73 Reds

@Castanza you and your wife are inspiring examples of what can come from a little sacrifice early on. Reminiscent of some of the subjects of one of the best books I've ever read - The Millionaire Next Door.

Yes, and higher inflation breeds higher interest rates. Having been through a few of these cycles the party will end - quite badly if you are heavily positioned in more speculative investments.

Sure but doesn't the risk have to be identifiable in advance? Otherwise how does an insurance company price its insurance for unidentifiable risks?

I'm of a different view, likely to occur even during Trump's term. I think indices will go much lower. Not sure when - could be months, could be 1, 2 or more years away. Unless and until we figure out a way to reign in govt. spending and begin to bring down debt, there has to be a reckoning sooner or later. There is no political will on either side to do it. We can't grow our way out of debt. Its not debt itself that is the problem, its the amount and never-ending increase of debt that is the issue. Forget about trying to pay it down, who is going to service it and how? The next generation? Many of whom don't even want to leave their homes and go to an office to work? And its not even debt that will trigger the downturn, but some exogenous event or series of events that will cause folks to wake up and realize that paying 25+ times earnings for the average mature public company just makes no inherent sense, along with all the other speculation that works until it doesn't.

@Viking What, if anything does that tell you about 2025 and beyond? FWIW, here's what it tells me: There is a lot of speculation in the public markets. How long it continues is anyone's guess - makes little difference to me though. But one day the masses are going to wake up and come to realize that just like any number of times in the past, prices don't go up indefinitely. Enjoy the ride for now. Companies like Fairfax and Berkshire will be your friend and ally when the sh-t eventually hits the proverbial fan.

And my guess is he learned the importance of a properly crafted insurance contract leaving no ambiguity for an insured event and an exclusion. How can an insurance company properly account for any risk that cannot be contemplated in advance? Answer: It has to be excluded from coverage.

Old news. The ICC is a joke. The US does not even recognize it.

For me the issue of concentration comes down to control. When you have no control over each of your investments, diversification is sensible. OTOH, when you pour your life savings into your own business, diversification makes no sense and in any event is not even feasible.

I think we need to distinguish between an outlier insurable event and a catastroophic event outside of insurance that affects the value of the company as a whole. Certainly nuclear war will affect the values of everything and your investment portfolio might be the least of your concerns. I have to assume that insurance contracts today specifically define "insurable event" and also define "exclusions" so as to eliminate liability to insure any outlier event that is not foreseeable.

Can you think of an example of an outlier event that Buffett or Watsa would not have thought of? If the outlier event is truly "outlier" does it fall within the definition of "insurable"? Before an insurance company writes an insurance contract, any outlier event, no matter how remote, should be a part of the equation.

+1 I would give self-reporting non violent, non-criminal , otherwise law-abiding illegals with jobs and families here another alternative - remain here and pay your way toward citizenship. The price should be high (to discourage others later from using it as a precedent) and the interim period should be the equivalent of probation - one strike and you're out.

Sanjeev, largely agree but does your "do not fall in love with a stock" philosophy have anything to do with tax deferral on cap. gains? Personally, 99% + % of stocks are held in taxable accounts. For folks like me with no interest in investing one could do far worse than simply DCA'ing into an S&P 500 index fund or equivalent and going on with life. For those of us with an interest, buying great stocks at sensible prices and not selling unless money is needed or unless the investment thesis changes also generates desirable results. What is a great stock? IMO, one that sells essential products/services, possesses near monopolistic qualities, superior management and capital allocation, enviable balance sheet, and remains profitable in just about any economic cycle. There aren't too many such companies which makes investing a lot less time consuming. Buy them when they are cheap in relation to their own historical valuation ranges. No need to fall in love with any stocks but if they aren't broken, why fix them?

Yep! Imagine if BRK had repurchased shares throughout its history and employed a TRS. One main difference seems to be that Buffett was very focused on empire-building (in a good way) even while shunning traditional means of increasing shareholder value. Of course history proves that he didn't need to do otherwise. If Prem and Co. learned their lessons from the 2010s, the sky truly is the limit. Proper underwriting gives an insurance company like Fairfax such a wide advantage over other asset management companies.

