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Charlie Munger: ‘The Phone Is Not Ringing Off the Hook’
- sputknick 7y agoI think the challenge here is the government is probably offering better terms than can be expected from Buffet. If someone is offering me free money, and someone will give me money if I give them control of my company guess which one I'm calling first.
- pmiller2 7y agoI wonder if that means Berkshire's recent bond offering was a mistake: https://www.fool.com/investing/2020/04/12/this-warren-buffett-strategy-could-bring-you-succe.aspx https://www.fool.com/investing/2020/04/12/this-warren-buffet... Berkshire has always held a ton of cash for just such an occasion. They can just buy up equity on the open market and take substantial control of a company. But, did they need even more money?
- toomuchtodo 7y agoIt was the right decision at the time. It's unlikely anyone could've predicted the Federal Reserve and the Treasury Dept would've stepped in with unlimited support before the recent self-imposed economic collapse.
- pmiller2 7y agoThey announced their intention to offer bonds in late March, well after it was generally known that the government intended to step in.
- deleted 7y ago[deleted]
- toomuchtodo 7y agoI don't believe it was until early April when the full force of support was evident. https://news.ycombinator.com/item?id=22822869 https://news.ycombinator.com/item?id=22822869
- whatok 7y agoThe recent Fed announcements mostly served to reopen the high yield primary market and the investment grade markets were wide open well before that; especially for a strong issuer like BRK.
- aguyfromnb 7y ago>Berkshire has always held a ton of cash for just such an occasion. Perhaps the occasion hasn't presented itself yet...
- CapriciousCptl 7y agoIt's Yen-denominated debt-- mostly useful to Berkshire so they can make Yen-denominated investments without currency risk. It's at less than 1% a year, which costs virtually nothing given the options it opens up for Berkshire. And you'll note that that debt makes up less than 1% of its total cash position, it's really just there so Berkshire can buy something quickly in Yen if an opportunity shows up.
- algo_trader 7y agooh man. nothing you have said make any kind of sense. if they have yen-denominated debt, then they have added currency risk if it is 1% of their cash position, they can just use some cash and buy yens and have those yens available. if they have hedged the bond currency risk, then they might as well have hedged it after buying yens in the open market if it's 1% interest, it is still probably more than the interest they earn on their cash position. just saying... (MAYBE, maybe, its a tax issue)
- CapriciousCptl 7y agoYou're coming at this from a "hedging" perspective-- Instead, think in terms of what the bond gives him-- a lot of Yen. That's opportunities to invest. The increased "risk" in this sense is miniscule-- since the cost of the oppurtunity is less than 1% Yen a year, even a 200% rise in Yen/USD only actually costs Berkshire 2%. And, my bet is Buffett knows of some companies he could deploy that Yen in right now to cover the interest anyway. He's just lying in wait for better oppurtunities. Now, there could be some other thing going on-- but taxes-wise in general U.S. companies issue US-denominated bonds to repatriate funds so I'm sure where you're going with that. My bet would be if it's not just for the opportunity, it may for their re-insurance reserves.
- whatok 7y agoThis doesn't make any sense. Issuers don't need to pre-fund acquisitions before making offers so BRK wouldn't need any JPY before acting and in the event of an acquisition closing, they would easily be able to issuer in any currency on earth. Don't know the name well at all but BRK issued in JPY last year as well so I'm guessing they have some recurring JPY liabilities.
- whatok 7y agoBRK issues regularly at the insurance company level. I wouldn't overthink it. Even with the recently issued USD bonds much wider, they're still yielding around the same at issue with rates much lower. Strong issuers like BRK should be taking advantage of much lower rates and extreme demand for investment grade bonds right now to refinance higher coupon debt.
- markstos 7y agoThe US government as considered taking equity stakes, too. https://www.marketplace.org/2020/03/20/covid19-financial-bailout-taxpayer-cost/ https://www.marketplace.org/2020/03/20/covid19-financial-bai...
- deleted 7y ago[deleted]
- whatok 7y agoThe US government is receiving warrants as part of the airline bailouts. In the case of AAL, they could potentially dilute existing shareholders by 10%. Ridiculously generous terms on everything considering the alternative.
- pmiller2 7y agohttps://archive.is/eAFo7 https://archive.is/eAFo7
- rabboRubble 7y agocurious FF / Safari through up security warnings for archive.is and archive.today. going at them from a roundabout way gives me a CloudFlare DNS error page. this's been going on the last week or so. wonder what the problem is?
- CapriciousCptl 7y agoDon't know about the FF thing but here's the CloudFlare thing straight from their CEO-- https://news.ycombinator.com/item?id=19828702 https://news.ycombinator.com/item?id=19828702
- rabboRubble 7y agothat explains the trouble I'm having. i have my local network resolving to 1.1.1.1. Or was it 9.9.9.9? Or 8.8.8.8? i'll have to dig into this a bit more. thanks! it's always dns :-)
- iNate2000 7y agoI didn't see anything on iPhone Safari. Are you working remote on a company VPN?
- icelancer 7y agoThis now returns a 403 Forbidden, probably related to the ongoing problems between archive.is and Cloudflare. Are there alternatives to archive.is?
