Warren Buffett continues to sell his holdings $Bank of America (BAC.US)$.

According to the Form 4 filed last week, Berkshire Hathaway reduced its Bank of America shares by 22.3 million shares between September 17 and 19, generating proceeds of $0.8961 billion at an average price of $40.23 per share.

Following this latest sale, Berkshire Hathaway's stake in Bank of America has decreased to 10.8%. Once the percentage drops below 10%, the company will no longer need to promptly disclose its reducing stake.

Since initiating the 'sell' button on July 17, Buffett has sold around $8 billion worth of Bank of America stocks, representing nearly 20% of his holdings.

Buffett has not provided any explanation for the selling reasons so far.

The only notable response came from Brian Moynihan, the CEO of Bank of America.

As a 'party involved' and a CEO who is often praised by Buffett, Brian stated at a financial conference hosted by Barclays on September 10 that he did not inquire about Buffett's sales in the past two months, 'So I don't know what he's really up to, because frankly, we can't ask and we won't ask.'

(Note: In 2008, Bank of America acquired Countrywide (the biggest subprime seller), referred to as the worst deal in history by The Wall Street Journal. Brian, originally the general counsel for Bank of America, performed exceptionally during the financial crisis. After the CEO resigned before 2009, he took up the reins, cut costs, and divested assets, leaving a good impression on Buffett.)

Brian added, 'On the other hand, the market is absorbing stocks, which is part of the daily trading volume... Life will go on.'

The CEO also sincerely expressed that when investors were full of concerns about the aftermath of the 2008 and 2009 financial crisis, Berkshire made its first $5 billion investment in 2011. Buffett is 'a great shareholder' who 'stabilized our company when we needed it.'

At that time, Berkshire obtained common stock warrants through its $5 billion preferred stock investment. After exercising them in 2017, the preferred stock was converted into 0.7 billion shares of common stock, at an actual price of only $7 per share.

Berkshire later purchased 0.3 billion shares at a price close to $30 per share.

In a 2019 episode of 'Rubenstein Show,' Brian actually revealed the behind-the-scenes story of Buffett's purchase of Bank of America.

This is an interesting conversation.

Rubinstein asked Brian, 'During the financial crisis, did the company also face operational difficulties? Did you need to call someone like Buffett for help? Was it difficult to pick up the phone at that time? Did you offer him any conditions proactively?'

"I didn't expect Brian to reply blandly, 'I didn't call him, he called us.'"

"Moreover, he directly called the customer service switchboard at that time, asking them to transfer the call to me, but the customer service couldn't transfer every call directly. Later, the CFO of Berkshire Hathaway found a way to reach me, finally allowing us to talk."

"Buffett said he wanted to invest in us. My response was, 'We don't need an injection of funds.' He said, 'That's why I called, you need to stabilize the stock price, and my funds can help you.'"

"That was in 2011 when the U.S. government faced default and various uncertainties, including mortgage and legal risks."

"We had our first call on Monday, signed an agreement on Tuesday, and received the money on Thursday."

"That's how he did it."

"Anyone can buy synchronously in the secondary market. He not only has the courage, but also has $5 billion in cash that no one else had at the time."

Later, this event was interpreted as Buffett's investment decision made in the bathtub. It is said that before communicating with Brian, Buffett was in the bathtub, contemplating the potential opportunities of Bank of America, and then decided to invest $5 billion.

Buffett sometimes humorously taunts himself with this, indicating that although his investment decisions are well-considered, they are not necessarily made in a traditional office environment.

The cooperation between Buffett and Brian has been sweet. If we include the dividends income of over $6 billion over the years (rough estimate, including preferred dividends from 2011-2017 and subsequent common stock dividends), Buffett has already recovered the costs of his investments in Bank of America over the years. The 0.836 billion shares he currently holds, valued at over $33 billion, are all profits!

So it's speculated that Buffett may not actually sell all of his Bank of America holdings. He may just settle some of the lucrative profits because when he started selling, the bank's stock price had already risen by over 30% this year.

Buffett and Brian have had very few public appearances together in the past 13 years. Intelligent investors (ID: Capital-nature) found a precious video from 2013 showing both of them participating in a charity event at Georgetown University, translating the valuable exchanges and sharing them with everyone.

Brian repeatedly says that Buffett is the "real rock star".

01 Washington Source

Brian, everyone says Washington is one of your hometowns, what is your connection to this place?

Buffett, 66 years ago, I delivered newspapers at Georgetown Hospital in Washington, which was a place where tips were easily received. I have many fond memories of Georgetown. During World War II, I was also in Washington. At that time, my father was a congressman, and that was the most united time I experienced in America.

Brian, you started investing very early, what fascinated you?

Buffett, indeed, since the age of 11. I spent 5 years delivering newspapers and saved $120 to buy my first stock. Every Saturday morning at my father's office, I would read books related to investments, I read every book I could get my hands on.

I really enjoy this activity. If it were baseball or other sports, they would be limited by physical conditions, but investing is not affected at all even if my legs have problems.

I have always been happy with this job, and I can be with people I like. Like people say, it's like dancing to work, but I'm already 83 years old, it's best not to let me demonstrate here.

02 Charity

Brian, let's talk about your charity work. How did you come up with the idea of ​​doing this with the Gateses?

Buffett Three or four years ago, we invited David Rockefeller to host a private dinner in New York with 16 to 18 attendees, inviting Oprah Winfrey, Mayor Bloomberg, and others. After listening to everyone's ideas about charity, we decided to invite more billionaires to make a commitment to donate at least half of their assets to charity.

For some people, this is difficult because it's like facing death and planning for what comes after. At this point, I would advise them, saying, if you can't make a decision at 70, will you have better decision-making skills at 95?!

People need the power of role models. We will collect letters from people like Rockefeller and put them on the website, which is really worth reading. Of course, we hope to attract young people like Zuckerberg and leverage their influence.

What I really want to emphasize is that I admire the ordinary people who donate a few dollars to us every weekend, money they could have used to watch movies or eat out. They actually give up things that could benefit them.

For me, I already have everything money can buy, so charitable donations don't affect me. The stocks I hold are useless to me, but they could be helpful in vaccines, education, and other areas.

Brian Why choose to cooperate with the Gates couple?

Buffett Originally, my wife and I planned to use the remaining money for society when we were in our twenties. I thought she would outlive me, after all, she was younger and women live longer, but she passed away in 2004, so I had to change the plan.

Practice makes perfect. I want to find those who are very good at donating money, younger, energetic, smart, and share the same goals in charity as I do. The basic principle of the Gates Foundation is that every life is equally valuable.

I have set up substantial foundations for each of my three children, and you can find relevant information on the Berkshire Hathaway website. My advice to them is, if everything they do in charity is successful, then they are doing it wrong, because important things are often difficult.

Brian, are you asking them to spend all the money within ten years of your passing?

Buffett, yes, I don't think I can choose a great-grandchild to accomplish this just because he shares my last name.

Brian, you are doing some different things in charity, like the East Lake Golf Project in Atlanta. You and Tom Cousins have done a lot of work for the long-term development of different communities.

Buffett, we aim to use a holistic approach, take ten years to develop entirely new communities, and promote this approach, along with Julian Robertson, but mainly Tom Cousins.

About a week ago, he published an article in The Wall Street Journal, describing this, he is an amazing person.

When you have the opportunity to work with high-quality, energetic, and intelligent people, and invest your own money, you seize the chance.

03 Economy

Brian, what do you think of the current economy?

Buffett, five years ago we experienced an unprecedented panic, we were very lucky, I'm serious. We were on the edge of a cliff, I attribute this to Ben Bernanke, Hank Paulson, and Tim Geithner, especially to President Bush, whom I once voted for.

If you have studied economics, you will know that Adam Smith proposed the famous theory of comparative advantage, Keynes talked about animal spirits, but President Bush, in just a few words, put forward what I consider to be the greatest economic insight in history.

In September 2008, he walked out of the White House (supporting the $700 billion rescue plan), saying, 'If money isn't loosened up, this sucker could go down.'

Now businesses are back. Many companies, including ours, are making record profits. But as a whole, the American people have not recovered.

The newly released Forbes 400 rich list shows that the total wealth of these 400 people is $2 trillion, compared to $300 billion 20 years ago.

If you read today's newspaper, you will find that the median income is the same, this is in terms of real purchasing power. It hasn't changed since 1989, and inequality is getting worse.

The rich live very well, do very well in business, have very high business profit margins, and the return on tangible business assets is amazing.

But for most people in our country, if we talk about the bottom 20% of households, there are approximately 60 million people, and the highest level is only $22,000. How to support several children.

With a per capita GDP of $50,000, we can produce a large number of goods and services, but we have not yet learned how to let everyone share the wealth we have.

Think about it, people are very dissatisfied with 2% per year, but with a population growth of 1% per year, it means the actual per capita growth rate is 1%. In 20 years, within a generation, the per capita GDP has grown by 20%, which is still fairly good within a generation.

The issue lies in how it is distributed. We must ensure that everyone participates to a reasonable extent. We don't want equal outcomes, but we also want a basic level that everyone is satisfied with.

Companies that effectively utilize artificial intelligence will initially be relatively few, unless we see many companies applying large language models to industries where this advantage can truly be leveraged.

04 The lesson of 70 years of experience

Brian As someone with 70 years of investment experience, what do you think are the lessons we have learned over the past few cycles?

Buffett The lesson is that people will continue to make the same mistakes.

When the real estate bubble bursts, people will feel panicked and want to escape. Although each situation is different when it happens, humans will maintain the same behavior.

Therefore, we will encounter recessions from time to time, occasionally accompanied by panic, but not all recessions stem from panic.

The good news is, in the 20th century, we went through two world wars, the Great Depression, the Spanish flu, the Cold War, nuclear weapons, and the Dow Jones Industrial Average rose from 66 to 11,497 points.

I bought my first stock at the age of 11 in the spring of 1942, just a few months after the Pearl Harbor incident. We were severely hit in the Pacific, and the European front was also not optimistic, but we have overcome it now.

Brian, what is your most optimistic view for the next ten years?

Buffett, I just imagine going back hundreds of years to 1789 when there was nothing here.

We eventually have a quarter of the world's GDP, and we want to better understand how to use these resources as we progress. You don't have to worry about systemic issues, you will have periodic recessions, and occasional panics.

In the fall of 2008, I wrote a column in The New York Times saying that this country will come back.

Brian, when was your best investment time?

Buffett, I have always believed that the best time to invest is tomorrow, because investing always brings very interesting events.

In 1950, when I was 20 years old, I first encountered GEICO, an insurance company. I was following Ben Graham, who taught value investing at Columbia University, and I found out that he was the chairman of GEICO.

I went to the company on a Saturday, and Lorimer Davidson, who was working overtime, spent four hours giving me, a young stranger, a lecture on everything about insurance.

When you reach my age, you will remember the help you received from different people, because no one can invest alone. Just like Obama said in the campaign that no one does things alone. We all have sat in the shade of trees planted by others and cooled off.

In 1976, GEICO miscalculated reserves and faced bankruptcy. In a very short time, I bought one-third of the shares in the market, which had become half by 1995 (they would buy back shares).

I went to see Mr. Davidson, who was 96 or 97 at the time. The stocks in his hands were almost costless. I said, if I propose to buy now, you will have to pay a large amount of tax. So if you disagree, I won't propose it.

He said to me, Warren, this is my lifelong wish.

That's how we bought the remaining parts of the company. He is a great person.

Question Session

Student 1 Do you have any recommended stocks? After all, us students also need to make some money.

Buffett I bought Benjamin Graham's 'The Intelligent Investor' in 1949. I don't remember how much I spent, I think besides two marriage certificates, this is the best investment I have ever made in my life.

Having the right framework is very important. You need to have a rational investment approach. Graham's approach is very simple, but some people embraced it, I embraced it immediately, and most people did not.

If you have the right investment ideas, you will find opportunities in the next 20, 30, 40, 50 years.

Frankly, you are most likely to find them in a period like five years ago when there is market panic, stocks sometimes sell at foolish prices, most stocks will be sold at a very foolish price at some point.

You don't need a high IQ to find them very cheap, but you need the courage to take action.

I often say that when it comes to investing, if you have an IQ of 160, give away 30 points to someone else because you don't need it.

I discovered early on that you don't need to be very smart, but you must have the right mindset: you must be able to ignore what others say, look only at the facts, and then decide whether the stock is selling at X or 2X.

When you can't find such an opportunity, it's better to do nothing.

Brian, just buy Bank of America now.

Student 2, you have invested in China, South Korea, Israel, recently interacted with 3G Capital, is it time to enter Brazil?

Buffett, I don't know where I'm going to invest next, that's what makes my job interesting, I'm not kidding.

If you play golf and hit a hole every time, you will give up because the game is no longer interesting.

So I like not knowing what my next step will be.

You mentioned that in 2006 I invested in Israel (note: the first major overseas investment), when I received a letter, I had never heard of IMC, ISCAR Metalworking, or the Wertheimer father and son before.

The letter, one and a half pages long, stated that if their family ever wanted to sell the company, the only company they wanted to sell it to was Berkshire Hathaway. If I was interested, they would be happy to come from Israel to discuss with me.

I replied to their email, and they soon came over. We bought 80% of this company I had never seen before for 4 billion US dollars.

Later, I actually visited the factory, and I had never seen an industrial park this clean. They said that's why they wanted me to see it with my own eyes. I said if I had seen it first, I would have paid more.

Regarding Brazil that you mentioned, I became acquainted with Jorge Paulo Lemann of 3G Capital during my time on the Heinz board.

He presented to me a proposal for Heinz during a flight, emphasizing the opportunity to acquire outstanding companies like Heinz. It was a great opportunity for us.

Let me tell you another impressive story. After our discussion, he sent me a page describing how both parties would advance corporate governance, taking into account the interests and demands of both sides. I didn't have to change a single word. Who wouldn't want to deal with someone like that.

Student 3, you mentioned how people make the same mistakes in both periods of prosperity and recession. Recently, there has been explosive growth in derivatives. You once referred to derivatives as weapons of mass destruction, do you think this could set the stage for the next financial crisis?

Buffett, if you look at what happened in September and October 2008, you will find that some unusual things happened.

The Federal Reserve injected $85 billion into American International Group (AIG), without doing so, our world would be very different.

Hank Paulson provided backing for money market funds, at that time, 30 million Americans panicked about money market funds, when $300 billion flowed out of non-government money market funds in 3 days, 125% of it returned to the government's $300 billion, which was almost equivalent to Wells Fargo & Co or then Wachovia's deposits.

The only way to prevent panic is for capable individuals to do whatever it takes, as Bernanke and Paulson did. And with the support of the President, this is the way to end a true panic.

In any case, the nation will survive crises, but it is difficult to establish regulations to stop people's foolish behavior, especially in recent years, where foolish behavior has proven to be very profitable.

Everyone thinks they are Cinderella at the ball, enjoying everything wonderfully, assuming they must leave at 11:58. But there is no clock on the wall, they are all still dancing.

So panic and everything will happen again. When it happens, people like me will buy in.

Student 4 Bernanke is leaving office next January. Regardless of who takes over, do you think they should continue the Federal Reserve's highly controversial QE program? If so, how long will it continue?

Buffett: I think they should adopt Bernanke's approach. He said he would continue to do so until he sees more improvement.

Economically, I think he's a bit disappointed, um, not particularly disappointed, but the speed of economic recovery over the past few years has been a bit slow. A few days ago, he also mentioned further extending (quantitative easing) terms, continuing to observe until seeing results.

He doesn't know the timing, but he will say that he will make changes when certain conditions arise.

The economy is recovering... We are conducting an unprecedented experiment, I mean, the Fed's balance sheet is as high as $3.5 trillion, and usually, buying securities is easier than selling securities.

Brian: But Warren, as we discussed before, doing so means the economy has to grow faster.

Buffett: He's not under pressure.

You know, the Fed is the largest hedge fund in history. I mean, you have $1 trillion in funds, provided by currency and circulation, without any cost.

Then you provide banks with about $1 trillion at a rate of 25 basis points. Calculated, the Fed has about $80 billion or a similar size profit margin.

The Federal Reserve is the fourth largest contributor to the US government's income, currently this is the case, but it was not the case a few years ago.

Therefore, the Federal Reserve has no pressure and can choose the timing on its own. If the Federal Reserve is steered by wise individuals, I think Bernanke is wise, and I also hope that his successor can handle this issue well.

Student 5 Munger said, "Warren and I always stay away from industries we don't understand." So you have confectioners, railroads, and Coca-Cola.

But now the world is changing, we are living in a new era. Perhaps in a few years, everyone will pay with an iPhone, and Bank of America will no longer issue credit cards...

Buffett: What should an old dinosaur like me do?

Student 5: Uh, you really don't know a lot of things.

Brian: He will show you his flip phone.

Buffett: Look at my new phone. I just replaced the telephone invented by Alexander Graham Bell (the father of the phone) with my flip phone. (He takes out his flip phone from his pocket, the audience applauds)

Student 5 My question is, new technologies are changing everything, and you cannot stay out of it by just sticking to tradition. In this situation, how do you evaluate and identify outstanding companies? What is the most important thing?

Buffett The most important thing is to make decisions, to be able to determine which things you can make wise decisions about; which things are beyond your capabilities, you cannot assess.

You don't have to make correct judgments about thousands of companies. You only need to make correct judgments about a few companies.

On July 5, 1991, I met Bill Gates in Seattle.

Bill said, you must have a computer. I asked, why? He said, well, you can use it to do your taxes. I said, I have no income, and Berkshire doesn't pay dividends. He said, well, you can track your investment portfolio. I said, I only own one stock.

Um, what I mean is, he told me that the computer would change everything.

I said, will it change whether people chew gum? He said, probably not. I said, will it change what kind of gum people chew? He answered not too much.

I said, then I'll keep making gum, and you keep making computers. I don't need to know everything, I just look for opportunities in the business I understand.

I do have a relatively good understanding of businesses like Bank of America, so I also invested. I am quite knowledgeable about some numbers and businesses.

Ted Williams wrote a book called 'The Science of Hitting'.

He had a chart showing the strike zone where he could swing the bat. He divided the sweet spot into 77 squares, each the size of a baseball. He said, 'If I only swing at balls in my sweet spot area - the chart shows his batting average in these areas is .400.'

If he has to swing at low and outside pitches, even if these pitches are still in the strike zone, his batting average drops to .230.

He said the most crucial part of hitting is waiting for the right time to swing.

But Ted has a disadvantage; when the count is 0-2 or 1-2, even if the ball lands in an area he's not good at, he still has to swing.

However, in investments, there is no concept of 'striking out.' People can throw various stocks like Microsoft, General Motors... at me, I don't have to swing, and no one will ask me to exit just because I don't act. It's only when I swing and my investment fails that it is counted as a failure.

So I can wait there, observing thousands of companies day after day, only when I see a company I understand, and I like its price, I will swing. If I hit, great; if I miss, it's just a failure.

So, this is a game with a huge advantage.

It is a serious mistake to think that you must have an opinion on everything. You only need to have opinions on a few things.

In fact, I have told students that if they graduate with a punch card with 20 holes, representing all the investment decisions they can make in their lifetime, they will become very wealthy because they will take every decision seriously.

You don't need to make 20 correct decisions to become very wealthy. You know, maybe four or five correct decisions are enough.

So I'm not too worried about things I don't understand. If you can understand some developing businesses and identify opportunities within them, like recognizing the opportunity with Amazon, that's really great. What Jeff Bezos has achieved is huge, and I salute him. He is an excellent businessman and a good person.

But can I foresee him being successful when other ten people won't? I'm not that good. Thankfully, I don't need to be.

I don't need to have an opinion on Amazon. I have my own judgment on Bank of America and Coca-Cola. Coca-Cola has been around since 1886. 1.8 billion 8-ounce servings of Coca-Cola products are sold each day.

Now, if you could earn an extra cent from each one, that would be $18 million per day, which is $7.3 billion per year, or $6.57 billion (note: he just casually mentioned these numbers, he's an 83-year-old man).

So Coca-Cola can generate a revenue of $6.575 billion per year just by charging an extra penny.

Do you think Coca-Cola is worth an extra penny compared to Joe's Cola? I think so. I have historical data of about 127 years to prove this. This is the type of decision-making I like to make.

You may have a completely different area of expertise, and you may be more knowledgeable about emerging businesses than I am. If you can understand a few of them and predict their future, you can become very wealthy.

Fortunately, I don't need to. If we invest in Heinz because I see people putting ketchup on hamburgers and potatoes, I believe this consumption pattern will continue.

Moreover, some products can be distributed globally, while others cannot. Chocolate bars are not easily sold across borders. If you look at Cadbury chocolate bars in the United Kingdom, they don't sell well in the USA; and if you look at Hershey's chocolate bars in the USA, they also don't sell well elsewhere. Soft drinks and ketchup can be distributed globally.

I prefer products that can be distributed internationally. Thank you very much.

Editor/Somer