Yet Another Value Podcast - Alex Morris, TSOH & Author of "Buffett and Munger Unscripted", talks 2024 Berkshire Annual Letter

Episode Date: March 11, 2025

Alex Morris, Author of "Buffett and Munger Unscripted" and Owner & Analyst at TSOH Investment Research, joins the podcast to discuss the 2024 Berkshire Annual Letter.You can buy your copy of Alex's new book, "Buffett and Munger Unscripted" here: hhttps://amzn.to/4asUWNiChapters:[0:00] Introduction + Episode sponsor: Fintool[2:40] Alex's initial thoughts on Berkshire's 2024 annual letter[4:23] Was there anything different for Alex reading the letter this year (having worked on the Buffett book and spending a lot more time studying him and Berkshire)[6:52] Buffett's macro take on 2024[9:59] Would it shock Alex if this is Buffett's last letter and/or he retires at the annual meeting[14:10] Capital allocation - changing strategy on the horizon[21:17] Discussion on $OXY[24:43] Buffett addressing his mistakes[31:08] Japanese investments[37:22] Results in the insurance business[39:27] Thoughts on Class A / Class B structureToday's sponsor: FintoolFintool is ChatGPT for SEC Filings and earnings calls. Are you still doing keyword searches and going to the individual filing and using control F? That’s the old way of doing things before AI. With Fintool, you can ask any question and it’s going to automatically generate the best answer. So they may pull from a portion of an earnings call, or a 10k, whatever it may be and then answer your question. The best part- every portion of the answer is cited with the source document.Now- if you’ve tried to do any of this in ChatGPT you may know that the answers are often wrong or hallucinations. The way Fintool is able to outperform ChatGPT is their focus on the SEC filings.If you’re an analyst or a portfolio manager at a hedge fund, check them out at https://fintool.com?utm_source=substack&utm_campaign=yavb&utm_content=podcast280See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

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But with FinTool, it only takes two seconds. I just say, what did Caesar say about their El Dorado deal synergies? And FinTool gives me a quote and a link to the source. In this case, it points me to Caesar's 2023 proxy. That's noted they'd exceeded their stated synergy target. And then if I want to do more, I can ask them some different questions and find out more about how the synergies have evolved over time. Good luck finding that with Control F in just two seconds.

So look, if you're an analyst or a portfolio manager, try FinTool today at fintool.com and take your research to the next level. That's fintool.com. all right hello and welcome to the yet another value podcast i'm your host andrew walker if you like this podcast i mean a lot if you could rate subscribe review wherever you're watching or listening to it with me today i'm happy to have one alex do you know what what number time it is oh gosh i don't know i don't got to be at least like five right do you have the shirt yet no you never sent me this shirt i don't okay well i'm gonna say it's the fifth time and he's getting the the five

timer club shirt for this one but uh with me today i'm happy to have from the sides of hitting my friend Alex Morris. Alex, how's it going? Good. Thanks. I haven't spent enough time talking about Berkshire lately with this book. So let's talk about this. Alex is front running the host, but that's why he's on here. We'll talk about that in one second. But before we get started, a quick disclaimer, remind everyone, nothing on this podcast is investing advice. We're going to talk through, we're talking about Berkshire today. So we might hit a lot of companies. Disclaimer, small, small position in Berkshire from some legacy accounts over here. Alex, Actually, I'm pretty sure if I remember the signs of hitting hazard position as well.

So there you go. You've got the disclaimer. You've got the bias out. Alex wrote a book on a book on Berkshire, Buffett and Unger unplug. That's why I figured he was the perfect person to pop on. Berkshire released their annual letter last Saturday. Alex is popping on to talk about it with us for 30 or 45 minutes. So 2025, Verkshire Annual Letter.

Alex, I'll just toss it over to you. First thoughts. Yeah, I mean, I guess this happens every year now as time goes by. The letter, it's interesting. It seems to, this one in particular to me, and I guess I should have gone back and read some of the past handful of years, but this one seemed to cover a lot of ground, a lot of interesting ground. There were some things that were kind of that pride and true shareholder letter type of discussions. There were other things that seemed interestingly placed in the letter, or in terms of just appearing in the letter at all, struck me as kind of interesting. And then there were a couple of Warren Buffett things that, I mean, I get, it's like for the groupies, like the people like us, we nitpick at a couple things.

And from his perspective, I appreciate that he sees himself as writing it to a broader audience. But there's some of the typical Warren things where you really didn't go, like, come on, man. Like, we could have loved a little bit more here. Actually, you sit on several interesting things I want to talk about. But let me just ask you, because you are in a unique perspective. You spent most of the past, maybe not most, but you spent a lot of the past year writing or editing a collection of Berkshire annual meeting transcripts, and then you've spent, I'm going to be fair, most of the past month or two doing the podcast circuit, promoting, talking about Berkshire and everything. So you've been thinking about Berkshire a lot. And I just want to ask, you know, most of us don't have Berkshire top of mind like 365 days a month.

