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Warren Buffett has the cash to buy Tesla, Starbucks, or McDonald's
- meesterdude 7y agomaybe he's got the cash - but i'm doubtful he would blow it on them. As he's indicated, he's gotten better returns from buying parts of companies than buying them out whole. I would be surprised if he does any M&A during this downturn, likely instead opting to invest more into the positions he's already got.
- altmind 7y ago... but is probably smart enough to buy other 10% of our lives. look at this and tell me this man got no 20/20 forward vision https://news.ycombinator.com/item?id=22401875 https://news.ycombinator.com/item?id=22401875
- wiredfool 7y agoYes. Buffet has cash. Buffet has lots of Cash for the last 10 years or so, and has said that there has been a distinct lack of opportunity to deploy that cash in significant chunks to buy good companies at reasonable valuations. What I'd really like to know is the breakdown of their exposure to life insurance (re?) vs other insurance products (auto) that might not be as badly affected by the pandemic. He's said that they've been on a good insurance run for a while, but that it will end at some point with a really bad event. I don't know if this is that bad event.
- markdown 7y agoInsurance doesn't normally cover pandemics.
- PopeDotNinja 7y agoParent comment is probably referring more to the next monster natural disaster(s) racking up many billions in damages: hurricane, flood, earthquake, etc. The insurance business feels good when it's bringing in payments and not paying out much.
- wiredfool 7y agoInsurance covers insurable events, some of them may be triggered by a pandemic, and some of those might be excluded. Check your fine print. * Life insurance is probably going to take a hit. My life insurance doesn't mention pandemic or acts of god. Suicide yes. Pandemic no. * Auto insurance is probably going to be marginally more profitable as miles driven drop. * Home/Property isn't likely to be heavily affected. * Health insurance is going to take a major hit. Probably in the bailout/re-capitalization range. * Reinsurance is going to be dependent on the specific underwriting that's been done. * Travel insurance. Ha. This is an extinction level event for them, so it's excluded.
- t0mas88 7y agoHealth insurance is probably going to be fine, because there will be lots of government money flowing into healthcare to drop prices (free tests etc). And total hospital bed capacity hasn't majorly increased (as in: nowhere near 2x), so the total cost they can incur per month isn't significantly higher. May even be slightly lower per patient because most complex treatments have been put on-hold. Life insurance may also be profiting depending on the structure of the portfolio. Differs a bit per market but some common products pay a monthly amount from let's say 65 until death. A virus might decrease life expectancy of that group from 81 to 77 or something, a 25% drop in required payouts. On the other hand they're often heavily invested in the financial markets which took a big hit. So could go both ways.
- KarlKemp 7y agoYou might have noticed ICUs are swamped and nurses are working around the clock? Hospitals do charge for that.
- ethbro 7y agoHealth insurance will be fine. There was a study (no citation handy) that looked at severe flu seasons, and their impact on health insurers. Barely a blip. Remember, ~80% of people have minimal symptoms after being infected with SARS-CoV-2. You can therefore absorb a lot of care for 20%, assuming most people are insured...
- cryptica 7y agoWhatever Warren Buffet does at this stage is going to be a success. Everything he does becomes self-fulfilling. People like him don't predict market movements, they cause them.
- gizmo 7y agoThat's way too reductive. Yes, his reputation helps tremendously, but even as a complete unknown he would still be a world-class investor.
- DennisP 7y agoHe actually did better when he was a complete unknown. Berkshire is huge now because Buffett averaged 20% annual gains for decades. Now his returns are down because it's hard to find good deals on companies big enough to matter to him.
- HenryBemis 7y ago> Buffett prizes financial security and has vowed to never exhaust Berkshire's cash pile. Supreme risk management, risking only a fraction of the cash. Do the same and there will always be opportunities to buy on any valley/dive. The biggest the valley/dive, the biggest buying opportunity. I admire his motto: http://enrichwise.com/wp-content/uploads/2014/08/Fantastic-Warren-Buffett-Quotes.jpeg http://enrichwise.com/wp-content/uploads/2014/08/Fantastic-W... and he keeps proving it right!
- imglorp 7y agoAnd his relevant corollary to be "Fearful when others are greedy and greedy when others are fearful.”
- dukoid 7y agoDo the world a favor and buy Fox news or News Corp O:)
- based64 7y agoYeah, we could really do with it being owned by actual conservatives instead of the liberal junior Murdochs. James' wife works the The Clinton Climate Initiative. The Fox network is LARPing
- christophilus 7y agoBuffett is a Democrat.
- H8crilA 7y agoI believe he thinks that old media is mostly dead, or at least a rather poor investment (cigar butt at best, but they're not doing cigar butt for decades). And he's focused only on his fiduciary duty towards shareholders, whom he calls partners, not the world at large. Someone like Seth Klarman may buy those if they get into deep distress. If it happened it would probably be via senior bonds and chapter 11.
- goldforever 7y agoDo the world a favour and buy out the useless CNN and Washington Post!
- jack_pp 7y agoCan someone with more experience explain what does "cash" mean in this context? Is it saying that 100 billion isn't actively invested and is simply being depreciated by inflation? It's said it's tied up in 'short-term investments' but that's not clear to someone who doesn't have knowledge of this domain.
- gizmo 7y agoBerkshire has almost all of their cash in short term treasury bills. It's a cash equivalent, because you don't want to keep 100bn in a checking account, and it does get hurt by inflation. But that's OK, because making a purchase when the time is right will more than make up for it. Cash is still king, in Buffet's world.
