Semper Augustus

[wabuffo]

Skip his monetary policy/Fed section ("The Point of No Return") - he clearly doesn't understand how any of this works.

wabuffo

[Xerxes]

Skip his monetary policy/Fed section ("The Point of No Return") - he clearly doesn't understand how any of this works.

wabuffo

Thanks
I can save on my printer

[no_free_lunch]

I went through bits of it. Certainly the most extensive BRK breakdown I have ever seen.  For those not inclined to wade through it he sees BRK at a meaningful discount to IV.

I saw DIS and I saw just a wee little bit about BRK, otherwise do we know their  portfolio?

[gfp]

I saw DIS and I saw just a wee little bit about BRK, otherwise do we know their  portfolio?

https://www.dataroma.com/m/holdings.php?m=SA

[Xerxes]

That is an interesting way to look at:

"Pre-tax operating earnings for nine months (excluding the $10.6 billion pre-tax write-down at Precision, which lowers book
value by $10.4 billion – writing-down goodwill is not tax deductible) amounted to $19.4 billion. So,
Berkshire spent over 80% of operating profit repurchasing shares at an average price 15% below where
they opened the year and at 105% of average book value per share. Right, the guy is washed out."

Given that most folks (in the media, here and myself included) tend to compare the size of the buyback to the size of cash pile.
The way he is saying is that 4/5 of excess cash was being used for buybacks. This view however implies that Buffet does not use the same mental bucket for buyback vs. other large M&A.

Buybacks are "funded" through operating earning.
Any M&As (large or small) are "funded" through the balance sheet.
 

[Cigarbutt]

Skip his monetary policy/Fed section ("The Point of No Return") - he clearly doesn't understand how any of this works.
wabuffo

What's the difference between when somebody is wrong and when one is 'clearly' wrong?
Outside of some specific factual inconsistencies and a different perspective, what is so clearly wrong concerning the 'point-of-no-return' section?

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Looking at his results from the letter (before fees i assume?), Mr. Bloomstran has returned (since 2000 not audited GIPS or otherwise, CAGR) about 10.9% versus 8.0% for BRK and 6.6% for the S&P 500. Is that alpha enough to go through (sometimes irrelevant?) what he says, on an annual basis?
Anyways, the coin on page 29 was 'printed' to the effigy of Julia Domna, wife of Septimius Severus and mother of Caracalla, two emperors who were critical actors in the Roman Empire decline. The decline is still looking for an explanation but currency debasement was certainly a symptom, if not a cause. Julia Domna was unusually powerful for a woman and was known for her moderation. She must have been concerned when Caracalla issued new coins with the same face value but with 25% less metal but the emperor was known to be irrational, if not psychotic and that was the name of the game, then. The Roman Empire could tolerate a slow debasement but could not eventually tolerate the seeds of destructive debasement that the two emperors sowed. During that period, the outcome for emperors was death by killing, 86% of the times.
http://money.visualcapitalist.com/deaths-roman-emperors-vs-silver-coin-content/
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One thing which is nice with the Semper Augustus letter is that the author provides the reasons for his conclusions which makes it an interesting exercise for independent thought.

[ValueMaven]

While his style is extremely verbose – this is hands down the most complete and comprehensive valuation update on Berkshire.  Period.  Really interesting example on what buybacks and a shrinking sharecount could look like over the next 5 – 10 years, and what this might mean for future returns for shareholders.  He has shares currently at a deep discount to IV valuation among his various methodologies.  Extremely interesting to see BHE have a negative effective tax-rate.  Not many distressed utility deals out there - but I'd love to see BHE be more active there (ONCOR anyone??) over the coming years. 

[Xerxes]

The only authority worth learning from on the Decline penned a total of six volumes on the topic.
I read all six something like 20 years ago, unfortunately as great historical work that was, it was not easy to pin down one element.

As a side note, Asimov's Foundation Trilogy was partially based on Edward Gibbon' work.
Perhaps there is a gem worth exploring in the Foundation Trilogy that can be linked to Fed M2 expansion.

[ValueMaven]

Isnt it fairly aggressive to consider the equity portfolios % of retained earnings as part of Berkshire's normalized earnings profile?  I realize Warren has written about this a lot in the past - I just struggle with any model that does this.  What do others think?

[Lemsip]

I think it is fair to consider these if you are looking at an estimate of earning power.  Obviously for valuation purposes, the public securities portfolio is quoted regularly so the maket's valuation is included in book value.

Berkshire owns 5.4% of Apple and as it stands you would not be able to get an accurate picture of Berkshire's true earning power derived from its Apple stake as only dividends received show up on the income statement.

In comparison, KHC earning power is regularly reflected on the income statemen due to equity accounting although the form of ownership is essentially the same with a 26.4% ownership in this case.

The issue is whether Bloomstran is being aggressive in the numbers he is using. I don't think he is. The 2019 Annual report had a table at the start of the letter which shows the retained earnings for just the top 10 portfolio holdings were $9b. Bloomstran uses $10b for the entire portfolio a year later so it doesn't look like he has applied unduly optimistic values here.