Saturday May 2, 2020 3:45PM to 8:00PM CST

Rajan’s Note

Philosophical Areas and Outlook:

• Nothing can basically stop America.
• Never bet against America.
• If you bet on America then you have to be careful about what you on and how you bet. Markets can do anything!
• If you bet on America and sustain that position for decades, you’d do far better than buying treasury securities!
• Warren shared many scenarios from the history… World War II, Cuban Missile Crisis, 9/11, the financial crisis… he was convinced about the American miracle. The American magic has always prevailed and it will do so again.
• If you had to pick one time to be born and one place to be born … without any control over gender… you would not pick 1720; you would not pick 1820; you would not pick 1920,” Buffett said. “You’d pick today (2020) and you would pick America. Ever since America was organized (constitution in 1789) … people have wanted to come here!!
• Nobody knows what’s going to happen tomorrow. Germs don’t have borders – Sam Num, Senator 2015. Bill Gates got more popular due to TED Talk… than Sam. Check his you tube videos… just 1400 views…. Biological threat is significant risk to worldwide economy and health!
• We learned a lot in last couple of months and also it is hard to factorfurther.
• You can’t rule out any possibility.
• Never borrow money or use margins. There’s no reason to use borrowed money to participate in the great American tailwind, but there’s every other reason to do so!!
• Own equities over the LONG period of time… it outperform money if you stick in your mattress, in banks!!
• Make sure equities are an investment, not an instrument for gambling
• Buy tiny tiny portions for long term
• For savings, the choices are primarily property or stocks or bonds!
• People bring attitude to stocks because they are highly liquid and quoted minute by minute! So we develop opinions and advisory services!
• Assume that you have a 30 acre farm… you don’t sell if your peculiar or idiot neighbor ask you daily. Because you think about the produce in farm over many years and inheritance. It’s not just land. You don’t budge and listen to him even if he is honest and pricing as per the market and even premium!
• But in stock market, people get 100 GM shares and sell in minutes or hours or days.
• The stocks have this big enormous advantage or disadvantage as many in the market are showing or asking you minute by minute to sell the stocks!!
• Think the way that you own the business and you like the management and products… and you go thru up and down. You have luxury to own cross section of America
• In stock market, people seek payment or investors are advised that they don’t need.
• The Best advice I can give to people is to just own SP500 for longterm. It’s fundamentally advantageous to own these stocks! You are buying parts of business.
• Financial advisors or investment managers don’t get money when they advise you to invest in SP500. They get money to advise you and convince you that they can do something better. Some will do it with luck or few with skills… it is not easy to produce the extraordinary returns of the index and match historically!!
• Recognize that you are dealing with an institutional industry that get money from advise and investment management!
• For every $1 invested when Warren Buffett finished college in the 1950s, the stock market has produced $100!!
• BERK is trailing by 8% vs. SP500. Warren will not bet his life to beat SP500. It is hard and gets tougher n tougher with larger funds and so many assets!
• Warren’s 99% money is in BERK and he n his family cares BERK! BERK cannot guarantee you to beat SP500!! Book value is $370B!! It is down and an investment opportunity! Good prospects and in a better position to pursue the future! Three sectors Insurance, Energy and Investments!
• We as people don’t get chance to buy the entire businesses or businesses are not ready to sell to us. So we as investors are lucky to own partially. Buffet feels he is very lucky to own 8-10% of these wonderful companies cross sectionally in America.
• Really everyone should buy with the idea of buying the partial company proudly.
• Anytime is right time.
  BERK Specific and Financial Topics
• BERK’s philosophy is always to operate as a true trustee forshareholders!!
• There are times when money almost stops (like in 2009 financial crisis). Money or investment grade company are frozen out in the market. So they created bonds against their assets to get money!
• The capacity of Wall Street and FEDERAL reserve was disorganized in last financial crisis!
• Feds balance sheet is updated and out every Thursday. You can see it has been changed in many many ways over last 6-8 years!!
• What BERK is doing now??
• BERK bought $4B equities and bought its own stocks for $1.7B. Sold$2.166B of equities.
• April 1 to April 30, 2020 sold $6.5B equities! Mainly airlines! BERK bought 10-12% of 4 Biggest Airlines (DAL, USL, AAL, LUV) for $7-$8B!
• Something is wrong with the airlines business. Difficult business as you are dealing with billions of people and if anything goes wrong, you are in tough spot! Buffett is looking forward to fly. Not disappointed but different opinion! Oversupply of airlines!! Buffet made the decision in BERK.
• When we sell something… we don’t trim. We sell whole!! When we make mind, there are no half courses! Sold the entire position in airlines!
• If we like a business, we’re going to buy as much of it as we can and keep it as long as we can. When we change our mind we don’t take half measures.
• Each Airlines will have to borrow $10-$12B more… either sell stock or right to buy.
• No fault of airlines but this has impacted them (plus hotel, cruise) and esp. airlines business. Too many planes while 70% may come in2-3 years. The world has changed. Less planes needed.
• Amazing job by airlines to raise money… tapped Money quickly… Govt has done it! Wether it make sense, we will find out from the investors!
• Virus doesn’t destroy money. It impacts the virtual money. As the money money moves around!
