WEBVTT - Kimberly-Clark to Buy Tylenol Maker Kenvue for $40 Billion 0:00:02.759 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business App. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.120 or watch us live on YouTube. 0:00:23.200 --> 0:00:26.599 Through Kimberly Clark buying ken View in a cash in 0:00:26.600 --> 0:00:29.600 stock you're worth about forty billion dollars. To include debt 0:00:29.600 --> 0:00:31.960 in there, the enterprise value blows up to forty eight 0:00:32.000 --> 0:00:33.440 point seven billion dollars. 0:00:33.680 --> 0:00:34.599 Diana Gomez a. 0:00:34.560 --> 0:00:38.040 Senior equity research analyst for Bloomberg Intelligence and has been 0:00:38.080 --> 0:00:39.159 covering this deal. 0:00:39.280 --> 0:00:40.879 Diana, what's your first take on it? 0:00:42.920 --> 0:00:48.760 So it is surprising in many ways from the perspective 0:00:48.800 --> 0:00:53.760 of Kimroy Clark, I must confess it shows that ken 0:00:53.880 --> 0:00:56.480 View really has a lot of work to do to 0:00:56.560 --> 0:01:01.320 turn around the business since it's split from Change about 0:01:01.360 --> 0:01:06.399 two years ago, and the third quarter miss just added 0:01:06.440 --> 0:01:08.920 up to a pile of disappointing results. 0:01:09.800 --> 0:01:13.120 Diane, I'm looking at the Cambrian clarkstock trading down eleven 0:01:13.160 --> 0:01:16.320 twelve percent here. What's that telling you? Are they overpaying? 0:01:16.440 --> 0:01:19.560 Is the market skeptical about synergies? What do you read 0:01:19.600 --> 0:01:19.959 into that. 0:01:21.560 --> 0:01:24.600 I believe more the later. In terms of the synergies, 0:01:25.120 --> 0:01:31.759 it is quite a steep climb. Obviously, there's a ton 0:01:31.959 --> 0:01:35.520 of law hanging fruit, let's say, in terms of efficiencies 0:01:35.520 --> 0:01:39.120 that can be gained in terms of plugging the great iconic, 0:01:39.440 --> 0:01:45.920 well known trusted brands from Canview into Caneview's system that 0:01:46.200 --> 0:01:50.960 is running at more efficient level at the moment, but 0:01:52.040 --> 0:01:55.480 it will there is septicism there because we are talking 0:01:55.480 --> 0:02:00.240 about revenue synergies as well as cost synergies, and this 0:02:00.320 --> 0:02:04.760 will be quite a complex new company. At the point 0:02:04.840 --> 0:02:09.720 when Kimberly Clark was just simplifying as they were, they 0:02:09.720 --> 0:02:13.760 are aiming to close the transaction on their international business 0:02:13.880 --> 0:02:19.919 I think was segments like tissue in mid twenty twenty six, 0:02:20.520 --> 0:02:24.160 and now this merger expected to close around the same time. 0:02:24.720 --> 0:02:28.120 Just seems to complicate the picture a little bit. Oh yeah, 0:02:28.200 --> 0:02:32.040 that is the TI And yes, and we know how 0:02:32.120 --> 0:02:36.280 Kenby has been dealing with some crisis in the last 0:02:36.800 --> 0:02:41.200 months with tailan Ore and then with talk all suits 0:02:41.240 --> 0:02:42.600 outside the US as well. 0:02:42.440 --> 0:02:44.639 So I'm glad you went there. The tailanol situation. 0:02:45.040 --> 0:02:49.200 The Trump administration has been attacking Thailand a overall. Do 0:02:49.240 --> 0:02:52.280 you think that's something that might complicate this deal? Could 0:02:52.360 --> 0:02:57.200 regulators step in and hold things up or raise questions 0:02:57.280 --> 0:02:58.720 that will just drag things out? 0:03:01.320 --> 0:03:04.720 Quite different questions, I would say, but great questions. So 0:03:04.880 --> 0:03:10.359 in terms of Taileno, the legal risk is there. The 0:03:10.800 --> 0:03:14.480 can View was already fighting in the courts some lawsuits, 0:03:14.560 --> 0:03:18.799 but we now have Texas State wall suit on top. 0:03:19.720 --> 0:03:25.440 On top of it, the humor re quarks price when 0:03:25.440 --> 0:03:28.760 we walk in terms of, for instance, and a bit 0:03:28.919 --> 0:03:34.360 to enterprise value multiple and I'm taking twenty twenty six, 0:03:35.720 --> 0:03:39.840 twenty twenty five sorry that they will report, so that 0:03:40.000 --> 0:03:44.279 will come at about fourteen times, whereas history call transactions 0:03:44.320 --> 0:03:47.360 in the consumer health space were in the range of 0:03:47.440 --> 0:03:50.840 sixteen to twenty times, So fourteen times comes below that. 0:03:51.000 --> 0:03:55.119 So really reflecting not only the struggles of can View 0:03:55.160 --> 0:03:59.880 where their organic growth is still declining, but also the 0:04:00.240 --> 0:04:04.480 viability risk with lawsuits that are ongoing. And that's a 0:04:04.560 --> 0:04:08.240 new lawsuits that can be added as well. In terms 0:04:08.280 --> 0:04:14.480 of the say antitrust competition regulatory approval, as I see it, 0:04:14.760 --> 0:04:18.320 they don't really overlap directly, but it really depends on 0:04:19.200 --> 0:04:23.200 a country region by region basis. Because we know the 0:04:23.360 --> 0:04:26.480 US stands can be very different from the European Commission one. 0:04:27.640 --> 0:04:30.159 Yeah, I should we expect more consolidation in the consumer 0:04:30.200 --> 0:04:31.520 product space, do you think. 0:04:33.240 --> 0:04:39.400 Yes? So that's a team that I've been watching very closely. Obviously, 0:04:39.480 --> 0:04:44.400 we had other large form of groups with significant consumer 0:04:44.440 --> 0:04:47.599 health businesses, so we are talking not only over the 0:04:47.640 --> 0:04:52.920 counter medicines but also the more personal care that deals 0:04:52.960 --> 0:04:58.120 with wellness. Sanofi decided to sell it to private equity, 0:04:58.560 --> 0:05:01.080 so at least for the next few years, that is 0:05:01.200 --> 0:05:07.119 thought buyer is still considering while not considering, as management says, 0:05:07.279 --> 0:05:10.840 puts it. But buyer still has their consumer health business 0:05:10.920 --> 0:05:15.920 and they could be walking into either wasting it or 0:05:16.920 --> 0:05:19.880 further consolidation within the current employers. 0:05:20.279 --> 0:05:20.920 Stay with us. 0:05:21.080 --> 0:05:23.359 More from Bloomberg Intelligence coming up after this. 0:05:27.040 --> 0:05:30.720 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:30.800 --> 0:05:33.919 weekdays at ten am Eastern on Apple, Cocklay and Android 0:05:33.920 --> 0:05:37.239 Auto with the Bloomberg Business app. Listen on demand wherever 0:05:37.279 --> 0:05:40.799 you get your podcasts, or watch us live on YouTube. 0:05:41.440 --> 0:05:43.040 Paul and I were just joking about how there was 0:05:43.080 --> 0:05:46.800 this headline that was basically clickbait, Amazon inching a thirty 0:05:46.839 --> 0:05:49.680 eight billion dollar deal with open ai for in video chips. 0:05:49.720 --> 0:05:51.520 You've got Amazon, you've got open. 0:05:51.320 --> 0:05:53.720 Ai, you've gotten video, and you've got a massive number 0:05:53.800 --> 0:05:56.280 thirty eight billion. So let's bring in man Deep Singh 0:05:56.279 --> 0:06:00.440 Bloomberg Intelligence senior tech industry analysts on these latest developments. 0:06:00.640 --> 0:06:02.080 Mandeep, I've lost. 0:06:01.760 --> 0:06:04.800 Track of how many companies open ai has signed deals with. 0:06:04.880 --> 0:06:07.120 It feels like the bigger questions who has it not 0:06:07.240 --> 0:06:08.400 signed a deal with at this point. 0:06:09.080 --> 0:06:11.719 That's a good way of framing it. But look, I 0:06:11.720 --> 0:06:15.080 mean they have announced their intentions very clearly that they 0:06:15.120 --> 0:06:18.400 want to add up to thirty gigawatts of capacity, So 0:06:18.560 --> 0:06:21.880 in the end, it is all tied to that bigger 0:06:21.920 --> 0:06:24.400 goal of you know, adding thirty gigawats. And just to 0:06:24.440 --> 0:06:28.760 put it in perspective, I mean, the entire gigawatt capacity 0:06:28.800 --> 0:06:33.800 of all the hyperscalers combined is around that ballpark thirty gigawats. 