Berkshire Hathaway’s cash increased to $128.65 billion in the fourth quarter of 2022 up from nearly $109 billion in the third quarter according to the latest Berkshire Hathaway annual letter. Even more astonishing is Apple represents nearly 40% of Berkshire’s portfolio, a stock that he purchased more of in Q4. My favourite quote from the annual letter: “When you are told that all (stock) repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive)”. Read the full letter here.
US inflation in January rises higher than expected
The Fed’s preferred measure of inflation – the core personal consumption expenditures price index increased 4.7% from a year ago adding to the expectation that the Fed will have to keep rates higher for longer. Inflation as we all know and love it including food and energy rose 5.4%.
HSBC profits from higher interest rates
Quarterly pretax earnings came in at $5.2 billion versus $2.7b billion for the same period last year. Full-year profits at $17.5 billion were lower than last year’s $18.9 billion due to the costs of selling a French bank. Rising credit losses were blamed on higher inflation.
Walmart and Home Depot: the consumer is under pressure
Walmart CFO John David Rainey: “The consumer is still very pressured… and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods. And so that’s why we take a pretty cautious outlook on the rest of the year.”. Home Depot Chief Financial Officer Richard McPhail: “We’ve seen an increasing degree of price sensitivity as the year’s gone on, which is actually sort of what we predicted in the face of persistent inflation.”
Tesco, ASDA and Morrisons don’t want you to eat real food
The rising costs of production such as energy have curtailed the supply of fresh fruit and vegetables to UK supermarket shelves. As a result, they’ve limited what consumers can purchase. ASDA has introduced ‘MAX3’ – “We have introduced a temporary limit of three of each product on a very small number of fruit and vegetable lines, so customers can pick up the products they are looking for.”
Intel cuts dividend by 65%
There is now open talk of NVIDIA replacing Intel in the DOW after its stock plunged from $68 a share in April 2021 to $25 this week. On top of cost cuts, CEO Pat Gelsinger intends to grow the dividend over time after a drastic cut – “The board and I continue to view the dividend as a critical component to the overall attractiveness of Intel”. A declining PC market and demand for its own products – its customers simply have too many chips and need to work through their own inventories. “While we know this dynamic will reverse, predicting when is difficult”.
Fed minutes: the inflation fight continues
There are signs that inflation is falling, but labor markets “remained very tight, contributing to continuing upward pressures on wages and prices“. Members believe that ongoing rate hikes will be necessary because more evidence of progress across a broader range of prices would is required. A few members of the FOMC members wanted a half-point or 50 basis-point rather than the recently announced quarter-point rise a few weeks ago.
St. Louis Fed President James Bullard wants rates north of 5%
“We have a good shot at beating inflation in 2023”. Bullard wants rates to go higher now so that in his opinion, the FOMC has a better chance of beating inflation in 2023. “Our risk now is inflation doesn’t come down and reaccelerates, and then what do you do? We are going to have to react, and if inflation doesn’t start to come down, you know, you risk this replay of the 1970s … and you don’t want to get into that. Let’s be sharp now, let’s get inflation under control in 2023.”