• As investor, be prepared.. Not just one problem but many other problems! There are things that trip other things and problems!!
• Don’t buy stocks today or tomorrow if your circumstances don’t allow you to be prepared to keep it for extended period!
• BERK stock went down 50% 3 times in history. If you had bought on borrowed money, you would have been destroyed long time back and cleaned totally!! There was nothing wrong with BERK! As investor you have to have your own money to wether it out the range of challenges in the market.
• BERK didn’t buy anything BIG. Because there is nothing attractive. There is no shortage of money in the market. BERK don’t buy to make statement to the world. BERK looks for terms and timings that market/companies are willing to offer!
• There are lots of scenarios possible! Some may require more money and some less!
• Great time for companies to borrow money  from FEDs  Companies that need money, market cap is not their 1st problem. 
• BERK does not lend money for short term. BERK factor in long term only.
• Virus could and would take off some jobs in many industries! Many would allow remote workers! When change happens to the world, you adjust to it!
• Some businesses (like retails, news papers) were having manyproblems (e.g. Ads, Cashflow) before virus. It was tough. The virus accelerated problems even further!!
• Many BERK subsidiaries won’t be opening even after locked down is lifted. They may be sold to others. BERK will not own it.
• BERK’s large part is aerospace industry. Boeing raised $14B earlier and now $25B. Last year Boeing thought they have good cash position. They don’t know their future. Wether they need new plane or not? It affects Boeing… it’s a blow as demand dry up and fluctuates!! Nobody predicted… because this time we just shut off the air travels! Aircrafts is a big business! Exports and lots of jobs… out of control of BERK!
• GEICO is 2nd largest auto company that BERK owns… 15% credit to customers due this year to reduced driving/accidents conditions due to locked down… $2.5B! Give more time to pay. If they cannot pay, give free insurance for few months! No use to have uninsured class of drivers on the road as a liability… some calculations are at play.
• Cost of litigation for auto insurance is much definable and not much… but property loses can be tricky. Additional insurance for commercial business interruption claims… commercial policies… it is good argument what’s covered or not covered in standard language. Wether it covers pandemic or not. BERK is not big in commercial insurance… but will have litigation costs…. Auto insurance is #1 and big focus on insurance…
• BERK business leaders understand how Berkshaire operates. It won’t bail them out. It includes airlines, furniture business etc.
• None of BERK’s companies have gone to govt. loans or money.
• Some BERK will do better if run independently… like retails and newspapers etc.
• On what companies are seeing now:
  • Some of the losses in sales are permanent (e.g. Candy Easter inventory)
  • Some already-weak businesses are not coming back
  • Some other businesses are hurt by changes in behavior that will stick
  • Not all of the job losses will be recouped
• We are dealing with huge unknowns. Virus has disrupted and changed the world.
• About OXY, when you buy a big company and make investment, it is all dependent on oil prices. The oil prevailed prices then were much higher (when BERK was in transaction for Anadarko) unlike today it’s negative! Oil production is going to be down now and demand is down too.. when Saudi and Russian are drilling oil with $20 barrel. If oil stays at this prices, it will affect banking industry also…
• You can do the same things in Copper… FARMERS are getting lousy prices for produce. It is the nature of the commodity business…
• OXY sold 300,000 barrels per day… they were protected by additional layer of $10 but not anymore now. Time and situation is different. With commodity these risks are always there…
• When world changes into a new world, when sooo much money available and poured into economy so that the interest rate becomes negative… this is an interesting hypothesis!! That makes life simple… there will be some consequences!
• Buy Back topic is a political football!
• BERK share are $300K… Splitting share doesn’t do anything to the value of share… Class B are there from last 14 years now. People can convert A to B. Give yourself or family cash!
• Banks are institutions that operate with lots of people’s money. They can be under pressure. That’s by FDIC and FEDs. This time bankingis not a problem but they had or can have problems in the future. FEDs now required new level of reserves to protect people’s money.
• Credit Cards… interest rate in credit card are competitions… plus may have issue what Warren says due to ownership of banks by BERK. Buffett says people should avoid using credit cards and use their piggy banks! Buffet doesn’t make 18% ROU!! If your kid is paying 18% to credit card company then you should lend your money and let kid pay 18% to you that’s smart thing to do 
• Living paycheck to pay check is a problem. It is not easy. BERK will100% take care of people. Who knows how long it lasts. There are millions n millions of people. They don’t have a job. All they did was to show up for a job and told not to come or furlong. Credit to GOVT. to help people!
• Poors are at disadvantage and suffering. Some are working 20+ hours per day. We even don’t know their name. This country is a rich rich rich country. People are contributing whole lot than many others… you really try to create a society and GDP per capital so everyone can make $60,000 per year. They don’t have to do 2 or 3 jobs in 24 hours or under debt!! Welcome the new idea to uplift families with kids and not enough money… there is some progress, things are better for bottom 20% now than 20-30-50-100 years ago. Warren would not be in bottom 20% 100 years ago!!
• Pandemic risks are unknown at this time!

The session lasted 4 hours 30 mins

#GreatStamina #GreatPassion #DepthofAnswers #HistoryLessons #AmericanTailWinds #89Years #Measured #Cautious #NotAggressive #That’sBuffett #AlwaysInspiring!!