As somebody who has Berkshire top of mind for a lot of the past, recent past, was there anything? different when you read this letter that kind of jumped out and you just in terms of oh he you know this is something he's always harping on or this is a new point he made was there anything different to how you read it this year um again i'd have to go back and read the most i feel like the most recent letters have have friended kind of in this direction more so than i think they did in the past um you know there's there's particular words or comments that i find interesting in the letter for example like when he's talking about the japanese investments and he used the phrase like our holdings of the five are for the very long term and we are committed

to supporting their boards of directors. I always find it interesting when he says something like that in terms of who is he talking to when he's saying that and what is the thought process behind that. I just find all those things very interesting. I'm sure there is a logic to it from his perspective, but it's, it all comes, to me it all comes back to this idea of, and again, he's writing to an audience that is more general than probably a lot of the people who are listening to this podcast, right? We're a little bit more in the crazy fans. But he opens a letter by saying, you know, a report has a certain amount of area it needs to cover and it's beyond basically what's required the required minimum. For me, I'd love when he then

talks about even something that's trending in the right direction, something like GEICO when he talks about Todd Combs and, you know, a long held gem that needed major repolishing as he puts it. Like, I would love to hear more on, on what happened there. I mean, I have a general idea in terms of telematics and some other things, but I'd love to hear a discussion about, you know, what Berkshire missed, what they could have done differently, what role he played in that, if any, like those discussions would be really interesting. Again, it doesn't have to be necessarily things that are negative. It could even be something that is turning around and working well. Like, why is it working well?

Or, you know, for example, I think the rational walk had an update on Berkshire's annual results. I think he did a good job showing Geico by quarter, and I got the indication that They're now starting to ramp. They're starting to try to pick up policies again after a period of really getting their butts kicked here in the last, you know, call it, especially the last two or three years, if I remember correctly, with the last five years or so, they've gotten demolished by Progressive on a relative basis. So again, like, I just think some of those discussions would be really, really interesting for people who are kind of deep on the business. And he doesn't have to do it in a way that's oversharing or negative. But it's just not the way he wants to do it, right? let me start a few things that were notable to me and look i read the letters once and then

i never read them again so maybe you know if you read i'm approaching the 40s at this point if you read a letter once for 20 years like you kind of starts remember but you might distort it or anything but some things that jumped out to me just number one he said 2004 bursher did better than i expected uh did better than i expected though 53% of our 189 operating businesses reported a decline in earnings. And I kind of wanted to match that up with, you know, there's been a lot of talk online about Berkshire's record cash position. He's not really buying a lot of stock these days. And I see lots of debate. Is Buffett bearish or is this just the new Berkshire, right? Like the cash rolls. And so when I, when he said 2024 was better

than I expected, even though over half their business reported declines. In my mind, I'm like, oh, it does feel like Buffett's bearish. Like he's saying better than expected. He was probably thinking more businesses declined. Like he was probably thinking we had a recession. And he's not to plain cash. So I want to pause there and get your thoughts on that like little macro take. Do you think I'm all? Would you have something different to say there? No. And again, it's hints at this line. It reminded me of, I should have pulled this specific language. When he talked about Apple's repurchases a couple years ago, he almost brained it in a way as it was like free money effectively, not actually accounting for the

fact that obviously Apple is using their cash to make this happen. And he does this every once in a while with the way he discusses certain things. And this topic of how much of Berkshire's cash or assets is in businesses overall has become kind of this talking point. The quote that I saw in the report that stood out to me was, while our ownership and marketable equities move, downward last year from 354 billion to 272 billion the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio well the far greater part isn't really relevant to the question of what the equity's bucket is doing necessarily they're two distinct things right but he says the value increased somewhat my point in saying this is

in a year when the market went up very significantly Berkshire's publicly traded equities portfolio have decreased very significantly, and it's not like the value of the non-quoted controlled equities increased substantially, right? So it's just one of those things where, and I understand, I get it to some extent, but he kind of really avoided having the conversation and kind of used a reason that's not entirely logical for walking himself away from that discussion, right? But I do understand overall, hey, you got to think about this in the context of an entity that is worth a lot more than just the quoted value of the publicly traded. So I get what he's tending at by doing that. And I can understand why he doesn't want to go into some of these discussions in much detail.

Let me ask you a big question. If we were clipping something out like hot takes that and we're like, we need a minute clip. We need something to track the people. This is probably what I'd clip. But ignoring death, which Buffett is 93 right now. I mean, death is certainly a possibility in the next year. But if I told you, hey, next year Buffett's alive, but he doesn't write the annual letter next year, would it shock you if this was his final one? It wouldn't shock me. You mentioned hot takes as I was getting prepared for this a little bit and I was listening to Jeff Gannon and Andrew Coon a little bit, talk about the shareholder letter earlier this morning. I started thinking more and more that maybe at the meeting he announces that he's retiring. As I started to think that a little bit more as I thought about some of the things that have come out in the press of late, kind of some of the things he mentioned and how he wrote the letter. and then I think I might have read a little bit too much into like the timing of certain events at the meeting and even like the structure a little bit. I don't know. I might just be reading into all this way too much, but I started to walk away thinking maybe maybe the plan is to make an announcement in the morning at the meeting as they normally do with the earnings results and he has the opportunity to talk about a little bit and then it's him and him and Greg on stage in the afternoon as a way to really give that the proper, you know, if he's alive next year, would he come back up on.

stage, who knows, but like maybe this is the way to kind of formally do. Certainly seems like, I mean, how many times in the last six months has there been some mention of his age that he seems to have kind of been involved in three or four times? You know, and it wasn't lost on me. He like, I've never heard or seen. I'm sure people knew, but he's 93. This is not a surprise. He's walking with a cane, but, you know, he mentions the cane thing.

