widenthemoat

+1 In my view, the market will stay expensive and "investors" will continue to speculate until the time comes when companies can fail again. The only way I see that happening is for the Fed to lose control, i.e. when inflation picks up to the point where investors in Treasury bonds demand higher rates to compensate for this. The Fed can't continue to force yields lower at this point by printing money, because this will only increase inflation expectations, and cause investors to demand an even higher yield as compensation. It will be a self-reinforcing fly-wheel, and a very ugly one at that.

The hedge against devaluation is interesting to me as well. These dollar price increases are not increasing purchasing power in real terms I suppose. I recently bet a substantial sum of money with a friend (who is an ardent BTC bull) that BRK will outperform BTC over the next fifteen years. The most ironic part of the bet...it was made in USD. His entire thesis rests on the dollar becoming worthless, yet he wants to be paid out in USD...

Long term value investor cites short term price fluctuations as indication of long term thesis success/failure I just poted numbers. I didn't make any comments. You did that. I just assumed you were letting the board know that crypto was on sale. Bitcoin +600% since this post. Doesn't produce cashflow though so cite some Munger quote and avoid independent thinking. Correction: It doesn't produce anything I used to think gold was valuable too until I heard that when you fondle the cube it will not respond. Gold has been a bit of a stinker of an investment in real terms over the long haul, hasn't it? If Bitcoin is the next gold, wouldn't it be fair to assume it would be a bit of a stinker over the long haul as well? If you could provide some numbers on how you calculate your intrinsic value I think that would help me a bit with understanding your position. Maybe I really am missing something, I dunno, but no one seems to be able to provide me any hard numbers. If this is the depth of analysis you're willing to do - yet continue to be stunned that the scammy worthless bitcoin "dies" yet continues to rebound to higher levels - you probably do not understand the thesis at the most basic level and will continue to be stunned. Stunned I shall be...I'll be patiently waiting for your intrinsic value calculation in the meantime. Clutch's gold alternative theory is at least plausible to me. I guess the next question would be why aren't gold prices going down while bitcoin prices are going up? Wouldn't an investor simply shift their 10% gold allocation to a 10% bitcoin allocation? I don't think the "market cap" of bitcoin can equal gold's current market cap unless investors become willing to allocate 20% of their portfolio to stores of value. I guess an investors 10% store of value allocation could be 100% bitcoin and golds market price goes to zero?

Long term value investor cites short term price fluctuations as indication of long term thesis success/failure I just poted numbers. I didn't make any comments. You did that. I just assumed you were letting the board know that crypto was on sale. Bitcoin +600% since this post. Doesn't produce cashflow though so cite some Munger quote and avoid independent thinking. Correction: It doesn't produce anything I used to think gold was valuable too until I heard that when you fondle the cube it will not respond. Gold has been a bit of a stinker of an investment in real terms over the long haul, hasn't it? If Bitcoin is the next gold, wouldn't it be fair to assume it would be a bit of a stinker over the long haul as well? If you could provide some numbers on how you calculate your intrinsic value I think that would help me a bit with understanding your position. Maybe I really am missing something, I dunno, but no one seems to be able to provide me any hard numbers.

Long term value investor cites short term price fluctuations as indication of long term thesis success/failure I just poted numbers. I didn't make any comments. You did that. I just assumed you were letting the board know that crypto was on sale. Bitcoin +600% since this post. Doesn't produce cashflow though so cite some Munger quote and avoid independent thinking. Correction: It doesn't produce anything Very insightful- thanks. I was a huge Bitcoin bull until I learned that it doesn't produce anything. Problem is the bulls seem to become more bullish as the price goes up. Seems fishy to me, but it's not my money so do as you please. I wish you the best of luck.

Long term value investor cites short term price fluctuations as indication of long term thesis success/failure I just poted numbers. I didn't make any comments. You did that. I just assumed you were letting the board know that crypto was on sale. Bitcoin +600% since this post. Doesn't produce cashflow though so cite some Munger quote and avoid independent thinking. Correction: It doesn't produce anything

