Munger interview WSJ 4/17/20

[LC]

Whenever we get to a market peak we generally also get the "The old man's gone senile and lost it" meme. It happened in 1999, it happened in 2006, and it seems like it's starting to happen again now.

 

As for the "All/most the value comes from tech innovation" idea let take a look down memory lane (figures approximate not exact):

 

Since 1990 to today Berkshire smokes the Nasdaq 1,300% to 500%.

 

Since 2000 to today Berkshire wins against Nasdaq again 400% to 100%

 

Since 2010 to today Nasdaq wins 270% to 180%. And they were tied at the end at 2018, with all the Nasdaq outperformance happening in the past year or so.

 

Sure sounds like someone who's lost it and overwhelmed by the new world in the new century.

 

Few things:

The question is buying when the market was down 25% from its high. I.e. SP500 at 2500 not 3300.

 

And you have to go back pre-2003 for Berkshire to outperform Nasdaq. For any investments made 2003-date, your money would have been better in Nasdaq.

 

That's 17 years of relative underperformance. And I say that with Brk as my #1 position. But criticism is necessary.

[Dalal.Holdings]

Whenever we get to a market peak we generally also get the "The old man's gone senile and lost it" meme. It happened in 1999, it happened in 2006, and it seems like it's starting to happen again now.

 

As for the "All/most the value comes from tech innovation" idea let take a look down memory lane (figures approximate not exact):

 

Since 1990 to today Berkshire smokes the Nasdaq 1,300% to 500%.

 

Since 2000 to today Berkshire wins against Nasdaq again 400% to 100%

 

Since 2010 to today Nasdaq wins 270% to 180%. And they were tied at the end at 2018, with all the Nasdaq outperformance happening in the past year or so.

 

Sure sounds like someone who's lost it and overwhelmed by the new world in the new century.

 

Yep--if this forum were around in 1999, you'd have heard the same things. He "just doesn't understand modern businesses". Ironic for a place named CoBF, and if this is how people here are thinking, then what's the hope for the wider investing public?

 

Meanwhile, please let me know how "value investors" or hedge fund managers performed during the last decade in comparison. We can look at performance before fees just to help the hedgies out a bit.

[Casey]

Whenever we get to a market peak we generally also get the "The old man's gone senile and lost it" meme. It happened in 1999, it happened in 2006, and it seems like it's starting to happen again now.

 

As for the "All/most the value comes from tech innovation" idea let take a look down memory lane (figures approximate not exact):

 

Since 1990 to today Berkshire smokes the Nasdaq 1,300% to 500%.

 

Since 2000 to today Berkshire wins against Nasdaq again 400% to 100%

 

Since 2010 to today Nasdaq wins 270% to 180%. And they were tied at the end at 2018, with all the Nasdaq outperformance happening in the past year or so.

 

Sure sounds like someone who's lost it and overwhelmed by the new world in the new century.

 

Bezos is to Buffett as QQQ is to SPY :)

[Dalal.Holdings]

Buffett/Munger have a ton of insight into the real economy with the data they see daily from their subsidiaries.  Buffett is close friends with Bill Gates--you know, the guy who resigned from Berkshire's board to work on COVID response.

 

Buffett/Munger have tough days ahead, as they have tons of businesses hard hit:

 

Railroads

Airplane parts manufacturers

Car dealers

Net Jets

Furniture stores

Mobile home makers

Retail candy stores

Stocks in airlines, banks, and Apple, among others

 

The only bright spots are insurance like GEICO, which is likely minting money, and the utilities, which are probably not hurt too badly.

 

Overall though, I think Berkshire is going to have a lot of rough segments and I wouldn't be surprised if there are layoffs across many divisions of the company.

 

Uncle Warren came rushing in to buy in 2008 because nothing was fundamentally broken about most of the economy.  Right now, I don't think that's the case, and one reason I don't think you've seen Buffett buying (in fact, he's been selling at least airlines, which require regulatory disclosure).

 

That was the argument he gave for buying IBM.

