Tobias: Let’s contrast that with Berkshire because you’ve got a Berkshire holding you say from about the same period. What was the thesis then? I think you can make a very good case for Berkshire now, but what was the thesis then?
The thesis very early on, when I first became an investor was I needed a share to get into the shareholding. So that was when I first bought it. And then, a few years later, I can’t remember exactly what happened. Maybe it was the– I think the market might have got hit pretty good on the US debt downgrade. I think there was something that was relevant to the market as a whole, not relevant to Berkshire.
But Berkshire share price fell pretty significantly. So, there was something in that period where I bought a decent size position. And, yeah, I’ve held it ever since because you guys were talking about it in Value: After Hours the other day, the idea that Berkshire is a conglomerate with so many pieces that are– I mean, you look at a business like Geico, it’s just been a complete homerun over the last 20 years. If you look at the railroads, it’s been a homerun. If you look at their other insurance businesses– and there’s moving parts in this stuff and not everything’s a homerun. But I think more often than not, an IBM is more than offset by an Apple, or something like that.
And surely the balance sheet right now is very conservative, and I give other companies like Facebook, a lot of flak for their balance sheet. The difference is in my mind, Berkshire is a company that will act aggressively if given the chance to do so. And some people will point to March and say, “Well, they didn’t do anything then.” One, that was a very quick down and up, in a lot of ways, and we’ll see what happens in the next couple quarters or years. But I wouldn’t be surprised if the opportunity is– There’ll be other opportunities, let’s put it that way. And they’ll do things like repurchases now. I think they’re not so stubborn that they won’t change their mind, even if it– I mean, they sold Wells. They won’t change their mind, even if it makes them look stupid or people will give them crap for it. And you’ve got to respect them for that in my mind. So, I still greatly enjoy having it in possession.
Tobias: In March, the Federal Reserve acted very quickly, the federal government acted very quickly. I think that if you look at what happened through 2007, 2008, 2009, Berkshire in many ways was the lender of last resort. And Goldman Sachs was at risk, had to convert to a bank holding company, issued some very expensive prefs too to Berkshire at the time, and that was– they’re one of the better-managed investment banks out there and that was emblematic of what was going on across the entire spectrum of finance, the entire financial sector. There was nothing like that this time around, there’s no opportunity to do that.
Alex: Right. I think that’s spot on. They’ve done deals here and there as they’ve seen what they thought were good opportunities to do deals. They bought Apple, whatever it is now, what’s probably $90 billion, something like that, $100 billion somewhere around there?
Tobias: It’s the greatest trade of all time I’ve seen.
Alex: That was a pretty good winner. I mean, it’s hard to complain with that one.
Tobias: You’ve got to give the old man credit for actually deploying that enormous amount of capital in the most visible stock on the stock market pretty much and managing to get that kind of return out of it, and there’s some luck in that as well, but getting it in is no easy task.
Alex: You made the comment the other day that when you go back and read the letters, how you read something, you go, like, “I completely missed that last time.”
Alex: Him talking about Apple, when I went back and listened to this idea of this being the most valuable real estate in the world, is more valuable than Fifth Avenue. And you see what has subsequently happened with Apple services business and just how valuable that screen is, it’s something that when he said it the first time just completely went over my head or didn’t have any impact. And I hear it now, and I’m like, that was incredibly smart what he thought about this business and he positioned it in a huge way. Again, people give him crap because they think he said he never would invest in tech. He’s never really said that, but that’s what they think he said. But he just does what he thinks, he’s intelligent, and it worked out fantastically. It has so far. This is one of my questions. Do you think that Buffett selling that supposedly $4 billion worth, do you think it’s [unintelligible [00:21:08] or no idea?
Tobias: Yes. I have gone back and forth with people on Twitter, not in — not right now, not prior to the selling. I went back and forth before there was any selling, saying that he had said– like, he’s pretty clear about the fact that this is their third business and he’s never going to sell a share. And then, when he sold, a few guys came around to collect the tickets. And I said, “Well, it’s not clear who’s done the selling there for that exact reason?” It’s 5 billion on a $109 or $110 or $111 billion position. It’s pretty modest selling really.
Alex: Right. Yeah, I wouldn’t be surprised if it’s not him. I put my money on it not being him, over it being him. I guess, we’ll see. If it is him, I think we’ll see that they’re going to continue to sell if that’s the case, because I don’t think he’s wanting to sell a little bit like that and then step away from the table unless the price changes very significantly, which I don’t– I’m not sure 135 to 120 counts as very significant enough, we’ll see.
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