Like, he's definitely setting himself up for older. Yeah, I just, it kind of struck me. Like, there's the line, it won't be long before Greg replaces me as CEO and we'll be writing the annual letters. Like, yes, he said stuff like that before, but that was pretty direct and I kind of thought. And then this letter, not that it's some incredible finale, but look, what does he say? The future of Brookshur's insurance. He talks about the insurance business and how to think about the insurance.

He lays up the culture, right? He mentions the RV dealership, who they bought, they partner with. They didn't really haggle over it, but they buy it for a fair price. they give him a salary and he gets to grow the earnings and they talk about trusting the partners everything like it kind of was to me if this was your final in hindsight it would make a lot of sense like hey we set the culture the future's insurance if you're buying this you're buying the insurance and some great businesses and we largely bet on america and he even had that thing where he said the american uh government needs to work to maintain like uh i think it was stable

policy and or a fertile field or something i was like oh he's hoping there are a couple of senators or representatives from Nebraska who are reading this and remember, you got to keep things somewhat stable. Yeah. Well, as someone who was hoping to be involved with selling my book at the annual meeting, it also does strike me as maybe slightly notable that understandably last year, given what happened to Charlie, that Fort Kelly's Almanac was the only book at the meeting. Now this year, again, they're only going to have one book at the meeting.

And it's basically a book about, you know, the last 60 years at Berkshire. It's a time. Granted, they did this book 10 years ago, 50 years of for sure happened. So maybe it's, you know, maybe it's just time going by and these things happen. But yeah, I just, again, I got the sense from reading it that it felt like more of

and also in, you know, in combination with some of the news that we've seen lately. It just seems like more of a setting us up for the future. You know what you need to do? Just like when you go to a baseball game, basketball game, whatever, there's the official merchandise

inside but there's the guy hawk there's the guys hawking the uh illegal knockoff merchandise outside you've got to be selling those illegal knockoff books outside you know hustling cissy and pay man you want a copy of a brook's your book on authorized yeah morin's in his 90s but he still probably would make sure that nobody's doing any economic activity near the meeting without him getting his cut um one thing that jumped out to me so again i was having in the back my head hey is this warren's final letter setting up for a Passover to kind of gregg One thing that jumped out to me, he mentions Todd twice when it comes to GEICO, does not mention Ted at all. I think, I can't remember, but I think this is notable.

You know, three years ago, he's mentioning Todd and Ted quite constantly, and he's really backed off that. Now, if this is his last letter, part of it might be Culture Center, right? Berkshire is too big. Five years from now, Berkshire, yes, the portfolio will matter, but it's going to be operating businesses, P&C, and probably dividends and share buybacks. right, like equity investments won't matter. So maybe if this is the last letter, he's setting up for culture setting. But it also struck me, you know, when he brought these guys in, it was here are the handpicked lieutenants. People talked about, I think particularly Todd, given his Geico role, could he be the next CEO?

He had talked about how these guys were going to allocate capital. And just no real mention of them allocating capital in the letter. I could speculate endlessly, but I'd love to get your takes on that. No, I think I think it's a fair point. I mean, again, we have a couple of mixed signals. right we have the repurchase activity as has completely dried up as of the fourth quarter it was immaterial in the third quarter was either 10 million or 100 million dollars i can't remember the number now but very small last 12 months was the lowest dollar amount of repurches that purchase

committed to since they started really repurchasing shares and i believe it was two or two three of 18 so you know there is there is some component of that here um but i i do think in general that is some something that's coming most likely in terms of capital allocation that's going to be a pretty significant change from from what we've seen historically at berkshire um what exactly that is i'm not sure but again it's just there's these positions i the question i wrote in a question to becky you know because it says you can do so at the end of the letter and one of the one of the thing i wrote in about was coca cola and just thinking about you know they've held this position for the last time warren touched it was in 1994 it held it for more than three

30 years without buying or selling a single share. And as we go forward, and again, like I referenced the Japanese companies, is this effectively a similar position where, you know, Warren, his belief is that effectively don't even have bother looking at it again. It's something we're going to hold in perpetuity. Or is there some other frame of reference to think about how Berger is going to be managed going forward? I mean, that's somewhat of an extreme example, but I do think there's a case we made that. And this is also a fair knock, I think, against Warren to some extent that they've kind of set the rules in terms of how they're going to judge themselves on holding whatever we're calling, quote unquote, excess cash

as kind of like a five-year test is the number that they've said previously. And I think in some ways we're past that in terms of some amount of cash from the balance sheet that feels above that. And I just really struggle to think that as this goes to the next generation of leaders, that that's going to be a continued approach that Berkshire operates with. That just strikes me as pretty unlikely. I mean, honestly, they can't, right? And it is interesting you say that because I believe Buffett in this letter has the old, hey, somebody snuck in and got that dividend out in 1967.

