Buffett/Berkshire - general news

[Xerxes]

Pershing also has no leverage to make any recommendations or changes to berkshire.  They can buy a qsr at 20x + and still seek margin expansions, buybacks, acquisitions etc and still do better than keeping berkshire which is basically tied to the economic recovery with no alpha so long as buffet is resistant to buying dips or buying back stock.  You really need to ask the question, what is berkshire really worth if buffett isn't buying back a languish stock in the 170s if he was willing to do so at 220.  How much instrinic value does warren think was impaired? I'd imagine in feb he probably thought it was worth 250/260 at least? What is it now if he isn't pressing the buy button here.  No excuses for it moving too fast either considering it was in the 170s for a good 2 weeks

 

Buffet is probably waiting for Fed to pull the rug out so that he can go to work. Fine by me.

 

And what leads him or anyone else to believe that they will? People having been saying these same things about the Fed, and the music stopping, and the "stock market doesnt match the economy" for the past decade. For a 90+ year old dude, Im not sure thats a great game to be playing. Or, as we've seen from time to time in the markets, the Fed may in fact do that, and the story doesnt play out the way the pundits think it will.

 

Ive become more and more convinced that the rallying cry of "the markets are overvalued" is just a convenient and pride saving way of admitting "I missed the opportunity".

From what I've seen generally the bunch that point that "ABC" has missed the opportunity just because the markets went up tend to correlate well with the bunch that claim that nobody could have seen "XYZ" event coming when asked why they don't have any money anymore.

 

Also, pretty sure Buffett doesn't give a shit about "the game" or how he should play it.

 

Like who? Can you name any?

 

Because once again, we saw most of the guys on top of their game, even some of the more prominent bears buying stocks in March. We saw BX and BAM buying RE hand over fist. We saw the Saudi Wealth fund buying hotels and entertainment companies. And we saw the guy who invented "the game" who "doesnt give a shit" about it now, capitulate at the bottom....

 

Gregmal

 

Saudi wealth fund invested less than $10B at bargain price, while they got hoodwinked into investing $45B to SoftBank vision fund. That $45B is now value trapped.

 

The game is about doing less stupid things and knowing the downside risk over the long term.

It doesn’t help that they did one right thing after one large stupid thing.

[Gregmal]

You generally don't hear much from them as they don't have any more money so nobody gives a shit anymore. Do you know how Chuck Prince is doing these days?

 

Ok but you stated:

 

"From what I've seen generally the bunch that point that "ABC" has missed the opportunity just because the markets went up tend to correlate well with the bunch that claim that nobody could have seen "XYZ" event coming when asked why they don't have any money anymore."

"

 

So I was just wondering what examples the correlation was based off.

[Guest cherzeca]

my thoughts on WEB:  I recall he exited muni monoline insurance because he thought local politicians  would care more about public employees than muni bondholders.  dont invest where some political bureaucrat can ruin your model.  I am beginning to think that WEB thinks this whole shutdown is a game that is controlled by these same politicians...I mean if you are invested in a business predominantly in NY, Cuomo is the most important risk factor you have to concern yourself with.  now how do you model Cuomo?...so I can see WEB saying give this time to let this play out and for the politicians to exit stage left, and then reconsider.  I also think Gates scared him.

[LearningMachine]

I think Buffett will have the last laugh.

 

He is spot on that some workers won't come back to offices.  Tech companies are already making decisions for the long term which will result in at least 25% reduction in office sqft, retail and even residential real estate in expensive cities.

 

Folks might be under-estimating how much 25% increase in incremental real estate supply can impact prices drastically in office, retail, and maybe even residential housing in expensive cities.

 

25% reduction in space needed can result in over 50% drop in prices because prices are based on incremental/marginal supply/demand.  Imagine you own 100,000 sqft of office space, which was all rented pre-Covid and could cover your mortgage payments. Imagine, post-Covid only 75% is rented. What will you do with the remaining 25,000 sqft? Will you sell/rent it for whatever price you could get if you couldn’t cover mortgage payments with the remaining 75%? Does anyone know what percentage of Detroit housing had to be on sale for prices to plummet? My guess is it didn’t even need to be as high as 15%.

 

50% drop in real estate prices will be deadly for banks and in turn, several industries.

[stahleyp]

I think Buffett will have the last laugh.

 

He is spot on that some workers won't come back to offices.  Tech companies are already making decisions for the long term which will result in at least 25% reduction in office sqft, retail and even residential real estate in expensive cities.

 

Folks might be under-estimating how much 25% increase in incremental real estate supply can impact prices drastically in office, retail, and maybe even residential housing in expensive cities.

