On another note, Buffett owns one of the largest electricity utilities in the U.S. During Berkshire Hathaway’s latest annual meeting, he pointed out that the company’s utility business has significantly diminished—primarily due to regulatory challenges related to wildfires. He is unwilling to invest any further in the utitlity business.
He emphasized the severe underinvestment in the U.S. power grid, noting that there’s been little to no meaningful investment over the past 30 years. While Berkshire has both the willingness and capacity to invest hundreds of billions of dollars to modernize the grid, the current regulatory environment makes such large-scale investments highly unlikely.
So, here you have one of the biggest owners in utilities; saying: " No más "
Thanks Vianney, that's crazy I wasn't aware of that. I had been working on the assumption US grid investment was ramping on the back of IRA.
Which is obviously not the case with them canning the $2B of financing.
"The Inflation Reduction Act (IRA) of 2022 included funds for grid transmission, with $2 billion for facility financing and $760 million for siting grants.
It seems likely that under President Trump, as of July 2025, the $2 billion for transmission facility financing has been rescinded, while the $760 million for siting grants may still be available"
The $2 billion in facility financing might sound like a big number, but in reality, it's a drop in the ocean. For context, Berkshire Hathaway Energy alone has total assets of $140 billion.
Buffett initially invested in the energy sector because it allowed for large capital deployment with predictable, regulated returns — a rare combination. Regulators would typically approve a 12% pre-tax return on equity, making it an attractive place to park significant capital long-term.
But that equation is changing. New regulatory pressures, especially in the wake of wildfire-related liabilities, are reshaping the risk/reward profile. What used to be a stable, capital-intensive utility model is now increasingly exposed to the wildfires and regulatory uncertainty — which undermines the original investment thesis.
Yes I should have mentioned that this is ontop of 50% of tariffs on aluminum, of which US imports 47%. Copper is still important for grid just more for distribution, then the transmission.
Both hit hard any electrification efforts. Transformers and last mile wiring is mostly copper. We all know copper grades have been declining. Plus, a lot of energy is needed to go from bauxite to aluminum and smelt it. If energy prices rise it's a double whammy.
Nice write you, Ferg. The annoyance with Trump’s rhetoric is that one tweet will add 10% to a position and the next day a different tweet will take away 10%. If nothing else, Trump is certainly making volatility great again.
As you are into podcasts and interviews, you may enjoy this chat with Andrew Brenton of Turtle Creek.
Thank you! I'd love to read this, unfortunately, the link is broken: "The General Theory of Portfolio Construction by Charles Gave (which generously has a free download option). It's only 73 pages and packed with insight."
On another note, Buffett owns one of the largest electricity utilities in the U.S. During Berkshire Hathaway’s latest annual meeting, he pointed out that the company’s utility business has significantly diminished—primarily due to regulatory challenges related to wildfires. He is unwilling to invest any further in the utitlity business.
He emphasized the severe underinvestment in the U.S. power grid, noting that there’s been little to no meaningful investment over the past 30 years. While Berkshire has both the willingness and capacity to invest hundreds of billions of dollars to modernize the grid, the current regulatory environment makes such large-scale investments highly unlikely.
So, here you have one of the biggest owners in utilities; saying: " No más "
Thanks Vianney, that's crazy I wasn't aware of that. I had been working on the assumption US grid investment was ramping on the back of IRA.
Which is obviously not the case with them canning the $2B of financing.
"The Inflation Reduction Act (IRA) of 2022 included funds for grid transmission, with $2 billion for facility financing and $760 million for siting grants.
It seems likely that under President Trump, as of July 2025, the $2 billion for transmission facility financing has been rescinded, while the $760 million for siting grants may still be available"
The $2 billion in facility financing might sound like a big number, but in reality, it's a drop in the ocean. For context, Berkshire Hathaway Energy alone has total assets of $140 billion.
Buffett initially invested in the energy sector because it allowed for large capital deployment with predictable, regulated returns — a rare combination. Regulators would typically approve a 12% pre-tax return on equity, making it an attractive place to park significant capital long-term.
But that equation is changing. New regulatory pressures, especially in the wake of wildfire-related liabilities, are reshaping the risk/reward profile. What used to be a stable, capital-intensive utility model is now increasingly exposed to the wildfires and regulatory uncertainty — which undermines the original investment thesis.
Aren't most transmission lines aluminum?
Yes I should have mentioned that this is ontop of 50% of tariffs on aluminum, of which US imports 47%. Copper is still important for grid just more for distribution, then the transmission.
Both hit hard any electrification efforts. Transformers and last mile wiring is mostly copper. We all know copper grades have been declining. Plus, a lot of energy is needed to go from bauxite to aluminum and smelt it. If energy prices rise it's a double whammy.
Good point
Nice write you, Ferg. The annoyance with Trump’s rhetoric is that one tweet will add 10% to a position and the next day a different tweet will take away 10%. If nothing else, Trump is certainly making volatility great again.
As you are into podcasts and interviews, you may enjoy this chat with Andrew Brenton of Turtle Creek.
https://youtu.be/VfCJk7Wvldk?si=3ks8brlRBkVD5hMZ
Finally, nice interview with Tom of Palisades Gold Radio.
I guess the question then is what things are not easily affected by his rhetoric
Thank you! I'd love to read this, unfortunately, the link is broken: "The General Theory of Portfolio Construction by Charles Gave (which generously has a free download option). It's only 73 pages and packed with insight."
https://web.gavekal.com/books/
If that doesn't work type Gavekal books in google.
44% or so of world copper is refined in the PRC. The tariff is leverage for something else.