But, you know, he said our partners have trusted us to reinvest, so we've reinvested really sensibly, but I think he sets the stage for you can't do it anymore. Because if they reinvested everything they did for the next 10 years, I mean, just because of the amount of cash they fell, this thing is going to trade for an enormous conglomerate discount. Because at some point, you're just like, hey, all the cash go, all the operating earnings comes, sits in cash, and eventually you're like, cool, this is a $2 trillion company with, you know, $800 billion in cash, like that has to trade for a discount. It's incredibly inefficient, right? And especially when it's no longer Warren Buffett first if it was no longer Warren Buffett or even if it was a

104 year old Warren Buffett but second like 800 billion cash you can't deploy that even in the financial crisis you can't deploy 800 billion or something you know so it has to change at some point yeah I mean they you know a notable thing from last year they they bought the remainder of Berkshire Hathaway energy like there's still things that but it's it was three billion dollars to buy the last or 2.9 billion to buy the last 8% of you know I just if it's under Warren's watch, that obviously would proceed differently if Berkter, you know, are these even feasible, but went out and tried to buy the remainder of American Express or something like that, but they own a very significant, significant equity stake in and obviously plan on

owning for a long time. I just, I really struggle to think that any of the, any of the new managers, you know, whether it's Greg or the investment managers, would, would six months into the job, you know, sign a check for $200 billion or something, but maybe it'll happen. We'll see. American Express is an interesting one because great brand. There's going to be a future there. You know, I know at some points, I've never doubted that there's a real place for the credit card companies, but I have wondered about American Express versus like a Visa and MasterCard just because American Express is the premium player as things go more online and you kind of lose the cachet of you whip out the MX card. but that's an interesting one. I do wonder, like, regulatorily, if they're already regulated, they're already huge,

but you throw Amex in there, now you've got, you're a bank, it's an interesting thought. Well, and they're already on 21% of it, by the way, like, their interest in the company is already pretty darn significant, so. True, but you own the whole thing, and the regulation's a lot different than if you own 21%, because you're systemic if you own the whole thing, and Berkshire, you know, earthquake in New York City destroy a trillion dollars of reinsurance damage and then AMX is at risk or something, you know, that's a little more systemic than, and obviously they structure and everything, but I think there would be a lot of thought of how big is too

big at that point. Apple was really like the perfect, I mean, obviously it was a fantastic investment, but it was really like the perfect publicly traded company for, obviously, because it was so big, right? It was a perfectly publicly publicly traded company for them to take a relatively small minority stake in and to have an investment in. But, like, that game is, it's even harder now than it was, you know, how many years ago was that nine years ago? I mean, the size of Berkshire, I think, 17, so yeah, about 16 or 17, something like that. So just, again, you're, you're in the world of investing in publicly traded companies and having an investment that's meaningful to Berkshire without being a very significant percentage of that company. The size of that

universe is just brunked to an incredibly small level. So a reminder that today's podcast is sponsored by fintool.com, the chat GPT for SEC filings and earnings transcripts. Just ask your question and FinTool will pull the best answer from the relevant documents, whether it's a snippet from an earnings call or a key point from a filing. If you're an analyst or portfolio manager, try FinTool today at fintool.com and take your research to the next level. That's fintool.com. Let me ask about a specific name that earlier I asked you about the bearishness, potential bearish and supersture. And one name that jumps out to me is, if you remember 18 months ago,

Occidental, the ticker is OXY, had the Buffett put, people like to call it, right? Every time, if I remember correctly, every time Occidental would drop below 60, Buffett was, I mean, literally hundreds of millions of dollars of open market purchases every time Occidental would drop below 60. Today, as you and are speaking, Occidental is probably around 45, 48, somewhere in that range, mid to high 40s. You're not really seeing any insider buying from Buffett. They've stopped. He did a small, small one sometime earlier this month, but 18 months ago, it was daily. You were getting four and fours for hundreds of millions of dollars. Now it's once a quarter. He maybe buys $10 million the entire quarter or something. And I'm just interested in that because he's had

very high praise for Occidental and the assets before. The price is a lot cheaper. Berkshire operates on a much longer time horizon than anyone else, right? So if he thinks, you know, I'm just, I'm a little surprised if he was buying in 2023 at 60 and today's the price is 48. I understand energy markets are a little different, but I don't, he's too big to play like I think macro is going to accelerate or decelerate in the next six months. If he thought 48 was a bargain, if he was positive, he'd be slamming the, he'd be slamming the money down, I would feel like.

So I just wanted to ask you about that particular one because I think it's very interesting. I have not followed the situation particularly closely, but my two best guesses would be, one, if they feel there's explicit or some other reason to think they have a limit on how large they can go on the ownership of the entity, which speaks what we're talking about, like if you're really limited at putting more dollars in, my other, my other guests would be, which I don't know is for sure, but I thought I'd heard something about basically M&A at Oxy. if they changed the capital allocation priorities from what they had basically public communicated, I think that's something that generally speaking, he would look at as a negative. Both of those could be correct. I am with you. I haven't followed it as closely as when it was fun 18 months ago where the stock would go below 60 and everybody like, that was the time to buy because Buffett's coming in.

