Berkshire Hathaway

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(15-08-2020, 08:07 AM)BlueKelah Wrote: Warren always said airlines is a bad investment then he went and bought shares in the major USA airlines.

We also know he said Gold is useless compared to silver and would not buy it.
Now he is buying gold exploration company Big Grin and selling his big bank holdings.
It seems desperate times call for desperate measures.... Is he starting to signal his loss in confidence???

https://finance.yahoo.com/news/warren-bu...28776.html

Actually I do not necessarily see WB's investment in airlines as a bad decision, nor is his subsequent decision to divest them. The US airline industry went from regulation to deregulation. The deregulation basically invited a "free for all" Battle Royale for profits - the only people who were making big money were probably the plane manufacturers in those periods. WB's investment came after the US airline industry consolidated into a regulated oligopoly of only 4 airlines. The large capex is still there but the race to the bottom for market share isn't. In summary, the dynamics of the US airline industry had evolved to become conducive for investing and this comes my favorite Keynes' phase "When the facts change, I change my mind"

Come Covid-19, when it became pretty clear that the oligopoly structure wasn't going to help profitability for travel companies in an extended shutdown or pandemic situation, it probably became clear to cut losses. We know from Prospect Theory that it is 3x harder to cut losses. Again, I see "When the facts change, I change my mind". There is no shame in making wrong decisions, the only shame is staying with wrong decisions.

I am not privy to the details of the gold exploration company investment nor its merits. But I do see a clear difference between gold exploration companies and gold. The former may have FCF and has a chance to compound retained earnings, the latter doesn't. Regardless of it all, the investment in Barrick Gold doesn't look big, so I am not sure if WB has a hand in this. It could be Todd Combs and Ted Weschler actually.

The bottom line is, all these is pretty much non consequential in our current market environment. The media is probably having a field day highlighting all these decisions (stay in record cash, selling out of airlines, buying gold companies etc) to provide fodder for criticism and news.

Biased as WB's fan boy! Big Grin
Reply
(15-08-2020, 08:07 AM)BlueKelah Wrote: Warren always said airlines is a bad investment then he went and bought shares in the major USA airlines.

We also know he said Gold is useless compared to silver and would not buy it.
Now he is buying gold exploration company Big Grin and selling his big bank holdings.
It seems desperate times call for desperate measures.... Is he starting to signal his loss in confidence???

https://finance.yahoo.com/news/warren-bu...28776.html

Actually I do not necessarily see WB's investment in airlines as a bad decision, nor is his subsequent decision to divest them. The US airline industry went from regulation to deregulation. The deregulation basically invited a "free for all" Battle Royale for profits - the only people who were making big money were probably the plane manufacturers in those periods. WB's investment came after the US airline industry consolidated into a regulated oligopoly of only 4 airlines. The large capex is still there but the race to the bottom for market share isn't. In summary, the dynamics of the US airline industry had evolved to become conducive for investing and this comes my favorite Keynes' phase "When the facts change, I change my mind"

Come Covid-19, when it became pretty clear that the oligopoly structure wasn't going to help profitability for travel companies in an extended shutdown or pandemic situation, it probably became clear to cut losses. We know from Prospect Theory that it is 3x harder to cut losses. Again, I see "When the facts change, I change my mind". There is no shame in making wrong decisions, the only shame is staying with wrong decisions.

I am not privy to the details of the gold exploration company investment nor its merits. But I do see a clear difference between gold exploration companies and gold. The former may have FCF and has a chance to compound retained earnings, the latter doesn't. Regardless of it all, the investment in Barrick Gold doesn't look big, so I am not sure if WB has a hand in this. It could be Todd Combs and Ted Weschler actually.

The bottom line is, all these is pretty much non consequential in our current market environment. The media is probably having a field day highlighting all these decisions (stay in record cash, selling out of airlines, buying gold companies etc) to provide fodder for criticism and news.

Biased as WB's fan boy! Big Grin
Reply
Gold miners is an asymmetrical play on gold price with operating leverage, if gold prices remained well above the gold miners' all-in costs (typically $1000-$1200 per ounce)
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
Reply
Gold miners is an asymmetrical play on gold price with operating leverage, if gold prices remained well above the gold miners' all-in costs (typically $1000-$1200 per ounce)
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
Reply
WB is all about buying assets whose value grows more geometrically than arithmetically.

There are plenty of good arguments which supports the long-term appreciation of gold. I don't think it is foolish for a retail investor to bet on gold.

But while gold may continue to appreciate over the long-term, it is somewhat cyclical, and over a long period of time, the rate of appreciation is slow.

I think WB -- and other investors with the same perspective -- does not buy gold simply because he can identify other assets whose value will grow at a much faster rate.
Reply
WB is all about buying assets whose value grows more geometrically than arithmetically.

There are plenty of good arguments which supports the long-term appreciation of gold. I don't think it is foolish for a retail investor to bet on gold.

But while gold may continue to appreciate over the long-term, it is somewhat cyclical, and over a long period of time, the rate of appreciation is slow.

I think WB -- and other investors with the same perspective -- does not buy gold simply because he can identify other assets whose value will grow at a much faster rate.
Reply
Hi Guys,

Take note on the impact of the investment to the portfolio.

I believe the gold related investment in the quarter ended in June is done by his apprentice and not really the idea from Buffet.

Just my 2cents
Reply
Hi Guys,

Take note on the impact of the investment to the portfolio.

I believe the gold related investment in the quarter ended in June is done by his apprentice and not really the idea from Buffet.

Just my 2cents
Reply
(15-08-2020, 05:59 PM)nedexel Wrote: Hi Guys,

Take note on the impact of the investment to the portfolio.

I believe the gold related investment in the quarter ended in June is done by his apprentice and not really the idea from Buffet.

Just my 2cents
A 0.5b position in a 200b portfolio. Even if it is from the man himself. The 0.3% is already telling.
Reply
(15-08-2020, 05:59 PM)nedexel Wrote: Hi Guys,

Take note on the impact of the investment to the portfolio.

I believe the gold related investment in the quarter ended in June is done by his apprentice and not really the idea from Buffet.

Just my 2cents
A 0.5b position in a 200b portfolio. Even if it is from the man himself. The 0.3% is already telling.
Reply
(15-08-2020, 09:02 AM)weijian Wrote:
(15-08-2020, 08:07 AM)BlueKelah Wrote: Warren always said airlines is a bad investment then he went and bought shares in the major USA airlines.

We also know he said Gold is useless compared to silver and would not buy it.
Now he is buying gold exploration company Big Grin and selling his big bank holdings.
It seems desperate times call for desperate measures.... Is he starting to signal his loss in confidence???

https://finance.yahoo.com/news/warren-bu...28776.html

Actually I do not necessarily see WB's investment in airlines as a bad decision, nor is his subsequent decision to divest them. The US airline industry went from regulation to deregulation. The deregulation basically invited a "free for all" Battle Royale for profits - the only people who were making big money were probably the plane manufacturers in those periods. WB's investment came after the US airline industry consolidated into a regulated oligopoly of only 4 airlines. The large capex is still there but the race to the bottom for market share isn't. In summary, the dynamics of the US airline industry had evolved to become conducive for investing and this comes my favorite Keynes' phase "When the facts change, I change my mind"

Come Covid-19, when it became pretty clear that the oligopoly structure wasn't going to help profitability for travel companies in an extended shutdown or pandemic situation, it probably became clear to cut losses. We know from Prospect Theory that it is 3x harder to cut losses. Again, I see "When the facts change, I change my mind". There is no shame in making wrong decisions, the only shame is staying with wrong decisions.

I am not privy to the details of the gold exploration company investment nor its merits. But I do see a clear difference between gold exploration companies and gold. The former may have FCF and has a chance to compound retained earnings, the latter doesn't. Regardless of it all, the investment in Barrick Gold doesn't look big, so I am not sure if WB has a hand in this. It could be Todd Combs and Ted Weschler actually.

The bottom line is, all these is pretty much non consequential in our current market environment. The media is probably having a field day highlighting all these decisions (stay in record cash, selling out of airlines, buying gold companies etc) to provide fodder for criticism and news.

Biased as WB's fan boy! Big Grin

No use debating about the airlines. He himself has already admitted it was a bad call and sold out already. Could easily say just like the bad tesco investment loss, which looked pretty good when he went in, then he sold at loss, then it rebounded back after he sold and he didnt follow his initial thesis and didnt hold. Same with airlines, maybe next year with new vaccine air travel rebounds and those same airlines he sold at loss shoot to the sky and make lotsa money. In any case he also bought that huge plane parts maker so maybe he decided to move into the sector aggresively, maybe it looked cheap and good to him back then.

