Berkshire Hathaway

  • 09 Feb 2012 at 6:31 PM

Don’t Think He Hasn’t Tried

In addition to being known as one of the most loved and revered businessmen- some would say- ever, a savvy investor and a lover of Cherry Coke, Buffett is known for one thing above all else– going out of his way to awkwardly marry aberrant sex fetish with folksy business wisdom. Some of his greatest hits include telling Bloomberg, on the matter of why people should want to sell their companies to BRK, “You can sell it to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever. Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it.” Telling investors on his decision to buy NetJets, “Once you’ve flown NetJets, returning to commercial flight is like going back to holding hands.” Telling investors, of the housing crisis, “As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out.” Telling CBS, on the topic of bridge: “You know, if I’m playing bridge and a naked woman walks by, I don’t even see her. Don’t test me on that!” Telling Forbes, in 1974, on stocks being undervalued: “[I feel] like an oversexed guy in a whorehouse.” [Forbes changed "whorehouse" to "harem."] Today he added another track to the album in an excerpt of his annual investor letter to be released this spring.

As part of his argument for why one shouldn’t own gold, he noted, “Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers — whether jewelry and industrial users, frightened individuals, or speculators — must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Only, as any Warren Buffett scholar worth his or her salt will tell you, that clearly wasn’t the line of his choosing but rather what Fortune, where it appeared, came up with after rejecting his previous drafts, reminding Buffett that theirs is family publication. We’ve obtained the originals and, in the interest of full disclosure and because its how Warren would have wanted it, will share them now. Read more »

There are those who think that Warren Buffett’s days of being an awesome value investor are behind him. Those people are crowing a little today after his recent darling Bank of America crossed $5 in the wrong direction, which I guess is a big deal. Here, however, is probably a thing not to think about that:

Yes, Bank of America’s stock swoon is dragging down America’s wisest investor, Warren Buffett, who now is about $1.5 billion underwater on his BofA common-stock warrants.

Disagree! I happen to have a model for that right here (earlier/caveats), and I have him very roughly breaking even (you’ll care about H24, which shows him up $52mm on his $5bn investment). This uses a 45% vol (vs. 62% mid on Jan-14 $7 calls, 77%ish for their A warrants struck north of $13, 58% 1-year realized) and 8.75% discount rate on the pref (around where I eyeball the Is and Js); you can dispute those assumptions and get a different smallish positive or negative number* but the important point is: Warren Buffett didn’t lose $1.5bn on his $5bn investment. If you’d invested $5bn in BAC common stock at around $7, when Buffett did, you’d have lost $1.5bn in round numbers. But you’re not Warren Buffett. (He is!)

Some people think that this is pretty crap – along the lines of “I’d be a great investor too if I could just get every financial firm to give me a sweetheart deal for lending them my Cherry Coke-encrusted halo” – but, of course, you can. A share of BRK/B is, like, 74 bucks. All that warranty goodness accrues to Berkshire Hathaway, not (just) Buffett.

Now, if there’s one investing strategy that I understand even less than “give my money to Bank of America to do what they will with it, what could possibly go wrong,” it’s “momentum investing,” where you buy stocks that have been going up because past results are a guarantee of future performance.** So I found this Fortune article about Cliff Asness’s new momentum-based retail mutual funds utterly baffling, and not only because a close reading suggests that these new funds were launched in 2009. Read more »

Two bits of news are out today at the high and low ends of what you could loosely call big financial institutions. At the low end, Jefferies, which I’ll stick with calling wee given its $40 billion balance sheet, is blasting out minute-by-minute, issuer-by-issuer, maturity-by-maturity, CUSIP-by-CUSIP accounts of its holdings of European sovereign bonds, its trading activity in those bonds, and the lunch orders of the traders trading those bonds. First it had no exposure – $2.4bn gross, $9mm net short notional, $37k of DV01, almost all cash with some futures – and then it had even less exposure, cutting gross exposure in half although apparently increasing net. The aggressive PR campaign seems to be working, with the stock basically where it was before anyone spent any time thinking about Jefferies, and up today in a down tape.

At the high end, Berkshire Hathaway, which is not entirely unlike a thinking man’s AIG and has a $385 billion balance sheet, disclosed Friday that it lost two billion dollars last quarter in mark-to-market on its $34 billion notional of short S&P index puts. Also Berkshire is ramping up single-name equity investments without telling anyone what they are.

One more thing about BRK/A that you may or may not find related is that it may or may not be a “non-bank G-SIFI,” that is, a financial institution that is not an FDIC insured bank but is nonetheless “too big to fail” because of its size and interrelationships:
Read more »

  • 12 Oct 2011 at 3:42 PM
  • taxes

Warren Buffett Opens His Kimono Ever So Slightly…

…and gives Congress a glimpse of the silver tuna. Want to see the full enchilada? The golden goose? The cast-iron baby arm? El Chorizo? Then you’re gonna have to get some other deep pocketed guys and gals to show what kind of heat they’re packing. You do that and WB promises he’ll give you the full autopsy results. Those are the rules. No tit? No tat. If anyone thinks he’s going to be the only one left standing naked, they can refer themselves to a fateful game of strip poker in ’57 from which he learned his lesson the hard way, and think again. Read more »

So here’s kind of a silly way to conceive of yesterday’s Berkshire Hathaway buyback, complete with Google Docs spreadsheet. Because everybody likes Google Docs spreadsheets.
Read more »

At the annual Allen & Company conference here, DealBook asked Mr. Buffett whether he thought Mr. Blankfein might resign from Goldman in the coming months. The Oracle of Omaha didn’t mince words. “I don’t think he is. I’ve seen nothing to indicate that myself, and I don’t want him to,” he said enthusiastically. “I want him to stay!” [Dealbook]

  • 07 Jul 2011 at 11:20 AM

Warren Buffett Wants Congress To Grow Up

Warren Buffett told CNBC today that Congress is playing a “silly” game of “Russian Roulette” by threatening not to raise the nation’s debt limit as it debates deficit reduction. In a live interview on Squawk Box from Sun Valley, Idaho, where he’s attending the annual Allen & Co. media conference, Buffett warned of “enormous disruption” if there’s no deal to raise the U.S. debt limit. Buffett told Becky Quick that the country’s bills will be paid one way or the other, and Congress should address the situation with “maturity.” [CNBC]