But it's just one, as I was prepping for it, I was like, oh, let me go see because energy markets have been pretty soft recently. and Oxi's got a lot of great assets inside of it. They've got a chem play. They've got a lot of, and he's not buying. So that was just kind of surprising to me. Yeah, it looks like they announced an acquisition in late 23. I don't know when he stopped buying, but announced an acquisition in late 23 to $12 billion.

So again, I don't know if he may have very well been supportive of that deal for all I know. But my sense on having looked at the annual meetings and thought a lot more about what really bribes, Warren's decision making, and PetroChina is obviously a very prominent example from the industry, right, that fits the same kind of narrative. If he then got a signal that management was, because I think Oxy explicitly had kind of output growth targets in terms of caps of how much they're going to grow, which, you know, generally speaking, people think that as a negative, and I think Warren looks at that as positive. And to the extent that they then, you know, amended that in some way, he may have decided it's time to pull back a little bit.

let me go one line I liked I don't know if I've got crazy takeaways but I'll give him many anecdotes with this I really enjoyed his line where he said I'm willing to admit my mistakes and if you read the annual letters of any other company there's no mistakes that get admitted he did call out Amazon as a notable exception which I thought was very interesting but I really like that because look I deal in a lot of really small shitty coes and I was talking to one board and it was clear to me the company is a flaming disaster and a lot of it is caused by the board management team and I wasn't being mean but guys the stocks down 90% in a year and you know the call started off with 10 minutes of the CEO talking about how great things were going how great operations

were and I was like what what world are these people living in and I think it impacts my relationship with them because I was like guys like yeah you guys are doing fine because all the board of directors makes $200,000 per year but but I don't know what world they're living in and they can't admit mistakes. And I just thought that was refreshing. So I'll pause there. You can comment but I just thought it was a really interesting line from Berkshire, like, lightly repudiate everyone else who's not willing to admit these things. Yeah. And it speaks to, you know, it speaks to Warren's position at Berkshire. It speaks to, in my mind, speaking of Amazon, it speaks to the Jeff Bezos, you know, the story of rock concert versus a ballet. Like,

You have to run it for what you want it to be, and you're going to get the people that you deserve over enough time as a CEO. Now, that said, a lot of CEOs coming to public companies and do not have that leash, or at least probably feel like they don't have that leash. I'm thinking of a company like Match Group that I follow. They're under the gun from activist investors. They need to do certain, I mean, the activist investors are sending a letter to the company

saying, hey, basically you can't turn around these results in 6, 12, 18 months, whatever the number is that you need to sell it. So, like, when you're operating from that perspective, it's not too surprising that that CEO then turns around and goes, I think I'm going to keep my bad news to myself, and I'm going to talk about things that are. But I think at one extreme, that's kind of what happens. And Warren has earned that.

And, you know, Berkshire's position in the way because he built it like this. And obviously, he's done a fantastic job. That certainly helps do. But I think that's, I think that's a huge part of that way of thinking. Again, coming back to what I was saying before, I'd really like as a shareholder who's obsessed with Berkshire and follows Warren's actions very closely to have a more concrete understanding of what he means when he says when he says that. I mean, there's prominent times start history. I talked about it in the book, like when he at the 2006 meeting basically says, I did make a mistake by not acting on Coke when it traded at XYZ price in 2000.

There are not a ton of examples like that throughout Berkshire's history. And again, that's not a comment about Coca-Cola, right? He's just talking about his own actions. I wish he gave himself a little more leeway at times to talk about things of that nature. And again, Guy Coe to me is a really prominent example in this meeting where why did the need for major repolishing to use his words, where did that arise from for a company that for so long was the, you know, the perfect example of a Berkshire gem that was just trucking along each and every year towards a better and better place over time. There's a lot to be learned from that. So I wish at times that, and he does it to some extent at the meetings, which speaks to why I wrote the book.

But it just doesn't happen as much in the letters or some other places. No, completely. I mean, the meetings, how many times have we heard about Dexter Shoes at the meeting? I want to ask you quickly, he calls out Amazon. And he says there's 2021 report is a notable exception of people and of someone calling out there in mistakes. I just thought that was interesting because, yes, Buffett reads very widely, no one does that, but the space in this letter is, it's precious retail, right? He knows it's going to be read by all of his shareholders.

This is getting edited. I'm not sure if Carol Loomis is still editing these or not, but these are getting edited. A lot of thoughts go into it. And in the same way, do you watch Severance at all? I do not. Oh, my God, I love Severance. But severance is one of those, you know, law-style mystery shows. And if they take the time to show you something, especially if they show it twice, there's a reason, right?