I was referencing the “simple investment” piece more so, but I have a hard time believing you could describe bitcoin to a ten year old in one sentence. Supply and demand imbalance doesn’t really cut it for me. Nobody can seem to tell me why people demand bitcoin other than that it’s going up. It’s not a currency. Currencies do not fluctuate like this. And it’s not a store of value either - those don’t fluctuate wildly either, they store value. If it “might” become a currency or store of value that is speculating. https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-are-cryptocurrencies-(ontological-perspective)/ Thanks clutch, I appreciate the thoughtful post and it’s one of the few times I’ve actually gotten a legitimate response. I agree it has the ability to become a currency or store of value. As your post suggests, anything can become so if society accepts it as such. With that said, we don’t know if Bitcoin will or not. Even if it does become a store of value similar to gold, how can anyone calculate its intrinsic value with a straight face? It’s just impossible. People are very interested in this again only because it has gone up in price. Imagine ten people in a room, and everyone owns one bitcoin and one million dollars. For an entire year, people trade their bitcoins to each other for higher and higher prices. Each person is only willing to pay more because they see their neighbor make a tidy profit and get a little jealous of how easy it was. At the end of the year, that room would have the exact same amount of bitcoins and the exact same amount of dollars in it, and a ton of wasted human potential trading it all around. If you think you can be the winner in that scenario, then maybe Bitcoin is for you, but it sounds a lot like musical chairs to me. It requires quite a bit of good luck, because nobody knows when the music will stop, and when it does you’re left holding a very expensive bitcoin that has zero actual value to human beings. Note: I’m typing all of this on my phone so please excuse and typos or formatting issues.

I was referencing the “simple investment” piece more so, but I have a hard time believing you could describe bitcoin to a ten year old in one sentence. Supply and demand imbalance doesn’t really cut it for me. Nobody can seem to tell me why people demand bitcoin other than that it’s going up. It’s not a currency. Currencies do not fluctuate like this. And it’s not a store of value either - those don’t fluctuate wildly either, they store value. If it “might” become a currency or store of value that is speculating.

Bitcoin reminds me of something I heard in a Peter Lynch speech. See link below, starting at 2:40 mark.

Sounds pretty arrogant to me to try and predict the madness of men. Not a great long term strategy in my opinion. Good luck

Isn’t this literally the definition of a bubble? Buying begets buying? Are you just planning on selling before the music stops? When the bubble gets to its high, maybe BTC $2M then after it crashes it will settle back to $500k. ...so yes. How did you get to $500k? Seems rather arbitrary to me... This stuff is junk and not an investment. In the words of Charlie, even if you make money you’re still a jerk

Isn’t this literally the definition of a bubble? Buying begets buying? Are you just planning on selling before the music stops?

$10 down, only $370 to go just to get your money back...

Thanks wabuffo, feel better already lol...

How do I do this? I know people have mentioned this in the past, and I have searched around, but can't seem to figure it out. Thanks in advance.

bizaro86, not taking a shot at your thoughts on the float liability, but rather want to see if you can poke holes in how I think about it. I'll use a hypothetical company that is 100% capitalized by float as my example. Let's assume we issue a $1.0m policy at the beginning of every year that gets paid out at the end of the year. We take that $1.0m and invest it into Treasury bills at a 10% rate (day-dreaming over here, I know). Well at the end of the year we would have $0.1m in the bank, $1.0m in a Treasury bill, receive cash inflows of $1.0m for the new policy issued, and pay out $1.0m of insurance claims/expense for the beginning of the year policy (assuming cost of float is zero). In this situation, the equity holder would be able to receive a dividend of $0.1m, unencumbered by the float liability. We can have this same situation occur forever into perpetuity, collecting $0.1m every year. My question becomes, why knock something off of the equity value if we never have to truly pay back the float and it doesn't cost anything in interest? That's $0.1m in my pocket every single year, just as if I funded the company 100% with my own money. Well, good way to think of it is- would you rather have $1 m in equity or $1 m in float, all else being equal? The real liability amount of float is less than, perhaps substantially so, then what is on the balance sheet but it is of course greater than zero. Personally, I think I would prefer $1.0m in float. I don't have to lay out a dime of my own money to earn $0.1m per year. If I'm laying out my own money to purchase the business from someone else, I would certainly prefer float if I wanted to grow the business - I would be able to distribute all earnings and grow them by using float instead of my own equity. I would also prefer float if it was profitable (i.e. essentially borrowing at a negative rate).

bizaro86, not taking a shot at your thoughts on the float liability, but rather want to see if you can poke holes in how I think about it. I'll use a hypothetical company that is 100% capitalized by float as my example. Let's assume we issue a $1.0m policy at the beginning of every year that gets paid out at the end of the year. We take that $1.0m and invest it into Treasury bills at a 10% rate (day-dreaming over here, I know). Well at the end of the year we would have $0.1m in the bank, $1.0m in a Treasury bill, receive cash inflows of $1.0m for the new policy issued, and pay out $1.0m of insurance claims/expense for the beginning of the year policy (assuming cost of float is zero). In this situation, the equity holder would be able to receive a dividend of $0.1m, unencumbered by the float liability. We can have this same situation occur forever into perpetuity, collecting $0.1m every year. My question becomes, why knock something off of the equity value if we never have to truly pay back the float and it doesn't cost anything in interest? That's $0.1m in my pocket every single year, just as if I funded the company 100% with my own money.

