Investment Strategies / Falling Knives
No. of Recommendations: 1
Berkshire Hathaway Energy bonds due 2048 to 2053 are trading for a 6% yield. It seems like a good opportunity if things revert back to the low interest days of 2008-2020. I'm not sure I'm ready for a 25 year commitment though. Any thoughts?
No. of Recommendations: 18
Berkshire Hathaway Energy bonds due 2048 to 2053 are trading for a 6% yield. It seems like a good opportunity if things revert back to the low interest days of 2008-2020. I'm not sure I'm ready for a 25 year commitment though. Any thoughts?
Well, if things revert back to low interest days then you wouldn't have to make that 25 year commitment, because as interest rates drop, the price of those bonds will go up commensurately. So if you buy at 6%, and rates drop to 4%, you can collect the 6% coupon for a few years, and then sell the bond at a profit and collect a capital gain that reflects the drop from 6% to 4%. In fact, it would be just the opposite, if rates do not drop over those 25 years, you probably will commit to the 25 year holding period, and collect the 6% coupon each year until maturity (or choose to sell at/near par, or lower if rates have risen).
My opinion? We probably won't see extremely low interest rates like the previous decade anytime soon. We may see slightly higher or slightly lower rates, but I strongly suspect that we won't see near-zero rates anytime soon. That's because the interest rate is essentially the "price" of money, and the price of EVERYTHING depends on supply and demand, and the supply of debt isn't likely to decrease for quite some time.
No. of Recommendations: 1
YTM is a bit different from coupon. What's the current yield on those BHE bonds?
There's been some weakness in BHE and PacificCorp long bonds, probably due to wildfire risk. It's been the same for PGE and SCE bonds.
Plus then you have WEB saying that if policymakers don't get the wildfire risk shared properly Berkshire would not be in that market.
What that means is up for debate, but BHE could sell PacifcCorp or file for bankruptcy?
No. of Recommendations: 2
US treasury secretary Bessent said recently that the US will never default on its debt! So now there is definitely a non-zero we do default, IMO. 🤔
Isn’t Berkshire’s cash/equivalents in mostly ST treasuries? Doesn’t seem like they think rates will fall anytime soon.
No. of Recommendations: 3
Berkshire cash is in US Treasury bills (< 1 year) and there's really no other market for Berkshire cash.
BH and BHFC debt and some sub debt is guaranteed by Berkshire Hathaway. Full faith and credit, haha.
BHE and BHE sub debt (PacificCorp for example) and BNSF debt is NOT guaranteed by BH. So it always trades at a discount to BH guaranteed debt.
No. of Recommendations: 4
>>Isn’t Berkshire’s cash/equivalents in mostly ST treasuries? Doesn’t seem like they think rates will fall anytime soon.<<
It's not a play on rates. He had more than $100 Billion in these cash equivalent Treasuries when they paid almost nothing. In terms of risk-- there's essentially zero chance you won't get paid back-but there is risk those dollars paid back will be crushed in buying power. So, you'd like to put the money to work buying productive assets-eventually--for many reasons. Or, if the bond market blows up--you get that served up to you. Optionality
No. of Recommendations: 16
"Berkshire Hathaway - Cash on Hand as of March 2025 : $347.68 Billion USD"
iShares 1-3 Year Treasury Bond ETF (SHY) - Net Assets 24.48B
Vanguard Total Bond Market Index Fund (BND) - Net Assets 352.82B
iShares 7-10 Year Treasury Bond ETF (IEF) - Net Assets 34.84B
Holy moly!
