Saturday, August 22, 2020

Warren Buffet sold all his Goldman Sachs stock? But they run the world...


This video talks about the recent stock trades of Berkshire Hathaway, the investment business headed by legendary investor Warren Buffet, and his lesser known partner, Charlie Munger.  If you go to about 1:12 in the video, you can pause it and read the list.  

Way back in the early 1990's, as a geeky, 20-something, BMX freestyler guy, I wanted to be ridiculously rich.  Like most young guys, I thought that if I could find a way to become rich quickly, I could avoid working lame jobs, and do what I wanted all day, which was mostly riding my BMX bike.  

Unlike most young guys, I started reading and learning about real estate, money, economics, and all things money related.  One thing I began to do was study the Forbes 400 magazine every year.  That was a pretty new thing back then, and had been coming out annually for 6 or 8 years when I first picked on up.  The Forbes 400 is an issue of Forbes magazine where they listed the 400 richest people in the United States, how much those people were worth, and two or three paragraphs about each person.  It comes out each fall.  Reading the Forbes 400, year after year, was incredibly enlightening in a financial sense.  First I learned that about 1/3 of the 400 richest people inherited their money.  So the first lesson, if you want to get rich really quick, is to find one of those people with a huge inheritance, and marry them.  That didn't appeal to me.  There were no hot, young, Kylie Jenner types on the list then.  

The next lesson in the early 1990's, was that most of the major fortunes were families who owned old, well known, industrial companies, like Levi Strauss, Seagrams, and M&M/Mars candy, businesses like that.  In the early 1990's, tech billionaires were a new thing, and there were only a few.  Most of the fortunes were from old, well established, industrial age companies, ones that were still primarily owned by one family.  Another big category then was real estate tycoons, largely self-made developers who bought lots of apartment buildings over their lifetimes.  No, not Donald Trump, he was (and still is) anything BUT self-made.  As we know now, his dad set him up in business, and he's been propped up by his late father, others ever since.  But guys like Donald Bren with the Irvine Company, and some other New York real estate magnates then, actually did build real estate empires, and become super rich.

One of the biggest surprises I learned from studying those early Forbes 400 magazines, was that only one guy (later his partner Charlie Munger made the list), Warren Buffet, actually became super rich from investing in stocksOne guy.  That's it out of the 400 richest Americans.  As it turns out, investing in the stock market is actually one of the worst ways to try and become super rich.  Stocks have their place, in "normal" times.  But they get sketchy during recessions and depressions, particularly for inexperienced investors and speculators.  The vast majority of the super rich back then, and now, built a huge business, and then took that already successful business public, so everyone could buy stock shares in it.  The billionaires of the world, old and new, made their billions by taking a large company public.  Buffet did that to a degree, but primarily built the nation's third biggest fortune by investing in stocks of other businesses.

 Even more interesting, Buffet and Munger are the most boring kind of investors that exist.  They spend their days reading, back home in Omaha, Nebraska.  They research all kinds of companies, and try to find established businesses with well known brand names (like Coca-Cola or Dairy Queen).  Then they watch the markets, day by day.  When a recession, or some kind of downturn hits, the everyday stock traders would freak out, and often sell lots of shares of a perfectly good company, really cheap.  The market panic days are what Warren and Charlie lived for, and still live for.  Basically, they had a list of companies they thought were solid in business and in management, and when the markets sold those companies cheap, Warren and Charlie would buy a big position.  Then they went back to reading and researching every day... and they waited.  Once the market turmoil calmed down, people realized the solid companies were still solid companies, and stock prices went back up.  And so did the stock price of Berkshire Hathaway.  That's called "value investing," and Warren Buffet learned it from an early mentor.  Value investing is the exact opposite of what dumb ass Millennial investors (and dumb ass Gen Xers and Boomers), are doing right now, which is buying hype, not businesses.  They'll learn... pretty soon.

Berkshire Hathaway was originally a textile mill that Buffet invested in.  Later, he bought chunks of insurance companies, which got a lot of money coming in from premiums.  That money needed to be invested well, so the companies would have the money needed to pay for insurance claims.  Berkshire morphed into a holding company as the textile business faded, and Warren and Charlie just kept buying large positions in solid businesses, with well known brand names, when those businesses shares were selling cheap.  Even more weird, Buffet very rarely sells shares.  

But we're in really crazy times right now, largely unprecedented, even in the decades Warren and Charlie have been investing.  Buffet will turn 90 in a week, and Munger is 96 now.  They've seen A LOT.  These guys both were kids DURING the Great Depression.  They remember it, to some degree.  That's probably why they're sitting on about $140 billion in "cash" right now.  They know shit's gonna get a lot crazier in the next couple of years, and they're ready for some chaos. 

In the video above, we see Buffet sold their positions in several airlines.  OK, that makes sense right now, airlines are screwed for at least a couple of years.  He sold out of RBI (Burger King, Popeye's Chicken, and Tim Horton's in Canada).  Hmmmm, OK, restaurants are struggling I can see that one.  But then I saw Buffet sold a huge chunks of several banks.  OK, that's big, Warren and Charlie see trouble in banking in the future.  But they sold 100% of Goldman Sachs?  Wow.

Goldman Sachs is basically the investment bank that tells the U.S. government what to do with money.  Seriously.  Check out this article, current Treasury Department secretary Steve Mnuchin is a Goldman guy.  Steve Bannon worked for Goldman.  Former Goldman Sachs people have been Tresaury Secretaries, economic advisors, worked at The Fed.  No bank in recent times has had more influence on the U.S. government, than Goldman Sachs.  And Warren Buffet just sold ALL of Berkshire Hathaway's shares in Goldman Sachs.  Warren and Charlie see something pretty brutal coming our way to make a decision like that.  They've literally walked away from one of the 2 or 3 most powerful banks in the world.  Wow.  That's big.  

Oh, by the way, Berkshire Hathaway stock can be yours for $322,126 per share, right now, if you're interested...

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