Jul 262019
 

In an SEC Form 3 filing last night, Berkshire Hathaway disclosed that it owned 950 million shares of Bank of America as of July 17.  This stake is currently valued at $29 billion, which is Berkshire’s second largest common stock holding behind its $50 billion stake in Apple.

This represents an increase of $1.5 billion or 6% from the 896,167,600 shares it reported owning at the end of March.

It also puts the stake at 10.4% of the bank’s shares outstanding. The filing says:

The beneficial ownership of the shares of Common Stock reported herein exceeds 10% as a result of the issuer’s repurchases of its own securities, based on the issuer’s most recently announced number of shares of Common Stock outstanding.

 

Buffett says that generally he likes to keep holdings below 10% because that level brings increased regulatory scrutiny, especially for bank stocks.

The Fed, however, has a proposed rule change that could increase the limit to 25%.

At this year’s Berkshire annual meeting,  Buffett said if the rule does change, “there will be companies where we drift up over 10 percent simply because they’re repurchasing their shares. That’s been the case with Wells [Fargo], and it’s been the case with an airline [Delta Air Lines] or two in the last year or so. So, if we like 9.5 percent of a company, we’d like 15 percent better, and you may see us behave a little differently on that in the future.”

 Posted by at 8:31 pm
Jul 172019
 
The Wall Street Journal published my letter to the editor which disagrees with James Grant’s (“The Fed Could Use a Golden Rule”, op-ed, July 12) recommendation for the Federal Reserve to re-introduce a gold standard.
The U.S. began to recover from the Great Depression of the 1930s when President Franklin D. Roosevelt cut the dollar’s ties with gold, which allowed the government to issue more money to lower interest rates. Similarly, the current record-long, 10-year expansion following the Great Recession of 2007-09 was greatly facilitated by the accommodative monetary policy implemented by the Federal Reserve. No other country uses a gold standard. Gold today isn’t being used as currency, but instead it is an alternative asset class that is being used as a speculative store of value.

Prof. David I. Kass, Ph.D.

University of Maryland

College Park, Md.

 Posted by at 5:17 pm
Jul 162019
 

I am quoted in U.S. News & World Report: “How to Invest in the S&P 500 at All-Time Highs” 

“Since the outlook for the U.S. economy over the next few years is good with GDP projected to grow at 2% or higher, interest rates expected to remain near historically low levels and corporate profits expected to grow, the S&P 500 index continues to be an attractive investment vehicle,” says David I. Kass, clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business.

Kass points to the 2013 shareholder letter from billionaire Warren Buffett. He’s still very much alive, mind you – but wrote that upon his death: “One bequest provides that cash will be delivered to a trustee for my wife’s benefit. My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

 Posted by at 3:47 pm