Five minutes a week that makes you smarter and calmer about your own money — plus a look at what I’m actually doing with mine…
Last week I promised to tell you what Warren Buffett’s company Berkshire Hathaway bought with the rest of the $24 billion they spent on share purchases last quarter. We knew he had spent $10 billion on Alphabet (Google), but we didn’t know where the remaining $14 billion went.
Why do we care what he bought? Because he’s the world’s most successful investor, that’s why, so there is nobody better to learn from and follow.
It turns out most of the mystery money was spent on even more Google shares, and a big chunk of the rest went into an airline he ditched completely in 2020!
Also this week: America's long-term borrowing costs hit their highest since 2007. That sounds like Washington's problem, but it reaches all the way to UK mortgage rates.
THIS WEEK IN 30 SECONDS
Berkshire's filing revealed the full Alphabet position: $38 billion, now its third-biggest holding.
Five years after swearing off airlines, Berkshire is now Delta Airlines second-biggest shareholder.
The interest rate America pays to borrow for 30 years hit its highest since 2007, and the same force sets UK mortgage rates...
THIS WEEK IN MONEY
What Buffett bought with the missing billions
Two weeks ago we knew Berkshire had spent about $20 billion on shares last quarter, but only the $10 billion Alphabet cheque had a name on it. Now we know the rest.
Most of the mystery money went on more Alphabet. On top of the $10 billion of shares Alphabet sold him directly in June, Buffett bought about $7 billion more. In total, Berkshire added 48 million Alphabet shares in three months, taking the stake to $37.8 billion at the end of June. Only his Apple and American Express holdings are bigger.
What it means for you: Nothing needs doing. If you hold an S&P 500 or global tracker you already own plenty of Alphabet, and you owned it before Buffett did.
The $4 billion mistake Berkshire just reversed
In May 2020, Buffett sold every airline share Berkshire owned — stakes in Delta, United, American and Southwest worth more than $4 billion — telling shareholders "the world has changed for the airlines."
He sold near the bottom, and later called it an understandable mistake.
The world changed back. This filing shows Berkshire bought 44% more Delta Airlines last quarter. It now owns 8.7% of the airline — about $5.4 billion worth — making it Delta's second-biggest shareholder.
What it means for you: You're allowed to change your mind. Buffett sold at the bottom, called it a mistake in public, and has now bought back in without any hand-wringing about what he said in 2020.
If something in your portfolio needs fixing, don’t be afraid to admit you got it wrong — fix it.
America's 30-year borrowing cost hit a 19-year high
On Tuesday, the yield on the 30-year US Treasury bond — the interest rate America pays to borrow money for thirty years — climbed above 5.3%, its highest since June 2007.
What it means for you: Bond yields sound like something only pension fund managers need to care about, but that one number is the benchmark almost everything else is priced against — including UK mortgage and annuity rates, because our bond market moves with America's.
Our own 30-year gilt yield touched its highest since 1998 earlier this year. How the machinery works is explained below.
WHAT I'M DOING
I'm writing this from Île de Ré, on a road trip through France, so the portfolio has been left to get on with it.
The one exception: QXO went on sale at a price too good to miss, so I bought some more whilst I was away.
Free readers get the thinking. Full members get the specifics — every holding, every buy and sell as I make it, and the real performance figures.
ONE THING WORTH UNDERSTANDING
Bond yields
A bond is an IOU. You lend a government £100, it pays you a fixed amount of interest each year — say £4 — and hands your £100 back at the end.
The yield is what that deal earns you at today's price, because bonds are traded after the government issues them and the price moves. If buyers go off the IOU and the price drops to £80, that fixed £4 of interest is now a 5% return instead of 4%. The price and the yield sit on a seesaw: when one goes down, the other goes up.
The reason it matters to you is that government bonds are the "safe" option every other investment is measured against. When the safe option pays 5.3%, shares have to offer more to be worth the risk, which is one reason they wobble when yields rise.
Mortgage lenders price their fixed deals off these markets, and annuity rates are built on them, so the effect is more far-reaching than it may seem.
When governments pay more to borrow, so does everyone else.
MONEY MYTH OF THE WEEK
"Copy Buffett's trades and you'll get Buffett's returns."
The filing where we got details of Buffett's share purchases is called a 13F, and it comes with a catch: it's published 45 days after the quarter ends. Those Alphabet shares were bought between April and June; you found out in mid-August. You get the trade months late, with no idea what he paid or why, and no notice when he sells.
And Berkshire got terms you can't have: the $10 billion of Alphabet came directly from the company at $351.81 a share, 7.5% below the market price that day, although it has since dropped below that.
So if you want to buy Alphabet, you can now get it cheaper than Warren Buffett did!
I use these filings as a source of ideas to research, and that's how Alphabet ended up on my list. I’m still undecided at present, as to whether to start a new position, or whether my existing portfolio stocks are a better use of capital at the moment.
JARGON, DECODED
Gilts — UK government bonds, the British equivalent of America's Treasuries. The name comes from the original certificates, which had gilded edges: "gilt-edged" meant as safe as lending gets. When a headline says gilt yields are rising, it means the UK government is paying more to borrow, and that anyone buying gilts today gets a better rate for lending.
WORTH YOUR TIME
Book of the week: The Psychology of Money, by Morgan Housel. We featured this in July and I make no apology for repeating it — it's the book I'd hand to anyone nervous about investing. Doing well with money, Housel argues, has little to do with how clever you are and a lot to do with how you behave. Both of this week's lessons are in it. £7.99 on Kindle, £8.49 in paperback. Get it on Amazon here.
Look up any famous investor's holdings yourself. The filings quoted in this letter are free to search. Type a name at https://13f.info and the whole portfolio comes up.
BEFORE YOU GO
Know someone who can quote Buffett but has never bought a share? Forward this to them.
See you next week.
Tim
P.S. Two dates for the diary. On Wednesday, Nvidia, the company at the centre of the AI boom, reports results after America closes. On Friday the new head of the US central bank gives his first big speech. I'll cover both next week.
P.P.S. I promise not to mention Warren Buffett at all next week. Probably.
I am not a financial adviser. Nothing here is personal financial advice. Please do your own research before making any investment decisions.