Inside today’s Daily Journal…

Editor’s note: On May 16, 2025, Porter released The Better Than Berkshire Index, designed to show Complete Investor subscribers that they can outperform Warren Buffett’s Berkshire Hathaway. Yesterday, Porter detailed how Warren Buffett long held onto his misguided belief in Peak Oil – a belief that led to some very questionable investments… Porter details those investments today.

Next week, using the insights he has learned from Buffett himself over the decades, Porter will continue to explain exactly what’s gone wrong with Berkshire and how investors can build a portfolio that can do better…

I first made the case against Peak Oil as early as 2006. At first I did so almost purely on philosophical grounds. I am a student of Austrian economics. I have studied the work of economist Julian Simon, and knew about the Simon-Ehrlich Wager, where in 1980 Simon bet the neo-Malthusian author Paul Ehrlich that the inflation-adjusted price of any five commodities Ehrlich chose would fall, not rise, over the next decade. Simon won decisively – all five commodities fell in real terms.

In the intellectual circles I frequent, the question of running out of oil is laughable. Free markets and human innovation have dramatically increased the supply of every commodity necessary for life on this planet, easily, for centuries and that’s overwhelmingly likely to continue. In fact, as is now only beginning to be recognized by economists outside of the Austrian school, the only possible shortage is humans. The real threat to our civilization isn’t running out of commodities, it’s running out of people.

Twenty years ago, these ideas were far from mainstream. And I might have been the only financial analyst in the world that was predicting a massive renaissance in U.S. oil and gas production. I certainly was among the first financial writers in the world to describe the full ramifications of the fracking revolution.

My first report, in Stansberry’s Investment Advisory in April 2010, about the enormous scope of the energy opportunity in Texas was written about the Eagle Ford Basin, the first big shale oil play discovered in Texas:

My Eagle Ford prediction was woefully conservative, even though at the time it seemed delusional. The basin generated $36.8 billion of oil revenue in 2013 alone – not the $2 billion threshold I had set, but 18x that figure in a single year. Cumulative oil and gas revenue from the Eagle Ford through 2025 has reached approximately $515 billion. The “hundreds of billions” figure has already been delivered, with 15 of the original 30-to-40-year window still ahead. The University of Texas Bureau of Economic Geology projects continued production from the basin through 2040 to 2050.

Understanding the American oil-production boom did not require any industry connections or even much insight. The well-by-well economics were published quarterly by every shale operator. The directional pattern and the magnitude of the enormous growth in production were unmistakable.

As I detailed yesterday, Berkshire Hathaway CEO Warren Buffett and Vice Chair Charlie Munger did not seem to care. They stayed wrong, on a falsifiable forecast, for 15 years. Worse, they stayed wrong while their largest single capital commitment was being deployed under the assumption that they were right.

As I wrote yesterday,

Meanwhile, the reality – that a continent-wide shale energy revolution was producing more cheap hydrocarbons than the United States could consume – never seemed to enter their minds.

The windmills would be funded, no matter what.

Sources: U.S. Energy Information Administration, Annual Field Production of Crude Oil; EIA Today in Energy, April 23, 2026; Berkshire annual letters; CNBC; Daily Journal Annual Meeting transcripts; Farnam Street Blog. US crude oil figures are annual averages and exclude natural gas liquids. Total US liquids production (crude + NGLs) approached 20 MMbpd by 2025

Today, Berkshire Hathaway Energy (“BHE”) is the second-largest owner of utility-scale wind generation in the United States, behind only NextEra Energy (NEE).

By the end of 2025, BHE’s cumulative capital deployed into renewable generation, transmission, and tax-equity investments had reached approximately $45 billion, on its way to $50 billion by 2028 per the company’s own published disclosure.

But BHE has never made a dime for Berkshire. How is that possible…?

In March 2000, Berkshire bought a 76% economic interest in MidAmerican Energy Holdings, a regulated electric and gas utility based in Des Moines, Iowa, for a total investment of approximately $2 billion – roughly $1.25 billion in common and convertible preferred equity plus $800 million in trust preferred securities.

