Berkshire – Munger and Buffett still got it
Berkshire Hathaway’s annual meeting is a kind of annual expression of faith these days, a “pilgrimage for capitalism”. The best material (in our eyes) was in the 90s and early 2000s when Buffett and Munger had a lot to say that hadn’t been yet explored – in 1998 Buffett says “the secret of life is weak competition”, which is basically the premise of Peter Thiel’s 2014 VC-founder-must-read “Zero to One” – think about it! The best businesses Berkshire has bought over time have been the ones which have little to no competition (Apple is the “crown jewel” here – last week’s results confirm that). But even in 2023 the two men have some gems which are applicable. Some of the best quotes from this year’s meeting:
On opportunity in investing:
“What gives you opportunities is other people doing dumb things,”
On Apple & the consumer
“We’re interested in owning a wonderful business forever. … We do learn a lot as we go along. … We’re learning all the time how consumers behave. I’m not going to be able to learn the technical aspects of businesses. It’d be nice if I knew it, but it isn’t essential. … We’ve got a business at Apple … I don’t understand the phone at all, but I do understand consumer behavior. … We’re learning all the time, from all of our businesses. … We don’t get smarter over time, we … get a little wiser, though, following it over time”
On Inflation and the US dollar:
“Nobody knows how far you can go with a paper currency before it gets out of control, particulary if you’re the world’s reserve currency…And you don’t want to try and pick out the point where it does become a problem because then it’s all over,”
A few other things to note – Berkshire doesn’t intend on taking over Occidental Petroleum or Chevron (“they have the right management”) and Berkshire’s majority ownership of both gives it the biggest exposure to the oil-rich Permian Basin. Buffett also took time to note Berkshire’s investments in Japan, which represent a 14% return on a capital and a 0.5% cost as Berkshire issued yen-denoted bonds to pay for the purchase. “A couple of decades ago that would’ve moved he needle [in terms of investment return], but today it’s a decimal on a balance sheet” quipped Munger.
O’Kane gets a payday
NZ/Aussie Banks reporting – already seen some from ANZ and MacQuarie (more on this tomorrow). Somewhat startling to see that top MacQuarie trader Nick O’Kane’s commodities unit accounted for more than half of the bank’s profit for the latest reporting period. O’Kane’s unit took advantage of gas and power volatility and took home a +$6B profit; O’Kane took home a $39M payday, which outstripped his boss Shemara Wikramanayake and JP Morgan boss Jamie Dimon. Nice work if you can get it. Shows the unconstrained approach of MacQuarie versus US investment banks, which can’t make as unconstrained bets post-2008 GFC.
Misc
Some bright news for IPOs – Jarden and UBS have won the mandate to float Mondiale VGL, one of Australasia’s biggest freight forwarders. The NZX will be happy to have this after a sluggish year in terms of listing activity.
We note that the spot price for carbon units fell to its lowest level in almost two years as uncertainty over the future role of forestry in the Emissions Trading Scheme (ETS) has scared investors off the market. Carbon units are currently trading at $53.25. Tower cut their profit guidance by +$10M on the back of higher-than-expected claims for the recent floods in the N.Island. Our insurance preference is QBE, no view on Tower.