WFC - Wells Fargo

[Mephistopheles]

WFC is a value trap, it will take years to work out current issues relative to the Account scandal. In the mean time, competition will move ahead of them.  Also note how Munger was flaming the new CEO who can’t even bebothered to move from NYC to WFC’s headquarter. It’s shows lack of commitment.

 

I think they just had it with WFC.

 

I must have missed Munger flaming the new CEO, what did he say exactly? Ted Weschler spends half his time in Virginia, do you consider that half ass commitment?

 

Sure Wells has these issues and it will take a few years. If there was no hair the stock would be 50% higher. Btw BofA had immense issues in 2011...

 

My friend works at WFC in the investment bank. He says the new CEO is doing a top to bottom review of every single business unit in order to streamline. This guy trained under Jamie Dimon, I'm willing to give him a chance, SF or NYC.

 

They still have the deposits and the branches, they just need to figure out how to make the ingredients work better.

 

It was during the Daily Journal shareholder Meeting

https://www.bloomberg.com/news/articles/2020-02-12/munger-says-wells-fargo-ceo-scharf-ought-to-be-in-san-francisco

 

Right or wrong, I don’t think they like the latest moves and the new Management and that May be the reason they sell down their position.

 

I agree that WFC‘s issues are fixable, but you have the pot. issue that this stock is dead money for another couple of years while the competition is moving forward.

 

Charlie should ask Ted Weschler to move to Omaha next

 

Though I do think it's weird for him to publicly criticize the CEO of one of their holdings, especially for something silly like this. And the man just started the job. Probably Charlie being old and cranky.

 

If you agree the problems are fixable, the stock may not wait until it's all fixed. Again take a look at BAC.

[Mephistopheles]

One more anecdote I want to mention: a couple of years ago Wells fired a whole bunch of their investment bankers for manipulating expense statements (committing fraud) to get free meals after hours. The whole thing started when a secretary noticed a discrepancy on one of the analyst's receipts, he apparently changed the timing on it to reflect a time after 7pm when free meal is allowed. So they started looking into the rest of his team and sure enough others were pulling the same crap. So WFC spent tens of millions of dollars on an outside law firm to clean house, resulting in a massive firing.

 

I'm sure this problem was wide spread on Wall Street prior to this. Point of this story being they are aggressively going after ethics violations. This was under Tim Sloan. And like I said earlier, from what I've heard, Scharf is analyzing or reshaping every business line.

 

Stock has been dead money but I'll take the dividend and repurchase especially since their capitalization can support it.

 

Ps the Fed asset cap lifting should be a catalyst to look forward to.

[RadMan24]

Charles Munger, whose Berkshire Hathaway Inc. and Daily Journal Corp. are shareholders in Wells Fargo & Co., isn’t a fan of the work arrangement set up by the bank’s new chief executive officer.

 

“That’s outrageous,” Munger, 96, said Wednesday in an interview when asked about Charlie Scharf’s choice to live in New York while running the San Francisco-based lender. “Anybody should move for a big job like that.”

 

www.bloomberg.com/news/articles/2020-02-12/munger-says-wells-fargo-ceo-scharf-ought-to-be-in-san-francisco

 

Munger has lived in the Los Angeles area for many, many decades despite Berkshire being based in Omaha. Despite being 96 (!) years old, Munger has two jobs: Vice Chairman of Berkshire and Chairman of DJCO.

 

He's a lovable old curmudgeon who just realized that newspapers are dead.

Probably still has a flip phone & can't figure out how to use a Roku box.

 

Personally, I'm OK with Scharf doing his thing at a distance.

 

The move seems more than just symbolic of a necessary shakeup,

and fits well with the new organizational splits.

 

Charlie forgot to invert this time.

 

My money will probably burn for this heresy.

 

Wells Fargo is a huge company with a lot of trouble going on. For those who recall a disaster waiting to happen with a CEO far removed from headquarters that was out of touch, look no further than Sears.

[Mephistopheles]

Charles Munger, whose Berkshire Hathaway Inc. and Daily Journal Corp. are shareholders in Wells Fargo & Co., isn’t a fan of the work arrangement set up by the bank’s new chief executive officer.