@Viking such a poignant post. You're right, so few companies are great allocators of capital and even fewer know when to repurchase their own stock in a material way. I mean how many companies announce stock buybacks only to repurchase shares at inopportune times and then later you come to find out that executive compensation packages and stock options only raised the number of shares outstanding? IMO, there is no reason to own stock in any public company that fails this test.

Thanks for the nice explanation, Viking. Perhaps someone will convince Warren or future management to do the same for BRK.

Nah, I think BTC is simply misunderstood. On a value-oriented forum like this, proponents should expect a lot of pushback. I don't think even the staunchest supporters really can predict its future. To me the issue is all about the price you pay and why the price is reasonable at any given level. Valuation seems to be based mostly on belief, not unlike politics and religion to your point. There are those proponents who tell you as one example that you will be poor for not buying BTC, which type of comment doesn't even warrant a reply. But I've found most proponents' views interesting and helpful in my (thus far) understanding of BTC.

And curiously those endings never announce themselves in advance yet are always so evident in hindsight.

Gold can be lost or stolen. You pay to store it and it has little to no utility. Not my idea of a store of value. In the U.S. I absolutely own RE. There is a legal process for government takings in the US and owners are compensated. Elsewhere gold can be confiscated and its portability therefore works against it to your very point. Never heard of equities being seized or stolen - you'll have to explain that one and why it wouldn't be just as easy to seize or steal gold, if not easier.

Well, in that sense I'm not sure what you mean by "store of value". I'd argue real estate trumps (sorry) gold by miles. Equities, for as long as they've been in existence. Just about anything that generates a return. If you've owned gold for (pick a time period) what do you have to show for it? And I own gold [coins] but for reasons entirely unrelated to a store of value.

How will cash flow ever exist for BTC? Its not that DCF is the only way to measure value. In fact, how many folks can accurately value anything using DCF? For stocks like Berkshire or AAPL, future cash flows are highly unknowable because much of the future business activity of these companies is yet unknown. Seems as if these stocks are bought not for the present but for what incredible brainpower can generate in the future. Yet unlike BTC, that only requires a leap of faith on an already known success story. Likewise, there are plenty of assets that can be valued by means other than DCF. Take collectibles as one example. Scarcity, uniqueness, historical perspective, beauty, appeal of the creator, appeal of the subject, to name a few. Not sure how BTC possesses any of those qualities but the topic is now of interest to me and this forum has provided lots of material for future reading.

Figuring out the value of the whole network, leaving subjectivity aside is indeed the tough part. The problem (for me at least) is subjectivity has generally been effective.

TY @rkbabang

Not here questioning your winnings! But Wall Street and the financial industry has never shied away from promoting anything that will put money in their pockets.

Re. Metcalf's Law I am left with some initial questions: The article starts out by comparing BTC to an Italian network of telephone tokens. This seems much like today's forever stamps where people hoard them on the basis of anticipated price increases. Yet the phone tokens and stamp prices rise gradually, in contrast to the price of BTC. How can this be reconciled in terms of coming up with a fair price? The article uses Facebook as a further analogy. Facebook, as an entity clearly has value that can be measured in any number of traditional ways. I can [almost] see where BTC as a network can also be valued based on the cumulative value to users of its convenience, etc... But what I can't decipher is how each wallet or coin can be valued, at least in a monetization sense, other than via bid/ask based on ??? Logically the value is not simply a proportional value of the network as a whole because the network is not a static, cost free endeavor. The article asks (rhetorically) where value is created for traditional currencies. What I think it neglects to acknowledge is that the US dollar is effectively a legal contract between the US government and the holder of the note for the nominal value of the currency. The article goes on to say that the model is based solely on supply and demand. The author seems to take a leap of faith by stating "we expect deviations to occur but significant deviations should be subject to scrutiny". Why? The author does acknowledge that the price has been, and can be manipulated. Doesn't this defeat one of the main purposes/advantages of BTC? I'm sure when I re-read the article more questions will surface. The article is fascinating and leaves me with more questions than before (that's a good thing!). I intend to read the other authorities you and others have provided. Thanks again.

Since BTC can be "lost" how can we know for sure that the supply will always be limited?