6 ms·

He was not so wise on the airlines...

• H8crilA 6y ago
  That really remains to be seen. Also, I believe BRK has lower risk tolerance than most people think. Listen to the latest annual shareholders meeting, he says that quite explicitly.
• blackrock 6y ago
  The $5 billion loss is likely pocket change to him. But he might be onto something. Which means, does he know some insider knowledge that we don’t? The airlines industry is practically about tourism. Yes, there is business travel, but tourism is an important part of it. But, there is unlikely to be any significant tourism in the years ahead, until some kind of vaccine comes out. So, does he know about some insider knowledge here. He doesn’t take strategic positions like this on a whim, and he clearly operates on fringe insider knowledge. Maybe his buddies are telling him, that here will likely never be a vaccine? Now, that is an interesting and possibly tradable thesis. Short the airline companies.
  • tankenmate 6y ago
    I would suspect that even after a vaccine comes out travelling of all sorts will be depressed; maybe to the point of permanently moving the needle. As an analogy, public health experts suggest we should do away with shaking hands in the future. It may well be that social norms such as travelling, shaking hands, etc will permanently change.
    • blackrock 6y ago
      Depressed travelling has some interesting plays here. This means that AirBnB is dead. And all those people that bought multiple houses, with multiple mortgages, which they can no longer service, are going to go bankrupt. Good riddance. You can’t short AirBnB, but what other companies can you short? The loan processing companies? Zillow? BofA?
      • mxschumacher 6y ago
        that the tourist sector is in trouble isn't exactly a secret at this point, so additional shorts seem risky. Avis Budget, a car rental company, does 2/3 of their rentals at airports and they carry a huge amount of debt. The car rental space is extremely competitive as it is and new ride sharing offers don't make things easier. Hertz is already very close to bankruptcy
        • tankenmate 6y ago
          And completing the circle Warren Buffet has a relatively famous saying, "After all, you only find out who is swimming naked when the tide goes out."[0] [0] Berkshire Hathaway Chairman's Letter (2001)
  • shakopeeant 6y ago
    People will be back on a plane and vacationing as soon as things open up. Just like people crowded the bars in Wisconsin as soon as they opened up. A loud minority of scared people is what you are hearing in the media. I have two vacations planned already.
  • tc313 6y ago
    I doubt that he has any special knowledge that provides an edge; nobody knows what the fallout will be from all of this or when/if a vaccine will be developed. More likely, he’s just thinking about the same facts differently than others. Buffett tends to be quite cautious with regards to potential catastrophic failures, so he’s probably more focused on all of the ways that airlines, banks, etc. might lose a ton of money rather than worrying about missing out on the recovery.
• mxschumacher 6y ago
  because he didn't predict a global pandemic and a government ban on flying? Selling at a loss is hard, Kudos to Berkshire for understanding that the world has changed and acting accordingly, most investors are going to try to sit this out and might well lose everything in the process.
  • rcpt 6y ago
    Why couldn't he predict it in February?
    • mxschumacher 6y ago
      If you know more than people managing hundreds of billions of dollars, you should consider getting into finance. Shorting the market before February 19th 2020 was quite brilliant. I suppose that few people predicted that this crisis would hit America so hard
      • MiroF 6y ago
        Half of the people managing hundreds of millions of dollars fail to outperform the market once they start managing those hundreds of millions of dollars.
      • mam2 6y ago
        Half of wallstreetbets made milions on shorting the maket on the coronavirus. That was not really so hard and he just fucked up.
        • valuearb 6y ago
          Half of Wall Street bets made photoshop money. Few there actually makes the trades they claim.