The Digest #209
Berkshire's conservatism, Weschler's IRA, National Indemnity, A Defense of Andrew Left, Inflation hammers the poor, Felony convictions as footnotes, Immanuel Nobel, Eisenhower and D-Day and more ...
Berkshire Hathaway’s Fiscal Conservatism
Berkshire Hathaway released second quarter results on Saturday, August 3. The company now holds an astounding $271 billion of cash and treasury bills after selling approximately half of its shares of Apple during the quarter.
There have been many highly questionable takes on why Warren Buffett has built up such a large cash position. The most dubious theory is that he has done so because he is nearly ninety-four years old and has a limited life expectancy. People who believe that Warren Buffett is conflating his personal longevity with Berkshire Hathaway’s time horizon simply do not understand Mr. Buffett or Berkshire Hathaway’s culture.
We cannot know exactly why Mr. Buffett has chosen to accumulate so much cash, but we can be sure that it is not burning a hole in his pocket. Berkshire is simply run in an ultra-conservative manner. As a shareholder for nearly a quarter century, this policy is precisely what I want to see, both during Mr. Buffett’s remaining tenure and beyond.
“Extreme fiscal conservatism is a corporate pledge we make to those who have joined us in ownership of Berkshire. In most years – indeed in most decades – our caution will likely prove to be unneeded behavior – akin to an insurance policy on a fortress-like building thought to be fireproof. But Berkshire does not want to inflict permanent financial damage – quotational shrinkage for extended periods can’t be avoided – on Bertie [Warren’s sister] or any of the individuals who have trusted us with their savings.”
— Warren Buffett, 2023 Letter to Shareholders
Articles
, August 1, 2024. The story of Ted Weschler’s IRA is legendary. “Weschler graduated from Wharton in 1983. He went to work for W.R. Grace in New York City at a salary of $22,000. Weschler’s salary deferrals along with employer matching and stock appreciation led to an account balance of $70,000 at the end of 1989. At that time he left W.R. Grace and began managing the IRA himself. Over the next 22 years Weschler grew the account at a 41% CAGR.” (Dirt Cheap Stocks)Berkshire Hathaway's 1994 AGM At-A-Glance by
, July 30, 2024. CNBC’s Warren Buffett Archive is a treasure trove of useful information about Berkshire Hathaway, but it is time consuming to go through all of the annual meeting videos and transcripts. Kingswell summarized the 1994 meeting in this article. (Kingswell)Becoming Berkshire: 1967- National Indemnity by
, July 24, 2024. “Buffett had met Jack during the earlier days of the Buffett Limited Partnership. As the legend goes, Ringwalt offered to invest $10,000 in the partnership. However, Buffett stated it should be $50,000. Ringwalt replied, “If you think I am going to let a punk kid like you handle $50,000 of my money, you are even nuttier than I thought!” (Becoming Berkshire), July 29, 2024. I have always viewed short sellers as useful for market efficiency, but I don’t like deceptive practices. While I have not reviewed the allegations against Andrew Left in detail, several charges are disturbing. I found this defense of Left interesting as a counterpoint. Obviously, Left deserves the opportunity to defend his conduct in court. (The Bear Cave)The Haves and Have-Nots at the Center of America’s Inflation Fight by David Uberti, July 30, 2024. Inflation hammers the poor and the middle class. The rich fare much better. “‘This is the most money we’ve ever made and this is the brokest we’ve ever felt,’ said Nicole Lewis, a mother of three who lives north of Flint, Mich. Pay raises since the pandemic helped Lewis and her husband, now a city manager, double their earnings to what had previously seemed unattainable: more than $90,000 a year. But price hikes for everything from groceries to auto insurance still forced the couple to siphon funds from savings.” (WSJ)
The High Cost of Poverty, June 10, 2022. “Americans are no longer fooled by the money illusion of nominal increases in wages that are woefully inadequate to even cover the official increase in the CPI-U, to say nothing of the larger increases in their personal cost of living which is tilted toward items within the CPI that are rising much faster than the overall average indicates.” (The Rational Walk)
