u/SkinwalkerThing

The S&P is questioning whether or not it should change the rules on adding a business to the index in order to accommodate IPO’s of SpaceX, Open AI, Anthropic and others.

Current rules to enter the index dictate that a company must be domiciled in the U.S., have a market capitalization of at least $22.7 billion, be publicly listed for 12 months. Positive financial earnings in the most recent quarter, and the sum of the trailing four quarters must also be positive, At least 50% of the company's outstanding shares must be available for public trading. Annual dollar value traded divided by the float-adjusted market capitalization should be 1 or greater, and a minimum of 250,000 shares must trade in each of the six months prior to evaluation.

These rules essentially protect the average American with their retirement accounts in passively managed index funds from getting scammed.

Essentially the S&P is mulling over whether or not Elon Musk, Sam Altman and others should be able detonate everyone’s retirement accounts by forcing them into the indices right away forcing passively managed funds to buy their IPO at terrible valuations and causing a huge destabilization.

This might be one of the reasons that Berkshire is holding nearly 400 billion in treasuries. When the S&P index blows up and valuations crash they will go shopping.

Any thoughts are appreciated this is probably the biggest threat financially speaking to the average American and nobody is talking about it.

Being honest I agree 100% with the fantastic business portion but I disagree with the opinion that you must buy at a fair price. In fact I think that you can pay almost any price for that fantastic business and it will work out if you hold long enough.

When I turned 18 I evaluated fantastic businesses I thought had true staying power per Charlie and Warrens wisdom. I paid arguably terrible prices at the time on Costco, Microsoft, Apple, Google, Amazon and Berkshire shares in 2011. Those holdings have all eclipsed the return of the S&P 500 by a crazy amount over the years since. If you would have asked me at the time I would have freaked out if one of those shares jumped up 5$ the day before I bought or dumped 5$ the day after. Now I realize I could have paid double or triple and still made out like a bandit, it didn’t matter what I paid at the time but the enduring strength of the overall business.

 I got incredibly lucky over the years picking those six and there were no Costco warehouses in my area growing up but always remembered Charlie spouting the virtues of the business and how great their model was. After I researched Costco I pulled the trigger on the stock despite having never experienced shopping there in person and only knowing affluent friends who used to shop there, a very risky play in my opinion. 15 years later it is the only place my family and I shop in person now for clothes, groceries and household items. I still use my iPhone everyday and do work on a Windows OS, I use Amazon for things I can’t find at Costco and Google search 100 things a day. Unfortunately I don’t use any Berkshire products or services often as I find them to be way too expensive with an exception in Dairy Queen, I love the peanut buster parfait.

Per Greg Abel there is increasing competition in the insurance and reinsurance space due to capital flowing in I assume they are taking about Progressive and a few other big competitors. Greg Abel said and I think correctly evaluates that it will be hard to catch up or maintain their customer base throwing the insurance income on a slow incline or even temporary stagnation.

The BNSF railroad is shutting down many cars due to high oil and diesel prices and not highlighter during the meeting but something I think is important is BNSF getting sued by their customers at higher and higher rates for breach of contract. Greg Abel stated that BNSF is underperforming other peers and while the margins are slowly improving yoy they are still 8% behind the leaders in the rail industry which is a huge gap to bridge even over a decade in my eyes.

The energy business faces increasing amounts of competition due to the AI data center build out and while they are trying to keep up with demand there is alot more capital than even Berkshire can provide flowing into that space though I hope with the midstream elements that they own will remain highly profitable and steadily growing.

That leaves the smaller manufacturing businesses which are going strong, See’s Candies, Dairy Queen and the various dividend streams from stock positions which I see as their second strongest growth and stability elements. Berkshire can’t live and die off this and the energy segment alone.

Which leaves the giant wooly mammoth in the room their excess capital stored in treasuries. I am going out on a limb and saying half of the capital $200 billion is used solely for the insurance side of the business which leaves approximately 197 billion.

Why don’t they start purchasing slowly at 10 billion a quarter fantastic businesses at fair prices that Warren has touted for nearly fifty years. I have no doubt they can find these deals. It would really help the balance sheet and investors worried over the miss allocation of capital and the value of USD getting devalued by putting them into quality businesses. If that isn’t an option do more stock buybacks which they have already announced they were doing just repurchase at $10 billion a quarter at good value. That leaves $187 billion after for the next quarter, still plenty of cash for acquisitions and it’s being replenished over time by the wonderful businesses they already own. A simple measured response in my mind but what do you guys think?

Greg Abel and Ajit Jain did a good job overall but the questions all seemed to be feel good nonsense as usual. Now that Warren and Charlie (RIP) are phased out of operations I hope we as shareholders get into the habit of fielding hard questions instead of phishing for compliments / golden rule esque bible and folk wisdom.

I would love to hear your thoughts!