Barrick Gold is amongst the top gold miner in USA right after Newmont. Needless to say, with gold at $1.8-2K levels this year and AISC of only sub $1k, not only Barrick but lots of gold miners all over the world are raking in the profits and lotsa cash flow there so long gold holds steady. And it will hold steady as long as FED keeps printing, which we know they have to until there is a stocks/economic depression/recession happening. All the smart money has already started moving into precious metals, july saw a massive inflow into gold and silver ETFs and stocks.

Let's not forget Warren style is to acquire cashflow rich companies or what he thinks will be cashflow rich in the future. As i explained above, many gold miners are raking in the cashflow and paying out the bonus dividends, its really a no brainer move to buy the higher tier miners who have proven reserves and low AISC and will generate lotsa cashflow in the coming year. And its not just gold, many of these gold miners are also producing silver and copper. If you seen the recent beginnings of the silver rally, this is really the space to be in for the short term.

Wait for it, only 2q showing his move towards gold miners and divestment of financials. Oracle has spoken and 3q will likely show his true intentions. He has so much cash now and run out of things to buy. He said no tech -> then went into IBM and then APPLE, then he said no airlines or gold and he has done opposite. Wouldnt be surprise if he suddenly started buying into tesla.

Hope his two hencemen can take over soon and start paying out dividends rather than hoarding cash and doing stock buybacks. Its very obvious berkshire is now to large to justify holding the cash. There is literally no solid investment big enough that he can make which could mimic his previous returns. Let's see if he really starts returning cash to shareholders, or if all along he has just been bullshitting everyone and just wants to keep all the cash in the company.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
Reply
(15-08-2020, 09:02 AM)weijian Wrote:
(15-08-2020, 08:07 AM)BlueKelah Wrote: Warren always said airlines is a bad investment then he went and bought shares in the major USA airlines.

We also know he said Gold is useless compared to silver and would not buy it.
Now he is buying gold exploration company Big Grin and selling his big bank holdings.
It seems desperate times call for desperate measures.... Is he starting to signal his loss in confidence???

https://finance.yahoo.com/news/warren-bu...28776.html

Actually I do not necessarily see WB's investment in airlines as a bad decision, nor is his subsequent decision to divest them. The US airline industry went from regulation to deregulation. The deregulation basically invited a "free for all" Battle Royale for profits - the only people who were making big money were probably the plane manufacturers in those periods. WB's investment came after the US airline industry consolidated into a regulated oligopoly of only 4 airlines. The large capex is still there but the race to the bottom for market share isn't. In summary, the dynamics of the US airline industry had evolved to become conducive for investing and this comes my favorite Keynes' phase "When the facts change, I change my mind"

Come Covid-19, when it became pretty clear that the oligopoly structure wasn't going to help profitability for travel companies in an extended shutdown or pandemic situation, it probably became clear to cut losses. We know from Prospect Theory that it is 3x harder to cut losses. Again, I see "When the facts change, I change my mind". There is no shame in making wrong decisions, the only shame is staying with wrong decisions.

I am not privy to the details of the gold exploration company investment nor its merits. But I do see a clear difference between gold exploration companies and gold. The former may have FCF and has a chance to compound retained earnings, the latter doesn't. Regardless of it all, the investment in Barrick Gold doesn't look big, so I am not sure if WB has a hand in this. It could be Todd Combs and Ted Weschler actually.

The bottom line is, all these is pretty much non consequential in our current market environment. The media is probably having a field day highlighting all these decisions (stay in record cash, selling out of airlines, buying gold companies etc) to provide fodder for criticism and news.

Biased as WB's fan boy! Big Grin

No use debating about the airlines. He himself has already admitted it was a bad call and sold out already. Could easily say just like the bad tesco investment loss, which looked pretty good when he went in, then he sold at loss, then it rebounded back after he sold and he didnt follow his initial thesis and didnt hold. Same with airlines, maybe next year with new vaccine air travel rebounds and those same airlines he sold at loss shoot to the sky and make lotsa money. In any case he also bought that huge plane parts maker so maybe he decided to move into the sector aggresively, maybe it looked cheap and good to him back then.

