Warren Buffett’s Berkshire dumps most of Goldman Sachs stake • Hacker News Board

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#31

Post by mxschumacher » Sat, May 16, 2020, 1:36 PM UTC

Slartie wrote: post #22

blackrock wrote: post #16

What does he know that we don’t? He just dumped most of his airline holdings, after losing some $5 billion dollars. It seems he might be going into cash, and sitting things out, until a true correction hits, and then he’ll go back in and pick up companies for pennies on the dollar.

He lost a huge pile on Kraft Heinz, and that was pre-Corona. Didn't yet realize those losses AFAIK. He lost a pile on the airlines and even decided to realize those losses. He lost a pile on that petroleum company that I forgot the name of, but which crashed and burned recently due to oil prices plunging. He hesitated a long time with tech stocks and lost a lot of money in the last decade due to opportunity cost. His…

I believe you would do well in studying the details of the deals you have mentioned before concluding they are failures.

Berkshire financed Occidental Petroleum's acquisition of Anadarco by giving $10 bn in cash. In return, BRK received:

- $10bn wort of perpetual cumulative preferred shares with a coupon of 8% (e.g. $800m a year). OXY can choose to pay in common shares instead of cash, but in this case Berkshire will get a discount. They have done this for the most recent quarterly dividend payment, since OXY's share price is so depressed, the $200m add up to a sizable position in OXY. If OXY doesn't pay the dividend, the coupon rises to 9% and has to be paid latter. OXY can redeem these shares at 105% of the nominal value in about 10 years.

- warrants to purchase 80m common shares until 2030, the strike price is $62.5, so this option is far out of the money. But given the extremely long duration (11 years) it is quite possible that those warrants become extremely valuable over time.

Let's wait for a few years and see how Berkshire does on the OXY trade.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#32

Post by mxschumacher » Sat, May 16, 2020, 1:40 PM UTC

dilandau wrote: post #18

Many in finance think we're headed for deflation. If that's the case, dumping equities for cash is a sensible move. He may be expecting chaos in the banking sector as bankruptcies roll in, and these mortgage fund fraud allegations gain traction. It's going to be a wild decade. Watch the government use this to vastly expand surveillance powers, too. Not going to be good for the average American.

The positions in GS and WFC have been reduced over the last few quarters, these sales should not be interpreted as "dumping equity" - besides the large private holdings (insurance, rail, energy, lots of manufacturing, retail etc), Berkshire still holds $200bn worth of equity.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#33

Post by mxschumacher » Sat, May 16, 2020, 1:43 PM UTC

blackrock wrote: post #27

tankenmate wrote: post #26

Earlier quoted context omitted.

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.

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?

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

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#34

Post by mxschumacher » Sat, May 16, 2020, 1:44 PM UTC

mam2 wrote: post #17

blackrock wrote: post #16

What does he know that we don’t? He just dumped most of his airline holdings, after losing some $5 billion dollars. It seems he might be going into cash, and sitting things out, until a true correction hits, and then he’ll go back in and pick up companies for pennies on the dollar.

He was not so wise on the airlines...

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.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#35

Post by shakopeeant » Sat, May 16, 2020, 2:03 PM UTC

blackrock wrote: post #21

mam2 wrote: post #17

Earlier quoted context omitted.

He was not so wise on the airlines...

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 kn…

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.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#36

Post by paulcole » Sat, May 16, 2020, 2:05 PM UTC

eganist wrote: post #23

voldacar wrote: post #7

Fun fact: The CEO of Goldman also makes pretty bad EDM music https://soundcloud.com/djdsolmusic

Sounds pretty standard for the genre honestly. Give him a few years though and he'll start to experiment. Or not. Who knows. My guess is this is a hobby for him.

> My guess is this is a hobby for him.

I’m not sure what would give you that idea.

He’s said in interviews he expects that when the EDM thing takes off he’ll transition out of his role at Goldman. Apparently he had to cancel a couple weeks of shows in Ibiza after COVID hit.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#37

Post by dilandau » Sat, May 16, 2020, 2:08 PM UTC

mxschumacher wrote: post #32

dilandau wrote: post #18

Many in finance think we're headed for deflation. If that's the case, dumping equities for cash is a sensible move. He may be expecting chaos in the banking sector as bankruptcies roll in, and these mortgage fund fraud allegations gain traction. It's going to be a wild decade. Watch the government use this to vastly expand surveillance powers, too. Not going to be good for the average American.

The positions in GS and WFC have been reduced over the last few quarters, these sales should not be interpreted as "dumping equity" - besides the large private holdings (insurance, rail, energy, lots of manufacturing, retail etc), Berkshire still holds $200bn worth of equity.

Thanks for clarifying

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#38

Post by hawaiian » Sat, May 16, 2020, 2:20 PM UTC

voldacar wrote: post #7

Fun fact: The CEO of Goldman also makes pretty bad EDM music https://soundcloud.com/djdsolmusic

The first ~25 minutes of D-Sol Mix October 2018 aren't bad.

Disclaimer: I listen to a lot of underground EDM semi-professionally so my tolerance might be too high.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#39

Post by lefstathiou » Sat, May 16, 2020, 2:37 PM UTC

logicchains wrote: post #6

drawkbox wrote: post #3

Earlier quoted context omitted.

> move into retail finance Whistleblower: Wall Street Has Engaged in Widespread Manipulation of Mortgage Funds [1]. Commercial real-estate was already going to absolutely hammered. > Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — as well as other lenders have engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials, acc…

>Time to start anti-trust breaking up the 'too big to fail' banks, they are a national security issue and ultimately a bad actor in fair markets. More like time to stop propping them up. If the government hadn't stepped in to save them during the last crisis, a bunch of those banks would have gone the way of Lehman Brothers.

I think the parent post is recommending an orderly breakup as opposed to a collapse where society is left to pick up the pieces.

The issue comes back to foreign competition. As much as Glass-Steagall made sense to some, it was repealed because US banks faced increasing competition from European banks that were able to bundle advisory with retail bank deposits. Unless everyone takes similar position globally (or we block foreign bank access to our markets) it’s hard to justify a handicap on the home team.

Re: Warren Buffett’s Berkshire dumps most of Goldman Sachs stake

#40

Post by Scoundreller » Sat, May 16, 2020, 2:43 PM UTC

mxschumacher wrote: post #31

Slartie wrote: post #22

Earlier quoted context omitted.

He lost a huge pile on Kraft Heinz, and that was pre-Corona. Didn't yet realize those losses AFAIK. He lost a pile on the airlines and even decided to realize those losses. He lost a pile on that petroleum company that I forgot the name of, but which crashed and burned recently due to oil prices plunging. He hesitated a long time with tech stocks and lost a lot of money in the last decade due to opportunity cost. His…

I believe you would do well in studying the details of the deals you have mentioned before concluding they are failures. Berkshire financed Occidental Petroleum's acquisition of Anadarco by giving $10 bn in cash. In return, BRK received: - $10bn wort of perpetual cumulative preferred shares with a coupon of 8% (e.g. $800m a year). OXY can choose to pay in common shares instead of cash, but in this case Berkshire will…

Ya, IMO, when he beats the market, it's his access to deals that the public can't get and then stamping your celebrity endorsement on it.

Maybe in the past there was lots of deep-value out there, but now we have analysts working every strategy.

Or squeeze a percent or two of efficiency by taking companies private under 1 umbrella. On average it works out, but it doesn't take many mistakes to sour it.