I've found this whole experience to be incredibly eye-opening. Some of these politicians make me sick. Every time I read the news, all I can think of is Atlas Shrugged and how spot on Ayn Rand was with some of this stuff. It's honestly quite depressing.

There seems to be this idea in the investment community that this pandemic has highlighted how incredible/invincible technology companies are and, therefore, they should command a premium valuation going forward. Generally speaking, I do think technology companies tend to be "better businesses", but I don't think they are necessarily far superior now than they were before the pandemic. COVID-19 was a random event that benefited technology companies and disadvantaged companies that require high levels of human interaction. Do people think it would be fair to say that the probability of a massive hack occurring that somehow shut down the internet for two months is less likely, from a probabilistic perspective, than what has occurred over the past two months? It's clear that companies with high levels of human interaction would benefit immensely from this, while technology company revenues would fall of a cliff - basically the opposite of what has occurred over the past two months. I really don't know the answer to that question, but thought it might be a good discussion for the board.

Time will tell I guess. I'm not one to predict market movements, it's just fascinating to me that there is such a large disconnect here. Either the market was grossly undervalued a year ago, and the inevitable decrease in earnings will still generate a reasonable rate of return when purchasing the underlying companies in the index now, or things are grossly overvalued now, and the returns will be not so reasonable. Or maybe there will be no impact to earnings at all from this, and we're right where we should be.

The markets reaction to the unemployment figures are a bit concerning to me. The SPX is at roughly the same level as a year ago (December 2018), yet unemployment just went up 10x. I sometimes scratch my head at what these "professional money managers" do. Makes me worry about peoples retirement accounts and whatnot. Who knows, maybe I'm wrong. I'll be on the sidelines until the companies on my watchlist become cheap again I guess.

S&P500 is down 25% now since Feb 19th. The problem with all the cash guys is they sit around dancing and proclaiming how right they've been for sitting on a pile on 1.2% yielding USD for the past decade but remain too negative to know an opportunity when they see one. Yes, congrats you're 80% in cash when the market falls 25%. As you have been since 2012. And now the market gets back to 2016 levels, and you're still thinking it needs to get back to 2010 in order to invest again... I think there is some validity to your statement, but I've personally been in cash for a long time (it's been painful, trust me) and that is not because I anticipated a massive market correction. I simply was not able to find companies that, in my view, were selling at a substantial discount to a reasonable estimate of future owner's earnings. With the recent selloff I've finally been able to purchase a couple of companies that I've been following pretty closely over the years, which I believe are "punch card" type investments (fingers crossed.) The majority of companies on my watchlist, however, are now probably fairly valued. With all of that said, I really have no idea where this market goes next - all I know is that I've got a list of companies I really like, and prices I want to buy them at based on some reasonable estimates. If they hit those levels, I back up the truck. I find this way of thinking takes a lot of stress out of the game, as you really don't have to worry about timing at all. The purchases I've made over the past few weeks could continue to collapse in market price, but I really don't mind given I plan on holding them for 5+ years and the cash they can distribute to me over those years is quite silly compared to the price I paid. Best of luck to everyone - wild times in the market.

Hi All, I currently live and work in the Boston area and wanted to see if the board could give me some advice on the best way to land an investment research analyst role. I became hooked on investing about six years ago and have spent a significant amount of my personal time over the years devouring as much information as possible on the subject. Based on what I have learned, I truly believe I could add a lot of value to an investment firm. The only problem is, none of this can be put on my resume - it has all been on my own time. Just as a little background, I am a CFA charterholder and have been a consultant doing independent business valuations for the past three years. I ideally would like to work at a small firm which follows a value-based approach. Any insight would be much appreciated.

Quick question for the board regarding the subtraction of cash from the market cap to get to enterprise value. The general idea behind this is that the cash is not necessary to run the business and therefore could be distributed to the owners upon an acquisition of the entire business. Why is it that nobody takes into consideration the taxes that would have to be paid when this distributions occurs? Say you have a company that only has cash of $1,000,000 in the bank. Let's just assume for simplicity that a distribution of this $1,000,000 would not be considered a return of capital and therefore would be taxable at 15%. Nobody would pay the full $1,000,000 because they could only receive the $850,000 net of the taxes paid upon distribution. Is this not the same type of logic that should be applied in an enterprise value calculation? Thanks in advance.

I noticed Allan purchased a very small amount of TripAdvisor. Ernst Teunissen, former CFO of Cimpress (Alan's largest position), just took over as CFO of TripAdvisor. Maybe a tracking position to see if Ernst can create a culture focused on IV per share growth? Haven't read TripAdvisor's financials but maybe someone can shed some light on their competitive advantages?