in as well.

To stay/look relevant, irrelevant people need to anchor themselves against the words of the relevant few. 

full disclaimer: i am irrelevant as well.

[bookie71]

Cramer is a first class jerk (jmho)

[flesh]

Anyone notice Ajit's hands shaking, especially towards the beginning? I wonder if it's a physical condition. If not, I'd say it's a good omen that he's invested enough

in his performance and at his age/wealth (in the agm) that he displayed nervousness. 

[JGBRK]

Flesh, yes I observed the hands shaking and thought the same thing.  Later on, he kept his hands to his side.

[CorpRaider]

Yeah, probably just nerves or a tick.  People made a big deal about it several years ago when he first spoke. 

160+ I.Q.s don't usually come without costs.  Perhaps he will never be a motivational wealth coach.

Edited May 10, 2021 by CorpRaider

[HeadOfLeverage]

On 5/3/2021 at 5:08 AM, LearningMachine said:

@Xerxes, you are probably right.  Do I remember correctly that Buffett publicly committed to the Japanese companies that he will be a long term shareholder?

Which companies do you think he might have meant, given he started talking about them as "And they are as a group."  Maybe some of the pharma companies, e.g. BMY and ABBV? 

I think figuring out the answer to this question will help us figure out what he sold in Q1. 

If I remember correctly he referred to the amount as $50B? So it probably includes a lot of positions where the buying is not his typical buy until it makes a difference for BRK (Apple, BAC, etc) or the position size is as big as it can get given he doesn't want BRK to be a bigger owner (banks other than BAC, airlines, etc).

So my guess is that it refers to several of the smaller positions which are not bought by Ted and Todd like Verizon, Chevron, pharma basket, Japanese basket.

[LearningMachine]

26 minutes ago, HeadOfLeverage said:

If I remember correctly he referred to the amount as $50B? So it probably includes a lot of positions where the buying is not his typical buy until it makes a difference for BRK (Apple, BAC, etc) or the position size is as big as it can get given he doesn't want BRK to be a bigger owner (banks other than BAC, airlines, etc).

So my guess is that it refers to several of the smaller positions which are not bought by Ted and Todd like Verizon, Chevron, pharma basket, Japanese basket.

Our memories are not as reliable as the transcripts are :-).  Here is what Buffett said exactly:

Quote

 

Becky Quick

You said you bought some stocks that you don't know a lot about. What are they?

Warren Buffett

Well, I will not get into naming them. So I said -- and maybe that there's some there that I think I know about, that I don't know about. But we have bought stocks where Charlie and I, I mean we know the business generally, but we don't have any insights.

And they are as a group, if I had to -- if you tell me I was going to be shot unless I got the best result, I would rather own those stocks than the Treasury bills we own.

But on the other hand, we work with the quantities of money where if we put 50 billion on things that I'm kind of so-so about but that are better than Treasury bills, it doesn't -- I'm not wildly comfortable about that even though it can be undone. Selling 50 billion when it's really attractive to buy something else, there's a lot of slippage that are going to happen in moving something like that around.

So that's something we talk about all the time. They're good companies. They're fine companies. But do we know something about those companies or have a way of evaluating that gives us an edge is the answer, I think.

 

 

In other words, what he said was that he is not  going to put $50 billion into something like that :-).  I doubt it includes Verizon as he understands that business well as he had the confidence to tell the questioner who asked about Verizon that "he's analyzed the situation well ... he's very capable of thinking it through very well himself."

Edited May 10, 2021 by LearningMachine

[HeadOfLeverage]

14 minutes ago, LearningMachine said:

Our memories are not as reliable as the transcripts are :-).  Here is what Buffett said exactly:

 

In other words, what he said was that he is not  going to put $50 billion into something like that :-).  I doubt it includes Verizon as he understands that business well as he had the confidence to tell the questioner who asked about Verizon that "he's analyzed the situation well ... he's very capable of thinking it through very well himself."

Ah, thank you for the reply . To me, the pharma basket feels like the prime candidate then. He definitely understands the oil business and its related capital cycle, except for the big unknown in where the oil price is going. But I highly doubt that he has analyzed the drug research pipeline of all those huge companies on a detailed level (would it even help for a layman?) just to put a few billion to work.

[LearningMachine]

2 minutes ago, HeadOfLeverage said:

Ah, thank you for the reply . To me, the pharma basket feels like the prime candidate then. He definitely understands the oil business and its related capital cycle, except for the big unknown in where the oil price is going. But I highly doubt that he has analyzed the drug research pipeline of all those huge companies on a detailed level (would it even help for a layman?) just to put a few billion to work.

Thanks, I'm thinking the same.  I wouldn't be surprised if the upcoming 13F shows he is now out of BMY and ABBV.

[fareastwarriors]

 

 

 

 

Key Takeaways from the 2021 Berkshire Hathaway Annual Meeting, with Chris Bloomstran