 

Except IBM had a strong moat in the corporate sphere when he got into it. Thanks to AWS and MSFT, that moat rapidly eroded. And Buffett did what he does when the facts change: he changed his mind and exited (likely at not much of a loss when dividends factored in).

[Guest cherzeca]

"The only bright spots are insurance like GEICO..."

 

I certainly would add reinsurance to the list of problem children for BRK right now.  dont know about geico.

[thowed]

To clarify, I (and I think most others) am not saying 'the old man's gone senile'.  I wouldn't presume to know one way or another.

 

It's just about being open-minded.

 

I've known people of a comparative age to Buffett - some are gaga, and some are super-sharp, but they're all tired, and slow.

 

I think there's a danger of people being too slavishly devoted to him.

[Gregmal]

Whenever we get to a market peak we generally also get the "The old man's gone senile and lost it" meme. It happened in 1999, it happened in 2006, and it seems like it's starting to happen again now.

 

Except the same things were said in 2015 and prior. Its just only after markets peak that people feel comfortable saying I told you so. When in reality markets are still indicative of gains that were made even a couple years ago by those that didn't sit on their hands. Not sloppy speculative gains, but gains even Buffett has admitted to missing. You like AMZN or GOOG but cant get interested after a 20-30% decline? You bought SRG at $35 but cant find a single share of a RE company to buy right now? It doesnt add up. I think they've probably done some buying, but its just a guess and has zero to do with the criticisms that have developed now for nearly a decade.

 

Its also easy to talk about new/old economies...look at what they own? Going into this year, financials, airlines, autos....what is there to even defend? You cant have this extreme bearishness and still hold some of that stuff? Its as laughable as someones who's only mantra has been pumping Tesla and being a shining example of "be more fearful when others are fearful" now lecturing on Buffetism's and value investing...

[stahleyp]

When did Buffett say/do in 2015 to suggest bearishness?

[Xerxes]

When did Buffett say/do in 2015 to suggest bearishness?

 

 

I think making Amazon a pillar in the portfolio like Apple would be the right hedge against headwinds in all of its various consumer businesses.

[Gregmal]

When did Buffett say/do in 2015 to suggest bearishness?

 

Hold $100B in cash? He says bullish stuff all the time. What do folks here say about him? Read into what he does, not what he says. The investments he's made for the most part come off as pressed and for the better part of the last decade have been poor ones.

 

The issue of what to do with the cash isn't new. And his long made comments that beyond a certain point its not productive. And then blows past that and builds up more. We're not asking him to follow the Apple playbook, but it wouldn't hurt either if he cant seem to find worthwhile investments...keep a $100B cushion and then use the excess to grow per share value.

[Guest cherzeca]

When did Buffett say/do in 2015 to suggest bearishness?

 

 

I think making Amazon a pillar in the portfolio like Apple would be the right hedge against headwinds in all of its various consumer businesses.

 

I agree, and I would extend this to goog as well.  but the point is that warren has never run a business, and doesnt appreciate how "technified" ALL business has become.  he has said tech is not within his circle of competence. well then retire, because all business relies on software today.  and this shut down is showing that firms which are technologically agile have moats that warren doesnt realize exist. warren is like a deer in the headlights, and a confused mind does nothing.

 

there, I said it.  men aged 89 and 95 are past their prime.  apologies in advance

[bookie71]

I agree, and I would extend this to goog as well.  but the point is that warren has never run a business, and doesnt appreciate how "technified" ALL business has become.  he has said tech is not within his circle of competence. well then retire, because all business relies on software today.  and this shut down is showing that firms which are technologically agile have moats that warren doesnt realize exist. warren is like a deer in the headlights, and a confused mind does nothing.

 

there, I said it.  men aged 89 and 95 are past their prime.  apologies in advance

 

I believe (Just my opinion and worth nothing) that he will wait it out as no one no how deep this mess will get and make sure Berkshire survives, then if any is left he will buy.  Who knows If the banks have enough reserves for the coming storm.

