Author Topic: Buffett, Bogle and Berkshire shareholders  (Read 10094 times)

longinvestor

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Buffett, Bogle and Berkshire shareholders
« on: July 15, 2017, 09:11:10 AM »
Buffett has been singing praises of Bogle regularly at the annual meeting and in the letter.

This year, Buffett was rather gracious and even put a spotlight on Bogle during the meeting https://www.youtube.com/watch?v=BE1JZTu3i_Q&t=23479s (starting at 00:24:29) and had this to say,

We have a special guest at the meeting this year. Jack Bogle. I understood that he was coming to the meeting. Where are you Jack? Can we get some light on Jack? There you are! I have been speaking about investing in Index funds in my letters. Index fund investing would  not have happened without Jack. Others talked about it. Jack Bogle probably has done more for American Investors as a whole than any other person in the country...........applause........the truth is that the development of index funds was not in the interest of Wall Street because it brought down the costs of investing. He was the subject of much derision and a lot of attacks. Now we are talking of trillions in index funds.  Jack has probably saved, at a minimum, left in the pockets of investors, without hurting them in overall gross performance, tens and tens of billions and that number is likely going to be 100's and 100's of billions over time. It is Jack's 88th Birthday on Monday and on behalf of American Investors, I would like to say "Thank you, Jack"......to thunderous applause. I clapped until I was among the last to do so.

Now to the topic. Buffett has raised some questions in the minds of Berkshire investors. After all, the index funds have done very well since the GFC, and even beat BRK's performance for the first time, in one 5 year period 2009-2014. Then we have the famous hedge fund versus Vanguard index fund bet. And then we have Buffett's sermon that the vast majority of investors would likely be better off simply putting all their money in an index fund, bought over time. And to make the head scratch, he even recommends to the trustees of his estate that his wife's portfolio be invested 90% index fund and 10% treasuries. And then we have Berkshire's size anchor and of course his age and how much he will be missed at Berkshire.

How about Berkshire investors? What's on your minds? Diversify out? All into index funds?

Chime in.

Edit: My question is not what you think Buffett thinks BRK will do; rather, if you are a BRK shareholder, what are your thoughts!






« Last Edit: July 15, 2017, 12:58:56 PM by longinvestor »


clutch

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #1 on: July 15, 2017, 10:35:54 AM »
It's very hard to argue against his logic. Especially if you assume that BRK now won't be outperforming the index by much.

For those who wants to programmatically invest, and hence remove any negative consequences of biases / emotion, I think indexing makes a perfect sense.

On the other hand, if you believe you can act rationally and properly value BRK, it could make sense to buy BRK at opportune times.

But the second method is obviously harder than the first, and requires both the skills and temperament. And I'm not sure how many investors can actually do the second method well, even if the decision was simply about buying BRK when it's relatively cheap.

Munger_Disciple

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #2 on: July 15, 2017, 10:41:17 AM »
Buffett may be hinting that Berkshire is unlikely to beat the index by much going forward due to its size. He also said (for the first time I think) at this year's annual meeting that if the cash pile starts becoming too big like $150B, he has to think about a dividend.

vinod1

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #3 on: July 15, 2017, 11:40:02 AM »
In the annual meeting he elaborated on this.

Why did Buffett advise his wife to invest in index funds versus into Berkshire Hathaway?

She won’t be selling to buy an index fund - every single share of Berkshire Hathaway will be going to philanthropy - so far 40% has been distributed - for someone who’s not an investment professional, what’s the best investment where there’s less worry than anything - big thing is money to not be a problem – there’s no way that there will be an issue absent a nuclear attack if she invested in the S&P; Buffett’s aunt Katy, whose husband used to employ Charlie and Warren, worked all her life and died at 97 with a few hundred million dollars, because she was in Berkshire Hathaway. She’d write Buffett and say she hated to be a bother but was curious if she would ever run out of money. Buffett told her that she’d run out only if she lived 986 more years. There will be people who come around with various suggestions on what to do with the money he leaves his wife, and there’s a chance she won’t have as much peace of mind only owning one stock as owning the index.


Vinod
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longinvestor

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #4 on: July 15, 2017, 12:02:31 PM »
In the annual meeting he elaborated on this.

Why did Buffett advise his wife to invest in index funds versus into Berkshire Hathaway?

She won’t be selling to buy an index fund - every single share of Berkshire Hathaway will be going to philanthropy - so far 40% has been distributed - for someone who’s not an investment professional, what’s the best investment where there’s less worry than anything - big thing is money to not be a problem – there’s no way that there will be an issue absent a nuclear attack if she invested in the S&P; Buffett’s aunt Katy, whose husband used to employ Charlie and Warren, worked all her life and died at 97 with a few hundred million dollars, because she was in Berkshire Hathaway. She’d write Buffett and say she hated to be a bother but was curious if she would ever run out of money. Buffett told her that she’d run out only if she lived 986 more years. There will be people who come around with various suggestions on what to do with the money he leaves his wife, and there’s a chance she won’t have as much peace of mind only owning one stock as owning the index.


Vinod

That and Astrid reportedly has rather modest spending habits. All her life, she apparently spent much of her time in thrift stores and such. Her needs for capital are nothing compared to the roughly $100B that would have been handed out to the charities. Every charity penny will remain in BRK shares until given away. If Buffett believed that the charitable money would compound faster in the index than BRK, he would have switched already.



« Last Edit: July 15, 2017, 12:58:29 PM by longinvestor »

cubsfan

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #5 on: July 15, 2017, 03:08:26 PM »
I'll take my chances with BRK. I don't own any index funds, but have a large stake in BRK beginning in 2002.
I scaled it up a lot last year. How much diversified do you need to be considering the makeup of BRK?
To me, it's a hand picked index fund with no fee. Warren will never promote BRK - never has, never will.
At this point, with the S&P at 20 or so PE - I think BRK will do just fine.

John Hjorth

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #6 on: July 15, 2017, 03:20:48 PM »
I'm in Berskhire, and it's the by far largest position - right now about 21% on overall basis.

When the talk is about indexing, I've developed a habit of going to p. 13 - 18 in the Semper Augustus Client Letter of February 2017 about Berkshire. There I study the "Company B", especially it's P/E, and it's P/B.

That's - simply put - my vaccine against indexing.

Berkshire investing is "sitting on your butt and your hands" investing. So is indexing.

Next time hell breaks loose here on Earth again, while indexing one will bleed exactly as the overall market is bleeding. Berkshire will come down some, too, but most likely not as much, because of all the cash and T-bills, the "lazy capital", and also a war chest in a severe downturn or a real crisis.

I consider Berkshire anfragile, in the meaning Mr. Taleb uses the word. The more stress you put it under, the stronger it will come out on the other side.

The drag on ROE for Berkshire from the warchest is to me the opportunity cost for Berskhire being antifragile. Just a special kind of put, built into the stock.

- - - o 0 o - - -

Edit: cubsfan beat me to it - for a part of my post.
« Last Edit: July 15, 2017, 03:28:08 PM by John Hjorth »
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longinvestor

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #7 on: July 15, 2017, 04:48:49 PM »
I'm in Berskhire, and it's the by far largest position - right now about 21% on overall basis.

When the talk is about indexing, I've developed a habit of going to p. 13 - 18 in the Semper Augustus Client Letter of February 2017 about Berkshire. There I study the "Company B", especially it's P/E, and it's P/B.

That's - simply put - my vaccine against indexing.

Berkshire investing is "sitting on your butt and your hands" investing. So is indexing.

Next time hell breaks loose here on Earth again, while indexing one will bleed exactly as the overall market is bleeding. Berkshire will come down some, too, but most likely not as much, because of all the cash and T-bills, the "lazy capital", and also a war chest in a severe downturn or a real crisis.

I consider Berkshire anfragile, in the meaning Mr. Taleb uses the word. The more stress you put it under, the stronger it will come out on the other side.

The drag on ROE for Berkshire from thP
e warchest is to me the opportunity cost for Berskhire being antifragile. Just a special kind of put, built into the stock.

- - - o 0 o - - -

Edit: cubsfan beat me to it - for a part of my post.

Interesting connection to antifragility. What's stress to Berkshire? Not getting elephants? Earnings swings, like we're seeing at BNSF? Cash piling up? Being dubbed Old Economy? (That is being heard once again😉)? Reinsurance market sucks? Scandal at investee? Inability to pull off the stock buyback?

Their way of dealing with any of this is to keep the head down and keep increasing the earnings power. And wait for sin & folly to reach a crescendo.

boilermaker75

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #8 on: July 16, 2017, 06:56:40 AM »
I'm in Berskhire, and it's the by far largest position - right now about 21% on overall basis.

When the talk is about indexing, I've developed a habit of going to p. 13 - 18 in the Semper Augustus Client Letter of February 2017 about Berkshire. There I study the "Company B", especially it's P/E, and it's P/B.

That's - simply put - my vaccine against indexing.

Berkshire investing is "sitting on your butt and your hands" investing. So is indexing.

Next time hell breaks loose here on Earth again, while indexing one will bleed exactly as the overall market is bleeding. Berkshire will come down some, too, but most likely not as much, because of all the cash and T-bills, the "lazy capital", and also a war chest in a severe downturn or a real crisis.

I consider Berkshire anfragile, in the meaning Mr. Taleb uses the word. The more stress you put it under, the stronger it will come out on the other side.

The drag on ROE for Berkshire from thP
e warchest is to me the opportunity cost for Berskhire being antifragile. Just a special kind of put, built into the stock.

- - - o 0 o - - -

Edit: cubsfan beat me to it - for a part of my post.

Interesting connection to antifragility. What's stress to Berkshire? Not getting elephants? Earnings swings, like we're seeing at BNSF? Cash piling up? Being dubbed Old Economy? (That is being heard once again😉)? Reinsurance market sucks? Scandal at investee? Inability to pull off the stock buyback?

Their way of dealing with any of this is to keep the head down and keep increasing the earnings power. And wait for sin & folly to reach a crescendo.

A recession is stress on BRK, as it is on the whole economy. But BRK comes out stronger (more earning power) from a recession because of the businesses BRK can add for cheap during the recession.
« Last Edit: July 16, 2017, 08:33:41 AM by boilermaker75 »

John Hjorth

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Re: Buffett, Bogle and Berkshire shareholders
« Reply #9 on: July 16, 2017, 08:12:43 AM »
Exactly what boilermaker75 said.
« Last Edit: July 16, 2017, 08:40:22 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai