Tuesday, 15 May 2012

Berkshire-Hathaway doesn't have any shares of JP Morgan, despite Warren Buffet's respect for Jamie Dimon and the fact that Mr. Buffett has personally purchased JP Morgan stock. A week ago, this was a confusing paradox. Today, however, meaning shines through.

What happened at JP Morgan Chase? It's a little complicated...

After the catastrophic bank collapse during the depression, legislation was drafted in an attempt to prevent high-risk moves and big losses by banks. Unfortunately, that legislation (known as the Volcker Rule) is in a permanent holding pattern. While JP Morgan Chase was wary of the rule for its limitations on banks' ability to trade on their own accounts and actively lobbied against it, essentially arguing that banks self-regulate more effectively than would be achieved with stricter federal oversight. Their $2 billion loss, however, speaks to the contrary. As nice as the idea of letting those in the industry do what they do best, this blunder is giving the nation pause to deliberate the effectiveness and consequences of laissez-faire banking. As Reuters' Felix Salmon put it: "JP Morgan more or less invented risk management. If they can't do it, no bank can. And no sensible regulator can ever trust the banks to self-regulate." 

Back to Buffett - at the Berkshire-Hathaway meeting this year, DealB%k's Andrew Sorkin asked why Berkshire didn't invest in JP Morgan when it is in Warren's personal portfolio. The answer was vague, stating that he was interested in the stock and had the means to invest in it personally. "My best ideas are all in Berkshire" he added. For many, the reply didn't satisfy. They wanted to know more about his thought process. Why wasn't JP Morgan Chase good enough? Why not split the difference between Wells Fargo and Chase? 

Now, warranted or not, JP Morgan's loss goes into the "win" column for Buffett. Without having to explain himself further, his caution is justified. It is likely the questions will wane, if not stop, when people look at the variances between his personal portfolio and Berkshire's. What was likely true all along has been highlighted by the JP Morgan Chase loss. As put by Business Insider's Sam Ro:

"When investing, Buffett is willing to take risks. However, when there are any doubts about a prospective investment, it won't go into the Berkshire portfolio. Ultimately, Buffett's investment philosophy is much more rigid for Berkshire-Hathaway than it is for himself."

Tuesday, 08 May 2012

For the third year, Omaha saw its population expand by approximately 35,000 over the past weekend. At most, 18,975 of the weekend pilgrims were in the CenturyLink Center listening to a handfull of fellows discuss the eighth largest public company in the world. While ado was made about the "Buffett Rule," focus remained largely on overall gains by Berkshire-Hathaway, general advice, and words of wisdom regarding energy operations.

Tuesday, 01 May 2012

With Berkshire-Hathaway's Annual Meeting this Saturday, we will be dedicating our May blog to all things BRK.

Tuesday, 03 April 2012

Earlier in this year, we had unprecedented strength in housing data. While many believed the numbers represented an end to the housing market decline, others were more reserved - concerned the strong numbers were a result of mild winters nationwide.

Tuesday, 27 March 2012

With gas prices reaching record highs in Milwaukee and across the United States, the search for a plausible alternative is going into high gear. We took a brief look at energy sources throughout time, but where are we headed? For some ideas, we're looking to a few centers of influence.