0:06:34.080 --> 0:06:36.920 So they are talking about, you know, some big numbers 0:06:36.960 --> 0:06:40.000 in terms of capacity editions. How they will do it, 0:06:40.400 --> 0:06:42.840 one is through a deal with Oracle, so that was 0:06:42.880 --> 0:06:45.600 a tree hundred billion dollar deal. Then they signed a 0:06:45.640 --> 0:06:49.240 two hundred and fifty billion dollars deal with Microsoft. So 0:06:49.720 --> 0:06:52.200 when you look at it. From that perspective, thirty eight 0:06:52.200 --> 0:06:55.760 billion is not that big. And look, I mean I 0:06:55.839 --> 0:06:58.919 can see what open ai is doing because they've seen 0:06:59.040 --> 0:07:03.800 you know, and sign a deal with Microsoft first, and 0:07:03.880 --> 0:07:06.760 then they signed a deal with Google TPUs. So Entropic 0:07:06.839 --> 0:07:09.920 and open ai are the purest place when it comes 0:07:09.920 --> 0:07:13.160 to llms. And if Entropic is getting all that compute 0:07:13.160 --> 0:07:16.960 capacity from the two hyperscalers that you know, open ai 0:07:17.120 --> 0:07:20.440 was doing business with, it was mostly Microsoft and then 0:07:20.600 --> 0:07:24.880 Microsoft added Entropics. So from that perspective, I can see 0:07:24.920 --> 0:07:27.320 why open ai wants to go to Amazon, which they 0:07:27.320 --> 0:07:28.080 haven't done so far. 0:07:28.120 --> 0:07:29.480 It's an arms race essentially. 0:07:29.600 --> 0:07:35.400 Yeah, yeah, Nthropic, open Ai. These are private companies, correct, Yeah, 0:07:35.480 --> 0:07:37.680 where are they getting this cash for all these big 0:07:37.720 --> 0:07:41.679 purchases and investments and things? Am I missing the funding 0:07:41.760 --> 0:07:42.280 rounds here? 0:07:42.960 --> 0:07:43.239 Well? 0:07:43.360 --> 0:07:46.920 So look at what they've done in terms of their valuation. 0:07:47.280 --> 0:07:51.280 OpenAI has grown to five hundred billion dollars in valuation 0:07:51.440 --> 0:07:54.120 this year. They started off the year at around two 0:07:54.200 --> 0:07:56.720 hundred billion dollars. So that just goes to show that 0:07:56.880 --> 0:08:00.000 every funding round they have attracted more money. In fact, 0:08:00.040 --> 0:08:03.160 people are lining up to give them money now, I 0:08:03.200 --> 0:08:07.080 mean granted, their revenue is still the latest numbers are 0:08:07.120 --> 0:08:10.800 close to fifteen billion dollars in ARR. That's growing over 0:08:10.800 --> 0:08:13.640 one hundred percent. Of what they have promised to investors 0:08:13.720 --> 0:08:15.960 is they'll get to one hundred billion in ARAR by 0:08:16.000 --> 0:08:19.480 twenty twenty seven, twenty twenty eight. What is average annual 0:08:20.200 --> 0:08:23.400 and recurring revenue? So that's where that's how we measure 0:08:23.440 --> 0:08:26.480 all the software companies. When you think about even fifteen 0:08:26.480 --> 0:08:29.400 billion dollars in ARAR puts them among the top ten 0:08:29.480 --> 0:08:34.400 software companies. So already openy is among the top ten 0:08:34.440 --> 0:08:35.240 software account You. 0:08:35.240 --> 0:08:36.920 Walk in and I want to poke holes in it, 0:08:36.960 --> 0:08:37.920 but he's got to. 0:08:38.200 --> 0:08:40.680 I know, I'm shaking in my head as he's talking 0:08:40.679 --> 0:08:42.200 about this conviction. 0:08:42.200 --> 0:08:43.760 Mandy, is there a point where. 0:08:43.559 --> 0:08:45.400 Open ai gets so big that it has to go 0:08:45.480 --> 0:08:47.880 public that it can no longer stay a private company? 0:08:48.160 --> 0:08:50.840 I mean, they already changed this structure where Microsoft got 0:08:50.880 --> 0:08:52.760 a twenty seven percent stake. 0:08:52.559 --> 0:08:55.880 Now and so yeah, but they're like multiplying in growth, 0:08:55.960 --> 0:08:57.920 so this will last for a little bit. And then 0:08:58.000 --> 0:09:00.280 the same question arises again, isn't it does? 0:09:00.320 --> 0:09:03.040 But they are separating out the nonprofit part with the 0:09:03.840 --> 0:09:08.040 profit entity that will go public and then they will 0:09:08.080 --> 0:09:10.280 sell their shares. I don't know how much money they 0:09:10.280 --> 0:09:12.680 would want to raise, given how much they are already 0:09:12.760 --> 0:09:16.160 raising in the private market. So look, I mean it's 0:09:16.280 --> 0:09:19.280 inevitable a company like open Ai, if they get to 0:09:19.320 --> 0:09:21.760 one hundred billion in revenue over the next three years, 0:09:22.160 --> 0:09:24.320 they have to be a public company. I just can't 0:09:24.320 --> 0:09:25.520 imagine them being private. 0:09:25.559 --> 0:09:28.520 And are the regulations that's push them in that direction? 0:09:28.600 --> 0:09:29.160 I mean, isn't it. 0:09:29.200 --> 0:09:31.079 You have a certain number of shareholders and at some 0:09:31.200 --> 0:09:33.480 point you have to you have to list. 0:09:33.640 --> 0:09:36.080 I mean, think about the backers of the company who 0:09:36.080 --> 0:09:38.880 are participating in these funding rounds. They would want an 0:09:38.920 --> 0:09:43.800 exit strategy. You know, you're you're kind of becoming an 0:09:43.800 --> 0:09:46.400 investor right now with the hope that you can get 0:09:46.400 --> 0:09:48.480 a return. And so once a company gets to one 0:09:48.559 --> 0:09:50.840 hundred billion dollars in revenue, I'm sure a lot of 0:09:50.960 --> 0:09:52.559 those investors will want an exit. 0:09:53.800 --> 0:09:59.640 Google announces big Capex race, stock goes up. Facebook and 0:10:00.040 --> 0:10:02.640 ounces big Kapex raised stock goes down. 0:10:03.280 --> 0:10:06.480 Why Because at the end of the day, you have 0:10:06.559 --> 0:10:09.880 to show ROI and you have to show revenue. In 0:10:09.920 --> 0:10:13.280 the case of Meta, they are planning to spend over 0:10:13.280 --> 0:10:16.880 one hundred billion dollars in capex next year with no 0:10:17.200 --> 0:10:20.880 explicit cloud revenue. So think of what Amazon's thirty eight 0:10:20.880 --> 0:10:24.520 billion dollar deal does today. It will add five billion 0:10:24.559 --> 0:10:28.040 dollars in revenue starting twenty late, twenty twenty six and 0:10:28.080 --> 0:10:31.720 twenty twenty seven onwards. Every year, this thirty eight billion 0:10:31.760 --> 0:10:35.360 dollar means they'll add five billion in revenue. That's how 0:10:35.440 --> 0:10:37.880 much open ai will end up paying Amazon. In the 0:10:37.920 --> 0:10:40.920 case of Meta, they're spending one hundred billion plus with 0:10:41.120 --> 0:10:45.400 no promises that they will somebody will pay for their infrastructure. Yes, 0:10:45.480 --> 0:10:48.640 they're getting some lift in their app pricing, but that's 0:10:48.679 --> 0:10:51.559 not enough to justify one hundred billion dollars in capex. 0:10:51.600 --> 0:10:55.280 So that's where the ROI question is the most obvious. 0:10:55.320 --> 0:10:57.959 In the case of Meta, because obviously they keep raising 0:10:58.000 --> 0:10:59.160 their numbers and they. 0:10:59.200 --> 0:11:01.839 Keep costing some say they're going to do other than advertising. 0:11:01.840 --> 0:11:03.160 What does Meta say they're going to get n one 0:11:03.200 --> 0:11:03.839 hundred billion dollars. 0:11:03.960 --> 0:11:07.160 Yeair pitches, We've got, you know, this family of apps 0:11:07.200 --> 0:11:10.480 with over three billion monthly active users, where people are 0:11:10.480 --> 0:11:14.480 spending forty minutes a day. We will give them more 0:11:14.520 --> 0:11:17.240 AI functionality. Look at what open ai has done with 0:11:17.400 --> 0:11:20.520 AI generated content. What Meta is saying is our AI 0:11:20.600 --> 0:11:24.120 generated content will be better than you know these llms, 0:11:24.400 --> 0:11:26.800 and that will drive engagement and will monetize it for 0:11:26.880 --> 0:11:27.440 you ads. 0:11:27.559 --> 0:11:29.880 Right, but they aren't able to provide explicit numbers in 0:11:29.920 --> 0:11:32.160 the same way that others are able to. So isn't 0:11:32.160 --> 0:11:35.520 that a good sign that equity investors are discerning are 0:11:35.840 --> 0:11:39.240 making a distinction between Meta and Amazon and alf BET 0:11:39.240 --> 0:11:41.680 and Microsoft that you know, they're poking holes in some 0:11:41.760 --> 0:11:44.080 of these narratives that the companies are. 0:11:43.840 --> 0:11:47.320 Are absolutely I think right now the market is making 0:11:47.360 --> 0:11:50.800 that distinction, which is why Amazon actually trails so far. 0:11:51.120 --> 0:11:53.719 It's only after their recent print that you got a 0:11:53.800 --> 0:11:56.240 lift in Amazon, and you know now with this deal, 0:11:56.600 --> 0:11:59.920 suddenly they're starting to see some more monetization for Amazon. 0:12:00.200 --> 0:12:02.240 So does that show that even if you're kind of 0:12:02.320 --> 0:12:04.439 late to the party as Amazon was, you can make 0:12:04.520 --> 0:12:07.559 up for lost ground, that the race hasn't gone too 0:12:07.600 --> 0:12:08.440 far ahead of you. 0:12:08.720 --> 0:12:12.120 I mean the paths right now is through AI infrastructure. 0:12:12.160 --> 0:12:16.320 Renting AI infrastructure, whether it's power or data center capacity 0:12:16.520 --> 0:12:20.600 or GPUs. That's where everyone is convinced there is revenue 0:12:20.800 --> 0:12:23.880 and there are profits. When it comes to applications. It's 0:12:23.920 --> 0:12:26.959 still very hazy in terms of which business model will 0:12:26.960 --> 0:12:30.040 actually generate profits or not. So I think the market 0:12:30.120 --> 0:12:32.480 has done a good job in terms of discerning where 0:12:32.520 --> 0:12:34.480 the monetization is so far. 0:12:34.800 --> 0:12:37.960 Stay with us. More from Bloomberg Intelligence coming up after this. 0:12:41.880 --> 0:12:45.559 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:45.640 --> 0:12:48.720 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:48.760 --> 0:12:52.040 Auto with the Bloomberg Business app. Listen on demand wherever 0:12:52.120 --> 0:12:55.600 you get your podcasts, or watch us live on YouTube. 0:12:56.280 --> 0:13:01.040 Berkshire Hathaway reported really strong earnings and it also reported 0:13:01.080 --> 0:13:03.120 that they have about three hundred and eighty two billion 0:13:03.200 --> 0:13:05.559 dollars of cash on the balance sheet, which begs the question, 0:13:05.600 --> 0:13:08.560 as it does every quarter, as it has for years, 0:13:09.000 --> 0:13:11.520 what do you do with all that money? Matthew Polozola, 0:13:11.760 --> 0:13:14.600 Senior Analyst, Property and capturin the Inschurch and Bloomberg Intelligence 0:13:14.679 --> 0:13:15.760 Droids is here in our studio. 0:13:16.120 --> 0:13:17.000 I'll tell you what you do. 0:13:17.240 --> 0:13:19.200 Your buy backstock and you put a three percent dividend 0:13:19.280 --> 0:13:22.520 yield on You give that cash back the shareholders. That 0:13:22.559 --> 0:13:24.839 falls on dep fears at Berkshire Hathaway, Right, I. 0:13:24.800 --> 0:13:28.120 Think so, I mean looks certainly a good problem to have, 0:13:28.840 --> 0:13:30.560 and I would make e quibble a little bit so 0:13:30.600 --> 0:13:34.760 that that three eighty two includes twenty ish billion in 0:13:36.040 --> 0:13:39.120 treasuries that didn't settle, So it's probably three sixty billion. 0:13:39.240 --> 0:13:39.880 Just a lot. 0:13:40.280 --> 0:13:42.040 It's a lot now, I would say. 0:13:43.040 --> 0:13:46.440 The interesting thing thing is the stock has underperformed the 0:13:46.559 --> 0:13:49.160 market by like thirty percent since Buffett announced that he 0:13:49.240 --> 0:13:52.600 was stepping down in May, and they haven't bought any 0:13:52.640 --> 0:13:54.080 stock over that entire period. 0:13:55.600 --> 0:13:56.120 Yeah, it does that. 0:13:56.160 --> 0:13:57.840 I turned my mic on, I say why. 0:13:57.760 --> 0:13:58.960 Yeah, So. 0:14:01.200 --> 0:14:03.320 Buffett used to have a rule when the stock was 0:14:03.760 --> 0:14:07.120 above one point two times priced to book, they wouldn't 0:14:07.120 --> 0:14:09.400 buy it back. They kind of kicked that out and 0:14:09.400 --> 0:14:10.679 they said, we're just going to buy it back whenever 0:14:10.720 --> 0:14:13.240 we see intrinsic value below. 0:14:13.679 --> 0:14:16.160 So, you know, I don't to me it begs question. 0:14:16.320 --> 0:14:18.280 I mean, maybe he sees the stock as kind of 0:14:18.400 --> 0:14:20.280 fully valued, even down you know. 0:14:20.480 --> 0:14:23.320 Year to date, even with the lagging performance as well. 0:14:23.400 --> 0:14:27.240 So does that change when greg Able, the handpicked successor 0:14:27.280 --> 0:14:30.160 to warn Buffett, takes the reins officially at the end 0:14:30.160 --> 0:14:30.560 of the year. 0:14:31.600 --> 0:14:35.640 You know, Scarlet, he walks a fine line between putting 0:14:35.680 --> 0:14:38.320 some sort of stamp on the company maybe over time 0:14:38.440 --> 0:14:42.120 and then kind of respecting the ethos of Berkshire and 0:14:42.160 --> 0:14:45.760 how they've operated, I would hope something happens. I mean, 0:14:45.960 --> 0:14:48.600 they did a ten billion dollar deal in the fourth quarter, 0:14:48.640 --> 0:14:52.480 they bought the oxycam business from Occidental. They just don't 0:14:52.520 --> 0:14:55.000 have things that can move the needle very much. Even 0:14:55.000 --> 0:14:59.680 in the quarter, their net stock buys and sells or 0:15:00.000 --> 0:15:02.320 negative six billion dollars, so they were negative on other 0:15:02.360 --> 0:15:03.080 equities as well. 0:15:03.160 --> 0:15:05.720 Yeah, there were net seller stocks for twelfth straight quarter, 0:15:06.200 --> 0:15:08.720 and that cash and equivalence. 0:15:08.320 --> 0:15:10.520 Was at a record high at the end of September. 0:15:11.200 --> 0:15:14.080 Is that a signal that they're waiting for the market 0:15:14.080 --> 0:15:17.680 to tank, that they see a correction, maybe not tank 0:15:17.760 --> 0:15:19.480 that might be too strong, they see a correction or 0:15:19.520 --> 0:15:20.840 consolidation in the near terment. 0:15:20.920 --> 0:15:21.560 Are ready for it. 0:15:23.360 --> 0:15:25.600 They're always ready for it. You know. 0:15:25.680 --> 0:15:28.800 Buffett has always said, we're not looking to time the market. 0:15:28.840 --> 0:15:32.760 We're just looking for good companies. He's also been you know, 0:15:33.000 --> 0:15:35.120 when I talk to people that the thought is is 0:15:35.120 --> 0:15:37.360 he just hoarding money for greg Abel and kind of 0:15:37.400 --> 0:15:39.360 setting the company up and just handing it over. 0:15:39.600 --> 0:15:43.840 He's said he's not doing that. So, you know, unfortunately, don't. 0:15:43.880 --> 0:15:47.240 They don't talk to investors, so we don't can't really 0:15:47.240 --> 0:15:50.200 pick his brain besides at the annual meeting, so we 0:15:50.200 --> 0:15:51.800 don't exactly know what's going on there. 0:15:53.240 --> 0:15:57.560 I think he's just extra conservative in his old age. 0:15:57.560 --> 0:15:58.200 I guess right. 0:15:58.240 --> 0:16:01.280 And here's my cynical Wall Street perspective. When mister Buffet 0:16:01.360 --> 0:16:05.400 passes three percent dividend yield, massive stock buyback, do you 0:16:05.400 --> 0:16:06.360 think that's a scenario. 0:16:06.920 --> 0:16:07.560 I think. 0:16:09.680 --> 0:16:12.640 Dividend yield, hopefully you know, some sort of dividend, maybe 0:16:12.680 --> 0:16:18.280 special dividends. The buy back I think will also kind 0:16:18.320 --> 0:16:21.000 of weigh on what able sees the intrinsic value. So 0:16:21.040 --> 0:16:24.520 I would say probably hopefully dividend. I would say maybe 0:16:24.840 --> 0:16:28.360 more steady buyback. There's also they can't buy back a 0:16:28.360 --> 0:16:32.120 ton of shares on volume because you know, there's rules 0:16:32.120 --> 0:16:33.760 on how much they can buy back and how active 0:16:33.760 --> 0:16:35.240 they can be in the market, so that limits them 0:16:35.240 --> 0:16:35.640 a little bit. 0:16:35.680 --> 0:16:36.640 That's plan B. We got it. 0:16:38.040 --> 0:16:40.120 Don't you have to split the stock like a gajillion 0:16:40.160 --> 0:16:40.400 to one. 0:16:40.880 --> 0:16:42.360 They have the A shares and the B shares. 0:16:42.400 --> 0:16:45.240 But there's I don't have all the exact rules, but 0:16:45.280 --> 0:16:48.360 they've talked about we can only buy back so much 0:16:48.360 --> 0:16:50.520 at a time they bought by none. So I think 0:16:51.000 --> 0:16:54.120 a steady buy back plus some returns of capital and 0:16:54.200 --> 0:16:56.800 forms of I would hope special dividends. They maybe they 0:16:56.800 --> 0:16:59.680 don't want to be beholden too a regular quarterly dividend. 0:17:00.360 --> 0:17:01.160 Yeah, makes sense. 0:17:01.200 --> 0:17:05.600 Okay, so that's something we'll watch for when that eventually happens. 0:17:05.640 --> 0:17:08.920 In the meantime, how are the businesses of Berkshire Hathway performing, 0:17:09.040 --> 0:17:09.920 especially insurance? 0:17:10.040 --> 0:17:12.120 Yeah? So all good. 0:17:12.200 --> 0:17:15.480 In the quarter, the insurance business made much more money 0:17:15.520 --> 0:17:17.280 than the year ago, but that was because they had 0:17:17.280 --> 0:17:19.560 a bunch of large losses in the year ago. They 0:17:19.600 --> 0:17:24.320 also had this favorable reserve development, which means they write 0:17:24.320 --> 0:17:26.879 business and those losses come in better or worse than 0:17:26.920 --> 0:17:31.239 they expect over time, and that was those losses were 0:17:31.240 --> 0:17:34.360 coming in better than they expected. So that is it's 0:17:34.400 --> 0:17:36.920 a good thing, but it's not a super high quality 0:17:37.000 --> 0:17:37.960 source of earnings. 0:17:37.960 --> 0:17:38.160 Beat. 0:17:38.280 --> 0:17:41.159 So the insurance business performed well on those two things 0:17:41.200 --> 0:17:44.960 which aren't super high quality in my opinion. The underlying 0:17:45.000 --> 0:17:48.240 business and the insurance doing well. The problem is hard 0:17:48.320 --> 0:17:51.320 for it to get much better next year. The underwriting side, 0:17:51.480 --> 0:17:54.400 the prices in that are going down so I think 0:17:54.440 --> 0:17:57.920 it's tough to see the insurance underwriting doing better next year. 0:17:58.080 --> 0:18:00.640 It's also tough to see the investment it's doing better 0:18:00.640 --> 0:18:03.399 next year. And we're talking about really just the fixed 0:18:03.440 --> 0:18:06.360 income investment. So like the equities, who knows what happens. 0:18:06.600 --> 0:18:08.840 But in terms of the interesting come, we saw that 0:18:08.920 --> 0:18:10.200 decline in the quarter as well. 0:18:11.000 --> 0:18:13.240 The business fundamentals of the underlying businesses. 0:18:13.680 --> 0:18:15.760 Did they move the stock historically? Not really. 0:18:16.200 --> 0:18:20.640 Yeah, it's tough because I asked the one fundamental question. 0:18:20.680 --> 0:18:22.240 That's enough. Let's get back to the main point of 0:18:22.359 --> 0:18:24.160 the story here. It's also my job too. 0:18:24.320 --> 0:18:27.840 But is there an activist investor who's ever oh, good question, 0:18:28.040 --> 0:18:29.320 one word about this company? 