Author Topic: 20190506 CNBC interview - post AGM  (Read 2420 times)

kiwing100

  • Full Member
  • ***
  • Posts: 203
20190506 CNBC interview - post AGM
« on: May 07, 2019, 02:32:49 PM »


ICYMI, Warren Buffett, Charlie Munger & Bill Gates on CNBC, post AGM

https://www.youtube.com/watch?v=2hdDE7XYr30



cherzeca

  • Hero Member
  • *****
  • Posts: 2210
Re: 20190506 CNBC interview - post AGM
« Reply #1 on: May 07, 2019, 07:37:00 PM »
underwhelmed by the due diligence/analysis that WB seemed to exercise in connection with oxy commitment.  not to mention that CM was sleeping at the time.

scorpioncapital

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1722
    • scorpion capital
Re: 20190506 CNBC interview - post AGM
« Reply #2 on: May 07, 2019, 09:08:16 PM »
They keep saying their investment process is proprietary, thats probably because if people knew it revolved around a one sentence thesis , with a little bit of experience and an acute sense of mental models ,people might be abhorred how little goes behind moving billons. Or perhaps they might be amazed how easy it is when you have a few simple principles and avoid big mistakes . It would show anyone can do this , on a certain level If they have good temperament , are patient and think of a few big things. you probably don't need to crunch any numbers much greater than 3 x 4 and so forth.

kiwing100

  • Full Member
  • ***
  • Posts: 203
Re: 20190506 CNBC interview - post AGM
« Reply #3 on: May 07, 2019, 10:49:49 PM »
underwhelmed by the due diligence/analysis that WB seemed to exercise in connection with oxy commitment.  not to mention that CM was sleeping at the time.

The OXY financing commitment is essentially a credit decision  -  i.e
1) will they default?
2) if they default, how much will BRK recover? 

For the credit risk, BRK is receiving a 5.55% spread over UST 10yr (8% coupon vs 2.45% UST 10yr), as well as a $50mn financing commitment fee.

The warrants are icing on the cake.

gfp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1806
Re: 20190506 CNBC interview - post AGM
« Reply #4 on: May 08, 2019, 05:31:12 AM »
Yeah, I'm not too worried about limited due diligence on the OXY decision.  Remember that Warren's public statements on this stuff are 100%  an advertisement of how great it is to come to Berkshire with these proposals.  He wants to use this as an ad to get people to call him.  Same with the FT interview.  He just wants the advertisement so a few more people call BRK with deals.

He was extremely familiar with OXY, Anadarko, Oil price factors, and the Permian Basin in particular.  He's read the annuals for years.  He knows a lot more about how he can lose money on the deal than he lets on.  It's a really good deal for Berkshire.  The 10 year minimum duration is extremely important, and I think he realizes that 11 year warrants, even on a measly $5 Billion cost basis of stock, are extremely valuable.

The dude has some experience with this stuff...  The public characterizations are all advertisement.  Look at how often he trumpeted the "No MAC clause."  Why else would he highlight the permissive terms of his deal

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1777
  • Never interrupt compounding unnecessarily -Munger
Re: 20190506 CNBC interview - post AGM
« Reply #5 on: May 08, 2019, 06:29:03 AM »
Yes, it is all a giant ad to attract more white knight deals without getting in the mud themselves. A certain profile of a CEO/BOD would go for this.

Hope there are 10 of them right now!

cherzeca

  • Hero Member
  • *****
  • Posts: 2210
Re: 20190506 CNBC interview - post AGM
« Reply #6 on: May 08, 2019, 07:01:09 AM »
underwhelmed by the due diligence/analysis that WB seemed to exercise in connection with oxy commitment.  not to mention that CM was sleeping at the time.

The OXY financing commitment is essentially a credit decision  -  i.e
1) will they default?
2) if they default, how much will BRK recover? 

For the credit risk, BRK is receiving a 5.55% spread over UST 10yr (8% coupon vs 2.45% UST 10yr), as well as a $50mn financing commitment fee.

The warrants are icing on the cake.

I disagree with this.  the warrants are the cake and WB basically said I dont care how much oxy pays for apc, he has no outs, so he is letting someone else (apc ceo) drive his investment (warrants).  I say warrants are the cake because while 8% is a great div yield, brk is not a credit spread hedge fund...at least it used not to be

CorpRaider

  • Hero Member
  • *****
  • Posts: 2167
    • The Corpraider
Re: 20190506 CNBC interview - post AGM
« Reply #7 on: May 08, 2019, 07:04:15 AM »
Merchant. Banking.

cherzeca

  • Hero Member
  • *****
  • Posts: 2210
Re: 20190506 CNBC interview - post AGM
« Reply #8 on: May 08, 2019, 07:07:48 AM »
They keep saying their investment process is proprietary, thats probably because if people knew it revolved around a one sentence thesis , with a little bit of experience and an acute sense of mental models ,people might be abhorred how little goes behind moving billons. Or perhaps they might be amazed how easy it is when you have a few simple principles and avoid big mistakes . It would show anyone can do this , on a certain level If they have good temperament , are patient and think of a few big things. you probably don't need to crunch any numbers much greater than 3 x 4 and so forth.

meshalum riklis used to say, I will let you (seller) set the price if you allow me to set the terms.  I see this in the recent oxy terms.  except things can get very sloppy if you dont maintain discipline all along the investment process.  while I agree that investing is simple but not easy (as per WB), I dont agree that getting your terms means you can be a patsy elsewhere in the deal process

calonego

  • Lifetime Member
  • Full Member
  • *****
  • Posts: 118
Re: 20190506 CNBC interview - post AGM
« Reply #9 on: May 16, 2019, 08:03:34 PM »
Warren and Charlie know the Permian. Very well. This is about swapping some regulatory capital Tbills into something with a yeild and then getting the kicker - the warrant exercised eventually once they're right about OXY/Permian.
Charlie in particular knows it inside and out (I'm sure Warren does to...) - plus CM knows the engineering... and the pipeline changes coming online and OXY's unique ability to operate well in the basin.
If you listened well to the interview on CNBC on Monday AM - Becky tried to get Charlie to speak about the Permian and what the future looks like down there and he wouldn't bite. They were speaking about this very thing on the weekend.
He just didn't want to be on the record IMO.
JC