Over the next 26 years, Berkshire deployed an additional $13 billion of equity capital into the company – in tranches funding the acquisitions of PacifiCorp in 2005, Northern Natural Gas pipelines in 2002, NV Energy in 2013, and the buyouts of the minority partners David Sokol, Greg Abel (now Berkshire CEO), and the Walter Scott family between 2000 and 2024. Across the same period, BHE generated approximately $40 billion of cumulative net income. But MidAmerica (now Berkshire Hathaway Energy) retained every dollar inside the company, and paid Berkshire Hathaway exactly zero in dividends.

Twenty-six years. Roughly $54 billion of total capital committed. Zero cash returned to the parent company.

The combined Berkshire interest in BHE was implicitly valued at $88.8 billion in June 2022, when Greg Abel’s remaining 1% stake was repurchased by the company for $870 million.

A little over two years later, in September 2024, when Walter Scott family’s estate sold its remaining stake, the same calculation produced an implied valuation of $48.9 billion.

The valuation declined by $39.9 billion in 27 months, on Berkshire’s own internal-transaction book. Roughly $40 billion of marked value, lost in 27 months, on a balance sheet whose cardinal rule is: Don’t lose money.

And BHE is not done losing money. PacifiCorp, the western utility BHE acquired in 2005, is the defendant in the largest single live wildfire-liability case in American utility history. The aggregate exposure, in the worst documented scenario, runs to approximately $50 billion. That is roughly the entire current value of the subsidiary, despite retaining $40 billion of earnings over the last 25 years.

To state the position clearly: the largest single live legal liability on Berkshire’s consolidated balance sheet is, at its worst-documented exposure, equal to the entire value of the subsidiary that holds it.

PacifiCorp’s exposure is not unique among western U.S. utilities. PG&E in California paid $13.5 billion in 2019 to settle wildfire claims associated with the 2017 and 2018 fire seasons in northern California, and emerged from Chapter 11 bankruptcy in 2020 having transferred a substantial portion of its equity value to a wildfire-victim trust. Edison International’s southern-California subsidiary has settled approximately $11 billion in claims associated with the 2017 Thomas Fire and the 2018 Woolsey Fire. Hawaiian Electric, in 2024, settled the Maui Lahaina fire claims for $4 billion against a market capitalization of less than $2 billion at the time of settlement.

The pattern across the western U.S. utility sector since 2017 has been clear, repeated, and uniformly destructive: a single fire season can produce litigation exposure that exceeds the equity value of the utility responsible for the proximate cause.

PacifiCorp operates approximately 18,000 miles of high-voltage transmission lines across six western states, large portions of which traverse timber, sagebrush, and rangeland in regions that are projected by every published climate model to experience increasing fire weather over the next several decades. The exposure, on a forward-looking basis, is structural. It will not be litigated away. It can be transferred only by selling the asset or by restructuring under bankruptcy protection – and BHE has consistently disclosed that neither option is under consideration.

There is a one-in-five chance, in my judgment, that PacifiCorp produces a write-down within the next five years that exceeds the cumulative write-downs of every other Berkshire subsidiary combined. There is a smaller, but non-trivial, chance that the eventual liability requires a Chapter 11 bankruptcy filing of PacifiCorp itself. In either scenario, the combined Berkshire shareholder loss – the lost equity, the lost retained earnings, the lost compounding – exceeds $50 billion in present-value terms.

And that’s not even the real problem. The real problem is this: Windmills don’t work.

The premium-priced renewable electricity these BHE assets were designed to sell into a hydrocarbon-scarce world was, by the time most of them were commissioned, competing against natural-gas-fired electricity at a fraction of the cost. Buffett knows the underlying economics do not work. He said so on the record, in May 2014, speaking to an audience in Omaha. He was asked why Berkshire was building so many wind farms in Iowa.

He answered:

The wind farms do not make sense without the tax credit. He said it in front of an Omaha audience and the comment was reported in the Daily Caller, U.S. News & World Report, and entered the official record of the Utah State Legislature in subsequent testimony.

The federal Production Tax Credit and Investment Tax Credit have, across the period BHE was deploying capital, paid Berkshire approximately $9.8 billion in cumulative cash tax benefits between 2018 and 2024 alone, per BHE’s own investor presentations. The subsidiary operated with a negative effective income tax rate for five consecutive years. Across the same period the U.S. Treasury was, on net, paying Berkshire to install renewable generation that BHE itself, by the chairman’s own admission, did not believe earned its cost of capital on the underlying economics.