 

“That’s outrageous,” Munger, 96, said Wednesday in an interview when asked about Charlie Scharf’s choice to live in New York while running the San Francisco-based lender. “Anybody should move for a big job like that.”

 

www.bloomberg.com/news/articles/2020-02-12/munger-says-wells-fargo-ceo-scharf-ought-to-be-in-san-francisco

 

Munger has lived in the Los Angeles area for many, many decades despite Berkshire being based in Omaha. Despite being 96 (!) years old, Munger has two jobs: Vice Chairman of Berkshire and Chairman of DJCO.

 

He's a lovable old curmudgeon who just realized that newspapers are dead.

Probably still has a flip phone & can't figure out how to use a Roku box.

 

Personally, I'm OK with Scharf doing his thing at a distance.

 

The move seems more than just symbolic of a necessary shakeup,

and fits well with the new organizational splits.

 

Charlie forgot to invert this time.

 

My money will probably burn for this heresy.

 

Wells Fargo is a huge company with a lot of trouble going on. For those who recall a disaster waiting to happen with a CEO far removed from headquarters that was out of touch, look no further than Sears.

 

I see so if Eddie Lampert lived in Hoffman Estates, IL, all would be good with SHLD now?

[DooDiligence]

Charles Munger, whose Berkshire Hathaway Inc. and Daily Journal Corp. are shareholders in Wells Fargo & Co., isn’t a fan of the work arrangement set up by the bank’s new chief executive officer.

 

“That’s outrageous,” Munger, 96, said Wednesday in an interview when asked about Charlie Scharf’s choice to live in New York while running the San Francisco-based lender. “Anybody should move for a big job like that.”

 

www.bloomberg.com/news/articles/2020-02-12/munger-says-wells-fargo-ceo-scharf-ought-to-be-in-san-francisco

 

Munger has lived in the Los Angeles area for many, many decades despite Berkshire being based in Omaha. Despite being 96 (!) years old, Munger has two jobs: Vice Chairman of Berkshire and Chairman of DJCO.

 

He's a lovable old curmudgeon who just realized that newspapers are dead.

Probably still has a flip phone & can't figure out how to use a Roku box.

 

Personally, I'm OK with Scharf doing his thing at a distance.

 

The move seems more than just symbolic of a necessary shakeup,

and fits well with the new organizational splits.

 

Charlie forgot to invert this time.

 

My money will probably burn for this heresy.

 

Wells Fargo is a huge company with a lot of trouble going on. For those who recall a disaster waiting to happen with a CEO far removed from headquarters that was out of touch, look no further than Sears.

 

Sloppy implementation of haphazard offerings in stores which are barren of customers.

All run by someone with crap for experience in the business.

 

I don't see the analogy.

[StubbleJumper]

Charles Munger, whose Berkshire Hathaway Inc. and Daily Journal Corp. are shareholders in Wells Fargo & Co., isn’t a fan of the work arrangement set up by the bank’s new chief executive officer.

 

“That’s outrageous,” Munger, 96, said Wednesday in an interview when asked about Charlie Scharf’s choice to live in New York while running the San Francisco-based lender. “Anybody should move for a big job like that.”

 

www.bloomberg.com/news/articles/2020-02-12/munger-says-wells-fargo-ceo-scharf-ought-to-be-in-san-francisco

 

Munger has lived in the Los Angeles area for many, many decades despite Berkshire being based in Omaha. Despite being 96 (!) years old, Munger has two jobs: Vice Chairman of Berkshire and Chairman of DJCO.

 

He's a lovable old curmudgeon who just realized that newspapers are dead.

Probably still has a flip phone & can't figure out how to use a Roku box.

 

Personally, I'm OK with Scharf doing his thing at a distance.

 

The move seems more than just symbolic of a necessary shakeup,

and fits well with the new organizational splits.

 

Charlie forgot to invert this time.

 

My money will probably burn for this heresy.

 

Wells Fargo is a huge company with a lot of trouble going on. For those who recall a disaster waiting to happen with a CEO far removed from headquarters that was out of touch, look no further than Sears.