- rckoepke 7y agoIs there any workaround to view this? I get 403. Edit: Nevermind, the workaround is to set default DNS to something other than cloudflare. Oddly I didn't expect that I was on 1.1.1.1 as I'm on Ubuntu but dual boot Win10, with windows already set to 8.8.8.8/8.8.4.4 and default Xfinity DHCP on linux (never got around to setting it on linux). Now I'm wondering whether xfinity DHCP or Ubuntu sets 1.1.1.1, and whether thats actually going directly to cloudflare or passing through xfinity DNS on the way to cloudflare. Some digging ahead.
- pmiller2 7y agoThis quote from Munger is what I find most interesting: > I do think, sooner or later, we’ll have an economy back, which will be a moderate economy. It’s quite possible that never again—not again in a long time—will we have a level of employment again like we just lost. We may never get that back for all practical purposes. I don’t know. There are roughly 2 ways this could go if what he says actually happens. One is that a lot more people are going to suffer economically because of a lack of employment. The other, which is what I'm hoping for but not expecting, is that we take this opportunity to acknowledge that Keynes was right, and we don't have to work as much as we do. If we can strengthen our social safety net so that being out of work does not necessarily imply falling deeply into poverty (not that being unemployed should necessarily be a great deal, just that folks shouldn't be losing their homes and their health insurance, and should still be able to lead a fairly basic life), then I think this whole crisis might have a silver lining.
- jacquesm 7y agoThe whole idea that 'being social' equates to 'socialism', the bogeyman edition is what will stop for instance the United States from adopting a more social agenda. Free - or at least affordable - public healthcare, public transportation, internet access and access to things like clean water should be a basic standard of living for any country that does not want to be labelled 'third world'. Instead, that whole agenda has been hijacked by parties that make it seem as though being nice & normal to your fellow human beings is somehow a bad thing because once upon a time someone else had an ideology that shared the same prefix.
- ctdonath 7y agoThe USA is effectively 50 countries with different demographics, geography, culture, and needs. Trying to impose any “one size fits all” solution won’t work because it’s not appropriate for a significant number of them.
- minikites 7y agoWhere is "access to clean water" (or frankly, anything on the list) not appropriate?
- jsanford9292 7y agoValue investing has been replaced by government support. Big companies like airlines are not allowed to "get cheap" anymore. From Berkshire Hathaway alone, there are hundreds of billions of dollars of private money waiting to step in during times like these. Instead, we will "bail out" aggressively managed companies and encourage all big companies to be more aggressive going forwards. Because they have a government backstop preventing them from failure. This will lead to more bailouts in the future, the burden of which falls to all American taxpayers. We are deviating from the incentives that make capitalism such an effective force.
- jmeister 7y agoA counterpoint and a reason for hope: After the 08 crisis, the big banks were required to keep aside a lot more money in reserves, agree to periodic stress tests by regulators, and forgo certain risky activities(proprietary trading). Now regulators/management are pretty confident that the banking sector is robust and a 08 like crisis cannot happen again.
- jsanford9292 7y agoI spent two years studying US regional banks and I can tell you that what you're saying is factually correct. 08 effectively nationalized the big banks. "Too big to fail" means any bank over a certain asset size will be rescued by the government if it gets into trouble. Basically, bankers get the upside if loans go well, taxpayers get the downside if they don't. The worst kind of nationalization. But the 08 regulations were so stringent that it would be very hard for banks to fail. Like you said. However, since that time, politicians decided that the regulations of 08 were too constricting to banks and were hurting small and medium biz growth. So a bipartisan coalition in Congress lifted the regulations for all banks <$250Bn asset size. Deregulation. So now, these bankers are free to chase profits without the chains from 08 and if their banks end up failing, we will still bail them out. The worst of both worlds.
- ethagknight 7y agoKeep in mind, this is a totally unprecedented government mandated shut down to the economy, not the result of overly aggressive fiscal management.
- tempsy 7y agoThe stock market is at its most expensive on a forward p/e basis. There is nothing about this supposed recession that has made stocks cheap for a firm like Berkshire to scoop up.
- neonate 7y agohttps://archive.md/eAFo7 https://archive.md/eAFo7
- bawana 7y agoNo amount of govt money will ever cause inflation again. The tools for govt intervention (the Fed rate, quantitative easing through the purchase of Tbills,etc) may have been effective in the time when the world was simpler (Remember 'It's a Wonderful Life' with James Stewart?). But loans from banks do not drive the economy any more. In fact many businesses look to VCs, and angels. Loans are for chumps. So what DO these tools do? Where does the money go? It goes to places that will generate the highest ROI - other financial opportunities and investments removed from the real world. In fact, I would interpret that skyrocketing stock market as evidence of too much money chasing too few equities. There may be 'inflation' of equities prices, bond prices, REIT prices, etc. But unless the money gets into the hands of the people who need a house or need a job or need food, it won't help the economy. Adam Smith's laws and the 'invisible hand' of the market assumes a continuous distribution of currency transacted by rational agents with equal access. Instead the world is quantized and now a large fraction of the population are below the threshold where these interventions are meaningful.
- raincom 7y agoExactly this. Just Fed/Treasury crediting $1B to every billionaire in the states won't help the economy; it just helps this rich to chase after financial assets (stocks), real estate (mega mansions), arts/paintings (picasso, van gough, etc), mega yachts, names on buildings, etc.
- bravo22 7y agoYes. The system is inherently unproductive. Pumping more money into it like giving a sedentary person more calories and expect their physique to end up like an athlete's. But you can also pump that money into the hands of people and have the same problem. If you give everyone 10K you haven't change affordability. If you give everyone 10K you haven't changed relative food prices. There are more fundamental problems to be solved.