Like every second is pressure on this. And when you've got 13 pages to the vote to specifically call out Amazon in 2021, it's 2025 now, was there a reason for that? I was curious just by him specifically calling out that company. Yeah, the short answer is I still haven't been able to figure out what the reason was. I want to read the tea leaves, man. I want to read the tea leaves. No, I do too. company name brand I just it was interesting to me the specific call out a you know

I yeah Buffett placed on a lot of different levels and you've seen this in the past I mentioned the thing where he gently nudges the US government like hey we need to keep the dollar like it's sustainable like he's playing on a lot of different games that's obviously a call to politicians calling out Amazon here was interesting um well and even to your point right it had been it almost would make more sense for him to write it as you know Andy Jassy the CEO of Amazon has been one example of someone who's done this. The fact that he specifically called out 2021 was just kind of, yeah, there's something about it that I'm not too sure why, but it seems interesting. Here's a, during the letter, he mentions, hey, when I was

prepping for this letter, I called up somebody, I called up, it's a woman, and I asked about their step-grandfather, and I asked them how deep into schooling they got, and they told me he got to the sixth grade. And I was just, if I wouldn't ask you how far into school your grandparents got or your step, would you be able to answer that off the top of your head? No. I was just mystified by that. I was like, oh, maybe do people have deeper family connections than I do? Like, what's going on here? That section is a good example of, again, it was just some parts of this, like he just randomly talked about CEOs and whether or not they went to, you know, Ivy League schools. it's just a funny thing to throw into the ladder that I'm not I'm not sure what made him decide that he wanted to put that into this year but he decided he wanted to put it in there this year it's just interesting I want to go on a quick rant he we've talked several times so far about the Japanese holdings and the Japanese holdings have been great right he's done almost a double inside of I guess five years since he started almost a double got dividend like it's been a really nice investment anyone would take almost a double in five years but it's

especially at his size. That's awesome. There was one thing I took issue with, and I saw a lot of people praising him. He said, hey, our Japanese investments will get $812 million in dividends from them, and the interest cost is $135 million. And look, it's great. No one doubts it's great, it's great. But I could put to, that is the type of thing I feel like I would see on Twitter where somebody's like, hey, my dividend yielding portfolio, you know, we could go borrow

margin and nothing on this financial advice. I'm just saying this to illustrate the insanity of it. I did a quick look. Margin on IVKR is 4.85% or something off the top of my head. The top five yielding companies in the S&P 500, which if I show them to you, you'd be like, oh, those are all probably pretty interesting value stocks. They yield about 7% and growing. You know, it's, where's my little list? I'll tell it to. Where's my chat GPT? I ask chat GBT. I'm trying to get better. Top, top yielding companies, Altria. Nobody hates that. Progressive. We've been talking about GEICO, great business. That's a 7.3% dividend yield.

Alchre is 8%. Dow, Historic chemical company. Lying about us, okay, you've got some cyclicality there, but those are yielding over 7%. Crown Castle, 7%. And for fun, I'll throw in Verizon at 7% and Pfizer at 6.5%. So, you know, like, we could go buy those. We throw $50 million into those, take out a margin loan. And then we could be saying, hey, the margin debt that we pay, you know, we're paying $2.5 million,

we're getting $4 million in dividends and growing. Like it sounded like something somebody would say it's just like I understand why I did it, but it was very financially unsophisticated and people just lapped it up. And it's a fantastic investment. I'm not doubting that. But I was just surprised he put that in there because here's the thing. You take both sides of the risk, right? And I was just very surprised by that.

Yeah. I mean, obviously the structure of the Yen denominated debt that they raise is slightly different than margin loads. Well, true. There's no call protection, but here's the other thing. Margin loans you can pay up and down like that. If his investments go to shit and he sells them, right, for any reason, right? He sells them. Then he's stuck there and he can't pay that cash.

He's got to wait until those bonds come callable. And so you could be looking. There's a scenario where you reverse, look, he's more involved, he's basically an investing god. I understand it's probably not going to happen. But if something bad happened to one of those companies, you can be sitting there looking that, okay, cool, I'm down 60%. I've got, I had to sell, I've got cash less than the value of the debt, and I've got to pay interest costs on this debt for another 10 years. And by the

way, the reason you're borrowing at such great interest rates is because you're an incredible credit, right? So you're borrowing at AAA interest rates. I just, I didn't like it. I didn't like it. Yeah, I mean, I get what you're saying. Again, the part that I find, the part that really jumps out to me is, I mean, I'm just eyeballing it now. This takes up, it basically takes up a page of, you know, there's 11 pages of kind of like meeting letter. The remainder is talking about the annual meeting. And I'm confused why this is, it's an interesting thing to update on and I get it. But it's $24 billion, $23.5 billion of market value on north of a trillion dollars worth of asset that Berkshire.

