Mar 282019

Warren Buffett was interviewed by Becky Quick on CNBC today.

The 7 highlights were:

(1) On Lyft’s IPO: “Buying new offerings during hot periods in the market — I don’t think it’s anything the average person should think about at all.”

(2) “It does look like the pace of increase in the economy has slowed down ..”

(3) Buffett likes Berkshire’s 5 1/2% stake in Apple.  Apple doesn’t have to do everything right to succeed.

(4) Berkshire’s recent additional purchase to over a 10% stake in Delta Airlines was a mistake.  But Buffett likes that Delta is buying back its shares as well as borrowing to buy back additional shares.

(5) The airline industry used to be suicidal.  Now it is still very competitive.

(6) Equities are far more attractive than U.S. Treasury bonds at current interest rates.

(7) Berkshire has made some investment mistakes, but hangs on to its winners.



 Posted by at 7:16 pm
Mar 222019

The U.S. Treasury yield curve is NOT inverted. The yield on the 3 month U.S. Treasury Bill is 2.44% and the yield on the 30 year U. S. Treasury Bond is 2.88%.  The U.S. Treasury yield curve is flat between 3 months and 10 years (2.44%), but upward sloping from 10 years to 30 years.

 Posted by at 11:10 pm
Mar 222019

Recession fears appear to be premature despite a flat yield curve (3 months vs. 10 Year Treasuries.)  All previous U.S. recessions since World War II were preceded by the Federal Reserve raising interest rates too far and too fast from much higher levels.  The Great Recession of 2007-2009 was also caused by subprime mortgages and too much debt in the housing market.  With the Federal Reserve not planning to raise short term interest rates in the near future, interest rates near historically low levels, and inflation stable at 2% which is the target of the Federal Reserve, there appears to be little likelihood of a recession later this year or in 2020.

 Posted by at 2:24 pm
Mar 222019

I am quoted in a Bloomberg article: “Buffett’s Course Reversal on Airlines Sparks Talk of Acquisition”.

Last year, the famed investor said he wouldn’t rule out owning a carrier, prompting talk about which one he’d grab. “One of those airlines would certainly be affordable and do-able” if Berkshire wanted to buy, said David Kass, a professor of finance at the University of Maryland’s Robert H. Smith School of Business. “But then the question is, would Buffett really want to do that?”

 Posted by at 11:05 am
Mar 182019

StoneCo Ltd. (STNE), a financial technology company in Brazil, is up 20% in extended hours trading at $41.44 on higher than expected earnings. It is now 70% above the IPO price of $24 paid by Todd Combs of Berkshire Hathaway in October, 2018.

StoneCo Ltd. is a financial technology company based in Brazil, the fourth-largest payment processor by volume in that country. Brazil is the fourth-largest market for non-cash transaction volumes in the world, which gives the company a lot of scope for growth.  Todd Combs of Berkshire Hathaway invested $340 million in the company’s initial public offering, buying about 11 percent of the company.  Berkshire had not previously invested in an IPO in decades.

 Posted by at 11:25 pm
Mar 092019

Today is the 10th Anniversary of the stock market bottom of March 9, 2009.  From October 9, 2007 through March 9, 2009 (17 months), the Dow Jones Industrial Average declined by 55%, with the S&P 500 declining by a similar percentage. The Great Recession officially began in December, 2007 and ended in June, 2009.  Over the past 10 years, both the S&P 500 and Dow Jones Industrial Average have quadrupled.

Although the S&P 500 (with dividends included) declined by 37.0% in 2008, it rose by 26.5% in 2009, 32.4% in 2013 and 21.8% in 2017.  This index rose in each year from 2009 through 2017, but declined by 4.4% in 2018.

Over the 54 year period of 1965-2018, the S&P 500 (with dividends included) rose in 80% of the years, while declining in the other 20%.  (The 54 years were comprised of 43 up years and only 11 down years for the S&P 500 with dividends included.)   During this time period, the S&P 500 (with dividends included) achieved a compounded annual gain of 9.7%.

 Posted by at 2:45 pm