As someone said "Patience"

 

[Dalal.Holdings]

I agree, and I would extend this to goog as well.  but the point is that warren has never run a business, and doesnt appreciate how "technified" ALL business has become.  he has said tech is not within his circle of competence. well then retire, because all business relies on software today.  and this shut down is showing that firms which are technologically agile have moats that warren doesnt realize exist. warren is like a deer in the headlights, and a confused mind does nothing.

 

there, I said it.  men aged 89 and 95 are past their prime.  apologies in advance

 

I believe (Just my opinion and worth nothing) that he will wait it out as no one no how deep this mess will get and make sure Berkshire survives, then if any is left he will buy.  Who knows If the banks have enough reserves for the coming storm.

As someone said "Patience"

 

"The big money is not in the buying and selling, but in the waiting."

 

And

 

“All of humanity's problems stem from man's inability to sit quietly in a room alone.”

 

Clearly some people are incapable of the above and believe the buying opportunities that will come with this crisis are already gone. And it's only been 6 weeks of this crisis...Reveals pretty much how hard it is for people to follow through with the quotes above.

[dpetrescu]

I’ll add a couple thoughts:

 

1. I think there’s no doubt they did some buying in March. How much remains to be seen. If I remember correctly Buffet typically does the interview rounds the week before the annual meeting. Someone correct me if I’m wrong but typically they announce big purchases or deals before the event (Apple, Burlington) and use the event just for questions. So we’ll find out next week.

 

2. I roughly remember the quote...there are knowable things worth thinking about and unknowable things not worth thinking about. They might be thinking the next year is just unknowable and it is not worth gambling. Some people argue this is a self-inflicted recession. If someone intensionally shoots themselves in the foot, wouldn’t they suffer the same medical consequences as someone that’s shot unexpectedly by someone without warning?

 

3. In late 2021, it seems that things are back to being in the knowable general range. If only we knew which companies would not go bankrupt until then.

[stahleyp]

I'm not going to say that Buffett is as on it as he used to be. If he were, KHC and IBM probably wouldn't have happened. With that said, we've had a lot of build up over the past 11 years. Is all of that done in a month and 35% drawdown? I would assume that's what they're thinking. The fact that people are reaching out to him and he's still not talking does not seem to bode well for the economy (unless he's really just super afraid of the virus and is staying put...but I would imagine he would still say something to the journalist). I don't think Buffett is a big market timer but I do think he has superior insight due to all of the business Berkshire is in - even if if some of his stocks picks were pretty bad.

 

With that said, he had about $76 billion in 2016 so it's not like he's had $100 billion+ for 5 years.

 

The fact that very few investors today have a experienced a deep and long bear market would be a bit concerning for him (like the 70s).

 

[wescobrk]

I'm not going to say that Buffett is as on it as he used to be. If he were, KHC and IBM probably wouldn't have happened. With that said, we've had a lot of build up over the past 11 years. Is all of that done in a month and 35% drawdown? I would assume that's what they're thinking. The fact that people are reaching out to him and he's still not talking does not seem to bode well for the economy (unless he's really just super afraid of the virus and is staying put...but I would imagine he would still say something to the journalist). I don't think Buffett is a big market timer but I do think he has superior insight due to all of the business Berkshire is in - even if if some of his stocks picks were pretty bad.

 

With that said, he had about $76 billion in 2016 so it's not like he's had $100 billion+ for 5 years.

 

The fact that very few investors today have a experienced a deep and long bear market would be a bit concerning for him (like the 70s).

 

 

Most of the board probably remembers, but a few are probably forgetting he had a 3 hour interview in late Feb on CNBC with Becky Quick. He talked about the virus and how confident he is about a vaccine (because of Bill Gates) and he would be buying stocks if they went lower (as he has for the last 78 years). True, this was before the "lock-down" but we have heard from him but not since then. Also, he has said in the past after he comes out with the annual letter and does his CNBC appearance that he wants to wait until the annual meeting to discuss questions about economy, Berkshire, etc, as he wants the shareholders to hear first.

It really is only an 8 week time period that he is incommunicado.

My guess is he did very little buying because it all happened so quick and also that he thought it would get cheaper. He has mentioned more than once if he would have waited longer after Sep of 08 he would have been able to buy a lot cheaper. As for all of his talk about not timing, I heard a lot of regret in his voice when he mentioned that he wasn't buying in Jan, Feb and first 8 days in March.

Buybacks are probably de minimis but maybe his line in the annual report a few institutions took him up on that and sold him some cheap Berkshire stock. I would take the under if there is a bet of him deploying more than $15 billion of the cash and my guess is the Berkshire buybacks are less than $5 billion.

 

We we will see in about 10 days and hear directly from him. I really hope he doesn't truncate the meeting as one board member intimated based on the comment from Carol Loomis to the board member. This will be the most interesting Berkshire meeting since he took over in 1965. We can't really count the 73-74 as less than 10 people were going to Berkshire meetings then. Well, the financial crisis was pretty damn interesting so this meeting and the 09 meeting are probably the most interesting to get his and Munger's take. Why would he truncate this one? Yes, everyone will be logging in from Yahoo but his audience, I'm betting, will be at record levels since most of the country (excluding Georgia and a handful of others) will still be on lockdown and won't have much else to do.

[Dalal.Holdings]

https://www.bloomberg.com/news/articles/2020-04-23/private-equity-to-get-squeezed-out-of-another-stimulus-program

 

Sounds like all these “sophisticated” PE investors now want some assistance from the government. Here’s a gem:

 

Privately, the industry complains that the Fed’s leverage limits are taking aim at a practice that the central bank itself has encouraged through its own monetary policy. Since the 2008 economic crisis, interest rates have remained low and are currently at zero -- a decision that has encouraged borrowing by corporations of all sizes.

 

Oh, why did the Fed make us take on too much leverage over the past decade! Who knew that leverage can be a bad thing!

 

Let’s see who makes it out of this stronger—PE with high leverage or BRK with cash on hand...

 

[stahleyp]

I'm not going to say that Buffett is as on it as he used to be. If he were, KHC and IBM probably wouldn't have happened. With that said, we've had a lot of build up over the past 11 years. Is all of that done in a month and 35% drawdown? I would assume that's what they're thinking. The fact that people are reaching out to him and he's still not talking does not seem to bode well for the economy (unless he's really just super afraid of the virus and is staying put...but I would imagine he would still say something to the journalist). I don't think Buffett is a big market timer but I do think he has superior insight due to all of the business Berkshire is in - even if if some of his stocks picks were pretty bad.

 

With that said, he had about $76 billion in 2016 so it's not like he's had $100 billion+ for 5 years.

 

The fact that very few investors today have a experienced a deep and long bear market would be a bit concerning for him (like the 70s).

 

 

Most of the board probably remembers, but a few are probably forgetting he had a 3 hour interview in late Feb on CNBC with Becky Quick. He talked about the virus and how confident he is about a vaccine (because of Bill Gates) and he would be buying stocks if they went lower (as he has for the last 78 years). True, this was before the "lock-down" but we have heard from him but not since then. Also, he has said in the past after he comes out with the annual letter and does his CNBC appearance that he wants to wait until the annual meeting to discuss questions about economy, Berkshire, etc, as he wants the shareholders to hear first.

It really is only an 8 week time period that he is incommunicado.

My guess is he did very little buying because it all happened so quick and also that he thought it would get cheaper. He has mentioned more than once if he would have waited longer after Sep of 08 he would have been able to buy a lot cheaper. As for all of his talk about not timing, I heard a lot of regret in his voice when he mentioned that he wasn't buying in Jan, Feb and first 8 days in March.

Buybacks are probably de minimis but maybe his line in the annual report a few institutions took him up on that and sold him some cheap Berkshire stock. I would take the under if there is a bet of him deploying more than $15 billion of the cash and my guess is the Berkshire buybacks are less than $5 billion.