And again, like, it's fine to talk about this. I just wish that when we go through the sections on, you know, Burlington Northern and B.H. that the conversation is a bit more than, I'm a fool out right now, just so I can, you know, Berkshire's railroad and utility operations are two largest businesses outside of insurance and prove their aggregate earnings, both however have much left to accomplish. Like, so we got two sentences about, and I get it,

it's, it's, he wants to approach us a certain way, but to the extent that this is maybe the final letter, it would have been, it would have been nice to have, you know, again, like the reassurance of, and this is probably people love the, love the meeting, right? right, to hear Warren say, in a lot of cases, something he said 20 or 30 years in a row in a slightly different way. But it is nice to hear him say it, that, you know, hey, here's, here's the lay of the land on Berkshire Hathaway Energy. Here's what happened last year and where

the discussions about, you know, what's happening with wildfires and other things for a regulatory perspective. He obviously had to massage the language in a certain way for it to be okay with stakeholders in that business, right? But there is a way for him to talk about some of these things, or at DNSF, like, is the operating ratio, should people outside investors who he's writing to be hyper-focused on the fact that the gap, the UNP is consistently 5, 6, 7, 800 basis points of OR differential, or is that the wrong way to think about this for some? Like, those things would be really, really helpful. And again, like, just in a general sense without, he can still stick to his rule of not doing

things by name in an overly, you know, aggressive way. I just wish we had a little bit more of that at times because it seems like we haven't had that for quite a while. And to yes and what you said, look, his, their position in Apple is $75 billion. And the Japanese stakes overall are $25 billion. So great trade. But look, versus Apple, you know, each one of those is about $4 billion, right? So versus Apple, each one of your Japanese positions, and I understand their basket and everything, is worth about the daily move in Apple, you know?

So, yeah, it's just, it was an interesting trade. And as you said, he took a lot of time to invest it. I think he's maybe prepping for he wants to buy more in Japan. Wouldn't surprise me or maybe he's prepping for. He didn't mention a few times most of ourselves going to be American. There's going to be some international. So maybe he's prepping for a big international acquisition. Or you know what?

The man's had a great career. Maybe you just wanted to spike the football one more time. I've been talking about 45 minutes. Anything, I think we've gone through most of the letter. Anything else jump out to you that you thought was interesting and not interesting you think people should be thinking about? I mean, I think one thing that it's, I guess it's discussed a little bit in the letter, more so in the annual report, just the results in the insurance business

and sitting here with this significant amount of liquidity for a long time. And if it got to a period of venture where it felt like rates were never going to go up, right? And, you know, you now look at this period where, I pulled the numbers, the insurance business from 2010 to 2020, the average pre-tax underwriting gain plus net interest income was roughly $5 billion a year over that period from 2010 and 2020. In 2024, that total was $25 billion. It was five times higher with, I mean, it was a great year in terms of insurance underwriting, Guy Coed. Very impressive results, which now sets the game for. Some acquisitions in between now and then as well. So, yeah, but it's,

it's huge. And again, one year of operating profits there are bigger than the Japanese profits over, the Japanese positions. So, yeah. NIH and an insurance business went from five in 2020, $5 billion in 2020 to nearly $14 billion this year. And again, it's another thing that that warns, I think it's that, I believe it was a 2012 letter where he said, you know, float probably won't grow, it was 11 or 12, won't grow from here very much. It might decline, you know, one to 2% a year or something. Fast forward to today, floats at 171 billion and at the turn at 2010 that's 66 billion so continued growth and float

has also been you know a nice tailwind and as he noted in the letter over the long term they've you know eaked out three and a half cents or something like that per per dollar of premium volume in terms of underwriting profits so it's it is really nice to you know the next question will be to the extent that a g is directly responsible for a decent chunk of these businesses um or someone like todd meaning to come in at guy co you know how how sustainable are some of these advantages. And that will be, that'll be an ongoing discussion. And some of these discussions will probably become more pointed in when Warren's not here, right?

Do you think Warren, last question, this would be my other hot take question. And I was thinking about before, but it kind of just popped up. Do you think Warren's okay with the Class A, Class B structure that Berkshire has right now? Or do you think he might try to flip it before he dies? Hmm. That's in flip it in terms of what would be the rationale? is there the main reason why I'd want to do so that you're thinking of? Yeah, look, Berkshire is huge.

There's no doubt about that. But how many A versus B shares are there at this point? I should have come ready to. I can pull it up while you. So imagine Berkshire is a $2 trillion company, and you could imagine 20 years from now where 5%, because A's can flip into B's and not the other way around, right? So you could imagine 20 years,

for now, it's a $4 trillion. Like, name your number, but 5% of it is from the Class A stock, and 95% is from the Class B stock. So, $4 trillion company, let's make it easy, $5 trillion company, 5%. So $250 billion is in the Class A's, and then $4.75 billion is in the class B's. Well, all of a sudden you've got a scenario where an unscrupulous person, now they'd have to be quite rich, but I can think of one very rich person who I think is kind of unscrupulous, who could be in debt, you know, all of a sudden, hey, if they can raise $75 billion, if they're worth $75 billion, and if you think about 20 years from now, that $75 billion will still be a ton, but there will be

people with $75 billion. They can raise $75 billion. They go take on another $25 billion debt. All of a sudden, they could have control, with $100 billion, they could have control of $5 trillion of market cap, right? So you get a lot of leverage on that, and then you can install yourself, and then you can turn Berkshire into effectively a closed and fund where you're paying $2.20 and like nobody can kind of stop you, right? So I wonder if I was, if I was Warren, I would probably eliminate the dual class

