Luke

"Fighting is done by the willing force of Ukrainians, supported by 90% of its population". Where do you have the data from to make these conclusions? As far as I am aware, they are FORCING men to kill or damage themselves for this war. (https://www.zeit.de/zeit-magazin/leben/2022-03/ukraine-russland-krieg-maenner-widerstand-flucht). They are picking up men straight from the streets, forcing them to fight, the exact thing Russia is doing to their citizens. Are the 90% of the population who are for the war safe in germany and don't have to fight? (women). How are they now doing research about the state of this country when there is maximum chaos? Why should Germans bear more of the financial burden than say other European countries? Top 10% of taxpayers already payed 5000€ per person last year if you calculate current costs for this war. Russia has nuclear weapons, ukraine wont win and we also wont win a nuclear war. We should stop sending all these weapons to an aggressive Ukrainian nationalist leader and let russia and ukraine figure it out. Everything is so damn well orchestrated that as a passive spectator you can not not cheer for ukraine, of course you only see the heroic moves from ukraine and the evil moves from putin and its soldiers.

Micheal Burry posted this article once on his twitter, interesting read: "An ascendant China seems eerily similar to the Ottomans. Beijing believes that the United States is decadent, undeserving of its affluence, living beyond its means on the fumes of the past - and very soon vulnerable enough to challenge openly. Left and Right seem to hate each other more than they do their common enemies. Like the Byzantines, Americans gave up defending their own borders, and simply shrugged as millions overran them as they pleased. Our once iconic downtowns, like end-stage Constantinople before the fall, are now dirty, half-deserted, dangerous, and dysfunctional. America prints rather than makes money, as its banks totter near bankruptcy. Americans similarly believe they are invincible without ensuring in reality that they are. Our military is more worried about being "woke" than deadly." https://townhall.com/columnists/victordavishanson/2023/03/16/are-we-the-byzantines-n2620664

"If such information were available, it would be evident must be kept secret because it contains security-relevant information include, which is subject to the confidentiality of treatment foreign intelligence services to the German intelligence services were forwarded. A disclosure of information that is according to the Rules of “third party rule” were obtained would be considered a disruption of the mutual basis of trust and would have one severe impairment of the participation of the federal intelligence services in the international exchange of knowledge. A possible Access by unauthorized persons would have significant disadvantages Impact on the trusting cooperation between the Federal intelligence services with foreign intelligence services have. Dignity as a consequence of a loss of trust Information from foreign bodies is omitted or essential decline, there would be significant information gaps with negative ones Consequences for the accuracy of the depiction of the security situation the Federal Republic of Germany and with regard to protection German interests abroad. A disclosure of the information would also enable further clarification of secret service activities and against the Federal Republic of Germany make it considerably more difficult. The The requested information therefore affects those in need of protection Secrecy interests that protect the welfare of the state parliamentary right to information prevails and the right to ask questions MPs exceptionally opposed to the interest in secrecy must take a back seat to the federal government."

Request: https://www.bundestag.de/presse/hib/kurzmeldungen-921048 The left-wing faction continues to see a great need for clarification regarding the attacks on the Nord Stream 2 and Nord Stream 1 pipelines on September 26, 2022. In a small question (20/4303), the MPs want to know, among other things, how the federal government can respond to legal and, specifically, international law criteria, attacks by, in the opinion of the questioners, state actors on infrastructure in international waters, some of which are owned by German companies through shareholder ownership evaluate and what knowledge the federal government has so far about the timing and technical sequence of the incidents and the damage caused. We ask the Federal Government: 1. How does the Federal Government assess attacks by, in the opinion of the questioners, state actors on infrastructure in international waters, some of which are owned by German companies through shareholder ownership, from a legal and especially international law perspective? 2. What knowledge does the federal government have so far about the timing and technical sequence of the incidents on the two double strands of the Nord Stream 2 and Nord Stream 1 pipelines? a) When and where did the explosion occur or did the explosions occur on the Nord Stream 2 lines? b) When and where did the explosion occur or did the explosions occur on the Nord Stream 1 lines? c) According to the Federal Government's knowledge, how many explosions or detonated explosive devices are there in total? d) What quantity did the explosions achieve, and according to the Federal Government's findings, what amount of military explosives would be necessary to achieve this effect in the corresponding water depth on the gas pipelines? e) How long is the distance between the explosion sites on the two pipelines? f) How much time does a conventional ship and a submersible each need on average to travel this distance? 3. What findings does the federal government have so far about the damage caused to the two double strands? a) How many of the four individual lines were opened by the explosions? b) How long are the pipelines torn? Reply of the government: “With reference to possible conflicts with the interests of allied states or their secret services, the so-called third-party rule, the federal government refuses to provide any further information. She even refuses to provide the usual information under classified classification or to deposit it with the secret protection office of the German Bundestag. If the government assumes that disclosure of its information could lead to a disruption of mutual trust with allies or impair the protection of German interests abroad, then Parliament must be involved all the more urgently. It is a serious attack on the sovereignty of the Federal Republic. The attack also destroyed infrastructure that was strategically important for the country's energy independence. In this serious situation, MPs must be involved.” The Question to me is how much does the secret service know and how much is told to the public? 2022-10-11_Nordstream_9-489-Nastic.pdf

Haha yeah, hard to sleep i get it!

Why?

Really wondering how big the propaganda level in our country is and how much truth there is to what Russia says. I surely do not believe the West to tell its citizens the truth but cant say to which degree. Most likely also impossible to know, party in our Parliament tried to gain further information regarding the bombing of the pipeline but where put off due to "state secrets".

https://www.washingtonpost.com/world/2023/05/13/zelensky-ukraine-war-leaked-documents/ Ukrainian President Volodymyr Zelensky has won the trust of Western governments by refusing to use the weapons they provide for attacks inside Russia and prioritizing the targeting of Russian forces inside Ukraine’s borders. But behind closed doors, Ukraine’s leader has proposed going in a more audacious direction — occupying Russian villages to gain leverage over Moscow, bombing a pipeline that transfers Russian oil to Hungary, a NATO member, and privately pining for long-range missiles to hit targets inside Russia’s borders, according to classified U.S. intelligence documents detailing his internal communications with top aides and military leaders. They reveal a leader with aggressive instincts that sharply contrast with his public-facing image as the calm and stoic statesman weathering Russia’s brutal onslaught.

Agree with dealraker, @Parsad please keep up this amazing board. How are your Nvidia calls going @brobro777?

Never laughed this hard in a while hahahahahaha, some good promotion for our budlight fans @Gregmal

Why?

+1. Returns might just end up being meh, but without a correction.

Greg, do you agree that at 26x earnings the Index is very expensive considering current interest rates? Buying the index for 28x earnings in December 1999 led to negative returns over a 10 year period till december 2009 where it then traded at 19x earnings. I agree that owning decent businesses at high yields is much better than bonds etc but if you are starting to get 6-7% on corporates etc while the index doesnt adjust to the new risk free rate reality? Still always smarter to find value even in an expensive market than to switch to bonds but i think @TwoCitiesCapital focussing more on bonds now when things are objectively expensive is better than buying the index without thinking about it. I also wonder how bubblesque the SP 500 has become when all these index fund companies own around 30% of the stock market, sometimes even own so much that if people would sell the fund, exit liquidity is so small that it just would destroy some stocks. At some point the liquidity has to go down if risk free rate gets attractive enough.

Fair enough. Understand, not sure if I could time the markets as well as that but to each their own.

Btw UK, with Prosus you are getting basically a 10% earnings yield per share on tencent and Co with the earnings yield being higher 38% in 3 years due to the buybacks. So we can have 0 growth for tencent but stable for the next 10 years and we will make more than 10% on earnings just doing nothing In 3 years EPS yield will be at 14% Think about it haha.

And you can EASILY paint a grimmer picture than the average sales growth and stable profit margins and maybe even a 15x multiple on earnings 10 years down the road. So 298 EPS-->4470 for the SP 500 in 10 years. So 0 growth+1.8% yield. So we all should be really happy that we are able to find better value than the index. I have to think about 2022 BRK AGM when munger was asked about Berkshire vs the SP 500 and he said he would bet on berkshire. Id heavily agree even at todays valuation!

Yep, I doubt that too. Take 19x earnings in 2033 and current profit margins, average of 4.1% sales growth (10 year average). Then the average 0.7% sharecount shrinkage that, as bloomstran put it nicely, completely ignores the big amount of profit that go away to shrink that sharecount, because management pays themselves nicely. Wouldnt even count that in. So 4.1% sales growth+1.8% dividend yield+20% multiple compression in the end: 4.12% returns next 10 years. We need a 4th industrial revolution happening that turbo charges GDP growth (our businesses that trade at 10% earnings will benefit too aka. FFH, Exor etc) to make this exciting at all... PASS Average sharecount shrinkage last annum 0.7% per year. Profit margins and multiple expansion has been driving growth very nicely, many people i know think they will make 10%+ in perpetuity...:D Yeah and with inflation margins will shrink too, bloomstran: "Presume inflation cyclically runs hotter than the Fed’s 2% made-up target and averages 4%, allowing for 6% growth in dollar sales per year. If inflation runs warm, kiss peak margins goodbye. Assume companies are forced to refinance debt at higher interest rates, leading many to delever. I won’t even touch on the potential for higher corporate taxes. Lower margins leave less for share repurchases, so hold share count flat. Yep, but why not just skip corporates, mortgages etc and buy things like FFH, Berkshire, Exor, Prosus, Nintendo etc. Bonds are cool but one can still find things that are attractive

I said before that capitalism, if it works, is a win win for the capitalist and the worker, if the incentives are set up right as you said. Yes, but currently we have 0 growth for the majority. My suggested policies would move the needle so that we pick up the worker/consumer, increase in investment and more competition etc. This is straight from the OECD: https://www.oecd.org/social/Focus-Inequality-and-Growth-2014.pdf "New OECD analysis suggests that income inequality has a negative and statistically significant impact on medium-term growth. Rising inequality by 3 Gini points, that is the average increase recorded in the OECD over the past two decades, would drag down economic growth by 0.35 percentage point per year for 25 years: a cumulated loss in GDP at the end of the period of 8.5 per cent. 2010 had inequality not changed between 1985 and 2005 (The most recent inequality trends since then are not taken into account as they affect future growth patterns). These estimates are meant to be illustrative and should not be interpreted as the causal effect of the actual change in inequality in each country. They indicate, however, that the possible impact of inequality can be sizeable. Rising inequality is estimated to have knocked more than 4 percentage points off growth in half of the countries over two decades. On the other hand, greater equality prior to the crisis helped increase GDP per capita in a few countries, notably Spain." Regarding redistribution: "The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth. Of course, this does not mean that all redistribution measures are equally good for growth. Redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and generate inefficiencies." Policies that help to limit or reverse inequality may not only make societies less unfair, but also wealthier. It is not just poverty or the incomes of the lowest 10% of the population that inhibits growth. Instead, policymakers need to be concerned about how the bottom 40% fare more generally. This includes the vulnerable lower-middle classes who are at risk of failing to benefit from and contribute to the recovery and future growth. Anti-poverty programmes will not be enough. Not only cash transfers but also increasing access to public services, such as high-quality education, training and healthcare, constitute long-term social investment to create greater equality of opportunities in the long run. Policy also needs to confront the historical legacy of underinvestment by low income groups in formal education. Strategies to foster skills development must include improved jobrelated training and education for the lowskilled, over the whole working live. I dont think China is destroying capitalist incentives, just trying to level the playing field, destroy harmful companies (education sector), stop insane housing prices so wages dont go into absurd rents that do absolutely nothing for GDP growth etc, they have stressed "healty development" and regulation of "disorderly capital", quite close to what the OECD describes in that article IMO. And yeah, something into this direction is necessary although i cant say how much is too far and how little, difficult but important questions, i think we tend to agree on the direction of this. Cheers guys!

Yeah, Investment grade debt too. But then again, @Gregmal stressed it often enough, there are enough options where you get a 10% yield+ right now (FFH, Prosus, Exor, Nintendo etc) which one would much prefer over treasuries or investment grade debt etc. The Index itself is just overpriced and overbought. +1

Taking that into account, Berkshire, Fairfax, Exor, BN, LVMH etc you name it, are all much better buys than the Index

Considering SP 500 PE is now at 25.61, a 4% earnings yield, multiple compression back to 19,2 would take of 2% of the projected 5.9%, so 3,9% annualized return. My Bank account gives me 3% on EUR right now haha!

And I really enjoyed Bloomstran projected performance of the SP 500 Index in latest letter: The past (margins up, multiple up (even higher today): And the future: (Moderate bull case) This is a realistic expected return without egregious assumptions and neither very bearish assumptions for the SP 500. At close to 6% treasuries those returns are shit, obviously.

The extreme opposite would be a world where the entire global wealth is funneled through Wall Street, US multinationals concentrating even more and owning the whole global market, investment is coordinated with government and results in some sort of privately planned economy with a few rich feudal lords that live outside the normal world on some islands while the rest of the population stagnates and works for them while providing 0 competition to the hugely concentrated market and having no opportunity to ever get out of where they are. The movie Elysium sort of captures such a system.

Well put, the little guy thinks capitalism is the problem while that was the only system ever that provided wealth over time to all, IF it works. It all starts going downhill if business gets too much power, congress gets inefficient and corrupt, and wages don't follow with growth. If wages stagnate, demand stagnates and then investment stagnates--> What are we seeing in the stock market? All-time high profit margins+above average multiple, average worker not taking part in wealth creation, continuant strengthening of business via acquisitions and mergers instead of investment, buybacks instead of investment and growing financialization. People don't know what to vote for anymore because things are promised (Obama, Hope&Change, ironically won an award for best advertising presidential campaign) but don't materialize in better living circumstances. Once capitalism gets so out of balance and the state can be bought, you will observe rising depression rates/rising hopelessness (already happening), rising medication and drug usage (20% of EU citizens on psychiatric drugs/opioids, self-medication, antidepressants and what not because they can not cope with reality), rising extremism (fascist movements, radical youth gangs (climate activist that destroy buildings etc.) and more and more violent protesting (france). To get out of the misery IMO we need a competent intervening government that starts increasing spending on public infrastructure (schools, teachers, investment in disregarded neighborhoods, public transportation, digitalization), immediate strengthening of workers via unions/organization, public housing, wealth tax for extreme net worth, higher capital gains and income tax for the very wealthy, 0% tax for average joe so the field gets evened out and competition gets a bit tougher etc, regulating anticompetitive business practices etc Accidentally all things that China is doing right now and at the exact same point in time when china starts doing these things you start to see the US upping their own spending too because competition gets tougher

Some thought provoking graphs about the state of consumer buying power: