VALUE: After Hours (S03 E09): Bumper Warren Buffett $BRK.A $BRK.B Berkshire Hathaway Letter Edition

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In this episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle chat about:

  • Berkshire’s Unwillingness To Swing At Tech
  • Taking Duration Risk
  • Berkshire’s Equity As A 100-Year Bond
  • The Rise Of NFT’s
  • “Oh, I Missed It.”
  • Parking Cash In Berkshire
  • Undervalued Are Always The Biggest Winners
  • Trimming $AAPL While Making Buybacks
  • ‘Costless’
  • Dotcom Level Stupid
  • Calling Out Bonds
  • Precision Castparts
  • The Impact Of Self-Driving On BNSF
  • Cyclical Airlines
  • Why $AAPL & Not $GOOGL?
  • The Buffett Discount Factor
  • Bagging The Berkshire Elephant
  • Australian & Canadian Pushback To $FB

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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Full Transcript

Jake: Get the podcast name right this time.

Tobias: [laughs] Hello, folks. It is the Value: After Hours, I almost got it wrong again. It’s Value: After Hours. It’s 10:30 AM on the West Coast, 1:30 PM on the East Coast, 6:30 UTC PM, 6:30 AM Australian Eastern Standard Time. It’s the pod after the Buffett letter has dropped. So, we’re doing an entire pod dedicated to the letter, the company, and the great man. How are you, fellas?

Bill: I’m good.

Bill: It’s like Christmas morning on Saturday morning.

Tobias: That’s right. [chuckles]

Bill: I actually didn’t even know that it came out. I had houseguests this weekend and it was one of the most enjoyable experiences in my entire life.

Tobias: Getting the letter? Not waiting for it?

Bill: No. My kids had kids to play with. I saw a friend that I hadn’t seen in three years. It was really nice to have human interaction.

Jake: [crosstalk]

Bill: [crosstalk] -this face in a city near you once vaccinations occur.


Bill: I’ll be hitting the road.

Jake: Hide your wives and daughters.

Bill: Well, there’s nothing to worry about there, but you may need to get your liver ready.

Jake: [laughs]

Tobias: I’m so sad. I had the screen open beforehand, and then all I had to do was refresh it in the morning and have the 2020 pop up. So sad.

Jake: I may or may not have tried to URL Hackett[?] on Friday hoping that maybe, they’d put it up already with [crosstalk] to it.

Tobias: Yeah, without linking.

Jake: Yeah, it didn’t work.

Tobias: We go our first downvote. Hit us, guys. Hit us with the– it’s all good interaction.

Bill: Is it?

Tobias: I think you’ve got reverse–

Jake: I don’t know.

Tobias: Someone couldn’t bring themselves.

Bill: That’s good. You should have felt bad about that. It’s too early.

Jake: Yeah, wait till we say something stupid first, then you can hit us–

Tobias: Yeah. You’re not going to have to wait long.

Jake: Yeah.

Bill: Who wants to open the shebang?

Tobias: Yeah. How are we going to do this? I think I should probably go last because I’m going to have the most– Bill’s on footnote 16 and I’m guessing JT’s read them all. Who wants to take it away? The most comprehensive understanding should go first and then I can hide my ignorance till we go through.

Bill: JT, you’ve been voted, sir.

Jake: Just because I do a little homework, I’ve got to eat the sandwich? All right.

Tobias: That’s it.

Bill: Indeed. You’re welcome, sir.

A Masterclass In Subtlety

Jake: All right. Well, let’s start at the highest level for me. Maybe this is downvotable, but I thought this was one of the best letters he’s written in recent memory. The reason why I feel that way is that it had such a beautiful subtlety to it. He didn’t call out specifics that he very easily could have. I know that makes some people mad. They like when Munger gets on and calls out people by name and by behavior.

Buffett took such as the high road and was so classy, and you know that he does not put a word out of place in these letters. If you’re reading between the lines, there’s plenty of scorn to be picked up, but he doesn’t do it in a way that tarnishes him at all, and he does it in such a subtle way that it will age tremendously well, I think. That’s my hypothesis. This letter will age really well.

The things that he said will be applicable to later time periods where similar behavior is happening, but they use different euphemisms and use different terms for whatever the vehicle is that is doing the shenanigans, and it will still apply. In that way, to me, this was a masterclass in subtlety.

Then, the other part is optimism. Looking at the broad sweep of history, especially American history, and business and how things have grown, what they’ve turned into. Then lastly, the uniting of America again in a way, and by talking about the East Coast with Geico, the West Coast was See’s, and then and then what he called, if you’re flying over, tip your cap to people in the Midwest, like Jack Ringwald and National Indemnity or Clayton Homes in Tennessee, or Pilot Flying J also. All of these things together, call it [unintelligible [00:04:28] inside the bed business as well, to me, this is a great letter.

Always Optimistic About The Future

Tobias: Yeah, I couldn’t agree more. I go through when I send my little tweets out summarizing what somebody said, I often can take out a lot of verbiage and summarize all the way down to get to the pith of what they’re trying to say. It’s incredibly difficult to do that with Buffett because there are no words that shouldn’t be there. You have to alter the meaning slightly to cut him down, so he’s not wasting any words when he writes, which is amazing in a letter that length, it’s always straight to the pith.

That’s the other thing, it’s taken me a little while to appreciate it, but I really do love his optimism. I do think it’s one of the secrets of his success, maybe secret, not so secret, but it’s certainly that optimism at all stages. He’s often criticized, and to be fair, I’ve criticized him for it, but he’ll create the Buffett yard, the Buffett measure of the market, and use that as a yardstick for how expensive the market is. Then when he’s asked in 2007 at the very peak what he thinks, he says he thinks it’s undervalued, and he thinks it’s going to look pretty good. He said the same thing over recent years. I do think that that’s part of his genetic makeup. It’s part of his success that he’s always very optimistic about the future.

When he describes the history the way that he does, it’s hard not to be optimistic along with him. It does seem there are lots of good reasons to be optimistic. So, I really enjoyed reading the letter too. I agree that it was one of the better ones that I’ve read recently.

Bill: I liked it.


Tobias: Nothing to add.

Bill: I have nothing to add. No, look, he’s the man. I think that some of the things that he didn’t say are as important as the things that he did say. I like that he took a little bit of a shot at the promoters. I thought that there was a pretty interesting odd lots on Monday that people can listen to about SPACs. It’s just interesting. I have somewhat conflicting feelings on– when he did his 06/25, partnership or whatever, that was pretty close to the risk-free rate. I’ve been trying to think about how different are some of the economics that people are extracting today than what he did… but I know that I said on the Twitter machine, I said that Buffett is like Babe Ruth.


Bill: There might be people that catch him, there’s something that’s special about Babe, there’s something that’s special about Buffett too, and it’s the way that there’s a nostalgia about their brands. I don’t think he’s always been this grandpa, I think it’s very cultivated image, but he’s incredibly good at it. If I have a career that’s worth listening to at the end, and I treat it with the same sort of gloves that Buffett does, I’ll be pretty proud of myself. I know that I already don’t, so I have a long way to go. I’m a little more loose-lipped than Buffett may be at times but–

Tobias: Well, let me throw this at you. He makes more jokes about sex than any other corporate letter out there. To what extent is he really cultivating the grandpa image?

Bill: Well, that’s what old men do.

Tobias: Ha, fair enough.

Bill: He’s telling us to say [laughs] it with a smile.

Tobias: There’s some stuff in the letters that I wouldn’t write– like there’s some stuff that he puts in there that I just no–

Bill: Yeah, well, you’d get canceled.

Tobias: That’s probably right.

Bill: That’s part of why he’s so good at branding.

Tobias: [laughs] Yeah.

The Buffett Discount Factor

Bill: He does have leeway that other people don’t have. Marcelo P. Lima tweeted out, like, “Is Buffett still the best investor of all time?” He said like, “VCs have created all these industries.” One thing that I think people have to understand is, one, the guy’s 90, so I’m not sure that his fastball has quite the pace on it that it used to have. I’d still take a 90-year-old Buffett over me in my prime all day long.

Sometimes, I think that some of these businesses and some of these deals get a little bit discounted because of who he is. What he has done with Berkshire Hathaway Energy is incredible. It was cool. I was somewhere in the 10-K, he’s talking about the– I think it was– what was it? Hang on. The energy deal that he consummated. He acquired the economic interest in Coke point. When he gave the ability to Dominion to claim some of the assets back as not part of the sale. He took 100% of the GP Economics, and they were allowed to keep some of the LP Economics. It’s like, “Man, this guy’s so good at structure.”

Unwillingness To Swing At Tech

Bill: The one thing that– Buffett is most definitely not a quant Robinhood investor, negative, sir. Anyway, I guess that the one thing that I keep going back to as I watch the business unfold, I understand that tech’s not in his circle of competence per se, but what I don’t understand is why they’ve been so unwilling to swing it at some of the tech companies that are pretty easy to identify and have been, at least for the last five years. I understand that you could say, “Well, he doesn’t want to take a zero and you can’t have a permanent impairment of capital,” but on any given insurance risk, you could get screwed. So, I don’t understand why that level of scrutiny is applied to investment sometimes. It’s hard for me to reconcile.

Tobias: That’s interesting. He takes a probabilistic approach to insurance, but not the same-

Bill: Yeah, but–

Tobias: -approach to investing.

Bill: Yeah, I don’t understand why they seem to me to be so focused on making these concentrated bets that they make them when there’s almost no risk, but if you look at the history of the equity markets, and you listen to what he says about buying an index, and over time America is going to work, why would that– there seems to be a disconnect in logic to me.

Take Smaller Bets On Tech

Tobias: You would say take a smaller bet on something that has the good economics that a Google does if you can get it at the right price, which maybe you have been able to on occasion over the last 10 years, since they started discussing it as a mistake.

Bill: Yeah, and maybe you think that–

Tobias: Put $5 billion into it.

Bill: Yeah, right. Then, maybe you buy another $5 billion if you’re down a bit, as long as the business is good enough. Rather than just accumulating all this cash waiting to deploy it when it’s pretty clear there’s not an elephant big enough that’s going to hit the market. In March, I thought he’d get a shot, maybe that’s what he was waiting for, and maybe the government bailed everybody out. That’s why you see $24 billion of buybacks this year. That’s very possible. But that’s the only thing that I don’t know.

Bagging The Berkshire Elephant

Jake: Can you argue, though, that he did bag an elephant this year, and it was Berkshire itself $25 billion worth of it? I mean, that’s a big number of–

Bill: Yeah.

Jake: If he had spent 25 billion to buy another company outright, we’d be like, “Ooh, got the elephant [unintelligible [00:13:00].”

Tobias: [laughs] That’s good point.

Bill: Yeah. I do think Berkshire is the elephant that he’s been waiting for. I think it probably disappoints him quite a bit because I don’t think he wants to be a buyback guy. That’s not what he’s been waiting for 10 years accumulating cash to buy in shares of Berkshire. That’s pretty anticlimactic.

Tobias: [laughs] The amount of criticism that he got for doing it, it’s funny. We’ve all been calling for a reasonable-sized buyback in Berkshire for a little while and I think everybody was surprised that how small it was in the quarter immediately following March last year.

Trimming $AAPL While Making Buybacks

Tobias: His excuse was that they have– and he said it explicitly in this letter that they have, in addition to the stock being cheap, they also need to make sure they’ve got enough liquidity for anything else that might eventuate, that’s a fine excuse. His explanation of it was excellent. He says, “We spent $36 billion on Apple. We’ve got $775 million in average on dividends. Then, we sold a portion of it, we sold $11 billion worth this year. We started with 5.2% because Apple’s also been buying back its stock. Now we have 5.4%.”

Bill: This is BS, man. This doesn’t make sense to me. He’s like, “Oh, and voila, you own more without doing a thing. You haven’t taken a penny out of your own pocket.” Well, you have, if you think that the capital at Apple is essentially your own, and you think that they’re making rational buybacks below intrinsic value, then why are you selling $11 billion here, or whatever you sold, maybe it’s not 11 billion. That’s maybe– [crosstalk]

Tobias: He said 11.

Jake: It was a 11.

Bill: Yeah, okay. Why are you trimming Apple while you’re also saying, voila, we– It’s clear to me that he doesn’t like these buybacks, but he’s not going to go out and say it.

Tobias: It doesn’t have to be not liking the buybacks. Apple got pretty expensive through the–

Bill: Well, they’ve been buying. It’s not voila, you could have had cash in your pocket. This isn’t some free lunch that exists that companies can just buy their shares. It’s super elevated prices, and it doesn’t impact shareholders. That’s corporate PR for-

Elizabeth Warren

Jake: [crosstalk] Whoa there, Elizabeth Warren.

Bill: -people they don’t know what they’re talking about.

Tobias: Elizabeth Warren’s comment was that companies anonymously buy back their shares in the market, and the only reason they do it is to make the-

Bill: Yeah, she’s pretty stupid. It’s now worth talking about this.

Tobias: -stock price go up.

Bill: She’s a moron when it comes to this topic.

Tobias: That’s a pretty accurate description of what’s happening, isn’t it? Aside from the anonymously, I don’t know what that’s all about, but that’s reasonably accurate description of what they’re doing. I don’t see where that’s moral or immoral or anything. When you issue shares, you’re a gigantic hero because you’re issuing shares to the public, because that’s the reverse of a buyback right That’s good and moral.

Bill: She’s an idiot. This is so stupid to give the attention [crosstalk] to.

Tobias: Bizarre statement.

Jake: We need to get back to Bill point though–

Bill: What she’s saying is they’re just propping up their stock price for CEO compensation, like fine. If I have plenty of issues with how CEOs are compensated and how corporations are run, buybacks is not the issue here.

Tobias: At the wrong price, they are. There are lots of bad buybacks.

Bill: Yes.

Jake: This is like the Jason Voorhees of topics. It just will not die. It just keeps coming back.

Bill: It’s just so stupid. It’s stupidity.

Tobias: One of the headlines that I saw too, was Buffett defends buybacks. I was like, defending it?

Bill: He should defend buybacks.

Tobias: We’ve been calling for it. I think they made specifically he undertook some buybacks in Berkshire. Buffett defends buybacks in Berkshire. Chris Bloomstran wrote this fanfiction, where they back like $20 or $40 billions’ worth last time. I was like, “That’d be great. That’d be fun.” That didn’t happen though.


Jake: I agree with Bill’s point, though, that Buffett used the word ‘costless.’ That is not true. I quibble with that word in this context. There is absolutely the opportunity cost of what that capital could have gone towards, if they could have reinvested in their business different ways that were profitable, both Berkshire and Apple. It wasn’t a costless improvement for you as a shareholder. I don’t agree with that word.

Bill: Yeah. He thinks about the words he writes. We just talked about how well he writes. Why the hell did he use that word? That’s frustrating to me. I don’t like when he does this stuff. I think it’s because his audience is too wide now.

Todd & Ted Trading In Separate Accounts

Tobias: Why did he sneak it in? I thought it was funny that he snuck in the discussion of selling $11 billion of Apple into that context of the rest of that discussion. I thought he was just like, “I’m just going to sneak in the bad news that I’ll solve this– a little bit with all this other stuff.”

Jake: Did you pick up that– he said that the– I forget the exact terminology. Basically, he let us know that whoever it was Todd or Ted that had bought Apple before sold.

Tobias: [laughs] In a separate account or something like that.

Jake: Yeah, that’s what he said. Something like separate account or something. I thought that was a little bit interesting. [crosstalk] -the cards too often on what those guys are doing.

Bill: Yeah. I guess I wonder why they don’t have a little bit more money to put to work. That would be the other thing that I’d be interested to be able to ask him.

Jake: Those two?

Bill: Yeah. I don’t know, give him $3 or $5 billion more.

Tobias: Don’t they have that kind of money? Don’t they have 10H, something like that?

Bill: Give them more, is what I’m saying.

Tobias: What’s the real free float of cash there. There’s some that’s backed by, or not backed, but it is backing the–

Bill: [crosstalk] He’s got a claim on–

Jake: $20 billion-ish I think he cites is, like, “We won’t go below $20 billion in cash for insurance reasons.”

Tobias: Okay, so he’s got a lot of float there.

That Derivative Contract

Bill: Something I always forget about is that derivative contract that he’s got outstanding those puts, I do wonder whether or not he was thinking about something in– I mean, it couldn’t have been enough to hurt the company but I do wonder if in March, he was like, “Man, if everything cracks, these damn puts that I sold might actually end up screwing me a little bit.”

Tobias: He must be a hit on that now. That must be like a [unintelligible [00:19:25] small number.

Bill: Yeah, well for today, but March 2020 before the Fed bailed everybody out, I’m not sure that was that clear.

Tobias: It’s not a lot– [crosstalk]

Bill: There’s a lot of uncertainty in March 2020 that he was probably looking at, so everybody that wants to result and be like, “Oh, well, everybody else bottom ticked it. Why didn’t Buffett? Maybe it’s because he runs an operating company.”

Calling Out Bonds

Jake: More importantly, an insurance company that needs to be able to meet claims to keep its sterling reputation. Speaking of insurance companies, did you find it interesting that he called out bonds the way that he did, and when you think through the next step of that, like, “Boy, what an advantage they’re going to have,” as equity holders as an insurance company, when everyone else can’t really do that, and they’re stuck in an asset that will maybe depreciate on them at the worst.

At the best case, it’s going to be a very, very anemic yield, which means that you can’t subsidize your underwriting through your investment portfolio, which means you’re going to have to raise rates, or you’re going to have to give up business or something if you’re an insurance company. I think that they’re actually in a very, very advantaged position to be where they are and the ability to right now at harder insurance pricing along with having– not being stuck in the bonds like everyone else is. It’s going to be interesting to see how this plays out.

Bill: Yeah, it’d be nice if they put more money to work to widen the spread though. I don’t disagree.

Tobias: Precision Castparts owning that as a mistake.

The $VZ Investment

Bill: Well, it was a mistake. I’m more concerned with this Verizon investment. I don’t know what the hell he is doing a Verizon, I really don’t. I’ve tried to wrack my brain to think about it. If somebody wants to tell me, it’s a low multiple dividend yield, okay, I think that’s probably not how Buffett’s investing. That seems a little basic, unless he just wants a perpetual dividend yield on Verizon, which, I guess could maybe serve the insurance float somehow, but that company is not going to– they’re going to need to invest a lot of money in their business. I’m not sure it’s a free cash flow machine ever.

Tobias: VZ.

Precision Castparts

Jake: Going back to Precision, I looked at a little bit of math on it. He paid a $38 billion enterprise value in 2016, and for that, it was about 20 times NOPAT and 25 times the last five-year average. This $10 billion write-down that he did on that, basically brought him back down to about 10 times EV to EBIT. That’s what he historically would have been willing to pay and when he paid up, the business didn’t deliver the growth that he needed it to for the price that he paid.

Tobias: To justify it, yeah.

Jake: The margin of safety wasn’t quite there as much. The idea that buying quality as your margin of safety, it can disappear on you occasionally, and so the price still is a big part of that margin of safety despite a lot of hand-wringing to the that I feel like a lot of the conversations today are– the last thing discussed though is valuation. It’s always, how good is the business? That’s 95% of the conversation. Then, oh, yeah, a little addendum, by the way, here’s how much we’re paying for.

Bill: Yeah, but I think a lot of people don’t actually think that and this isn’t before this year. I think a lot of people that cover aerospace didn’t think Precision was that good of a business. It’s just what people that own HEICO and TransDigm have decided that Precision was not as good of a business. I heard that from a lot of people well before the write-down. I did think that it was interesting that he commented that he overestimated average earnings because that’s how I underwrote the airlines and I was happy to see that we were probably thinking somewhere along the same lines. Not rocket science. It’s a cyclical, you should try to normalize it, but I thought that was interesting.

Cyclical Airlines

Tobias: It’s funny that the airlines have proven to be so cyclical, it did look like they had kind of hardened up a little bit.

Bill: There was a fucking pandemic, dude.

Tobias: I’m aware, but I’m just–

Bill: No one thought that you could stop the entire industry.

Tobias: Yeah. That’s not so much cyclical, that’s almost like force majeure and it’s like–

Bill: Yeah.

Jake: There’s always something that comes along eventually that is going to force the hands.

Tobias: Yeah, that’s right. Some sort of– [crosstalk]

Cognitive Mistakes

Bill: That’s an example. He bet on the industry, that industry had a left tail event that had a probability of coming out that could result in permanent impairment of capital, and you can’t buy Google? I don’t understand why that’s a bet that he’s comfortable with, big tech that they understand is not. I’m not trying to criticize the guy. I just like to go to dinner with him, even though I’m not going to, but if I could, that would be the conversation I’d want to have. I talked to Trent about it quickly on Twitter, and he was like, “Well, tech is not inside their circle of competence.” Okay, well, I do understand that statement, and it’s definitely true. They’ve said it over and over again. The questions that I have is, one, is saying it over and over again, causing them to create a cognitive mistake that they rail against constantly. Two, why?

Tobias: Why is Google any more technical than Precision Castparts?

Why $AAPL & Not $GOOGL?

Bill: I don’t know, that’s the thing. You’re talking about– why is it any different from Apple? It’s almost like a consumer habit thing.

Jake: Maybe the better analogy would be a global newspaper, which they understand pretty well.

Tobias: Yeah. Classifieds.

Bill: Yeah. Maybe, the issue is that they don’t feel within– outside of their circle of competence. They don’t feel they can assess the range of payouts well enough, that would potentially be an answer that I’d be comfortable accepting. I think I’d probably push back on it, but they’re them, not me.

Tobias: It’s one of the funny things about [crosstalk] treating all of those-

Bill: I mean, I sort of am.

Tobias: -treating the tech companies–

Bill: I told them they were wrong to sell Wells, I was right there. Then I did it at a lower price like a moron. Thanks, taxes.

Tobias: It is funny trading tech as a monolith when there are lots of different business– Microsoft is nothing like Google, is nothing like Amazon, is nothing like Facebook. Facebook and Google are probably the closest together and they’re still pretty distinct businesses and pretty distinct. They don’t directly compete in much stuff, probably increasingly, so all of them are competing together. I don’t know if–

Jake: That’s what I was going to say. That was used to be true probably more so, but we’re probably heading in a direction where that actually is more true.

Tobias: Isn’t that funny? Why is that? Chasing–

Jake: There’s only so many advertising dollars to go around. I don’t know. We’ve got to figure out how to get yours.

Tobias: You can buy ads on Amazon if you want to sell your stuff on Amazon.

Bill: How do they not buy Amazon ever? They got that. I’m sure they got that.

Tobias: One of the boys did, right?

“Oh, I Missed It.”

Bill: Active Robinhood investors saying both Charlie and Buffett regretted not buying Google. They admitted their mistake. My point is that every single day from 2010–

Jake: Still a mistake.

Bill: Oh, yeah. One of the biggest mistakes in investing, I think is saying, “Oh, I missed it.” I think that can cost you a ton of money. I think it can cause you to turn your brain off to an opportunity that you now understand, part of saying I missed it is then also saying, “Well, today I understand it.” [crosstalk] -missed it.

Tobias: When did they sell it first?

Bill: I think that was three or four years ago, wasn’t it?

Tobias: Yeah, is that old, yeah.

Bill: They meant it a long time ago. I bet they were talking about in 2014, “Ah, we missed it.”

$FB’s Cheap

Tobias: I think that Google does get cheap on occasion if you back up the cash. We were talking about this before we came on. There was a lot of discussion around about– I can’t remember exactly, but 2014, 2015, 2016. In much the same way there was a lot of discussion about Microsoft in 2011, 2012, 2013, as it being too cheap. May be now that the discussion is Facebook is too cheap. You might have other reasons for not wanting to own Facebook, but quantitatively, it’s reasonably cheap at the moment, based on the quality of the business.

You’ve got to make some assumptions about the continued growth, and Bill and I can have an argument about the terminal risk there. I don’t think we’re going to argue actually, I think we’re probably going to agree. Everybody, I think, is standing around saying, “Well, Facebook’s cheap,” it’s just some people are going to buy it and some people are not. I’d say in five years’ time, the people would buy it and are probably right.

Bill: Yeah, unless the concerns materialize. That’s like everything, but I agree with you. I own some of it, I’m not buying it, like actively hand over fist here. I think that it’s pretty cheap.

Australian & Canadian Pushback To $FB

Tobias: I think that big risk is Australia’s pushback on them, Canada’s pushback on them. I haven’t actually followed it that closely, but they cut off all the traffic to the local websites in Australia, and that caused some sort of ad crime and they had some sort of negotiated resolution, but I don’t know if that’s a permanent position. I don’t know what they’re seeking to achieve. They’re getting people to pay for the links, pay for outgoing links. What are we doing before Facebook existed? How did you get your links? Use that Google link share?

Jake: I think I’m over my skis talking about this, but my understanding is it has to do with the news media in Australia and using their content without paying them. I don’t know, what’s a popular Sydney–

Tobias: Sydney Morning Herald. There two groups. There’s The Sydney Morning Herald complex and then there’s Rupert Murdoch’s papers.

Jake: You as an Australian go and copy paste a link to the Sydney some article in that and then share it with your friends. Then Sydney’s not getting paid for that and that’s what they’re trying to force.

Tobias: Because they accept the first paragraph or something like that. Nobody reads beyond the headline in the first paragraph and so they don’t get to sell advertising.

Jake: I don’t know. I’m not sure what the– It sounds like there’s some political, like Murdoch behind it, pushing the government to crack down on–

Bill: That’s what I was just thinking.

Jake: -get him paid, I don’t know.

Bill: It’s like somebody politician or some puppet somewhere got something in there, whatever.

Tobias: Almost, what a dick.

Bill: Now they’re making a big deal.

Tobias: Canada followed suit, didn’t they? Is there some other newspaper baron out there?

Bill: I don’t know. Facebook’s so interesting, because I feel all the politicians need them and all the politicians also need to bitch about them. It’s a really interesting whipping boy that– I bet you really take– if Facebook, Zuckerberg was just like, “Alright, fine. You guys can advertise and target on this,” politicians would be shocked. They wouldn’t know what to do. The rage machine would really, really take a notch down and then they’d actually have to do something for the society.

Tobias: They’re all boys behind the scenes. They’re all buddies. This is all just pantomime for the rest of us.

Chrome Search Bar – The Ultimate Site Search Tool

Bill: I know. That’s what I’m saying. They all get along. It’s all just a show. Follow the money. It always tells the answer. One thing about Google that’s funny is if I have to look something up on my blog, I google it.

Tobias: On your blog?

Bill: Yeah. I don’t even look on the blog. I don’t even search the blog. I’m just like, “Okay, this is the company. This is the blog name.” If I ever paste anything, it’s always got a Google link. [crosstalk]

Tobias: I do the same thing on lots of sites. It’s easy to use the Chrome search bar, than to go into the search on the side.

Bill: Yeah.

Tobias: It’s a better search experience.

Charlie’s Back This Year

Bill: What else about the Buff Dog?

Jake: Hey, how about Charlie back for this year-

Bill: Yeah. Going back to LA.

Jake: -coming to you live from LA. Got to like that.

Bill: Dope.

Jake: Hell, yeah. Getting the band back together.

Bill: Yeah, I thought he was pretty good at Daily Journal. I’ll be interested to see if he fires some shots at Berkshire.

Jake: I’m so excited for this because last year not having him was, one, Batman didn’t have Robin to play off of. It made a big difference. You needed somebody there to be the heavy, so Buffett could be the plucky optimist. But then, you bring it back now, and to me is like, I’m almost glad he wasn’t there last year, because now I’m really going to appreciate him being there this year.

Bill: I had a different take. Last year, I loved the meeting.

Tobias: Do you like the pitch-dark auditorium with Buffett’s sitting in the middle with bedraggled hair?

Jake: Buffett like this– [crosstalk] [laughter]

Bill: Yeah, because there are none of the stupid questions. I thought they did a really good job calling the questions last year and kept it to business stuff. That’s what I liked about it.

Jake: Well, [crosstalk] but you get Munger, too.

Tobias: Need to do better [crosstalk] DJCO of that.

Bill: Yeah. Well, although I’d argue this one, you got a lot of life lessons again, but I’m jut tired.

Tobias: Yeah, that’s what I mean, do you want this or do you want [crosstalk] business? You want to hear more about the business?

Bill: Yes. You got two business geniuses, ask them business questions. You want life stuff, go to Tony Robbins.

Tobias: Yeah.

Jake: [laughs]

Bill: So stupid.

Parking Cash In Berkshire

Jake: He’s talking about the different buckets of investors inside of Berkshire, whether it’s institution or index or individuals. That was a great conversation or section, by the way, just talking about Phil Fisher’s idea from 1958 about getting the customers, the clientele that you deserve as shareholders. Anyway, he’s saying there’s some investors active who use Berkshire as kind of a placeholder for cash, they’ll just park in Berkshire. He said he doesn’t have any quibbles with that, and that they actually have positions like that for themselves. I was wondering, what do you think in that portfolio is a placeholder position people use Berkshire for?

Tobias: I was a little bit surprised when he said that too, because as we were just discussing before, he’s got that approach where he doesn’t really take a position until– there’s no risk.

Jake: That’s not a punch card mentality, is it?

Tobias: Yeah. I’ve heard lots of people say that to me in the past that they use Berkshire as like a cash substitute, which I always thought was funny. It’s still mark to market, but isn’t the point of it that, like what you’re really holding your cash for, is you get a March 2020, so you can go spend it. Guess what happened in March 2020? Berkshire got mark to market, too.

Bill: Yeah. I understand it, though. I have the least amount of cash that I’ve ever had and I’m really nervous about it but I’m also really nervous about holding cash, but [crosstalk] part of the way that I’m like– Yeah, I know. Part of me is like, “Well,–”

Jake: How it got you.

Bill: Yeah, that right.

Jake: Push you out that risk curve.

Tobias: Yeah.

Bill: Yes, I fully admit it, but I don’t know what you do with it. You want to stay inside the risk curve and just watch stuff rip?

Tobias: There’s no good answer.

Bill: Yeah. It’s a very hard time to invest.

Tobias: Anybody who’s been disciplined, anybody who’s done that and hold cash has been so thoroughly punished that they don’t have much left at this point.

Bill: Yeah, well, it was a big part of the reason that I had a big year last year, was I had a decent amount of cash to deploy in March. I don’t have that bullet now. That’s probably when I was saying that I feel the most uneasy that I’ve ever felt, that’s probably part of why I feel so uneasy.

Tobias: Could you reverse engineer a put or something like that? What kind of cash you want if the market goes down by X percent before the end of the year, and then put a put on?

Jake: Why not just raise a little more cash and sleep like a baby?

Tobias: That’d be easier.

Bill: I sleep okay. It’s not like I don’t sleep well. Actually, I don’t. I woke up super early. Fuckin, kids. 3 AM, “Dad, I peed.” “Stopping peeing.”

Jake: [laughs]

Taking Duration Risk

Bill: Anyway. The other thing that I liked about the letter is I liked how Buffett said that taking duration risk wasn’t a good solution to the problem of yields and also taking credit risk. I didn’t think that was particularly earth-shattering advice, but it’s nice to hear.

Jake: “Risky loans are not the answer to inadequate interest rates.”

Bill: Yeah. Well, and I think people should think about that when they’re looking at low multiple stocks. I do think that you’ve got to understand that there’s a lot of shitcos in the low multiple world. if you’re coming here, because you love low multiples, know that the three of us do something around that problem.

Tobias: You can’t [crosstalk] somebody for that.

Bill: What?

Tobias: Liking [chuckles] low multiples. I like low multiples.

Bill: Yeah, but you don’t strictly like low multiples. That’s my point.

Tobias: No. Not a lot. I’m trying to buy cheap cash flows and cheap cash.

Bill: The people that I’m concerned about because we do actually have a following now that people come here to learn, I’m just here to say, “I don’t know why y’all come here, but thank you for coming.” It’s just to say like, you’ve got to apply more filters than just price.

Tobias: Yeah.

Bill: That’s important.

What Would Your One Filter Be?

Jake: Toby, if you could only apply one filter, what would it be?

Tobias: [laughs] Yeah, I’ve got my metric.

Jake: Yeah.

Bill: But you have overlays on it.

Tobias: Yeah.

Bill: You have the accounting protection overlays for instance, correct?

Undervalued Are Always The Biggest Winners

Tobias: Yeah, I do lots of things in addition to trying to– When I look back over various backtests and look at things that have been purchased, all of the big winners always come from a point of being undervalued, which typically means EV/EBIT was 10 or less, that’s just the case. You could have got Microsoft around that kind of level in 2011.

You got Google around that kind of level like 2014, 2015 from recollection, will have another look at that, but that’s the case. I’m trying to do what I think Buffett actually does, which is he buys wonderful companies, but he only buys them when they get dirt cheap. Then, you’re going to be wrong and some turn out to be donuts, some never become wonderful again, but some go back. Then, there’s things like Microsoft. It probably really wasn’t a wonderful company. At that point, it was pretty good, so they had pretty good returns on equity, but it had that one year where it backed off the rails.

Jake: Growth stopped.

Tobias: Yeah, growth stopped. Ballmer being there, stock hadn’t done anything for 13 years, 14 years. You had to buy it at that point. Then, it becomes this super compounder software as a service dog. That’s how you get the returns, but nobody was buying then thinking that.

Berkshire’s Equity As A 100-Year Bond

Jake: Let me ask you, guys, this. I’ve struggled with trying to figuring out, I guess I’m not CFA level enough to know the answer to this. If you thought about Berkshire as a bond, which I always find it interesting when Buffett takes that analogy and uses bond– because it’s so much easier to anchor on to what the cash flow is from a bond, so there’s less uncertainty about the flows of cash over time, which allows you to think a little bit more clearly about it.

But if you thought about Berkshire as a 100-year bond– their equity as a 100-year bond with a 10% coupon because their ROE is probably going to be around 10%, I feel that’s a pretty reasonable bet given the businesses that they’re in and what they’re likely to do. My math has at a P/E of roughly 15, that means that the bond is trading at around 104 to get to a 7% yield from a 10% coupon. All with a tontine type structure, where 5% of the shareholders are dying every year. Dying, not actually dying but being retired.

Tobias: The shares are being bought back.

Jake: Yeah. What would a bond if it was called that with those principles in it? What would that trade for? Is 104 the right price? Or, is that stupidly priced?

Tobias: Yeah, that sounds way too low in this market. How do you get to 104? Is that the price to book or is that the–?

Jake: No, that’s a 7% earnings yield on a 10% flow, like a 10% coupon. The difference between 10 and 7 is– It’s a yield to maturity kind of idea.

Tobias: Is that right? That seems too low.

Jake: I might be off on that math. I’m struggling to get that right. I’m sure there’s somebody who’s smarter than me, who could say like, “No, idiot. That’s not right.” I’m in the ballpark at least. [crosstalk]

Tobias: It’s a 10% coupon and you’re getting it to 7% yield, doesn’t that mean that it has to be up? It’s the inverse of 7 or 10.

Jake: Right. That’s why it’s at 104. If it was a 10% yield and a [crosstalk] 10% coupon, you would be at 100.

Tobias: Yeah. Somebody do the math. I think it’s a little bit higher than that.

Bill: Can you all see me? My computer just went completely dark.

Tobias: You’ve got a– [crosstalk] [laughs]

Jake: Yeah, you’re– [crosstalk]

Bill: Yeah. I could hear some of what you were saying, but not everything. Somebody commented that Rocket Companies was going to the moon and I tried to look and it ruined everything, and it is going to the moon. That is a great business that I’ve liked for a while. Yeah, but it is probably going to the moon for reasons not related to the business. Thank you, WallStreetBets.

Jake: Because it’s the space exploration thing with the rocket. [laughs]

Bill: No, I think they got no more shares left to short or something like that. I mean, it’s up 60%, since like one PM or something like that. It’s moving.

Jake: That’s the new down.


Bill: It’s a weird world, man. I’m sorry to not know what you were talking about, but I don’t know– [crosstalk]

Jake: I kind of didn’t know what I was talking about, either, so you’re on the same page with me.

Bill: Okay. All right, cool. I think long term, if Berkshire buys in $20 billion a year, it’s going to be hard to have a totally unsatisfactory result from here.

Tobias: Yeah.

Bill: I don’t know if they’re going to outperform. That sort of depends on whether or not today’s multiples are justified, which I think some people say they are and some people say they aren’t. We’ll sort of see.

Tobias: Did you say 10% return on equity, is that all– it’s higher than that, isn’t it?

Jake: I’m going off of their really big redeployments into Berkshire Energy and BNSF, which are going to give you probably a regulatory 10 percent-ish return.

Tobias: Fair enough, forward looking.

The Impact Of Self-Driving On BNSF

Bill: What do you think self-driving does to BNSF?

Jake: That’s not the competition.

Bill: You could start to drive the cost down.

Tobias: It’s a freight thing.

Jake: The competition is trucking.

Bill: Yeah, well, that’s what I’m saying. Long road trucks on a highway.

Jake: My bigger concern would be 3D printing. If I don’t have to move materials around the surface of the earth-

Tobias: You’ll still do that.

Jake: -as much as I–

Tobias: Maybe not buy–

Jake: You still will, but–[crosstalk]

Tobias: Maybe not finished products overseas, but you’re still going to have to move them within the borders of the country, and you’re going to need to get commodities over here somewhere to. Japan has to import everything.

Buffett’s Natural Gas Bets

Bill: It’s interesting how long Buffett is on natural gas. He likes natural gas a lot.

Jake: I think that’s smart. I think as Texas has shown us recently, it’s really hard to get all the way and meet some of these renewable goals that we all aspire towards without a pretty healthy segment of natural gas electricity to stem you between when renewables aren’t working.

Bill: Can I just say for people that are like, “Oh, he’s not a visionary,” Berkshire Hathaway Energy has done more for renewable energy than most energy companies. The idea that this guy isn’t investing for the future something is an absurd narrative to try to craft.

Jake: Whoever said that–

Bill: I just see it.

Jake: Those people are full of shit.

Bill: I just think they’re not thinking or they like to hate on him, which fine, go hate on him, but the dude has crushed your career. There’s two people that deserve to say scoreboard to him and the rest of us are just commentators in the peanut gallery.

Tobias: Who was it, Musk and Bezos?

Bill: No, I would say Bezos and Gates.

Tobias: Not Musk?

Bill: We’ll let that one play out.

Jake: I like Buffett’s ideas on that that he says when he wakes up and looks in the mirror, that’s everyone who needs to have their say, have their say.

Tobias: [laughs]

Bill: I think Musk is a bit like Sammy Sosa. We’ll see if the bat’s corked or not.

Jake: Corked bad, huh?

Bill: Anyway, send your questions.

Dotcom Level Stupid

Jake: Speaking of baseball analogies, I was thinking the other day about you putting us in the fifth inning or whatever. Where are we at with that first of all, fifth inning?

Bill: Oh, I don’t know. We had a little bit of a pullback. The starter maybe iced their arm. They might have another couple of throws left in them. I thought they were getting tired, but they might be back.

Jake: My counter to that is that might be right. However, most of the runs that are going to be scored in this game have already been scored. It might just be not much happening for the next few innings before the game is over.

Bill: I think you underestimate how stupid this could get.

Tobias: You’re saying how stupid it is?

Bill: I think that it’s not that stupid yet.

Tobias: I think this is dotcom level stupid at the moment.

Bill: No. Not close. Still got $2 trillion left on Apple.

Tobias: Look at SPCE, look at space.

Jake: [laughs]

Bill: There’s craziness. Don’t get me wrong. There is objectively crazy, I’m not–

Tobias: GME, the weed bubbles, bitcoin.


Jake: People paying hundreds of thousands of dollars for these non-fungible tokens.

Bill: Yeah, this is interesting.

Jake: To me that’s like bait. Is this Beanie Babies all over again? Digital Beanie Babies?

Tobias: Yeah.

Bill: I’ve got to tell you something, though.

Jake: I don’t get it. We need to raise rates.

Bill: Can I just say something? Grimes is pretty talented at what she’s doing. That was pretty talented stuff. I looked at some of those that she was designing, she’s a very artistic woman.

Jake: Are you allowed to look at him? You don’t own them.

Bill: Well, let’s put it this way, I looked at her Twitter feed. I think that there’s something very– Look, I don’t understand it. Okay, I’m not going to buy it. I don’t really understand art to be perfectly candid. This is just digital art.

To me, it’s basically the same asset class. It’s very interesting how Jim Bianco this week, not somebody that I would perceive to be a bitcoin bull, is talking about how this is the next iteration of the financial system, he laid out four things. Look at his Twitter feed, I don’t know what the hell he’s talking about, but he’s talking about it. This is part of the bitcoin thesis is like, it’s going to start to get adopted by institutions.

Then, the idea starts to get fermented, and that starts to– That’s playing out. Now, whether or not the price makes sense is– I know that, especially a group of value investors are going to get super pissed off at hearing that. I don’t have an idea what it should trade at. Between that and these non-fungible tokens, it’s weird stuff going on. I think it’s interesting. I don’t know how it all turns out. Yeah, it could definitely be beanie. I wouldn’t pay $1 for any of this crap. I don’t mean that about bitcoin. I mean that about like NFTs and stuff like that. I reserve judgment on bitcoin.

Tobias: Someone’s going the comment up here. You can get five-second NBA videos of–

Jake: Was that Top Shots or something– [crosstalk]

Bill: Yeah, I don’t understand– What do you want? You want like Tyler Herro hitting something from the free throw? That’s stupid.

Jake: What do you get though? You get to just watch it over and over again? Can I watch that on SportsCenter?

Tobias: Yeah, you can for free.

Bill: No, I don’t think you can, unless I don’t think-

Tobias: On YouTube.

Bill: -you can watch it on– I think in theory, you should get to get paid if SportsCenter runs your clip. For instance, like Ray Allen draining that three that save the Heat against the Spurs, that’s a big moment. I can actually understand somebody wanting to own that. Some random shot, that’s stupid.

Jake: How do you own that though? Isn’t that already owned by NBA?

Bill: Tokenization, bro.

Jake: When they sell it, do you buy it from the NBA then?

Bill: I think they are releasing it, yes.

Jake: This is just fractionalized content that they license from ABC, or they licensed to ABC to just to show it live, but then if they ever show it again, I get paid?

Bill: I believe that that’s the concept, that’s the only concept that I actually– [crosstalk]

Jake: Okay, I’m kind of interested in that.

Tobias: It’s not a bad idea.

Bill: Yeah.

Jake: Cash flow just fractionalized though, in a way. Why does it have to be on the blockchain? Why can’t I just own it like anything else, like I could own a catalog of songs?


Tobias: Well, you can do that. There’s a site you can go to and you can buy the rights to lots of different songs, and I can’t think what it is, but I’ve gone and had a look just to see if there are some old songs that I really liked that were– they go for surprisingly little money, some of them and they sort of show what their income stream has been like over the last few years. I don’t buy anything.

Bill: I just want to say the guy that I know that retired on the beach from flipping oil companies said, “Three years ago, baseball cards are bombed out. I’m going to go collect baseball cards because they’re going to come back.” Now, he’s flipping them for insane profits, relative to what he paid. He’s laughing as he’s doing it. He jokes that he’s going to– a year and a half ago, he was like, “I’m going to make up CryptoKitties,” and sure as shit, people started to trade CryptoKitties on the internet. I do think there’s a lot of insanity going on. I have somebody yelling in my ear consistently that there is. I just think that there’s–

Tobias: What are you waiting for? What moment of peak insanity do you think rings the bell?

Bill: I don’t know. I’ll let you know.

Tobias: What are we kind of looking for? I want to know that.

Jake: Yo, after it crashes, he’ll tell you it was the ninth inning.


Bill: No. I mean, I’ve said over and over again. I think Apple $5 trillion, I think if Microsoft doubles from here, I think that’s probably it. I think once you have zero equity risk premium and rates this low, that’s when people can really get their faces just destroyed. If that happens, I’m selling everything. I’m telling you guys right now, I’m out. I will not mess around in that game. I’ll still play this one because I still think you can get good cash flow out of cable companies, relative to rates. I still think you can find decent investment places. I think Berkshire, if you’re not willing to take a– if that’s your perception of not a lot of risk, I think you could easily make 7% to 10% in that entity over time, that’s not crazy to me. There’s not enough crazy to tell me that things are objectively crazy. I do think that there’s stupid going on, though, and I agree on that.

Tobias: I’ve got a good question.

Jake: [crosstalk] -argument. Well, go ahead. Yeah, let’s get to some questions.

Bill: You probably could make the same argument in ‘99. Maybe I have no idea. I don’t care.

Tobias: I think that’s the problem. Buffett’s analogy of being Cinderella at the ball, where the clocks have no hands on them is exactly right.

Bill: Yeah, I’m just trying not to be caught in it.

Tobias: I think we’re all in it. I don’t think there’s any way out.

Bill: I’m not buying SPACs.

Tobias: Yeah, no, that’s fair. When you really get the bloodletting, there’s nowhere to hide.

Bill: Yeah, that’s fine. I don’t disagree with that. I don’t know what to do with–[crosstalk]

Tobias: There are places to not be, there’s going to be a ground zero, and you don’t want to be standing at ground zero, that’s going to be probably– anything that’s not making money is going to be carved to pieces. That’s what happens, that’s how you get the great prices at the bottom because things get sold for silly prices, and people don’t sell because they want to. They sell because they have to. Well, they sell because they panicked.

Policy Has Cut Off The Left Tail

Bill: Look, the conversation that I had with Naufal, that changed the way that I think about some of this is I think that there’s a reasonable probability that he articulated that policy has cut off a lot of the left tail of financial prices for now. The left tail is gone, which means asset prices rerate higher. Then, in three years or so, the way that this fixes itself is through inflation, and then there’s going to be nowhere to hide, but that’s by design.

Tobias: Yeah.

Jake: Couldn’t you have made that argument at any time and the last 100 and– what 1913, the Federal Reserve was founded?

Bill: Yeah, but that’s why I think a lot of people have gotten destroyed making the inflation argument. They’ve just not been correct as far as how we calculate inflation, which is flawed, but that’s– I don’t know [crosstalk]

Tobias: Throw some questions, guys.

Bill: Buy some NFTs.

Tobias: Throw some questions at us, amigos.

Bill: Buy some CryptoKitties. Buy a couple rare baseball cards. This is what’s going on. This is what people are thinking. I think people are wrong.

Tobias: Questions. What happens to Geico if full self-driving advances? What would Buffett do to hedge against that? Samson Narokobi, who’s a big holder of Tesla, big Musk fan. Obviously, the answer is that Geico fails, and he should hedge it by buying Tesla. Samson, is that the answer you wanted?

Jake: [laughs] It’s what they wanted to hear.

Tobias: The actual answer is that there’s going to be exactly the same number of accidents, as they always have been. It’s just it’ll be a car that’s responsible, rather than the driver, it still going to hit walls and make mistakes for a long time.

Bill: I don’t know that I’d buy that.

Tobias: For a long time.

Bill: Yeah, probably for a while. You’re also going to have–

Tobias: You’re going to need insurance anyway. You’re not going to get away with no insurance.

Jake: My guess is premiums will fall slower than risk will.

Bill: Yeah.

Jake: Therefore– early on, I bet it’s a boon for Geico. Maybe long term, not as much. I don’t know. It’s always 10 years away, so you don’t have to worry about it.

Tobias: Yeah, that’s right. We’ll get flying cars before we get self-driving cars. That’s not true. I think we’ll get self-driving cars earlier than that.

Bill: Cars suck these days. I tried to price out a car that I would like, and it’s like I can’t. It’s stupid expensive. Then you got all these chips, and it’s just going to get totaled and sent a car part. Like the Tesla that my grandma totaled backing out of the garage, that’s insane. It’s doesn’t make any sense.

Tobias: Well, that’s Tesla.

Bill: If that’s where cars are going, that’s crazy.

Tobias: There’s a profit center for Tesla.

Bill: I know but think about what you’re going to have to pay for insurance.

Tobias: You do pay more insurance–[crosstalk]

Bill: You talk about what happens to Geico? Geico is going to make a lot of money for a little while, and then maybe it’s what like one last ring of the orange or whatever. I bet it produces a lot of juice.

Buffett’s Been Following GEICO For 70 Years

Jake: Dude, by the way speaking of Geico, Buffett’s been following Geico for 70 years. You think you know a company, you’re like, “Oh, I’ve been following this a long time. I really know this one inside and out.” 70 years. Imagine how much more you understand than what we’re capable of on anything. Just amazing. The other thing, too, I did a little math on Geico, when it first started did $238,000 of business and it’s now at $35 billion a year in business. That’s a 15.4% compound annual growth rate for 83 years. That’s just unbelievable.

Bill: Yeah, it is… by Tesla.

Jake: [laughs] Short Geico.

Bill: Somebody wanted us to comment on US multistate operators in the weed space. I don’t know enough. I’m working on it. I’ll tell you when I have an opinion.

Tobias: There’s a lot of water in that space.

Bill: A lot of water?

Tobias: Yeah.

Bill: What do you mean by water?

Tobias: Lot of air. They water–

Bill: Oh, yeah. Jason Wilde is a cool dude, man. I found out about him. That guy’s a monster.

The Future For $HOG

Tobias: Yeah. Thoughts on Harley Davidson. It’s very specific. I think Harley’s almost more of a– [crosstalk]

Bill: Yeah, avoid it. That’s a terrible business going forward, I think. I just don’t think people– I mean, look at all the data on motorcycles. I don’t see them coming back.

Tobias: What’s the data say?

Bill: It’s not good. It says that a bunch of boomers bought a bunch of motorcycles, and now they don’t like them as much.

Tobias: Ah, so you can get them secondhand cheaper.

Bill: Well, they’re just not selling well. It’s a great brand. I just think it was a better brand 15 years ago than it is now.

Tobias: Yeah.

Bill: I was at a biker rally though, just this weekend, not like at it, but I drove by one. They seem to be having a lot of fun. Scantily clad women, so that’s still going.

Jake: What was the average age?

Bill: It was old. A lot of wrinkles.

Jake: Well, that might be a Florida thing too.

Bill: It could be.

Tobias: On the VZ investment, are we overlooking Buffett on Verizon 9% yield? Wow. With some growth that’s great in this rate environment?

Bill: Yeah, I guess. I don’t know, we’ll see.

Tobias: What’s your feeling on that? Why are you so anti to the VZ investment?

Jake: CAPEX gobbles up all that dividend capital.

Bill: Yeah, they’re got a ton of debt. It’s a fine balance sheet. It’s not like a ton of debt, but they’ve got a dividend that they have to service and they just spent a bunch of money on Spectrum and the 5G strategy doesn’t have me convinced that that’s not going to just require a ton of capital. T-moose is eating everybody’s lunch because they have a better mousetrap. It’s just not something that I’m particularly interested in. I’ll tell you what, I’ve never made a good investment in that setup. A big company trading at a cheap multiple, really hasn’t gone very well for me. That could be the problem, especially not one that has huge capital requirements.

Jake: You’re just bitching about not buying Google and now you’re– [laughs]

Bill: It’s not at a cheap multiple though. When has Google ever traded at-

Jake: Well, it was.

Bill: -9% yield? It’s always been growing 30%. It doesn’t require capital. It’s like a completely different business.

Jake: I don’t know about that.

Bill: It is.

Jake: [crosstalk] -require capital. If you looked at CAPEX on these big tech companies-

Bill: Have you looked at the margins, sir?

Jake: -all these in [crosstalk] light.

Bill: Now get out of here, you’re out of your mind.

Tobias: Gents, one last question, then it’s time. Quick answers. This is a big one. Unfortunately, any thoughts on Preston’s argument that inflation or government money printing is going to assets? I mean, I can’t see how– apparently, you’re not allowed to say this.

Bill: Yeah, it is.

Tobias: Apparently, this is a thing that you’re not allowed to say about it. Of course, it is.

Bill: Yeah. How wouldn’t it be? Look at what’s going on.

Tobias: Yeah. All right.

Jake: Is there even a question here?

Bill: Listened to the Odd Lots about SPACs. I really think we’re in this environment. I guess what I’m trying to figure out is if we always have been and this is just sort of a different world, but like finfluencers and meme stocks and stuff, like that’s where we’re at right now.

Tobias: That seems pretty toppy to me.

Bill: Yeah, maybe.

Jake: Davey Day Trader with an ETF to see that.

Tobias: Yeah.

Bill: No, that’s crazy. Jesus.

Jake: Yeah.

Tobias: I’m impressed with the way he markets it.

Jake: Yeah. Wasn’t that a nice little video he put together?

Tobias: Didn’t know you’re allowed to do that.

Jake: I know. [laughs] What’re you even doing this [laughs] [unintelligible [01:01:24] — [crosstalk]

Bill: I’m going have to watch it.

Tobias: That’s it for this week. Thanks, amigos. We’ll see you next week.

Jake: Cheers.

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