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2020 Berkshire Hathaway Annual Letter [pdf]

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Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#61

Post by skybrian »

gwern wrote: post #51
tuna-piano wrote: post #12

Just an interesting sidenote. It does feel like the letter is shorter than it used to be, so I plotted the number of pages by year in the PDF fils on their site. Looks like there was a decrease from 20 pages to 15 starting in 2017. Graph: https://imgur.com/a/TQ2oewY

This is a shockingly boring and cursory annual letter. Most of it reads like a copy-paste from all of the previous letters (retained earnings, bonds bad, why non-Berk conglomerates suck, insurance float is awesome, etc). OK, it's nice that Apple did some stock buybacks, and that they did too. Uh, what else? It was a whole year. And what a year - what it doesn't say is far more important than what it does. Where's the…

I suspect he and his ghostwriters are saying less and less on purpose. Why take a stand on an even mildly controversial issue at this point? (And everything is controversial now.) He has nothing to prove.

We might as well ask why his shareholder letters were interesting before? It’s a fairly unusual tradition.

Maybe the next CEO will have something to say, but it’s pretty optional.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#62

Post by JesseMeyer »

whb07 wrote: post #60
JesseMeyer wrote: post #8

Earlier quoted context omitted.

Do you honestly believe that Warren does not understand inflation?

I believe the mind of a 90 yo Buffet is not the same as the 30 yo Buffet. My general point being that even if he's aware and picks some number less than 5% inflation (which is debatable), sitting on a giant cash pile and getting fear paralysis or whatever it is he's waiting on (clearly not a buying opportunity) isn't what a present day champion would do. But thats fine. Just can't expect him to be the past champion h…

What would you expect a 'present day champion' to do during the most volatile market since just prior to the Great Depression?

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#63

Post by whb07 »

JesseMeyer wrote: post #62
whb07 wrote: post #60

Earlier quoted context omitted.

I believe the mind of a 90 yo Buffet is not the same as the 30 yo Buffet. My general point being that even if he's aware and picks some number less than 5% inflation (which is debatable), sitting on a giant cash pile and getting fear paralysis or whatever it is he's waiting on (clearly not a buying opportunity) isn't what a present day champion would do. But thats fine. Just can't expect him to be the past champion h…

What would you expect a 'present day champion' to do during the most volatile market since just prior to the Great Depression?

Go on cnbc, cry about the world ending and being scared for your life and then buy up everything circa march.

Also Buffet is old enough to have remembered other "pandemias" and times of volatility. He was there during the hong kong flu of 69. He was around when Polio was a thing. Hes been through Black Monday and 9/11.

Tons of money to be made in volatility. You're using that word in a negative manner. Volatility up is a great thing.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#64

Post by tim333 »

mettamage wrote: post #28
bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

Investing and poker have some fun commonalities. One that I want to focus one in this particular case is: always play the game you know well and know how you're going to win it [nuances, 0] In Poker: find the fish, understand why they're fish and exploit it [example, 1]. In investing: find underpriced assets, understand why they're underpriced and exploit it [examples, 2, 3]. From this perspective, Buffett doesn't un…

>From this perspective, Buffett doesn't understand how price movement works in tech companies.

For someone who allegedly doesn't understand that the recent $89bn gain on Apple stock is nice going. Luck perhaps?

Incidentally he's also talked about poker as a model for investing. After telling the Mr Market story in the 1987 letter he goes on:

>But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game. As they say in poker, "If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy."

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#66

Post by tim333 »

ethbr0 wrote: post #34
mettamage wrote: post #28

Earlier quoted context omitted.

Investing and poker have some fun commonalities. One that I want to focus one in this particular case is: always play the game you know well and know how you're going to win it [nuances, 0] In Poker: find the fish, understand why they're fish and exploit it [example, 1]. In investing: find underpriced assets, understand why they're underpriced and exploit it [examples, 2, 3]. From this perspective, Buffett doesn't un…

Obligatory Buffett paraphase: there are no called strikes in investing (ie if you choose not to swing at an opportunity, that then turns out to be good, nobody penalizes you) As much of Berkshire's success has been based on limiting losses as pushing successes. "Buffett declines to invest in company" is a less sexy headline than "Buffett buys large stake in X" though. Maybe Buffett's old. Maybe Berkshire is played ou…

Buffett has always said he ignores the macro stuff and just focuses on acquiring great businesses.

He did dump airline stocks at the start of the pandemic on the basis that their business wasn't going to do great for a while.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#67

Post by tim333 »

whb07 wrote: post #5

Like every lion in the savanna, it must relinquish its reign at some point. Buffet talks pridefully about holding $250+ BILLION in cash, as if it were pegged to a gold standard. Nearly half his life was based on such a system, and so it’d be hard to remove that idea. Yet he sits on it proudly seemingly unaware that sitting on such an amount has eaten up 3%+ via the printing press of the FED. That and you know... not…

$250bn is a lot of cash but markets are expensive and may not remain so forever. He also had a lot of cash in the run up to 2008 and it came in quite handy.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#68

Post by tim333 »

the-dude wrote: post #15
bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

Fair enough. But if his letters are not so insightful anymore, whose are?

It's a different kind of stuff but I find Jeremy Grantham pretty insightful. Grantham does more overall market levels rather than individual stocks, Buffett the reverse. Here's a recent one https://www.gmo.com/americas/research-library/waiting-for-th... on how things are a bit pricey now. Though he's not a perma bear - this is one he put out saying things were cheap almost exactly at the 2009 bottom https://www.gmo.com/americas/research-library/reinvesting-wh... Grantham is mostly retired but has popped up recently to comment on the current situation. He's on youtube a bit too if you google.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#69

Post by from »

dominotw wrote: post #18
bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

> In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I hear this often that berkshire isn't what it used to be because of 'scale'. What does this even mean. At what point does it become too big. Is there a general logic that after X billion $$, investment firms become inefficient?

If you have one billion dollars and find a $100 million opportunity, you have an ROI of 10%. If you have one hundred billion dollars and find a $100 million opportunity, you have an ROI of 0.1%. He needs to search for very large opportunities to attain a good return because he has so much capital. This is why some funds return money to investors if they get too big--it's very difficult to generate returns with that much money.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#70

Post by dominotw »

from wrote: post #69
dominotw wrote: post #18

Earlier quoted context omitted.

> In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I hear this often that berkshire isn't what it used to be because of 'scale'. What does this even mean. At what point does it become too big. Is there a general logic that after X billion $$, investment firms become inefficient?

If you have one billion dollars and find a $100 million opportunity, you have an ROI of 10%. If you have one hundred billion dollars and find a $100 million opportunity, you have an ROI of 0.1%. He needs to search for very large opportunities to attain a good return because he has so much capital. This is why some funds return money to investors if they get too big--it's very difficult to generate returns with that m…

> If you have one hundred billion dollars and find a $100 million opportunity

Why would they always be finding one opportunity. Can't they find 100 $100 million opportunities. Why doesn't "finding opportunists" model scale ?

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