Garry Kasparov: How the free world gave Putin the green light; Berkshire Hathaway's fourth-quarter earnings report and share repurchases; Visiting family and friends

1) A few readers have asked me why I haven't commented on Russia's invasion of Ukraine, which is dominating headlines and causing big swings in the markets.

The simple answer is that I don't have any particular insights beyond reading the papers and watching the news like everybody else.

Forced to share an opinion, I'd say I agree with Russian former world chess champion, Garry Kasparov, who's been warning the world for well over a decade – mostly to no avail, sadly – about the dangers posed by Vladimir Putin. For example, in 2015 and 2016 he published these op-eds in the Wall Street Journal, Putin's Culture of Fear and Death and The U.S.S.R. Fell – and the World Fell Asleep, and in 2016 he published this book, Winter Is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped.

Kasparov shared his latest views in this recent op-ed in the Chicago Tribune, How the free world gave Putin the green light. Excerpt:

Early Thursday morning, Germany invaded Ukraine. So did the Netherlands, Italy, France, Great Britain, and every other country that has supported Russian dictator Vladimir Putin's war machine for the past decade.

The missiles that slammed into Kharkiv, the helicopters attacking an airport near the capital Kyiv, every bullet in every Russian paratrooper's gun – all were built or bought largely with money from the free world. That same free world now stands in shock that these weapons are being used to do what they were designed to do.

Europe bought Russian gas and oil and welcomed Putin's oligarch cronies' looted billions in IPOs, real estate purchases, and political donations legal and illegal. Even after Putin invaded Ukraine in 2014 and annexed Crimea, Europe tried to keep business as usual separate from Russia's assault on European security and the global world order.

On Thursday, Putin repaid them in full for their years of appeasement...

Russia has the world's largest nuclear arsenal and Putin invokes it regularly, but there is much that can be done to constrain him and save lives now. After years of my warnings and proposals being ignored, and now hearing "You were right, Garry!" all day, I'll repeat what I said in 2014: Stop telling me I was right and start listening now. My recommendations:

• Support Ukraine militarily, immediately. Everything but boots on the ground, meaning every advanced weapon, intelligence and cyber-capability. It has to be now. If Ukraine falls, Putin will bleed it dry to compensate for sanctions and dig in, as he has in Crimea and eastern Ukraine. Victory in Ukraine is also the only way to avoid doing this all again, when Putin needs new targets to distract from the disastrous state of Russia.
• Bankrupt Putin's war machine by freezing and seizing Russian assets and access to markets. Kick Russia out of SWIFT and other financial networks, and every international institution.
• Expose and seize the assets of Putin's cronies and their companies and families in the free world. Take away their visas and send them back to live in the dictatorship they helped build.
• Recall all ambassadors from Russia. There is no point in diplomacy or communications with a rogue dictatorship making war. Send the message that isolation will be total until all aggression ceases and Ukraine is made whole.
• Turn off, shut down, and send home every element of Putin's global propaganda machine. Russia Today and other platforms beam lies and hate into millions of homes in the free world, while Putin maintains total control of the media in Russia.
• Call out Putin's lackeys in the free world. The lobbyists, the law firms, the former politicians like German ex-chancellor Gerhard Schröder, who chairs two of Putin's strategically important energy companies. This includes the fifth columnists of all political stripes who side with a dictator for ideology or Russian cash. Why do executives and advertisers tolerate the likes of Tucker Carlson braying Putin propaganda in prime time? Donald Trump and his acolytes in Congress still can't find a discouraging word for Putin and repeat Russian propaganda blaming NATO and President Biden even as Russian bombs fall on Ukraine. I've bashed every U.S. president since Ronald Reagan over Russia policy, but praising a bloodthirsty dictator to score partisan points is disgusting and un-American.
• Replace Russian energy exports by increasing production and opening new sources, from fracking to nuclear to renewables. Giving authoritarians so much leverage for extortion is unacceptable. There's no point in saving the planet if you don't save the people on it.

2) Berkshire Hathaway (BRK-B), which I continue to believe is the No. 1 retirement stock in America, is up 6.4% this year, which compares very favorably with the 7.8% decline in the S&P 500 Index.

The company reported its fourth-quarter earnings on Saturday, along with CEO Warren Buffett's much-anticipated annual letter, which I'll comment on in tomorrow's e-mail. (Here are links to the news release and shareholder letter/10-K.)

As I do every quarter, I asked my longtime friend and former partner Glenn Tongue, who is the axe on the company, to share his analysis of it. Here's what he sent me:

As we have come to expect, the financial fortress that is Berkshire Hathaway reported strong results. There were no huge acquisitions, making the analysis straightforward. As usual, operating earnings are the important metric (as opposed to capital gains and losses, which are an accounting artifact). Here are the two charts from Berkshire's news release:

Operating earnings grew 45% in the fourth quarter and 25% for the year, astonishing numbers for a company of Berkshire's scale. Balance sheet cash is up to $144 billion, which is also astonishing.

I was pleased to see that Berkshire continues to buy back its stock in size, as you can see in this chart:

In total, Berkshire repurchased $27.1 billion of its stock in 2021, almost exactly equal to its free cash flow, reducing its share count by a remarkable 5.3% year over year.

I was curious to see if Buffett's share repurchases were price sensitive, so I did a little sleuthing...

Berkshire steadily repurchased approximately 25 million B-share equivalents per quarter last year, so we can conclude that the price was low enough to justify buying back stock throughout the year.

Then, using a few pieces of data I uncovered, I estimate that in the six weeks from January 1 through February 14, Berkshire only repurchased 1.9 million B-share equivalents – a roughly 85% slowdown from the pace of 2021.

But then in the next 10 days, the company repurchased another 1.9 million shares, which is only approximately 25% below the 2021 pace.

To see why Buffett is buying back his stock at such different rates, let's look at the stock price so far this year:

I suspect if we had day-by-day data, we'd see that the buyback pace slowed dramatically as the stock price rose in the first two weeks of the year, picked up as it fell later in the month, slowed again as the share price recovered from late January to early February, and then picked up again in the last two weeks as the price fell a bit.

It seems from this pattern that Buffett pulls back when the share price goes much above $315.

Thank you, Glenn!

3) I'm having a great time hanging out with my parents at Lake Sunapee, New Hampshire. Here we are on the frozen lake during the snowstorm on Friday:

On Saturday, I drove 90 minutes to southern Vermont and my wife drove up from New York City to visit my best friend from high school, Bob, and his high school sweetheart, Sarah. Here's a picture of us on their farm:

We decided not to go downhill skiing yesterday because of the big crowds at Stratton and Mount Snow, so Bob and Sarah took us cross-country skiing instead. We went to the nearby Prospect Mountain Nordic Ski Center, which had nicely groomed trails, and they taught us skate skiing. Bob took two short video clips of me doing it (posted here) and here's a picture of me:

It's a serious full-body workout – I was drenched in sweat!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.