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“ The Apple sale is proving perspicacious. I wish the entire position had been sold at a mid-30s multiple. The business isn’t worth that much, even net of tax. Berkshire sent more than $20 billion of taxes to Washington last year just as capital gains taxes on the Apple sale.” I asked him if Brk can spin out the apples shares so we can all make our own decision.

per·spi·ca·cious
[ˌpərspəˈkāSHəs]
adjective
having a ready insight into and understanding of things:
"it offers quite a few facts to the perspicacious reporter"



lol, I can save others the time!

“ The Apple sale is proving perspicacious. I wish the entire position had been sold at a mid-30s multiple. The business isn’t worth that much, even net of tax. Berkshire sent more than $20 billion of taxes to Washington last year just as capital gains taxes on the Apple sale.” I asked him if Brk can spin out the apples shares so we can all make our own decision.

Buffett is in awe of what Apple has built. Remember that Apple has essentially sent back the value of Warren Buffett's entire life's work (~$1 Trillion), as excess capital it didn't need, in the last 12 or 13 years. What remains after that trillion bucks was mailed out is valued at $3 trillion.

Will they mail shareholders another $1 Trillion of excess capital they don't need in the next 10 years? The next 7?

Warren is in rare air up there looking for great companies he can actually buy and sell. He found one that is better than anything else he owns and real big too.

If Apple is going to be buying in more than $100 billion of stock every year we should all hope the share price comes down so they can stretch their dollar a bit.

https://s2.q4cdn.com/470004039/files/doc_earnings/...

" If Apple is going to be buying in more than $100 billion of stock every year we should all hope the share price comes down so they can stretch their dollar a bit."


Check my math but I figure if brk spins it out we get 140 apple shares for every 1000 Bs we own. You can hold your apple shares, Chris can sell his, I would sell calls against the apple. Thanks bud.

Will they mail shareholders another $1 Trillion of excess capital they don't need in the next 10 years? The next 7?


As a point of reference, both Google and Microsoft are deploying upwards of $100B in capital for data center capacity in the next 12-18 months.

What is Apple's position going to be?

1. Invest in their own capabilities for AI? (would require significant CapEx)
2. Setup another partnership agreement with a hyper scaler? note: This is what Amazon has done)
3. Buy an AI platform provider? (this could easily cost $500B)

My guess is that they will look at option [2] as it worked well for them in Search (Google Partnership).

tecmo
...

What is Apple's position going to be?

who knows, but as we have seen from them in the past - they don't have to be first, they don't have to invent it. They just need to make it intuitive and useable for ma and pa and the kids.

I've always loved that they don't burn epic amounts of money on acquisitions and arms-race type capex. How long until the fruits of those $200 billion competitor capex budgets are essentially obsolete?

If Apple can hold their position with the consumer they will be ok.

Everyone is excited about the AI arms race spend, and I would be excited if I was supplying data centers with gear and power (picks and shovels baby!) but one company's revenue is the other company's capex and the obsolescence of these investments is probably a lot faster than the depreciation schedule on their books.

Remember that Apple has essentially sent back the value of Warren Buffett's entire life's work (~$1 Trillion), as excess capital it didn't need, in the last 12 or 13 years. What remains after that trillion bucks was mailed out is valued at $3 trillion.
Will they mail shareholders another $1 Trillion of excess capital they don't need in the next 10 years?

As an aside---
Just a reminder that a share buyback is not in any way a distribution to shareholders. Yes, they mailed out that money, but it didn't go to shareholders, it went to people agreeing no longer to be shareholders. Buyback money isn't a "yield" in any sense of the world, the way some people portray it. For an investor it's just capital allocation, not different from the company purchasing shares of a different company. In neither case does the shareholder get that money to spend.