 

 

Wasn't Eddie's investment always predicated on a sum-of-the-parts basis? The idea that you take the thing and blow it up -- sell Land's End, Craftsman, Kenmore and other brands, figure out which stores are the most valuable real estate so you can close them down, move the inventory to other stores and sell the property/leases, and then eventually once the valuable assets are liquidated you just shut down the rest.  It all would have worked fine if he could have done it more quickly, but Sears bled money for too many years before he could shut it down.  Bad implementation, but it had nothing to do with Eddie's city of residence.

 

 

SJ

[Spekulatius]

The Sears - WFC analogy doesn’t resonate, those a totally different circumstances. I have no opinion yet on WFC CEO, but merely wanted to point out that Munger doesn’t seem to enthusiast about him , which may explain why BRK is selling down their holdings. Make out of this what you will.

[CorpRaider]

If Scharf calls in to an earnings call from his yacht, I will sell my stock. 

 

I think it is amazing that he chose his family over the visa job.  DJCO still has like 55% of the us portfolio in WFC, so I don't think Munger is that serious (and he's paying attention, he hit the eject button on that posco out a few years back).

[Spekulatius]

If Scharf calls in to an earnings call from his yacht, I will sell my stock. 

 

I think it is amazing that he chose his family over the visa job.  DJCO still has like 55% of the us portfolio in WFC, so I don't think Munger is that serious (and he's paying attention, he hit the eject button on that posco out a few years back).

 

Posco stock ‘t have huge embedded gains. I bet Munger doesn’t sell because WFC because he bought it in 2009 at a very attractive price and almost bottom ticked it if I remember correctly (<$10?). Wabuffo would know.

 

If so, it could well be that BRK only sells down their higher cost shares with lower embedded gains and keeps the shares acquired decades ago at a ridiculously low cost basis.

 

[wabuffo]

Posco stock ‘t have huge embedded gains. I bet Munger doesn’t sell because WFC because he bought it in 2009 at a very attractive price and almost bottom ticked it if I remember correctly (<$10?). Wabuffo would know.

 

Spek - you are correct.

 

Posco was a tax-loss sale (although there could have been other reasons why Munger sold it).  He bought the PKX stake for $6.47m in the summer of 2011, wrote it down by $1.72m in Sep 2013.  By the time he sold the majority of the stake at the end of 2014, it was a 24% capital loss.

 

Wells Fargo has a very large embedded gain.  Its hard to separate WFC/USB because he bought them at the same time - but it was right around the period when all bank stocks were hitting their GFC lows in late Feb/early Mar 2009.  I would bet his cost basis on WFC is <$9 per share (give or take). 

(cost basis for WFC/USB = $15.5m x 90%WFC/10%USB split = $13.95m WFC cost basis.  $13.95m/1.592m WFC shares = $8.76 cost basis per WFC share).

 

His latest S. Korean stock (Hyundai Motors) looks like another tax-loss candidate on which he took a $4.6m impairment hit last year.  Overall his Asian stock picks haven't been doing great.  BAC/WFC make up the vast majority of DJCO's deferred gains (although USB has been a great performer too on a % basis, though its much smaller). 

 

wabuffo

[Cigarbutt]

1-

As far as the tax cost-basis of WFC shares (not that it matters usually because the investing style is usually binary), I've never seen documentation describing the cost-basis method that Berkshire Hathaway uses (I assumed they used an average cost basis). I guess it will be possible to figure out if they progressively wind down the position.

 

2-

Just a remark on the choice of buying WFC in early 2009. It appears that Mr. Munger's timing was perfect but I assume he would accept that such exact timing was lucky (to the extent of the exact timing). I find the retrospective exercise interesting because there were a lot of potential opportunities then. It's also interesting because if you compare the total return of holding WFC (assuming buying near absolute lows in February and March of 2009) and buying the S&P 500 index at the same time, the net result (as of now, assuming holding during the entire period) is about the same!

This is not to put a shade on Mr. Munger's amazing stock picking abilities but one could argue that it would have been less "risky" to buy the index in early 2009 and to go fishing after (or ride a catamaran or whatever).

[Jurgis]

It's also interesting because if you compare the total return of holding WFC (assuming buying near absolute lows in February and March of 2009) and buying the S&P 500 index at the same time, the net result (as of now, assuming holding during the entire period) is about the same!