 

25% reduction in space needed can result in over 50% drop in prices because prices are based on incremental/marginal supply/demand.  Imagine you own 100,000 sqft of office space, which was all rented pre-Covid and could cover your mortgage payments. Imagine, post-Covid only 75% is rented. What will you do with the remaining 25,000 sqft? Will you sell/rent it for whatever price you could get if you couldn’t cover mortgage payments with the remaining 75%? Does anyone know what percentage of Detroit housing had to be on sale for prices to plummet? My guess is it didn’t even need to be as high as 15%.

 

50% drop in real estate prices will be deadly for banks and in turn, several industries.

 

Hmmm...this isn't something I've thought a lot about (how values can drop dramatically even if demand doesn't fluctuate by the same amount). Interesting thought.

[alpha]

 

BYD to supply ford with batteries.

 

https://www.reuters.com/article/us-ford-byd-electric/buffett-backed-byd-to-supply-ev-batteries-to-ford-idUSKBN2381VJ

[gfp]

General comments on 6/1 reinsurance renewal pricing -

 

https://www.businessinsurance.com/article/20200602/NEWS06/912334892/Reinsurance-rates-jump-as-COVID-19-adds-uncertainty-to-market#

 

In addition, retrocessional capacity is entering the market from sources that typically only offer substantial capacity when rates are at historically high levels, Mr. Shields said

 

“We are hearing repeated references to companies like Berkshire Hathaway and D.E. Shaw playing a role. Their longstanding approach has been to let the market come up to their elevated levels and that’s when they’ll put their capital at risk,” Mr. Shields said.

[Cigarbutt]

General comments on 6/1 reinsurance renewal pricing -

https://www.businessinsurance.com/article/20200602/NEWS06/912334892/Reinsurance-rates-jump-as-COVID-19-adds-uncertainty-to-market#

In addition, retrocessional capacity is entering the market from sources that typically only offer substantial capacity when rates are at historically high levels, Mr. Shields said

“We are hearing repeated references to companies like Berkshire Hathaway and D.E. Shaw playing a role. Their longstanding approach has been to let the market come up to their elevated levels and that’s when they’ll put their capital at risk,” Mr. Shields said.

More of the same elsewhere:

https://www.reinsurancene.ws/fhcf-will-not-renew-its-private-market-reinsurance-in-2020/

"Kuczwanski notes that since 2015, there’s been ample private market capital and significant risk transfer capacity, which has enabled the FHCF to participate in the private market without lowering the amount of capacity available to direct writers in Florida. However, capital is now less abundant that in prior years..."

The world has changed. The question is unfolding as to whether it's cyclical or secular.

[longterminvestor]

Short term this may look bad, seem bad, but not as bad as it looks/seems.  If rates continue to tick up long term, Berkshire RE will begin to take risk at "their price".  Buffett has been saying for past few years RE insurance biz has not been as good of a business because of over capacity. 

 

Back in 2008, Buffett got paid $244MM as an option to "lend" $4B @ 6.5% in event of storm (see article below).  Interesting structure because he was dealing with State of Florida Government (FHCF).  FHCF has been running a surplus AND book of business has declined rapidly b/c private markets have taken risk so FHCF's needs for risk reduction has diminished since 2008. 

 

https://www.heraldtribune.com/article/LK/20080731/News/605231753/SH

[CassiusKing1]

Oh boy.

 

https://www.cnbc.com/2020/06/05/trump-says-warren-buffetts-airline-stock-sale-was-a-mistake.html

[DooDiligence]

Oh boy.

 

https://www.cnbc.com/2020/06/05/trump-says-warren-buffetts-airline-stock-sale-was-a-mistake.html

 

Yeah, WEB should have taken total ownership & decked out the planes with cashmere carpet & gold plated toilets.

 

Great advice from the master of M & A.

[fareastwarriors]

Warren Buffett’s lack of big moves during sell-off is ‘tied to his age,’ Ken Fisher says

 

https://www.cnbc.com/2020/06/08/warren-buffetts-lack-of-big-moves-during-sell-off-is-tied-to-his-age-ken-fisher-says.html

[LC]

fareast, thank you for posting. I think this is fair criticism.

 

I have been wondering when is the appropriate time to ask the question, "What do people think of WB's actions during Mar/Apr?"

 

The follow up questions being, "what does this indicate for a long-term investor in Brk, and what is the function then of the 120+B cash balance?"

 

Perhaps it is still too early to ask such questions, but I think anyone making a meaningful investment in Brk needs to question these factors.

 

[clutch]

The age factor is particularly salient due to his perceived risk of Covid at an old age.

[bookie71]

I think his lack of moves is because nobody knows how this will play out and the cash may be needed to protect the existing companies. 

[kab60]

He seemed pretty level headed and sharp during the AGM, so I suppose he misjudged the situation - or at least the outcome - like Druckenmiller and most famous money managers as well as the majority of people on this board judging by the activity here in March. So that sucks as a shareholder. On the other hand, I think his stake in Apple shows he hasn't completely lost his marbles and turning on Airlines and banks, despite bad timing, indicates he's still flexible. Anyway, I think I'd prefer if Berkshire just put idle cash in S&P 500/BNSF/BHE/buybacks depending on the best expected returns so it became a permanent, float-levered equity on the broad market, because I think it's basically impossible for him to stockpick and beat the averages with the money he juggles with. Espescially when he won't go near stuff like Altria or Bud and cuts himself off from obvious opportunities. I Hope the old guy has an ace up his sleave and bought back a truckload in Q2, but I wouldn't count on it.

[Munger_Disciple]

Warren Buffett’s lack of big moves during sell-off is ‘tied to his age,’ Ken Fisher says

 

https://www.cnbc.com/2020/06/08/warren-buffetts-lack-of-big-moves-during-sell-off-is-tied-to-his-age-ken-fisher-says.html

 

Recent Forbes article about Fisher:

https://www.forbes.com/sites/noahkirsch/2019/10/21/unearthed...

 

 

[sleepydragon]

Warren Buffett’s lack of big moves during sell-off is ‘tied to his age,’ Ken Fisher says

 

https://www.cnbc.com/2020/06/08/warren-buffetts-lack-of-big-moves-during-sell-off-is-tied-to-his-age-ken-fisher-says.html

 

Recent Forbes article about Fisher:

https://www.forbes.com/sites/noahkirsch/2019/10/21/unearthed...

 

If Phillips Fisher is still alive, he will slap his face a few times.

 

[spartansaver]

Warren Buffett’s lack of big moves during sell-off is ‘tied to his age,’ Ken Fisher says

 

https://www.cnbc.com/2020/06/08/warren-buffetts-lack-of-big-moves-during-sell-off-is-tied-to-his-age-ken-fisher-says.html

 

It's true, back in 08/09 when Buffett was young he was able to act aggressively.

 

(this is a joke)

[mattee2264]

 

https://www.marketwatch.com/story/warren-buffett-is-an-idiot-says-investor-who-claims-daytrading-is-the-easiest-game-ive-ever-played-2020-06-09?mod=home-page

 

Echoes of 1999?

[gfp]

 

https://www.marketwatch.com/story/warren-buffett-is-an-idiot-says-investor-who-claims-daytrading-is-the-easiest-game-ive-ever-played-2020-06-09?mod=home-page

 

Echoes of 1999?

 

Seems like it is in jest.  Is there reason to believe that particular guy is serious?

[rb]

Check out his twitter feed. He's 100% for real.

 

You'll loose some time you won't get back but it's good for a chuckle.

[sleepydragon]

https://bankunderground.co.uk/2020/06/09/covid-19-briefing-corporate-balance-sheets/

 

“ “While it is still very uncertain how the Covid-19 induced crisis will unfold and to what extent it will resemble the global financial crisis, some lessons from the global financial crisis might be good to keep in mind. Joseph, Kneer, Van Horen and Saleheen (2019) show that during the global financial crisis companies with limited cash holdings had to reduce their investment and therefore lost productive capacity. When demand returned and market conditions improved they were not able to catch up with their cash-rich rivals and as a result lost market share to them. Companies with large amounts of cash on their balance sheets at the onset of the coronavirus crisis might therefore emerge as winners in the post-Covid world.”

 

Buy BRKa!

 

[LC]

https://bankunderground.co.uk/2020/06/09/covid-19-briefing-corporate-balance-sheets/

 

“ “While it is still very uncertain how the Covid-19 induced crisis will unfold and to what extent it will resemble the global financial crisis, some lessons from the global financial crisis might be good to keep in mind. Joseph, Kneer, Van Horen and Saleheen (2019) show that during the global financial crisis companies with limited cash holdings had to reduce their investment and therefore lost productive capacity. When demand returned and market conditions improved they were not able to catch up with their cash-rich rivals and as a result lost market share to them. Companies with large amounts of cash on their balance sheets at the onset of the coronavirus crisis might therefore emerge as winners in the post-Covid world.”

 

Buy BRKa!

 

This is a very fair counterpoint to the "Buffett did nothing!" criticism.

 

You can earn a great return investing 6, 12 months after the crisis when the smoke has cleared.

[gfp]

Check out his twitter feed. He's 100% for real.

 

You'll loose some time you won't get back but it's good for a chuckle.

 

Yikes, I guess you are right.  Seemed like he was drinking in most of his videos, day or night.  I loved the irony of the 'I should be up a Billion dollars today!' line on the day old man Buffett watched his largest equity position - a tech stock - go up by $10.53 per share, while owning 250,866,566 shares of that tech stock. 

 

Looks like there is a very real possibility that Berkshire's largest equity position will be worth more than the entire market cap of Wells Fargo at some point.  But seriously, what have you done for me lately old man?