 

We we will see in about 10 days and hear directly from him. I really hope he doesn't truncate the meeting as one board member intimated based on the comment from Carol Loomis to the board member. This will be the most interesting Berkshire meeting since he took over in 1965. We can't really count the 73-74 as less than 10 people were going to Berkshire meetings then. Well, the financial crisis was pretty damn interesting so this meeting and the 09 meeting are probably the most interesting to get his and Munger's take. Why would he truncate this one? Yes, everyone will be logging in from Yahoo but his audience, I'm betting, will be at record levels since most of the country (excluding Georgia and a handful of others) will still be on lockdown and won't have much else to do.

 

Fair points.

[Guest cherzeca]

I'm not going to say that Buffett is as on it as he used to be. If he were, KHC and IBM probably wouldn't have happened. With that said, we've had a lot of build up over the past 11 years. Is all of that done in a month and 35% drawdown? I would assume that's what they're thinking. The fact that people are reaching out to him and he's still not talking does not seem to bode well for the economy (unless he's really just super afraid of the virus and is staying put...but I would imagine he would still say something to the journalist). I don't think Buffett is a big market timer but I do think he has superior insight due to all of the business Berkshire is in - even if if some of his stocks picks were pretty bad.

 

With that said, he had about $76 billion in 2016 so it's not like he's had $100 billion+ for 5 years.

 

The fact that very few investors today have a experienced a deep and long bear market would be a bit concerning for him (like the 70s).

 

 

Most of the board probably remembers, but a few are probably forgetting he had a 3 hour interview in late Feb on CNBC with Becky Quick. He talked about the virus and how confident he is about a vaccine (because of Bill Gates) and he would be buying stocks if they went lower (as he has for the last 78 years). True, this was before the "lock-down" but we have heard from him but not since then. Also, he has said in the past after he comes out with the annual letter and does his CNBC appearance that he wants to wait until the annual meeting to discuss questions about economy, Berkshire, etc, as he wants the shareholders to hear first.

It really is only an 8 week time period that he is incommunicado.

My guess is he did very little buying because it all happened so quick and also that he thought it would get cheaper. He has mentioned more than once if he would have waited longer after Sep of 08 he would have been able to buy a lot cheaper. As for all of his talk about not timing, I heard a lot of regret in his voice when he mentioned that he wasn't buying in Jan, Feb and first 8 days in March.

Buybacks are probably de minimis but maybe his line in the annual report a few institutions took him up on that and sold him some cheap Berkshire stock. I would take the under if there is a bet of him deploying more than $15 billion of the cash and my guess is the Berkshire buybacks are less than $5 billion.

 

We we will see in about 10 days and hear directly from him. I really hope he doesn't truncate the meeting as one board member intimated based on the comment from Carol Loomis to the board member. This will be the most interesting Berkshire meeting since he took over in 1965. We can't really count the 73-74 as less than 10 people were going to Berkshire meetings then. Well, the financial crisis was pretty damn interesting so this meeting and the 09 meeting are probably the most interesting to get his and Munger's take. Why would he truncate this one? Yes, everyone will be logging in from Yahoo but his audience, I'm betting, will be at record levels since most of the country (excluding Georgia and a handful of others) will still be on lockdown and won't have much else to do.

 

+1. Also you made me consider that good friend gates may have advised warren that a covid vaccine would be harder than one might think and that warren decided he should look to vaccine development results rather than market prices for the bell ringing

[racemize]

https://www.bloomberg.com/news/articles/2020-04-23/private-equity-to-get-squeezed-out-of-another-stimulus-program

 

Sounds like all these “sophisticated” PE investors now want some assistance from the government. Here’s a gem:

 

Privately, the industry complains that the Fed’s leverage limits are taking aim at a practice that the central bank itself has encouraged through its own monetary policy. Since the 2008 economic crisis, interest rates have remained low and are currently at zero -- a decision that has encouraged borrowing by corporations of all sizes.

 

Oh, why did the Fed make us take on too much leverage over the past decade! Who knew that leverage can be a bad thing!

 

Let’s see who makes it out of this stronger—PE with high leverage or BRK with cash on hand...

 

just as a data point, BX just said they took no money from the government, don't plan to, and have ample reserves to support their companies.