Jim

Googled it and found this, “ Stock buybacks can be considered a form of "yield" or return of capital to shareholders, although it's not a direct cash payment like a dividend.
Here's a breakdown:
Yield in finance refers to the returns an investor gets from holding an asset, usually expressed as a percentage of the investment.
Dividends are a classic form of yield, where a company directly distributes profits to shareholders, typically in cash, according to Medical Economics.
Stock buybacks (or share repurchases) involve a company buying back its own outstanding shares from the market.
This reduces the number of shares in circulation, which can increase the value of the remaining shares.
It also improves per-share metrics like earnings per share (EPS), according to Bankrate.
This ultimately increases the ownership percentage of each remaining share and can enhance the stock's potential upside.
Shareholder Yield is a broader metric that encompasses not only dividend payments but also stock buybacks and debt reduction, providing a more complete picture of how a company returns value to its investors.
In essence
Stock buybacks increase the value of current shareholders' investments by reducing the number of outstanding shares and improving key financial metrics, which can lead to higher stock prices.
This represents a less direct but potentially more tax-efficient way of returning value to shareholders compared to dividends.
Therefore, while not a traditional "yield" in the form of a direct cash payment, stock buybacks are a significant component of shareholder yield and represent a way a company returns value to its current shareholders. “

" For an investor it's just capital allocation, not different from the company purchasing shares of a different company. In neither case does the shareholder get that money to spend."

Good morning bud. Many years ago Buffett decided to buy and promote IBM and Ginny, which I strongly opposed on the Fools board, before the Fools canceled me, remember partner? In real time I pounded the table that Buffett should be buying brk not ibm. The opportunity cost of buying ibm over brk must be in the tens of billions. Do you think Buffett agrees with your position on the buyback issue? Rethink it bud, thank you.

In essence
Stock buybacks increase the value of current shareholders' investments by reducing the number of outstanding shares and improving key financial metrics

This belief is the overwhelming concensus, in fact I rarely find any opposition to it. CEOs themselves frequently quote this view.

In this sense the AI search is correct and doing what it is designed to do - it is assimilating the consensus view. It did this correctly.

Nevertheless there are many views in the world that are at concensus but are simply wrong. This not an important one, but it is one of them.

The confusion very likely lies in that EPS indeed increases when shares are repurchased.

But EPS also increases if cash is used to make a really bad investment in an unrelated dud, or overpriced, company with even some small earnings. EPS then increases and cash goes down and whether the aggregate value has gone up depends whether what was purchased is today worth more than the cash used.

Another part of the confusion might lie in the falicy that if not buying back shares then the cash will never be used for any other capital allocation, and will just remain unused forever.

For example if shares are bought back, this will overwhelmingly also increase the value of the company when comparing to the company not using that cash for anything and for 15 years and being declined the option to use it. Such a contract of having no option for cash other than buybacks never is written of course.

By the way, there is economically no difference between Berkshire doing a buyback on the one hand, and on the other hand just adding Berkshire as another stock within its published portfolio, without any shares cancelled. Same economic effect, just different way of doing the accounting. If buybacks were expressed in this way, Wall St would start to understand better that a buyback is just a stock purchase along the same lines as any stock purchase.

When Berkshire uses cash to buy shares of Apple, we don’t say it is “returning cash to shareholders”. In exactly the same way it make no sense whatsoever to say that buying shares of Berkshire is “returning cash to shareholders”.

I explained this to Tom Gaynor at Markel after a conference cal where he described a buyback as returning cash to shareholders, and to his credit he had the mental agility to agree after being explained.

Explaining to a few won’t change the concensus view however. That will remain forever.

- Manlobbi

" By the way, there is economically no difference between Berkshire doing a buyback on the one hand, and on the other hand just adding Berkshire as another stock within its published portfolio, without any shares cancelled. Same economic effect, just different way of doing the accounting. If buybacks were expressed in this way, Wall St would start to understand better that a buyback is just a stock purchase along the same lines as any stock purchase."


Good morning, sometimes it's a bit shocking what others opine but I hear you both. There is a HUGE difference between Buffett buying and promoting ibm vs buying and promoting brk. It's VERY dangerous business to buy and promote the work of others in the financial markets, in this case Ginny, I've been there done that. I trusted Buffett and Munger like no others in my lifetime, period, not many other control Ceos the past 60 years have earned my trust.

BTW, thank you for not cancelling me, yet, lol.

In this sense the AI search is correct and doing what it is designed to do - it is assimilating the consensus view. It did this correctly.

Indeed. A good way to think of anything written by an LLM is "the answer you get from an articulate person who believes everything they read on the internet".

The good news is that it has read everything on the internet. That's also the bad news : )

Jim

google, is a beautiful thing.

