Warren Buffett makes a big bet on gold

Buffett bought a stake in miner Barrick Gold

Barrick Gold Warren Buffett
Warren Buffett has famously disparaged gold but evidently he’s had a change of heart.
According to a Q2 13F filed today, The Oracle of Omaha added 20.9 million shares of Barrick Gold, which is the world’s second largest gold miner. He paid $563.5 million for the stake, which equates to $26.95 per share and his Berkshire Hathaway owns 1.2% of the company. It was the only new company he bought in the second quarter.
The shares closed at $26.99 on Friday but jumped about $1.00 in after hours trading.
Warren Buffett
This could indicate a massive change of heart from the world’s most famous investor, or one of his deputies.
His most-famous musing on gold was from back in 1998:
“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
As recently as 2018 he repeated his misgivings about gold.
“The magical metal was no match for the American mettle,” he wrote in his annual letter while comparing the returns of both since he first invested in stocks in 1944.
Now this doesn’t necessarily mean he has a new view on gold. Barrick’s cash flows with gold steady at these levels are compelling (and other miners are even more compelling).  Still, expect much more interest in the space now that Warren Buffett has given it his blessing.
Other highlights from his Q2 13F:
  • Exited Occidental Petroleum, but added to Suncor Energy
  • Cut JPMorgan stake by 62%
  • Cut Mastercard stake by 7%
  • Aside from SU, only added to STOR and KR
  • Reduced WFC, SIRI, PNC, MTB, BK
  • Exited DAL, LUV, UAL, AAL, QSR, GS, OXY
In terms of the ones he reduced. In general Buffett doesn’t sell shares unless he plans to sell out. However at times he has to sell to stay below ownership limits.
Overall, his investment mix doesn’t exactly show confidence in the economic or stock market recovery.

Berkshire Hathaway reduced J.P. Morgan stake in 2nd quarter

13F filings from Berkshire Hathaway

The latest 2nd quarter 13F filings from Berkshire Hathaway show:

  • reduced J.P. Morgan stake by 62%.
  • Exited Goldman Sachs position
  • Southwest air
  • United Airlines
  • Delta Air Lines
  • American Airlines
  • Restaurant Brands International
  • Occidental Petroleum
Other swings in positions show increased stakes in:
  • Store Capital Corp.
  • Kroger
  • Suncor energy
Reduces positions in:
  • Wells Fargo
  • J.P. Morgan
  • SiriusXM
  • PNC Bank
  • M&T Bank
  • Bank of New York Mellon
  • MasterCard
they added new positions in:
  • Gold
  • Barrick Gold

Apple says it doesn’t expect to meet revenue guidance this quarter- Full Report

Apple issues update

Apple says they now expect a slower return to normal conditions in China with demand curbed within the country.
Here is the statement:
Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.
The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province – and while all of these facilities have reopened – they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide.
The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.
Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations.The situation is evolving, and we will provide more information during our next earnings call in April. Apple is fundamentally strong, and this disruption to our business is only temporary.
Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.
How can three things all be your ‘first priority’? Judging by all the Foxcon reports, it’s tough to make the argument that health and safety is exactly the priority.

Charlie Munger warns ‘lots of troubles coming’ – ‘too much wretched excess’

Charlie Munger is Warren Buffett’s longtime business partner and vice chairman of Berkshire Hathaway

CNBC have this report up on his comments at a shareholders meeting.
  • “In China, … they love to gamble in stocks. This is really stupid,” Munger said. “It’s hard to imagine anything dumber than the way the Chinese hold stocks.”
  • To make his point about excess, Munger cited the proliferation of EBITDA as a fake profit metric. “I don’t like when investment bankers talk about EBITDA, which I call bulls— earnings,” 
Here is the link for more.

Apple extends coronavirus store closures in China

Apple pushes back reopening

Apple had intended to reopen stores on Feb 10 but now says it plans for Feb 13-15, according to a statement sent to Bloomberg.
The market is using Apple and Starbucks as a bit of a barometer for Chinese commerce. This really shouldn’t be a surprise, the streets in Shanghai are empty.

Trump weighs exempting Apple from China tariffs

President Donald Trump said on Wednesday after touring a plant that assembles Apple computers that he was considering whether to exempt the U.S. company from tariffs on imports from China.

“We’re looking at that,” Trump said in answer to a reporter’s question about the tariffs, after touring a plant in Austin, Texas, with Apple Chief Executive Tim Cook that assembles the company’s Mac Pro desktop computers.

Cook, who has a strong relationship with Trump, has sought relief for Apple from the U.S. tariffs, which are part of a months-long tit-for-tat trade war between the world’s largest economies.

“The problem we have is you have Samsung. It’s a great company but it’s a competitor of Apple, and it’s not fair if, because we have a trade deal with Korea — we made a great trade deal with South Korea — but we have to treat Apple on a somewhat similar basis as we treat Samsung,” Trump said.

Apple announced in September it would make its new Mac Pro computers in Austin. The announcement came days after U.S. trade regulators approved 10 out of 15 requests for tariff exemptions filed by Apple amid a broader reprieve on levies on computer parts.

Earlier this month, Apple also asked the Trump administration to waive tariffs on Chinese-made Apple Watches, iPhone components and other consumer products.

Trump has made boosting the U.S. manufacturing sector one of the goals of his presidency, taking to Twitter to pressure U.S. companies into keeping jobs at home.

Earlier on Wednesday, Apple said it had started construction of a new campus in Austin that will employ 5,000 workers, with the capacity to grow to 15,000. It is expected to open in 2022.

Berkshire taps Japan’s hunger for yields with $4bn bond debut

Warren Buffett’s Berkshire Hathaway headlined a record day in Japan’s bond market Friday by setting the terms on a 430 billion yen ($4 billion) offering, the biggest yen-denominated issue ever by a foreign multinational.

The U.S. investment group is selling five-, seven-, 10-, 15-, 20- and 30-year bonds.

The biggest chunk, 146.5 billion yen in 10-year debt, carries a 0.44% coupon — an attractive yield at a time when Japan’s benchmark long-term interest rate languishes below zero.

Banks, insurers, asset managers and other investors flocked to Berkshire’s offering, which falls under a global yen bond heading that allows foreign buyers to participate. Debt offerings under this framework have been growing gradually, with such big names as Apple, Starbucks, and Procter & Gamble joining in, and both Wall Street and Japanese financial institutions are pitching bond floats.

The success of the record debt sale could embolden other multinationals to raise capital in Japan’s bond market, where most yen-denominated offerings by foreign issuers have been small.

Berkshire’s AA issuer rating from S&P Global Ratings puts it slightly above the AA- of Japanese blue chip Toyota Motor. (more…)

Jamie Dimon and Warren Buffett can’t get it right

Jamie Dimon and Warren Buffett can’t get it right

15 months ago Jamie Dimon and Warren Buffett were warning people not to buy bonds. At the time, US 10-year yields were at 3.0%. Today they’re at 1.48%. 30-year yields are now below 2%.
Here’s a look at 30-year futures since:
Jamie Dimon and Warren Buffett can't get it right
They’re up 16% while the S&P 500 and Berkshire Hathaway shares are both flat.
He wasn’t alone. On the same weekend last year, JPMorgan CEO Jamie Dimon was warning about the 10-year rising to 4%.
The point here isn’t to point out incorrect calls. I’ve had plenty myself.
It’s a reminder that no one knows the future. Jamie Dimon is going to continue to be the greatest bank CEO of his era while Buffett will remain the greatest investor of all time.
Sometimes you’re wrong. Roll with the punches.

Lessons From Warren Buffett’s 2014 Letter to Shareholders

The education of any business person is incomplete if it doesn’t include a thorough reading of Warren Buffett’s annual letters to shareholders. I often say that I have learned more from reading his annual letters than I have reading anything else. And I spend much of my days reading! That said, this year’s letter was no different than usual. In fact, it was even more jam packed than normal because Buffett spends more and more time these days focusing on Berkshire AFTER Buffett. So his life lessons are more widely discussed than ever.You should go read the letter yourself, but in case you don’t have the time I’ve jotted down some of the key takeaways:

Macro Matters. As much as Buffett focuses on the micro (specific companies) he’s always mindful of the macro. And he certainly understands that his success couldn’t have happened without riding the biggest macro wave of the last 100 years – the amazing growth of the US economy:

“Who has ever benefited during the past 238 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. In my lifetime alone, real per-capita US output has sextupled. My parents could not have dreamed in 1930 of the world their son would see.”

As I always say, it’s easy to look like a great swimmer if you can figure out the direction of the current. Figure out the macro and the micro more easily falls in place.

Accounting, accounting, accounting. If you read a Buffett letter you’ll notice that it’s filled with accounting tables. I’ve stated in the past that the language of economics is accounting. It is the way we communicate the health of our economy, our institutions and our people. Buffett knows this. Buffett’s a masterful businessman because he understands the language of economics.  If you’re not well versed in accounting do yourself a favor and spend more time learning the language of economics – accounting. (more…)

Warren Buffett on the Lottery of Birth

One of the reasons J.D. asked me to join his merry band of GRS writers was so that I could add the occasional investing lesson to the line-up. Today, I’m going to hand that duty off very quickly to someone else, and then get to a life lesson from a great investor.


Today’s lesson comes from fund manager and former Motley Fool writer Whitney Tilson, whose Tilson Focus Fund (TILFX) has the best one-year return in Lipper’s multicap core category, according to Barron’s. In a recent interview on GuruFocus, Tilson said he began his investing career by reading all of Warren Buffett’s letters. If that sounds like good advice to you, every Berkshire Hathaway annual report since 1977 — which include Buffett’s letters — can be found at the Berkshire website. (If you have a yen to hear Buffett sing as well as read his words, check out his cameo in this GEICO video.)


The luck of the draw
But if you’d like some other kind of wisdom from Buffett, here’s a scenario that he often describes in speeches and interviews. (We’ve now moved into the “life lesson” part of this show.)

 It’s 24 hours before your birth, and a genie appears to you. He tells you that you can set the rules for the world you’re about to enter — economic, social, political — the whole enchilada. Sounds great, right? What’s the catch?


Before you enter the world, you will pick one ball from a barrel of 6.8 billion (the number of people on the planet). That ball will determine your gender, race, nationality, natural abilities, and health — whether you are born rich or poor, sick or able-bodied, brilliant or below average, American or Zimbabwean. (more…)

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