[Dalal.Holdings]

https://www.bloomberg.com/news/articles/2020-04-23/private-equity-to-get-squeezed-out-of-another-stimulus-program

 

Sounds like all these “sophisticated” PE investors now want some assistance from the government. Here’s a gem:

 

Privately, the industry complains that the Fed’s leverage limits are taking aim at a practice that the central bank itself has encouraged through its own monetary policy. Since the 2008 economic crisis, interest rates have remained low and are currently at zero -- a decision that has encouraged borrowing by corporations of all sizes.

 

Oh, why did the Fed make us take on too much leverage over the past decade! Who knew that leverage can be a bad thing!

 

Let’s see who makes it out of this stronger—PE with high leverage or BRK with cash on hand...

 

just as a data point, BX just said they took no money from the government, don't plan to, and have ample reserves to support their companies.

 

Well thus far they have been ineligible to take money due to limitations on leverage. However lobbyist groups which partly represent BX among other PE clients sure are working hard to change those rules:

 

March 31 (they weren’t explicitly pushing for it then):

https://www.cnbc.com/2020/03/31/coronavirus-private-equity-firms-lobbied-congress-treasury-in-bailout-push.html

 

The American Investment Council, which lobbies on behalf of the private equity industry, spoke to congressional leaders and Treasury Department officials, sources said.

 

Members of the American Investment Council include private equity giants such as Blackstone, the Carlyle Group, Apollo Global Management, Kohlberg Kravis Roberts and Warburg Pincus.

 

April 23 Bloomberg article (but they are looking to loosen up the rules now!):

 

https://www.bloomberg.com/news/articles/2020-04-23/private-equity-to-get-squeezed-out-of-another-stimulus-program

 

Private equity firms and their trade association, the Washington-based American Investment Council, have been pressing the Fed to allow more flexibility in assessing who’s eligible.

 

I highly doubt Blackstone will publicly say it wants the money. It will instead work in the background through its lobbyists to change the rules in its favor...

[Xerxes]

I recall listening to Buffet interview back in March and I felt an unease with his uneasiness about Covid’s impact. Anyways, I hold BRK because they are different. And if they are not doing anything, as we are still in the early innings how the wheels would come off, I am ok with that.

 

If I wanted a mediocre conglomerate that buys and sells at the wrong time, the GE of old would be of a great option.

[Cigarbutt]

https://www.bloomberg.com/news/articles/2020-04-23/private-equity-to-get-squeezed-out-of-another-stimulus-program

Sounds like all these “sophisticated” PE investors now want some assistance from the government. Here’s a gem:

Privately, the industry complains that the Fed’s leverage limits are taking aim at a practice that the central bank itself has encouraged through its own monetary policy. Since the 2008 economic crisis, interest rates have remained low and are currently at zero -- a decision that has encouraged borrowing by corporations of all sizes.

Oh, why did the Fed make us take on too much leverage over the past decade! Who knew that leverage can be a bad thing!

Let’s see who makes it out of this stronger—PE with high leverage or BRK with cash on hand...

just as a data point, BX just said they took no money from the government, don't plan to, and have ample reserves to support their companies.

just as a data point, the largest 19 US banks 'returned' almost $80B to shareholders between the third quarter of 2007, when some felt trouble was being contained,  through the accelerating phase of 2008. Interesting to note that the $80B (and more) was 'returned' to banks as part of a plan labelled, as typically is in those cases, with capital letters.

The banks are much better capitalized at this point and the present environment, by itself, has little 'predictive' power but this is only to say that it may be risky to assess risk from the point of view of actors (like private equity) who tend to act pro-cyclically and to be lagging indicators.

[rb]

PE shops right now are holding the biggest bag of crap out there outside of a shale E&P portfolio.

 

They paid high multiples, used a ton of leverage, and the CLO market doesn't have a pulse. But they're ok. Suuuurrreee.

[Nomad]

PE shops right now are holding the biggest bag of crap out there outside of a shale E&P portfolio.

 

They paid high multiples, used a ton of leverage, and the CLO market doesn't have a pulse. But they're ok. Suuuurrreee.

 

Where's the Fed to buy them out at par when you need it?  ;D