- H8crilA 7y agoI'd just add that in addition to that $128B in liquid Treasury securities (which is what "cash" means when we talk about such large amounts) they also have about $103B debt that cancels their net cash-debt position to about $25B. The debt has long maturity, though, so most of the cash can be deployed immediately. Also, Buffett applies something like the Taleb's "barbell method" to his holdings: he never buys high grade corporate bonds. It either has to be something "distressed", a convertible, a preferred stock, warrants, common stock well below intrinsic value, best if they call him and beg him to buy, i.e. something with high potential returns, or "pristine" and boring assets, like govt securities. As he says himself - when things get bad everything freezes. In 2008 even Berkshire couldn't get credit.
- sunstone 7y agoMost of Berkeshire's debt is associated with their utility businesses which have very low risk and low margins because of safe multi-decade contracts.
- HenryBemis 7y ago> $125 billion in cash, cash equivalents[1], and short-term investments[2] in US Treasuries[3] at the end of December [1]: https://www.investopedia.com/terms/c/cashandcashequivalents.asp https://www.investopedia.com/terms/c/cashandcashequivalents.... [2]: https://www.investopedia.com/terms/s/shorterminvestments.asp https://www.investopedia.com/terms/s/shorterminvestments.asp [3]: https://www.investopedia.com/terms/o/off-the-runtreasuries.asp https://www.investopedia.com/terms/o/off-the-runtreasuries.a... Regarding [3] the difference between ON-the vs OFF-the, is that the "on-the-run treasuries have a specific maturity date.
- kneel 7y agoThey really need to tax this man, he's even on record saying how he needs to be taxed more.
- tim333 7y agoBerkshire the company is one of the US's biggest taxpayers. Buffett himself is giving most of his money to charity (the Gates foundation).
- agustif 7y ago75% of Gates Foundation's money end's up in big four consulting firms, which by gates himself do a better work at deploying money than other more rational actors like local governments or communities. So yeah, prob that's not charity too... it's just a way to get the maximum available tax cut, you donate to your own or your friends charity and he or she funnels backs the money where you need it to be.
- imglorp 7y agoSource? Just looking at the annual letter, they're out there doing good things in third world health impact.
- agustif 7y agoWow, -3 points https://www.vox.com/science-and-health/2019/12/13/21004456/bill-gates-mckinsey-global-public-health-bcg https://www.vox.com/science-and-health/2019/12/13/21004456/b... "How we got here: The Gates Foundation believes in consultants"
- perl4ever 7y agoIf he gives away $100 billion, and pays zero taxes, the money is still gone. When I see this sort of comment, I always think of Seinfeld: "Kramer: They just write it off. Jerry: Write it off of what? Kramer: They just write it off! Jerry: You don't even know what a write off is, do you? Kramer: No. Do you?"
- tim333 7y agoThat's assuming they are for sale at the current market cap which they are not really. Otherwise I think he'd kinda like to own McDonnalds.
- taksintikk 7y agoIf real estate is included in the valuation McDonalds ftw.
- szczepano 7y agoIt's too early to buy, people are still greedy.
- simonh 7y agoAt the level Berkshire operates at the calculation is different from generically investing in the market. Buffet buys companies, or big chunks of them, so what matters is the risk profile and liquidity of the individual company. Also when he buys by definition he will create the bottom price of the stock. Him buying will make it go up, so he can’t wait until the price hits bottom, he waits until he has the best buying opportunity and that includes beating other potential buyout investors to the deal so what they are doing matters too. I do agree though, prices have recovered a bit due to the big stimulus package, but there is a lot more bad news to come and markets will react to that.
- imglorp 7y agoOkay since you opened the door to playing "call the bottom" where do you think it will be? I'll swag first. The end will be in sight when the US new case rate hits its inflection point and begins decreasing. From that you can sorta tell when things will settle down biology-wise.
- dhimes 7y agoSo that's a couple of weeks away, according to the projections I posted yesterday. Peak deaths in the US are estimated for 15 April.
- perl4ever 7y agoI'm still reading things in other US-centric forums (automotive, oil & gas industry) where people are remarking about "hysteria" or acknowledging current numbers but implicitly assuming that the increase in cases is zero. So I think it's very dangerous to assume that prices are accurate if probably millions of people haven't caught up to reality yet. One thing that I read is that the current rebound might have been largely driven by automatic rebalancing of institutional investors who split between stocks and bonds.
- Justice4Yall 7y agoIt's that time of the decade, when you can write this article , but a lot of companies have that cash. Question is would it make sense for Buffet or others to buy them - and would they sell?
- seemslegit 7y agoAnd the sense not to.
- RickJWagner 7y agoBehold the power of Buy-and-Hold. Also, watch financial forums for posters who were bashing Buffett relentlessly the past few years. They are oddly silent now!
- doggodad 7y agoTarget (TGT) is, overall, a well-run company with a straightforward business model. It would be a smart move to buy them at a discount because either they continue to expand into other markets and/or they could sold to the likes of Walmart or Amazon sometime in the future. Improvements: They do need to move more towards an online/in-store-equivalency platform model like Walmart, maybe with a handheld scanner self-checkout and loss-prevention AI. Heck, skip the stores entirely with delivery only-sales might be a better idea to eliminate shrinkage. I can't see WB buying any other companies on the list besides GE or 3M because it's not clear the others are diversified, defensible, undisruptable and simple enough.
- oblib 7y agoWarren needs to give his employees a raise.
- oblib 7y agoI knew I'd get a few down votes, but facts are facts and we can't down vote them: https://www.wealthdaily.com/articles/wages-vs-corporate-profits/88939 https://www.wealthdaily.com/articles/wages-vs-corporate-prof...