Marathon Petroleum Keeping America Great; Berkshire Hathaway Making America Great -- April 5, 2019

This is so incredibly cool. Some months ago, I said that US refiners would finally realize that they need to optimize their operations for light oil, and since then we have had several stories that they are doing just that, slowly but surely.

Don sent me this link yesterday, or maybe the day before. I'm only now getting caught up.

Making America great again.

Marathon Petroleum will upgrade its Galveston Bay refinery. Link here. Data points:

• $1.2 billion upgrade
• its Galveston Bay refinery: the second biggest refinery in the US
• upgrade over three years (can you say lots of jobs?)
• will add 40,000 bopd throughput
• will generate $525 million in earnings/year

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Berkshire Hathaway's Annual Report

Delivered to your mailboxes over the weekend, I do believe.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here.

Big takeaways from the Berkshire Hathaway annual report:

• the company will no longer report annual change in book value (or something like; when I get home, I will check exact verbiage); with new SEC regulations, it no longer makes sense; has to do with mark-to-market stuff; I understand it completely (seriously); there were probably better ways for the SEC to handle this problem but it is what it is; by the way, the "mark-to-market" issue was responsible for the summer, 2009, stock market crash;
• Berkshire Hathaway will now replace the annual change in book value with share price (at least I thought that's what I read; I'll check it when I get home); if so, that makes lots of sense; will drive the SEC nuts [it is explained in the note below the photo below; from the annual report]
• Berkshire Hathaway is desperate for a "big purchase" but cannot find any company out there worth buying at current prices; Warren says he refuses to overpay, though he admits that he has
• instead of buying any company outright in the near future, Berkshire will go back to what it used to do: buy equity but not the entire companies
• if one didn't know the "whole" story about Heinz, one would hardly be enlightened by the annual report

I give a fair amount of grief to Warren Buffett and Berkshire Hathaway for what they report and what they don't report and how they report it but in the big scheme of things, one has to admit, reading their annual report, especially the introductory letter by Warren is incredibly interesting and educational.

The one-page history of Geico and Berkshire Hathaway is worth the price of the annual report.

Sophia has been reading her "Bob" books to me, and I've been reading "Peppa the Pig" to her, but starting tonight, I'm going to start reading Berkshire's annual report to her. But first, she told me, driving to Tutor Time this morning, she wants to stop for gas on the way home.

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Berkshire Hathaway Inc

Letter to the shareholders, page 3, starting near the bottom of that page:

Long-time readers of our annual reports will have spotted the different way in which I opened this letter. For nearly three decades, the initial paragraph featured the percentage change in Berkshire's per-share book value. It's now time to abandon that practice.

The fact is that the annual change in Berkshire's book value -- which makes its farewell appearance on page 2 -- is a metric that has lost the relevance it once had. Three circumstances have mad that so.....

• Berkshire has morphed from a company whose assets are concentrated in marketable stocks into one whose major value resides in operating businesses ... that is expected to continue ..
• while our equity holdings are valued at market prices, accounting rules require our collection of operating companies to be included in book value at an amount far below their current value, a mismark that has grown in recent years
• it is likely that -- over time -- Berkshire will be a significant repurchaser of its shares, transactions that will take place at prices above book value but below our estimate of intrinsic value. The math of such purchases is simple: each transaction makes per-share intrinsic value go up, while per-share book value goes down. That combination causes the book-value scorecard to become increasingly out of touch with economic reality.

In future tabulations of our financial results, we expect to focus on Berkshire's market price. Markets can be extremely capricious: just look at the 54-year history laid out on page 2. Over time, however, Berkshire's stock price will provide the best measure of business performance.