2019 Berkshire Hathaway Annual Meeting

[shalab]

Certainly hope so - I was expecting a lot of negative headlines but found only one in bloomberg that said "Buffett Confronts Tech-Driven Change Amid Investor Questions". Disappointed to say the least. Now we need more seeking alpha articles and the "globe and mail" folks disseminating investing advice to sell Berkshire in favor of their favorites.

BRK  -3% today -looks like the annual post shareholder meeting stock price slump has started for BRK. Maybe another opportunity to buy shares in the $195 range.

[DanielGMask]

Did anyone find a transcript of the meeting?  I am sure one will pop up....

Here it is!

[CorpRaider]

Ok, so I was working on a post that was just going to be a simple thought experiment about BRK versus the S&P 500 going forward and questions around size and of course then I get bogged down citing Buffett partnership letters and Charlie's interview with the Journal (which was fabulous BTW) and then I notice a guy at the annual meeting kind of asked them about what I was thinking, but Buffett basically pretended (imop) not to follow the question about financial leverage/float.

So, if you had new BRK and it had $500 billion in assets and you invested everything in the S&P 500 and then just applied the leverage (1.6x?) from the float would you not outperform over the long term assuming positive returns in the S&P 500 and free or negative costs to the float?   What would be the logical limit of this? 

Maybe growth until the insurance operation keeps growing until it becomes too large and you start writing money losing business/calls on capital that coincides with a sell off in the market/economic recession (i.e., removing the two assumptions above)?

[sleepydragon]

When you apply the leverage, what is the interest of the margin loan you will be charged at? It will be between 4-8% depending on your broker.
Also, in years 2008, you could get margin calls and sell at the rock bottom low.

[CorpRaider]

I must have done a poor job communicating.

Assume the margin rate is +5% (you are getting paid to borrow) if you are operating an insurance business as a .95 combined ratio, it is not callable, or at least totally uncorrelated. 

The thought experiment is how does it not outperform the index by 1.X times the leverage assuming positive equity returns and that the insurance operation doesn't get so big that it starts writing AIG trash (which I think would be the theoretical limit on that side of the B/S; on the other side it might be that you become so big you make huge market impacts when you move $$$).  [So maybe under that scenario you are looking at a 12-16% CAGR for a long-ass while versus historical 20 something.]

[IceCreamMan]

I think you need some assumptions about volatility and how often you rebalance (re-lever). For example, assume that the S&P has the following return sequence over the next 4 years and you re-lever once a year: +24%, -55%, +75%, +33%. The S&P avg annualized return would be +6.75% but a 1.5x S&P strategy would do -6.75% annualized.