This is not to put a shade on Mr. Munger's amazing stock picking abilities but one could argue that it would have been less "risky" to buy the index in early 2009 and to go fishing after (or ride a catamaran or whatever).

 

And that in essence is why active investing is tough.

[rb]

2-

Just a remark on the choice of buying WFC in early 2009. It appears that Mr. Munger's timing was perfect but I assume he would accept that such exact timing was lucky (to the extent of the exact timing). I find the retrospective exercise interesting because there were a lot of potential opportunities then. It's also interesting because if you compare the total return of holding WFC (assuming buying near absolute lows in February and March of 2009) and buying the S&P 500 index at the same time, the net result (as of now, assuming holding during the entire period) is about the same!

This is not to put a shade on Mr. Munger's amazing stock picking abilities but one could argue that it would have been less "risky" to buy the index in early 2009 and to go fishing after (or ride a catamaran or whatever).

 

That's the thing about investing though isn't it? You can say the above and be about right. But that assumes efficient markets and that the S&P and WFC are priced correctly. If they aren't then you're not right. And therein lies the rub. Because at this point in time at least one of them is not priced correctly.

 

If we go back to 2018 you'd look like a fool saying the above because WFC outperformed the hell out of the S&P. So at that point it sure looked like Munger made a very wise choice going with WFC vs S&P and catamarans. And I am 100% sure that 2 years from now the situation will be a lot different than today. Munger's choice will again be a wise one, or he'll look like a damn fool for making it. It's just how this game that we chose to enter works.

[CorpRaider]

Yeah all we know is that he hasn't sold a share.  We can speculate about motives, just like with WEB (who also sold a good slug of WFC in 2018 and when asked about it was like meh, we still like it and would buy more...well he did qualify that it might not gleefully).

 

I personally doubt the god of long-term, quality-compounder bro, investing (and thinking in opportunity costs) is letting a 21% marginal tax hurdle on gains prevent him from making a change if he feels a franchise has been materially impaired.  I also recall that he was raving (like pounding the table) about the quality of said franchise a year ago on national TV and during BRK AGM and nothing has changed since other than hiring a wunderkind CEO and resolving/reserving for big chunks of litigation (Sloan was already fired and he didn't like it then either).

 

I gotta' stop posting/writing about WFC I am getting too enthused...all the negative sentiment...all the negative rates/permanent deflation...all that obvious bubbling/cover for change....all that hidden earnings power. 

 

Dudes posting about needing help to execute financial transactions on the same board, highlighting why you might want a branch you can walk into if you are dealing with real money...so on and so forth.

[Cigarbutt]

2-

Just a remark on the choice of buying WFC in early 2009. It appears that Mr. Munger's timing was perfect but I assume he would accept that such exact timing was lucky (to the extent of the exact timing). I find the retrospective exercise interesting because there were a lot of potential opportunities then. It's also interesting because if you compare the total return of holding WFC (assuming buying near absolute lows in February and March of 2009) and buying the S&P 500 index at the same time, the net result (as of now, assuming holding during the entire period) is about the same!

This is not to put a shade on Mr. Munger's amazing stock picking abilities but one could argue that it would have been less "risky" to buy the index in early 2009 and to go fishing after (or ride a catamaran or whatever).

That's the thing about investing though isn't it? You can say the above and be about right. But that assumes efficient markets and that the S&P and WFC are priced correctly. If they aren't then you're not right. And therein lies the rub. Because at this point in time at least one of them is not priced correctly.

 

If we go back to 2018 you'd look like a fool saying the above because WFC outperformed the hell out of the S&P. So at that point it sure looked like Munger made a very wise choice going with WFC vs S&P and catamarans. And I am 100% sure that 2 years from now the situation will be a lot different than today. Munger's choice will again be a wise one, or he'll look like a damn fool for making it. It's just how this game that we chose to enter works.

Retrospective analysis is fraught with pitfalls and arbitrary choices of dates is one of them. You are correct in suggesting that the differential return would have been favorable (perhaps a few % points per year and even higher with the perfect timing of sales) by retrospectively selecting hypothetical selling time points but the fact is that Mr. Munger did not sell at those dates.