For Big Companies, Felony Convictions Are a Mere Footnote by Dave Michaels, July 30, 2024. The fact that felony convictions of corporations no longer mean much of anything is another sign of the degradation of our society. Furthermore, the financial “penalties” imposed on companies are borne by shareholders, not by the executives who oversaw the criminal conduct. “Boeing’s agreement this month to plead guilty over two employees’ misconduct in the run-up to two fatal crashes of 737 MAX planes shows how times have changed. A criminal conviction now matters less for big companies, which have proven able to mitigate the negative consequences and survive bad publicity.” (WSJ)
Why You Need To Lift Heavy Things by
, July 27, 2024. Focusing only on cardiovascular fitness is insufficient for maintaining good health as we get older, as this article explains. For this reason, I added resistance training to my running routine a few years ago and I have recently started rucking with about thirty-five pounds of weight a few times per week. (Dr. Paddy Barrett)Rucking: Benefits, Gear, FAQs, March 4, 2024. 2 hours, 50 minutes. “Delving into the significance of rucking in military training and its applicability to the wider population, Jason McCarthy, the founder of GoRuck, discusses the mental and physical benefits of rucking as a mode of training, provides practical tips for beginners, and answers frequently asked questions ... ” (The Peter Attia Drive)
$656,000 of Frugal Things I Still Love Doing by Mr. Money Mustache, July 23, 2024. Old habits die hard. Long past the point where it is necessary to be frugal, many people continue to derive satisfaction from frugality. In many cases, saving money coincides with activities that help build and maintain a healthier body and better mental health. While not all of the ideas in this article will appeal to everyone, the point is that saving money does not need to feel like deprivation. (Mr. Money Mustache)
, August 5, 2024. “The vital thing to understand- and the point that I want to stress the most- is that walking is not an activity. Or rather, it should not be conceptualised as and reduced to being a mere activity. It is much more than that because it is much less than that. Walking is one of the great forms of inactivity and in a world of striving and consumerism and grasping and impatience it is one of only very few potential forms of inactivity left.” (The Commonplace)Podcasts
Adam Mead on the Financial History of Berkshire Hathaway, July 29, 2024. 1 hour. Adam Mead, the author of the Complete Financial History of Berkshire Hathaway, joins Tobias Carlisle and Jake Taylor to discuss the company. (Value After Hours)
Essential Skills for Successful Investing w/Ian Cassel, July 28, 2024. 1 hour, 15 minutes. Ian Cassel was a private investor managing his own capital before starting a fund. In this episode, he discusses challenges facing private investors who must seek attractive returns from their holdings while also generating cash flow to pay for living expenses. I can relate to this since I went down a similar path starting in early 2009, although I never switched to managing other people’s money. (We Study Billionaires)
The Russian Rockefellers: The Nobel Family Dynasty, August 7, 2024. 1 hour, 6 minutes. “The name of Nobel usually calls to mind Alfred Nobel, inventor of dynamite, and the internationally prestigious prizes that bear his name. But Alfred was only one member of a creative and innovative family who built an industrial empire in prerevolutionary Russia. The saga begins with an emigre from Sweden, Immanuel Nobel, who was an architect, a pioneer producer of steam engines, and a maker of weapons.” (Founders Podcast)
Longevity 101, July 29, 2024. 1 hour, 32 minutes. I have often linked to Peter Attia’s podcast and I am a big fan of his book which I reviewed last year. For those who are just getting started, I would recommend this episode in which Peter discusses the highlights of his program to increase the odds of living a long life and, far more importantly, enjoying good health in the final decade of life. (The Peter Attia Drive)
Eisenhower’s Logistics and Diplomatic Nightmare, July 25, 2024. 1 hour. When we think of D-Day, we naturally think of the great military victory over Nazi Germany that represented the beginning of the end of Adolf Hitler’s tyranny. However, D-Day was a highly risky and controversial decision at the time. I learned a great deal about the behind-the-scenes planning and politics in this podcast. (History Unplugged)
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Thank you for sharing my article, it is truly an honor to make the Digest.
I appreciate the mention, thank you very much. Lots of other great stuff to dig into here too.