Barrick Gold is amongst the top gold miner in USA right after Newmont. Needless to say, with gold at $1.8-2K levels this year and AISC of only sub $1k, not only Barrick but lots of gold miners all over the world are raking in the profits and lotsa cash flow there so long gold holds steady. And it will hold steady as long as FED keeps printing, which we know they have to until there is a stocks/economic depression/recession happening. All the smart money has already started moving into precious metals, july saw a massive inflow into gold and silver ETFs and stocks.

Let's not forget Warren style is to acquire cashflow rich companies or what he thinks will be cashflow rich in the future. As i explained above, many gold miners are raking in the cashflow and paying out the bonus dividends, its really a no brainer move to buy the higher tier miners who have proven reserves and low AISC and will generate lotsa cashflow in the coming year. And its not just gold, many of these gold miners are also producing silver and copper. If you seen the recent beginnings of the silver rally, this is really the space to be in for the short term.

Wait for it, only 2q showing his move towards gold miners and divestment of financials. Oracle has spoken and 3q will likely show his true intentions. He has so much cash now and run out of things to buy. He said no tech -> then went into IBM and then APPLE, then he said no airlines or gold and he has done opposite. Wouldnt be surprise if he suddenly started buying into tesla.

Hope his two hencemen can take over soon and start paying out dividends rather than hoarding cash and doing stock buybacks. Its very obvious berkshire is now to large to justify holding the cash. There is literally no solid investment big enough that he can make which could mimic his previous returns. Let's see if he really starts returning cash to shareholders, or if all along he has just been bullshitting everyone and just wants to keep all the cash in the company.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
Reply
I agree with Weijian's opinion. Basically, when the facts change, he change his opinion too. He does so all the time; e.g. with airlines and tech. The initial reasoning process is sound, but he was unlucky with the pandemic. There is always a factor of risk associated with any investments; when things don't go your way, adjust, and move on.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
Reply
I agree with Weijian's opinion. Basically, when the facts change, he change his opinion too. He does so all the time; e.g. with airlines and tech. The initial reasoning process is sound, but he was unlucky with the pandemic. There is always a factor of risk associated with any investments; when things don't go your way, adjust, and move on.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
Reply
Buffett's Berkshire buys 5% stake each in five Japanese trading firms

Reporting by Bhargav Acharya in Bengaluru; Editing by Himani Sarkar and Paul Simao
AUGUST 31, 2020 / 6:56 AM

(Reuters) - Warren Buffett’s Berkshire Hathaway (BRKa.N) said on Sunday it has acquired more than 5% stakes in each of the five leading Japanese trading companies.

Berkshire Hathaway’s wholly-owned subsidiary, National Indemnity Company, will notify Japan’s Kanto Local Finance Bureau of the purchase of the stakes in Itochu Corp (8001.T), Marubeni Corp (8002.T), Mitsubishi Corp (8058.T), Mitsui & Co Ltd (8031.T) and Sumitomo Corp (8053.T), the company said in a statement.

Berkshire Hathaway intends to hold its Japanese investments for the long term, but may increase its holdings up to a maximum of 9.9% in any of the five investments depending on price, the company said.

More details in https://www.reuters.com/article/us-berks...SKBN25Q0YD
Specuvestor: Asset - Business - Structure.
Reply
Buffett's Berkshire buys 5% stake each in five Japanese trading firms

Reporting by Bhargav Acharya in Bengaluru; Editing by Himani Sarkar and Paul Simao
AUGUST 31, 2020 / 6:56 AM

(Reuters) - Warren Buffett’s Berkshire Hathaway (BRKa.N) said on Sunday it has acquired more than 5% stakes in each of the five leading Japanese trading companies.

Berkshire Hathaway’s wholly-owned subsidiary, National Indemnity Company, will notify Japan’s Kanto Local Finance Bureau of the purchase of the stakes in Itochu Corp (8001.T), Marubeni Corp (8002.T), Mitsubishi Corp (8058.T), Mitsui & Co Ltd (8031.T) and Sumitomo Corp (8053.T), the company said in a statement.

Berkshire Hathaway intends to hold its Japanese investments for the long term, but may increase its holdings up to a maximum of 9.9% in any of the five investments depending on price, the company said.

More details in https://www.reuters.com/article/us-berks...SKBN25Q0YD
Specuvestor: Asset - Business - Structure.
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