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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 7
No. of Recommendations: 1
Suspect all BAC will be gone
No. of Recommendations: 0
“Suspect all BAC will be gone”
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The armory dry powder is starting to look ☢️
ciao
No. of Recommendations: 1
I spent some time looking at their bond portfolio today. Compare it to Citi. Shameful how they managed that.
No. of Recommendations: 4
I luv it! De-risking away from equities that might be exposed to banking industry meltdown and other financial contagion. Drawdowns are coming in the next couple years and we’re overdue. Maybe I won’t sell the BRK after all, cuz Newfydog made a good point about BRK being a partial cash proxy with optionality, with a coiled spring loaded for bear!
No. of Recommendations: 9
good point about BRK being a partial cash proxy with optionality, with a coiled spring loaded for bear!
I don't argue, but bear in mind that the spring has a short range of travel. At Berkshire's size, big outperformance is pretty much out of the question.
Unless we once again see a period that willing buyers with ready cash are truly rare, which is (a) an extremely rare occurrence and (b) not a global situation you really want to wish for.
Jim
No. of Recommendations: 5
My expectations:
Several outcomes are of course possible but the one that looks more likely than it normally does is this.
During the course of the next year or two, the fear gauge is switched from nervous to panic. We are at extreme levels on so many factors and usually something gives. The fragile nature of the economy and markets from extreme Fed intervention, combined with the interconnectedness is a potentially lethal combination. It just can’t be this easy to avoid pain. The price of our failures as a responsible society have to be paid and once that narrative is out of the bottle and fear takes hold: as we saw a few weeks ago, things can move very quickly.
I tried a few hedge techniques this year, buying a VIX futures funds and got really lucky to get out of it during the recent spike, without having too much of my capital eaten by premiums. But despite a massive surge in the VIX, within a few months of placing the trade, it was a waste of time (time and premiums and low probability of picking the right exit point being huge hurdles to success. Not suitable for holding for any length of time).
I think Berkshire is probably a great equity to own for what might lie ahead, as everyone here does. However, it will be far from immune from short term pain coming from market price declines, should we see that. It will just get to a lower price to book. Berkshire will do some allocating but nothing on a scale that will matter much in the short term. Swinging for the fences, at this stage, is not likely. The attraction to Berkshire, for me, is that I can remain in equities to an extent and benefit from what happens in the really long term and try to survive the potential coming big storm until it eventually passes. But it will be a painful time ahead, if expectations are high.
I have some cash but not nearly as much as I’d like. Buffett liquidating large parts of the equity portfolio, is important and indicates higher taxes to come. That alone, is a major problem for equities and the whole economy.
I like the idea of waking up some day and seeing my equity portfolio down 50, or 60% and seeing what my reaction is. Have I prepared financially and emotionally.
I plan to continue raising my cash levels and may buy some market insurance in the form of out of the money, long dated puts on the companies that might not fare well at all in a melt down (hype, high leverage, grand future promises, poor governance). Puts that would 5x more if the market tanks. It may give me some comfort, as the rest of my portfolio including Berkshire takes a beating. And then I could close out and buy more quality at more reasonable prices.
Plan:
Berkshire & other equities
Cash
Puts (less than 5%)
No. of Recommendations: 1
good morning Nola, we might be realizing a lot more, free money in deferred taxes, than we think? The 64-BILLION-dollar question is, WHY does brk continue to trade like we have a chip to knock off Nvidia, about to be announced? Something is going on bro, I'm thinking on it, so that the usual suspects, can attack any independent thought. The long tradition in brkville, take care bud.
No. of Recommendations: 4
A good friend sent this link to me yesterday:
"GarrettMcAuley: "The Bank of America’s unrealized bond portfolio losses now exceed $100 billion. That’s about the equivalent (on a pretax basis) of half of the company’s tangible common equity. Wow."
https://x.com/rcwhalen/status/1825487809630585310?...
No. of Recommendations: 2
For those who have been around a while Rich Whalen is no joker,
"
Richard Christopher Whalen
@rcwhalen
GarrettMcAuley: "The Bank of America’s unrealized bond portfolio losses now exceed $100 billion. That’s about the equivalent (on a pretax basis) of half of the company’s tangible common equity. Wow."
No. of Recommendations: 1
No. of Recommendations: 18
"GarrettMcAuley: "The Bank of America’s unrealized bond portfolio losses now exceed $100 billion. That’s about the equivalent (on a pretax basis) of half of the company’s tangible common equity. Wow."
I find it interesting that it wasn't JUST locking in low returns for a long time. Remember that in times of distress, there is no such thing as a "held to maturity" asset--everything gets sold that can be sold. If any little financial crisis were to show up, those would not be paper losses. This view of things may be one reason Mr Buffett is getting his hat and heading for the door. A crisis is unlikely (isn't it always?) but it's not worth taking a risk that size.
Jim
No. of Recommendations: 1
" Buffett’s Berkshire Hathaway Sells $550 Million of BofA Stock
Berkshire Hathaway has cut its stake in Bank of America to 12% with CEO Warren Buffett seemingly taking advantage of the strength in financial stocks.
Berkshire resumed its sales of the stock in recent days, unloading 14 million shares for about $550 million. The BofA holding is its third largest equity stake behind Apple and American Express.
The stock was sold on Thursday, Friday, and Monday at an average price of about $39.50 and Berkshire now holds 928 million shares of BofA worth nearly $37 billion, according to a filing with the Securities and Exchange Commission Monday.
Berkshire’s moves accounted for nearly 20% of the trading volume in BofA stock on Monday. It was also an active seller of the stock in late July and has offloaded about 100 million shares in total.
What’s Next: The big question is when Buffett will stop selling the stock. He may want to get the BofA stake down to 10%—at which point Berkshire would no longer have to report sales within two business days as it does now. Often when Buffett starts selling a stock, he ends up eliminating it entirely. BofA, however, is Berkshire’s only outsize stake in a traditional bank.
—Andrew Bary"
No. of Recommendations: 1
Wonder if we’d be selling JPM now if we had retained it rather than BAC. We owned $8.37B of JPM at year end 2019, which would have grown to ~$13B if we had held the position. As discussed at that time, many were confused why sell JPM & keep BAC? Not complaining, just thinking out loud.
No. of Recommendations: 7
getting his hat and heading for the door
Jim: You realize that phrase brands us as being a Certain Age, right?
23 skiddoo --
--sutton
No. of Recommendations: 12
getting his hat and heading for the door
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The 2nd chart gives a nice Q2 perspective on current holdings
& the big black cash pile getting ever larger with each B of A sale.
“So You Bought $1,000 Of Berkshire, Hathaway Stock: What Did You Get?“
https://sherwood.news/business/berkshire-hathaway-...ciao
No. of Recommendations: 19
“So You Bought $1,000 Of Berkshire, Hathaway Stock: What Did You Get?“
It's an interesting question.
This is his answer:
$317 in equities
$292 in cash and cash equivalents
$391 implied market value of all other assets (39.1% of his total)
But unfortunately his answer is totally wrong. Not just because he chose a rather meaningless scaling factor, but mainly because he forgot there are liabilities.
If you buy $1000 worth of Berkshire at the current price of $669225 (all other figures using June 30 breakdown), you get ownership of $626 worth of net assets. P/B is 1.598 right now.
That $698 in net assets is made up of $1153 in total assets, minus $527 in liabilities.
The $1153 of total assets that you get for your $1000 breaks down as follows:
$327 in equities
$288 in cash and cash equivalents
$538 implied market value for all other assets (46.7% of the total assets you've purchased, and 53.8% of the $1000 you invested)
Jim
No. of Recommendations: 1
Jim-
Thanks for this info. Your note begs the following question:
Of the $538.00 in market value for all other assets, what annual operating income can be attributed to this portion of assets?
Thanks!
No. of Recommendations: 9
Of the $538.00 in market value for all other assets, what annual operating income can be attributed to this portion of assets?
First, bear in mind that it's $538 in gross assets, not net assets.
But I come up with $17.20 to $18.40.
The lower number is the last four quarters. The higher number is a "cyclically adjusted" number taking out the bulk of the BHE wildfire losses.
But I didn't kill myself ensuring accuracy, so take that number with a grain of salt.
Here's what I did:
Normally I value a share based on investment assets per share (adjusted downwards for the perpetual drag of having to hold a lot of low-return cash), plus a multiple of the after-tax earning on everything that is NOT an investment. The "everything else" I use is rails, utilities, manufacturing/service/retailing, and a cyclically adjusted estimate of underwriting profit. I took that "earning on everything else" number and scaled it to a $1000 investment at today's price.
It's off by a bit because in this thread the division is equities/cash/other, not (equities+fixed income+cash) versus (other).
i.e., the "other assets" figure of $538 implicitly includes the fixed income holdings. There isn't a whole lot of that these days, so it's not a huge difference.
Perhaps a better way to look at it, to keep things consistent within any given model:
I estimate that investments per share 396379 at end Q2, or $592 for each $1000 invested.
Everything else from your $1000 investment, including both operating units and liabilities and market-value multiple/discount, added up to $408 of your money invested.
Those $408 had, after interest etc, after tax income of around $17.20 to $18.40.
So, imagine Berkshire did a spin-off of all investments per share. You would get a portfolio of $592, plus a rump share containing everything else which would then be trading at $408, which had a variety of assets and liabilities.
It's late and past cocktail hour, so don't take this as gospel : )
Jim
No. of Recommendations: 4
Of the $538.00 in market value for all other assets, what annual operating income can be attributed to this portion of assets?
The 'other assets' (not cash or cash equivalents, not equities) make about half the earnings, which they often call 'operating earnings' or 'operating income'. If you look at the Q2 report, for the first half of the year, Berkshire reported $22.8b in 'operating earnings', along with $20.2b in the much more volatile 'investment gains', which must now include realized AND unrealized gains on the equity portfolio, for a total of $43b. The comparable half-year figures for last year were $18.1b from operations and $53.3b from investments. This includes underwriting earnings which are also quite volatile.
Double the first 2 quarters' $22.8b in operating earnings to get a year's worth, $45.6b. To get a number per $1000 in value, you would half to divide that by 669.2 (using Jim's number for the A-share value, $669,225, although the A-shares are a smidgeon lower now), so that would mean $45,600/669.2 = $68.14 per $538 of other assets embedded in $1000 worth of Berkshire shares.
It's not sensible to do the same exercise with the investment earnings - even a year's worth is too little to establish a pattern, because of how volatile the equities are. It's not even ideal to do the above exercise without considering that 6 months' of underwriting, or even 12 or 24 months, is not enough, given the fact that these operating earnings include underwriting earnings. A big insurer expects lumpy results from underwriting. So ideally, one would back out the underwriting earnings from the above operating earnings, and add back in some percentage which is typical of the long term (say, 1% of premiums written), and then separately consider cash (easy) and the big equity positions, to make sure you think they are really worth as much as their current quotes say they are. If you do this with just Apple, you are already a quarter of the way there...
dtb
No. of Recommendations: 6
Double the first 2 quarters' $22.8b in operating earnings to get a year's worth, $45.6b. To get a number per $1000 in value, you would half to divide that by 669.2 (using Jim's number for the A-share value, $669,225, although the A-shares are a smidgeon lower now), so that would mean $45,600/669.2 = $68.14 per $538 of other assets embedded in $1000 worth of Berkshire shares.
This seemed too high to be true, and I attributed that to abnormally good underwriting results, but there's a mistake in there - the $45.6b number is for the company, and I needed to divide by 1.438 (the number of millions of A shares) before dividing by 669.225 (the number of $1000 amounts in one $669,225 A-share. That would give us 47.38 per $1000 of share value, or $47.38 per $538 in assets embedded in the $1000 of share value.
Still a big number, but $47, not $68. And not the number that Jim provided in the interim, so it may still be wrong, but I don't have time to go over whether Jim's number is wrong, or, more likely, mine.
Sorry for the confusion, DTB
