The Digest #172

Published on November 2, 2023

Pilot’s Founders vs. Berkshire Hathaway

The founders of Pilot Travel Centers have sued Berkshire Hathaway to settle a dispute over the valuation of their remaining 20% minority interest in the business. When I read about the lawsuit, I was skeptical that Berkshire would violate the terms of the agreement that governed its initial investment in Pilot in 2017 and the transactions that will eventually result in full ownership. Earlier this week, I wrote an article analyzing the situation for paid subscribers. It contains a brief preview for all readers.

Berkshire Hathaway will report third quarter earnings on Saturday morning. I am planning to review the results over the weekend and will write an article for paid subscribers that should be sent out early next week.

Series I Savings Bond Fixed Rate Rises to 1.3%

The fixed rate for newly issued I Bonds increased to 1.3% on November 1. In addition to the fixed rate, I Bonds pay additional interest that is tied to the inflation rate as measured by the Consumer Price Index for urban consumers, also known as CPI-U. The current semi-annual inflation adjustment is 1.97% which results in a total composite rate of 5.27% for I Bonds issued between November 2023 and April 2024.

If the CPI-U represents an accurate measure of the cost of living, which is a matter of considerable controversy, the 1.3% fixed rate can be considered the “real rate” for I Bonds. The fixed rate has varied over time and 1.3% is the highest offered since 2007. 

Real rates on Treasury Inflation Protected Securities (TIPS) have been increasing in recent months. The current real yield on the five year TIPS is 2.31%, a full percentage point higher than the new fixed rate on I Bonds. I Bonds have an annual purchase limit of $10,000 and taxes can be deferred until the bond is redeemed. TIPS pay taxable interest semi-annually and tax is also due on annual inflation adjustments even though the investor does not receive those adjustment until maturity.

I Bonds are not marketable securities and can only be redeemed after a one year. Redemptions prior to five years result in the loss of three months of interest. TIPS are marketable securities and are subject to interest rate risk if sold prior to maturity. 

There are clearly trade-offs that should be considered when it comes to comparing I Bonds and TIPS. I have written several articles on these securities over the years that go into much more detail. The most recent articles appear below.


Ted Weschler Q&A Transcript by Kingswell, October 30, 2023. Ted Weschler was interviewed on April 27, 2022 at Nebraska Furniture Mart. This was shortly prior to the 2022 Berkshire Hathaway annual meeting. The footnotes in this full transcript of the interview provide useful context on several of Weschler’s answers. (Kingswell)

The Circle of Competence Trap by Ben Claremon, October 29, 2023. “I don’t think 65-year-old Charlie would have been comfortable investing in BYD. For that matter, 65-year-old Buffett probably never puts a dime into Apple. Just thinking about the examples they have set by expanding their circle of competences over time—and how that has compounded their knowledge—is evidence that you shouldn’t take their advice to not invest in things you aren’t familiar with as some sort of gospel.” (Compounders)

Tesla in November 2023: Story twists & turns, with value consequences! by Aswath Damodaran, November 1, 2023. Article includes a detailed valuation of Tesla with a downloadable spreadsheet for scenario analysis. (Musings on Markets)

Luxury Retailers and LVMH by Dan Shuart, October 28, 2023. An interesting primer on the unique (and often strange) economics of luxury retail. “When a company can sell a bag for $20K, let alone the absurd $150K Louis Vuitton Urban Satchel bag, there is obviously more to it than just using really nice leather.” (Eagle Point Capital)

Plan to Hike Electric Bills 29% Sparks Fury in Wyoming by Dan Frosch, October 29, 2023. Customers are unhappy with Rocky Mountain Power, a subsidiary of Berkshire Hathaway Energy. Electric rates were last increased in 2020 by 1.1%. Politicians are threatening to displace Rocky Mountain Power by creating a state-run utility. (WSJ)

11 Things I Learned About Investing by Frederik Gieschen, October 27, 2023. “You are not the next Warren Buffett. Or the next George Soros, Peter Lynch, David Tepper, etc. … There is nothing wrong with picturing yourself in someone else’s shoes early on. And it is important to understand how and why some investors excelled. But you have to integrate those lessons into a path that is uniquely yours, in markets and life.” (The Alchemy of Money)

Attenuating Innovation (AI) by Ben Thompson, November 1, 2023. This article is a critical analysis of recent moves to regulate artificial intelligence. (Stratechery)


Charlie Munger, October 30, 2023. 1 hour, 6 minutes. In a wide-ranging interview, Charlie Munger provides his usual candid wisdom and reveals some anecdotes that were not previously known. I don’t want to provide spoilers. Just hit play! (Acquired)

Learning from Warren Buffett and Charlie Munger w/Chris Davis, October 28, 2023. 2 hours, 21 minutes. TranscriptVideo. It’s great to get more insight into the views of a recent addition to Berkshire Hathaway’s Board of Directors. (Richer, Wiser, Happier)

David Senra – Lessons from the Founder Historian, October 29, 2023. 1 hour, 26 minutes. Transcript. David Senra’s Founder’s Podcast is one of my favorites. The back catalog is probably as good as many MBA programs. It is rare to listen to someone with even a fraction of David’s enthusiasm for his life’s work. (Art of Investing)

Panera Bread Founder and Cava Investor Ron Shaich, October 24, 2023. 59 minutes. Transcript ExcerptVideo“Shaich explains why ubiquity can breed contempt and what founders should consider before taking their company public.” (The Profile)

A Road in Dyrehaven in Fall

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The Digest #172
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