structure before I passed. Now, I know he's giving it to his kids, but if Warren does think about the long game and guess what, his kids, because he's 94, his kids are pretty old too. like I'd really be thinking about how do I uh do I want to have that risk and maybe it doesn't care maybe that's for the people but one worry I have is Berkshire could very easily trade at a huge conglomerate discount or it could trade at it like 10 years from now if the people aren't doing right or people could take control of this and like really run a buck here yeah okay now that you're saying I'm remembering slightly some of those structures where he's quantified basically some period of time where it's going to be in

controlled of friendly hands. But yeah, to your point, that obviously will change over time. And, you know, honestly, my answer to it all is to the extent that it's, if it ever gets to a place where that actually is not, there is this scenario where it's actually necessary. But not everything that comes in the form of activism or change is necessarily mysterious. So, you know, Berkshire as an entity, is constrained in some pretty significant ways and it's upon the next managers to find a way to manage this thing

in a way that makes sense and that works for shareholders and that doesn't work better in some other structure, right? So I do think that'll probably be a reality to some extent over the course of enough time, right? I mean, it's going to take a while

for this to get there. But I think that'll be the reality of the entity and I think they do have some opportunities at their disposal to the extent if they wanted to get smaller or to focus in some areas that they could try and do that, but it's going to require some capital allocation decisions that are quite different, obviously, than what Berkshire did for a very, very long time. And even including, even including their purchases, you know, it's still been a smaller part of Berkshire's

overall capital allocation priorities over the last decade or so. So, yeah, there's, you know, that's going to be, it's going to be really challenging and they're going to have to find a path forward. A reminder that today's podcast is sponsored by fintool.com, the chat GPT for SEC filings and earnings transcripts. Just ask your question and FinTool will pull the best answer from the relevant documents, whether it's a snippet from an earnings call or a key point from a filing. If you're an analyst or portfolio manager, try FinTool today at fintool.com and take your research to the next level. That's fintool.com. Buffett has historically been an incredible judge of shareholder value, right? Sorry, not shareholder value, yes, but also

of people's character. So there is something to that. But look, I could imagine a scenario where people are one way around Warren while he's alive. And then, you know, he trusts them. And then they pass the class, they get the controlling stake. And maybe even it's not instant. But, you know, there are a lot of people who we're talking to 2025. Their views are a lot different than they were five years ago, you know.

And a person controlling the class B for five years. I look at John Malone. John Malone, he's giving a lot of his lieutenants, his class B shares. He said this four or five years ago. He's giving a lot of his lieutenants who trusts his class B shares. And I do look at some of the moves Liberty has made over the past year. And I wonder if Malone was looking around saying, hey, you know, I don't know if I can trust these guys who I was going to give my class B shares.

Maybe it's I can't trust them because, you know, I'm worried they're going to self-deal. Maybe it's I can't trust them because I don't think they're as good as I once thought they were, or they lost this step or something. Or maybe it's just, hey, why am I bothering with this? Let's just wrap this all up. I'm John Malone. The candy shop is always open. It's time to sell.

But I wonder about that with Warren because Berkshire is going to be a really big company and it's going to take a big check, but nowhere close to as big a check to get control. And if you're like, hey, Andrew, here's a $200 billion check. Warren's not a lot around. How can you create a lot of value? One way I tell you is we could go take Berkshire over and we could, you know, install a two and 20 fee on it and start paying ourselves you can get pretty pretty spicy there yeah this is where you know coming back to some of who's warned talking to in certain sections

of the letter and i believe it was a lawsuit journal had this article basically about howard buffett and you know the future of berkshire not too long ago maybe in the past six months but the first page of the letter includes a decent batting average and personnel decisions is all it can be hoped for the cardinal sin is delaying the correct mistakes or what Charlie would call thumb-sucking. Problems he would tell me cannot be wished away. They require action however uncomfortable that may be. I mean, for Warren to say he's had a decent batting average when, you know, the comment in other meetings has been basically, we've never had a manager, Lee Berkshire. I guess they fired some people along the way

or asked the lead. But generally speaking, I think their personnel is that probably been pretty darn good, at least in terms of like the really important ones, right? Maybe not a perfect record. But for him to say, you know, a decent batting average, it's just an interesting reminder of like, hey, if things are not going the way that they are, should be going, then we need someone who's willing to make very tough decisions. And, you know, I think he's basically explicitly set at times that he's, he's entrusting his son to do that. So that's, that is what Berkshire is. And if, if people don't like it, then they should probably take action. All right. You know what? Just quickly.

Oh, I can't get it. I do have, I have the book here, but it's under, there you go. My copy is there. It's still got a lot of markings, but it's under a protein powder jar. And I just can't get it out right now. But Alex, any last thoughts before we wrap this up? Any thoughts, Berkshire related or otherwise? No, I'd greatly enjoy having me back on the pod.

I'll be wearing my shirt next time. I'm excited. All right. I'm going to, I thought I had sent you one. I'm going to make sure we get you one sent. And yeah, Alex Morris, Buffenmonger unscripted. You can buy it on your favorite bookstore is probably Amazon. If you're interested, check out the science of hitting.

And thanks for coming on, looking forward to. I think we're talking, I think we're at least doing a panel of some form on media in the summer. So I'll talk to you hopefully before then. But people will hear us talk then, if not before. So cool. Alex Morris, thanks again. Thank you. Appreciate it.

Thank you. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.