" Buffett's opinion on stock buybacks
Warren Buffett has consistently defended stock buybacks, arguing that they can be a valuable use of corporate capital when done correctly. He emphasizes that buybacks should be made at value-accretive prices, benefiting all stakeholders, including shareholders who sell their shares and management. Buffett has also criticized those who argue that stock buybacks are harmful, calling them "economically illiterate" or "silver-tongued demagogues." He believes that when the share count goes down, the interest in the company's businesses goes up, and that every small bit helps if repurchases are made at value-accretive prices."


I agree with Uncle Warren when he's right, how about you fellas?


I guess I'm still here. Thank you.

" The good news is that it has read everything on the internet. That's also the bad news : )

Jim"


Should we conclude from this conversation that you two should offer Buffett a tutorial on capital allocation?

Btw, Jim, what's the odds that I'm gone by the close? Thank you.

As an aside---
Just a reminder that a share buyback is not in any way a distribution to shareholders. Yes, they mailed out that money, but it didn't go to shareholders, it went to people agreeing no longer to be shareholders. Buyback money isn't a "yield" in any sense of the world, the way some people portray it. For an investor it's just capital allocation, not different from the company purchasing shares of a different company. In neither case does the shareholder get that money to spend.

Jim

yeah yeah.. Let's just agree that the money "left the company" and that the money wasn't needed to reinvest to create the company left over today.

Warren can decide if he likes their capital allocation decisions or not (I'm sure at some price he would be less smitten with Tim Cook repurchasing Apple shares).

But the magic for Warren is that the $100 billion + per year is not needed (hyperscalers with gazillion dollar AI datacenter budgets appear to disagree, we'll see if Apple is making a miscalculation about the future).

I own some companies that own their own stock as an investment. It isn't the norm. Fairfax Financial does it in the form of a derivate - a Total Return Swap - with several large Canadian banks (who have hedged their exposure) as counterparties. Cash flows back and forth depending on the performance of the share price during the period. This method avoids the "investment" being classified as treasury stock.

Another of them, which shall remain nameless since it is one of the most actively reviled companies on earth, owns a significant number of un-cancelled shares through an LP investment. The company's management gets to vote those uncancelled shares (which were purchased with shareholders' capital), making it a controlled company. GAAP counts the companies look-through pro-rata share of its own shares as treasury stock and their value does not appear on the balance sheet.

Gains and losses in an issuer's own shares are not taxable in the USA, by the way. I believe Fairfax's Total Return Swaps are taxable.

The fact is that any company can do a secondary stock offering in the future at a different price, so it doesn't make a whole lot of functional difference if the shares are cancelled or not (besides voting and a few other double-dip perks).

Anyway, I went off on a tangent there.

Apple didn't need the money. You say it wasn't returned to shareholders but it certainly left the company. Certainly distorts return on equity when capital leaving the company methodically reduces shareholders equity towards zero and eventually below.

A good way to think of anything written by an LLM is "the answer you get from an articulate person who believes everything they read on the internet".

Indeed. Including it believes what *other* LLMs think they have read on the internet.

It becomes the "Telephone Game". There have been several stories of lawyers making legal filings using AI where some of the citations have been completely made up.

except grok, where certain metrics will trigger a response based on musk's views.
R&D well spent, that's some mighty fine stem-based propaganding.

Indeed. A good way to think of anything written by an LLM is "the answer you get from an articulate person who believes everything they read on the internet".

The good news is that it has read everything on the internet. That's also the bad news : )

And yet, it shouldn't be hard to develop an LLM whose primary directive is to figure out the truth, and it's very disappointing that it seems no one is doing that.

Elan

And yet, it shouldn't be hard to develop an LLM whose primary directive is to figure out the truth,

Just how could an LLM do that? The internet is loaded with people claiming and showing that the Earth is flat not a globe, that you don't need a driver's license if you are just "traveling, not driving", that jet airliner engines run on compressed air instead of fuel, that there is no such thing as gravity. On and on and on.

Oh, and that continents don't drift. Except that one turned out to be false after all.

How is an LLM going to be able to decide which crackpot theories are crackpot theories and which are true? So, yeah, I think it will be hard.

How is an LLM going to be able to decide which crackpot theories are crackpot theories and which are true? So, yeah, I think it will be hard.

That's exactly what science is all about – verifiability versus guesses and crackpot misconceptions. I've not looked into it deeply, but Perplexity's responses to my queries have included footnotes that cited respected sources across the millennia. While I might weight one or another of these 'experts' by popular consensus differently, I've yet to see any sourced from idiotic social media kooks.

Tom

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