 

Also, a 10-year period is a reasonable (long enough) period to evaluate "performance". I think Mr. Buffett has suggested 3-year or 5-year periods as reasonable minima. I think it's reasonable for an individual investor to assess the validity (retrospective) of active investing vs the index over longer time-periods and to switch accordingly unless the pleasure of stock picking overrides the cost (or vice-versa).

 

There are times that are different and, who knows, maybe this is such a time.

Since this thread is about WFC, I will stick my neck out.

This thread and other similar threads about large well established and traditional banks contain inputs that suggest that those banks constitute good long-term investments, an assessment I agree with from the point of view of relative performance. I've always liked WFC (and USB and some others) but count on the possibility that those banks will underperform before they outperform.

[fareastwarriors]

Wells Fargo to pay $3 billion in settling criminal and civil investigations into its fraudulent sales practices

 

 

https://www.cnbc.com/2020/02/21/wells-fargo-to-pay-3-billion-in-setting-criminal-and-civil-investigations-into-its-fraudulent-sales-practices.html

[gokou3]

Looks like the asset cap is still in place?  Wonder if there is any timeline for removal..

[CorpRaider]

This morning's interview kinda' sounds like WEB might be dumping WFC doesn't it?  Reminds me of the IBM thing.

[Lemsip]

This morning's interview kinda' sounds like WEB might be dumping WFC doesn't it?  Reminds me of the IBM thing.

100% replay of his IBM language. Sure it will be reduced steadily to zero  this year.

[CorpRaider]

I wish they would ask him about Scharf.  If he didn't do the gushing Dale Carnegie thing it might reveal a lot.  That's the only thing that has really changed since the last time he spoke about it.  If they said we don't think you should get a wall street ceo and they weren't in favor of Scharf (weird bc they were buying BK while he was CEO...but maybe that was T&T).  I could see the change if Scharf in opinion pitched the board on his vision of having WFC emulate JPM totally...including creating a similar investment banking operation.  I would be out on that change too.

 

I kind of think it more likely they endorsed him since the WFC board had to recruit him so hard and they killed the candidacy of that Goldman target. 

[Foreign Tuffett]

This morning's interview kinda' sounds like WEB might be dumping WFC doesn't it?  Reminds me of the IBM thing.

100% replay of his IBM language. Sure it will be reduced steadily to zero  this year.

 

Link to video? Or at least summarize what he said?

[Guest Schwab711]

It probably doesn't have to do with Scharf so much as BRK frustrated with WFC's relationship with regulators. The asset cap is a really big deal and it will continue to hurt the company for years after it is lifted. WFC is going to have material vintage risk soon, as they can't grow to reduce prior vintage exposure. They are going to be forced to choose between low returns or increased risk repeatedly.

 

I really hope the Fed doesn't use asset caps as punishment going forward. It seems like it could lead to more systemic risk.

[Foreign Tuffett]

This morning's interview kinda' sounds like WEB might be dumping WFC doesn't it?  Reminds me of the IBM thing.

100% replay of his IBM language. Sure it will be reduced steadily to zero  this year.

 

Link to video? Or at least summarize what he said?

 

NM, I found it.

 

https://thereformedbroker.com/2020/02/24/everything-warren-buffett-said-on-cnbc-this-morning/

[sleepydragon]

I cut about 50% of my WFC during the first week of Jan. Still have about 12-14% of my portfolio in WFC.

I remembered many years ago WEB sold a lot of Moody's but he didn't feel all of it, and the stock went up many times after he sold. A lot of stocks sold by WEB turned out to be fine.

hopefully WFC won't be like IBM :)

[rkbabang]

This morning's interview kinda' sounds like WEB might be dumping WFC doesn't it?  Reminds me of the IBM thing.

100% replay of his IBM language. Sure it will be reduced steadily to zero  this year.

 

Link to video? Or at least summarize what he said?

 

NM, I found it.

 

https://thereformedbroker.com/2020/02/24/everything-warren-buffett-said-on-cnbc-this-morning/

 

Thanks for saving me the googling.  "This morning's interview" was very nonspecific.