Subject: Re: In progress observations
5 years ago Berkshire had $138b net cash. So over half a decade it has effectively ended up assumulating $232b more of cash reserves looking for a use. I would be much more comfortable with a steady regular buyback than hope for Greg Abel to suddenly reinvent himself as a market timer extraordinaire sitting around waiting to pounce in the next crash ( which Buffett himself did not do at any time in the last 10 years despite a number of clear market dislocations).
So as a shareholder I would want to see Greg making a steady series of intelligent decisions rather than comfortable hoarding capital waiting for some spectacular meltdown in the markets. Berkshire has long since crossed the size of reserves where the reserves it already has are more than sufficient for any large transaction the capital markets can throw at it. I don't really want another 5 years to go by and berkshite sitting on $600-700b idle cash and pretending that is evidence of intelligent capital allocation. If that happened, I think the market should rationally award a lower than usual valuation multiple to the business.

I feel that this is so “obvious” and yet, the situation has been maintained now for a very, very long time. I cannot understand what is happening at Berkshire on this matter. I fear that Sue Decker let the cat out of the bag. Buffett’s own letters highlight that if Berkshire cannot beat the S&P 500, it shouldn’t exist. He moved the goalposts with his various tests and now, I think, we don’t know whether Berkshire should exist based on any test. What is the test, exactly, for measuring performance against the S&P 500. The stock performance over time? From what date?

It is just so weird. Now, not only is Buffett not in charge (right?), we discover that Abel is not only the business picker, but also the stock picker? That’s not the deal I thought I signed up for when Weschler and Combs were hired.

There is no scenario I can conjure where I’d be comfortable with Abel putting $300 billion to work in any reasonable amount of time. I doubt I’m alone. I say there is next to zero chance that happens. I expected at least $5 billion of buybacks this quarter alone. There should be a dividend. The notion - sold to us - that a dividend can be “created” by selling the stock (as Buffett eloquently described when he set up the Gates donation) is not the point. The point is capital allocation.

If Berkshire does not comfortably beat the S&P 500, one should own the index instead. That was his advice to his wife. It is my advice to my heirs (assuming a basis step up still exists).

I simply cannot understand what their plan is. Their biggest capital allocation “front” was utilities. Is that now “dead”? Buffett bought in the West but now everyone is moving South. He’s at the mercy of some crazy state legislatures out there.

How many years will we keep hearing that BNSF needs to improve? From its leaders no less.

Buffett is the GOAT. And, perhaps it is too soon. But, when can we move on? No one wants to do a post Covid evaluation, and it’s been 6 years. A decade after Buffett, will we be hearing “markets can do anything”?

I am at a total loss to explain how the shareholder base is going for this. Buffett mentioned to Quick that Berkshire (he?) would be willing to do a $100 billion deal tomorrow. We need three of those - now - and then one every two years thereafter (and more frequently as the cash flow presumably rises from the deals). I hate to say, but I cannot fathom how Buffett believes that is going to happen. It isn’t.

We got a boost when interest rates on cash went from zero to reasonable. The market bid the stock up. I’m not measuring from the high. I’m looking solely at the capital allocation.