0:18:30.200 --> 0:18:33.359 So historically there have been investors very vocal about it. 0:18:33.720 --> 0:18:37.080 I don't, I don't have names, But no one's ever 0:18:37.119 --> 0:18:40.040 been able to move the new buffet's always the majority shareholder. 0:18:40.119 --> 0:18:42.640 So there's really been no one who's ever been forcing 0:18:42.680 --> 0:18:46.520 them to do anything. And so why would they even listen? 0:18:46.640 --> 0:18:48.280 And can you do that with a company that has 0:18:48.320 --> 0:18:50.199 an A class year and B class year with this 0:18:50.400 --> 0:18:50.800 what is. 0:18:50.760 --> 0:18:52.280 His voting control? 0:18:52.520 --> 0:18:53.960 I haven't done it, man, I don't, I don't, I 0:18:53.960 --> 0:18:55.640 don't know, at the top of my head, I thought 0:18:55.640 --> 0:18:57.480 it was something like sixty percent of the share or 0:18:57.520 --> 0:19:01.119 something like that, and other inside will hold more. So 0:19:01.920 --> 0:19:04.840 there's almost no way of wrestling control from him. The 0:19:04.880 --> 0:19:06.560 A shares and the B shares they did so the 0:19:06.600 --> 0:19:09.399 A shares are several hundred thousand dollars, and then they 0:19:09.480 --> 0:19:12.040 instituted the B shares and they're they're getting peg to 0:19:12.119 --> 0:19:14.080 each other, so they can't. 0:19:14.119 --> 0:19:15.960 You can't. You couldn't buy up the B shares and 0:19:16.320 --> 0:19:17.560 kind of take control either. 0:19:18.160 --> 0:19:19.840 They've come up with all kinds of rules to make 0:19:19.880 --> 0:19:22.000 sure that all the things you just proposed can't happen. 0:19:23.320 --> 0:19:27.120 He's not a dumb guy bother Yeah, exactly right. It's 0:19:27.160 --> 0:19:28.160 been extraordinary run. 0:19:28.520 --> 0:19:30.479 Is there a sense that the law of large numbers 0:19:30.640 --> 0:19:32.920 over the last several years, if not the last decade, 0:19:33.080 --> 0:19:33.960 is kind of caught up to this. 0:19:33.960 --> 0:19:34.760 Name, Yeah, for sure. 0:19:34.800 --> 0:19:38.320 I mean they they bought a company for twelve billion dollars, Allegheny, 0:19:38.359 --> 0:19:40.560 and it barely moves the needle. They bought this oxy 0:19:40.600 --> 0:19:45.399 Cam for ten billion, barely moves the needle. They bought 0:19:45.440 --> 0:19:48.280 like twenty billion of Chevron stock two years ago. It 0:19:48.320 --> 0:19:50.320 didn't even come up at the annual meeting. People didn't 0:19:50.320 --> 0:19:52.840 even ask about it. I was sitting there. I couldn't 0:19:52.840 --> 0:19:55.600 believe it is that no one's going to ask about this. So, 0:19:56.440 --> 0:19:59.479 you know, there's just things that are are tough for 0:19:59.520 --> 0:20:01.840 them to to move in from having so much money. 0:20:02.400 --> 0:20:05.480 They're making those investments in Japan, which I think are interesting. 0:20:05.520 --> 0:20:07.320 So they invest in the trading houses in Japan. 0:20:07.960 --> 0:20:09.600 It's hard for. 0:20:09.520 --> 0:20:11.639 Me to know a ton about those businesses. Some of 0:20:11.680 --> 0:20:14.399 them are like mini Berkshire's. Maybe this is stuff that 0:20:14.440 --> 0:20:17.879 they kind of do in the future. Also the energy business. 0:20:17.960 --> 0:20:21.240 Greg Abil's an energy guy. Aon is an insurance broker. 0:20:21.280 --> 0:20:23.680 They talked about last week. This huge opportunity with the 0:20:23.760 --> 0:20:27.800 hyperscalers needing risk transfer services and other things. So those 0:20:27.800 --> 0:20:29.960 are things that fit right into berkshires wheelhouse right, the 0:20:30.040 --> 0:20:32.840 risk transfer and the energy businesses, So those are opportunities 0:20:32.840 --> 0:20:33.639