Berkshire Hathaway sells US airline shares | Hacker News Reader

Berkshire Hathaway sells US airline shares

bbc.co.uk

60 pointsrvz18 comments

He had nothing but positive things to say about the American economy. He spent a large amount of time at the beginning putting things in prospective, to show the amazing growth we've had since the nation's beginnings.

He was careful to always talk about "the next 20 to 30 years." That's something he always does, saying he can't predict what happens over the next year. However, between the lines, it seems like he was not optimistic about the short run. I think you could see it on his face.

Maybe it was just not having Charlie Munger around to throw out quips between questions.

This happened sometime in April. They sold enough to get under 10% ownership (reporting requirements) around early April.

Most institutional investors most likely already assumed they were preparing to unload the rest of their positions. But now everyone has the confirmation, they spent the rest of the month after that unloading those shares.

More important than the headline, is that Buffett said they currently aren't buying anything. They most likely expect another leg down.

Now that he’s shown his hand, will everyone else that own airline stocks head for the exits? And effectively cause a “bank run” on the equities.

This coming Monday might be an interesting day in history.

Apparently Buffet isn't afraid of the printer, which is massively disrupting what should be a bear market.

Regardless of whether or not we are printing money, it's better to invest into companies that have a future, as opposed to ones that are going to be limping along.

Airlines will need a lot of government money to stay afloat, and it may come with strings attached, to the detriment of shareholders.

But that's now impossible to know. Any bailed out company by definition had no immediate future. Yet here we are.

Understanding the investments, having at least a rough idea of their future potential, is one of Buffett’s things.

That’s why it should be no surprise he’s pulled out of this sector.

I think it was more a surprise that he bought in at all. Interesting reading in this context, is from 2017, when they bought into these positions - https://www.businessinsider.com/warren-buffett-blasted-the-a...

Buffett appears to have very much a love/hate relationship with the Air sector. Every time he buys in, he gets bitten.

And I'm saying it's all fooey. A real 'oracle' in a free market would have pulled out in January. The government is not going to let the airlines fail. To be clear, I'm not insulting or saying I know better than Buffet, just that the Fed throws a wrench in all logic.

You Are trying to reason as if the action happened in a vacuum. He’s not pulling out the money because he’s certain the entire airline industry is going to disappear. He’s pulling out because the uncertainty for the industry is much higher than his investments in other industries. The fact that the Fed is throwing wrenches in normal logic supports that decision, it doesn’t negate it.

> The government is not going to let the airlines fail.

Just because a company won't fail doesn't mean it's a good investment to hold on to. Maybe Buffett thinks that it will take years for the airlines to become profitable again, or even that they'll never be profitable again and will be subsidized by the government forever.

> The government is not going to let the airlines fail.

That’s pretty much the logic my dad used when he advised me to invest £1,000 in Lloyds bank when I was still at university.

LLOY is currently trading at 5% of the price I paid for them. Not 5% less, which would be bad enough after 15 years, but 5% of their original value.

Can the Fed really save them all?

So much for being a self-proclaimed “free market”. We might as well call this the United Socialist States of America.

He then said he had been wrong to invest in the airline industry.

Is this really news worthy? A $50bln loss for Berkshire Hathaway is a joke after decades of relentless compounding growth.

If anything, this should be a boon for his insurance holdings because now their liabilities are an "act of god."

> Is this really news worthy? A $50bln loss for Berkshire Hathaway is a joke after decades of relentless compounding growth.

It's quite obvious you're just headline reading here & don't understand why its newsworthy. With the loss, He goes into extensive detail about these losses in his shareholders letters.

And, didn't accounting rules change recently for how you report that on your P&L? He now has to report swings not just value created/lost when he enters/exits a position.

I remember reading something about that in the last year.

This is pretty significant, as besides Berkshire's IBM gaffe [0], Berkshire is famed to hold positions for long periods of time, even through very tough down cycles. IMO based on their take here, it says quite a bit about the near future of the air travel industry.

[0] https://www.cnbc.com/2018/05/04/warren-buffett-says-berkshir...

Hmmm. What about NetJets?

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