In July 2025, the One Big Beautiful Bill Act ended new wind and solar production tax credit eligibility for projects starting construction after July 4, 2026.

The economic case for BHE Renewables’ ongoing capital deployment, on Buffett’s own analysis, ends soon. The roughly $45 billion of capital already deployed will continue to earn whatever it earns from the sale of physical electricity, less the operating costs of the assets, less the lost subsidy stream, less the eventual decommissioning costs of the wind turbines whose useful life is approximately 20 years and whose original installations are entering retirement age now.

I am virtually certain that there’s not a single Berkshire Hathaway shareholder who realizes how much Berkshire has at risk in these investments – and I’ll be watching to see if anyone brings it up at Berkshire’s annual meeting on Saturday. There’s $45 billion of fixed-asset investment, sustained by a subsidy that is ending, into a sector whose customer base – the U.S. electric ratepayer – is now demanding lower-cost natural-gas-fired alternatives.

Buffett has never made money in energy. And that track record is about to become meaningfully and materially worse.

Tell me what you think of today’s Journal: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

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1. The 10-year Treasury is closing in on Trump’s pain threshold again. The yield on the benchmark 10-year U.S. Treasury note has risen back to 4.40%, closing in on the level that has triggered two White House interventions in the past 13 months. President Trump moved aggressively to talk down yields when they breached this threshold in April 2025 and again in March 2026 – and for good reason. The U.S. economy, with its mountain of debt and massive refinancing needs, simply cannot afford a sustained move higher.

2. Hershey’s cocoa-price shock is over. Complete Investor recommendation The Hershey Company (HSY) reported Q1 this morning with net sales up 10.6% to $3.1 billion (beat) and adjusted earnings per share (“EPS”) of $2.35 (up 12.4% year over year), crushing the $2.07 estimate by nearly $0.30. Management reaffirmed full-year guidance of 30% to 35% EPS growth. The cocoa-price shock that squeezed earnings in 2024-25 has subsided. Hershey continues to be a market-leading consumer staple – and one of Porter & Co.’s favorite “forever stocks.”

3. Agricultural commodity prices are rising as the Iran war collides with crop stress. U.S. wheat futures are up 30% year to date, driven by drought and soaring fertilizer costs. Only 30% of the U.S. crop is currently rated good or excellent, and farmers are expected to plant the least wheat this season since records began in 1919. Meanwhile, sugar futures are up nearly 10% over the last two weeks, as Brazilian mills are diverting roughly 95% of cane production to ethanol amid higher crude prices. Costlier oil and 20% to 40% jumps in nitrogen and phosphate fertilizer prices – both a direct result of the ongoing Strait of Hormuz closure – mean food inflation is likely to accelerate.

Last night, Alphabet (GOOG) reported Q1 revenue up 22%, smashing consensus, with operating margin expanding to 36.1% and operating income up 30%. Google Cloud was the standout: revenue accelerated 63% to $20.0 billion while backlog doubled quarter over quarter (“QOQ”) to $460 billion. And the big one related to AI: Gemini Enterprise paid monthly active users jumped 40% QOQ… We first featured Alphabet a year ago, in our Sunday Screen – up 124% since then – before formally recommending it to Complete Investor subscribers in September – up 63% since then… and to Tech Frontiers readers in February.

Earlier this year, we polled readers on three war-related topics. On April 10, we asked about the reopening of the Strait of Hormuz and the majority of readers (86%) rightly predicted it would reopen after April 30… On March 25, 46% of survey takers expected a deep correction in the S&P 500 over the following month, while only 9% were right, with the market index climbing 8%. On oil prices – under $70 a barrel before the war – a strong 79% majority predicted correctly on March 12 that prices would climb above $90 by April 30… oil now sits at $105 a barrel.

Gale S. writes:

Bill J. writes:

On Tuesday, Martin Fridson wrote a guest essay in Porter’s Daily Journal explaining the grim demise of U.S. Treasury bills.

Felix C. writes:

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.