thepupil

I don’t think rising rates (if they occur) will directly and materially affect earnings for a very long time. The majority of large cap publicly America investment grade and is a) underlevered b) is borrowing on an average of 17 yr maturity at issuance (SIFMA) c) has debt that has an average maturity of 13.75 years (LQD etf = source) rising rates maybe create an alternative to equities but not for a a few hundred bps (sooner for liability matchers like frozen pensions). so I see no margin mean reversion from rates. Going from 20% to 30% tax rate would be a 12.5% decreases in earnings power. ($80 vs $70 of post tax earnings for every $100). $10/$80 = 12.5%. if this came to pass and the whole market went down 13%, I wouldn’t regret being 100% long. Likewise if we land in between and earnings go down 7%. so in my view rates and taxes are boogeymen meant to separate bears from their money over the long term. i worry more about other stuff, but ultimately find most stocks to not be egregiously valued. I’ve thought corporate America is over-earning for a while, but one has to believe it’s REALLY overearning to be REALLY concerned with valuations. so I don’t know if I really care at all about Shiller PE and it’s mean reversion based metric. Why is MSFT or AMZN or FB’s average of the last 10 years earnings relevant? Entire new business lines have been created in the past decade.

based on anecdata, i think SFH RE in my area has peaked in price/frenzy. neighbor had to have house on market for 2 weeks and sell 5% below list! they did overprice it a bit. probably would have gotten a higher price if they listed $100K lower than they did. (ie list at $1.1mm, attract multiple offers, sell at $1.2mm vs list at $1.2mm go cold for 2 weeks, sell at $1.15mm)

thanks! appreciate the perspective. I disagree with most of it, but helpful to hear where you're coming from. You've probably outperformed most thanks to the crypto! This very much resonates w/ me

TwoCities, given your view, what sort of net exposure do you run? what's your asset allocation? what hedges do you have in place? how might that differ if stocks went down 30% w/ some multiple contraction?

I'm in my early 30's as well so I can't comment on the 90's. whenever i hear the B word, I pull this up. the index of high quality companies in the US. there are 125 of MSCI's definition. https://www.msci.com/documents/10199/4af921f5-0bbc-470b-ad69-19a177fad9cf The US is the world's best performing market. these companies have tonned it and returned 16% / year for the past 10 years. But are they "bubbly"? 27x trailing and 24x forward. I would say NO. Prices don't seem bubbly at all; stretched? sure, they're stretched. I'd note that in early 2020, when RuleNumberOne was inundating us with bubble talk, this same index was 20x (not sure if trailing or forward). in my view we can't really be in a bubble unless earnings are VERY MATERIALLY unsustainable. I'm not talking a 10% ding from a little higher tax, I'm talking a 40% cut. my preferred definition of a bubble is that prices could halve and still be expensive. Any company on this list I would buy hand over fist at 14x trailing and 12x forward. So earnings must collapse or the cost of capital must skyrocket for us to be in a bubble. there's a risk of either or both occurring, but is it the base case? is that what is most probable? I also don't think we're in a real estate bubble. I'm not saying that everything out there is cheap, safe, and has a giant margin of safety or anything; it's not! But bubble is a strong word. and for all the attention that crypto and meme stocks get, I know plenty of people participating, but have yet to really meet anyone who's irresponsibly leveraged / allocated in that stuff. likewise w/ real estate. it doesn't at all feel like 2005/6 in south florida when i was in high school and EVERY one's parents regardless of circumstances were buying/buildingon spec/flipping on spec etc. No one is entitled to high real returns; we've been financially repressed for 10+ years and valuations may continue to go up as stocks re-price to deliver lower returns going forward. Stocks don't have to be as cheap as we'd all like. Most people and institutions are on autopilot. they have a lower cost of capital than a bunch of wannabe buffett's expecting to buy good companies for 10x. TINA TINA TINA fo feena fee fo fo meena TINA. Buy Stocks! They've reached a permanently higher plateau

this may have already been mentioned, but isn't the biggest lesson here one of time allocation. Feel like a lot of people have made/lost money on this, but there's a big difference b/w "I'll wager 200 bps on this and read the updates and see how it works" and "I spent a decade reading about legal/politival stuff and then lost X%"

Todd Combs was a financials focused long/short manager. He made 34% net of fees 2005-2010 (~6%/year) during a very crazy time. Unsure if it was market neutral type of fund or what kind of net exposure. https://www.wsj.com/articles/BL-DLB-28105 The fund has also had strong relative performance during extremely challenging times in the financial services sector, outperforming its benchmark by roughly 80 percentage points since inception in November 2005 (positive 34% cumulative net return for Castle Point since launch vs. negative 46% for the XLF).

any chance he did some huge charitable donation concurrent w/ his roth conversion, like set up a foundation? not sure how exactly the charitable deduction worked then and now. it's particularly puzzling in tha roth conversions are ordinary income which is hard to offset.

https://www.corelogic.com/insights-download/homeowner-equity-report.aspx there's also some good stuff here regarding home equity and typical LTV

https://constructioncoverage.com/research/where-residents-have-paid-off-homes#:~:text=According to Census Bureau data,to rise significantly during recessions. it's surprising to me, but 38% of homes are owned free and clear, but looking at the data, a lot of that is on the lower end (example West Virginia has the highest amount of free and clear homes, but that's with a median value of $85K). Proud Maryland resident, where only 16% (the lowest in the country) don't partake in the leverage!

From 3/30/2015 FIH total return: 7% in USD (1.1% / yr) MSCI India 62% in USD (8.1% / yr) MSCI India Small Cap 85% in USD (10.4% / yr) Price to book: 1.2x ---> 0.7x, w/ peak of 1.4x and trough of 0.4x in covid depths Almost any publicly traded investment company is destined to eventually trade at a big discount and go from loved to hated to maybe loved again. I need to play a little catch up and missed buying this at the juicy lows, but probably not a terrible time to have a look at this given the long term underperformance and sentiment correction (from premium to discount). BVPS has gone from $9.5 to $18 since 6/2014, so it's not like it's destined to destroy value. But price has really mattered. If you paid a big premium, your return probably sucked. If you got a big enough discount/bought into bad macro, you probably are sitting on a decent IRR.

I pulled Berkshire's annual for year ended 1998, when 10 yr treasuries yielded 6% and were very much positive / real. Berkshire was running very low duration back then too. Buffett has always had the 70's seared in his mind and seems to have been on the wrong side of the long duration trade for decades. I am not saying he is wrong. I think the cash / very ST FI makes sense in the context of the rest of his portfolio. But I don't think Berkshire is positioned any differently today than 5,10,20+ years ago. So I think his strategy is consistent. Run an overcapitalized insurance company. Don't take (much, if any) duration/credit risk. Own equities. I don't think it has to do with the current inflationary trends of 2021.

Not a bad 6 months for this group of overcapitalized high-ish quality securities. I must say that I'm having trouble getting too excited about stuff lately. Not going to cash, and been buying large cap tech / the chinese tech holco's/proxies (Prosus/Softbank etc.), but don't feel quite as chipper about the portfolio right now. FMBL: +20% LAACZ: +18.5% BRK/B: +22% EQC: -1.6% WEAK! BSM / DMLP: +35%, +26% GOOG, FB, MSFT: +33%, +23%,+15.5% EQR/AVB/CPT/ESS/MAA: +29-32% SPY: +10.9% VT: + 9%

A smidge of Prosus and Softbank.

the math on that sounds much better than BPT

if you want to go crazy, BPT is an interesting OTM option on oil. it is very likely worthless and is designed to become worthless with the passage of time as the royalty recieved is equal to the WTI price minus an ever increasing number (see below for rough guesstimate) and production is declining. It stopped paying distributions in 2020 and is about to run out of cash and at risk of being dissolved any day. But if oil keeps going up, the royalty will be positive again and distributions will flow. If oil went to $100 (and stayed there) there'd be something like $15 of future distributions. On an intrinsic value basis, that kind of 4-5x is not that interesting. you'd make more money in futures options. but given BPT's history of trading wildly above intrinsic value as retail can't properly price it*, you could see the stock move to a multiple thereof. At $100 for 2022, BPT would distribute ~$2/share (per quarter, $8/year). all it takes is some dumb seeking alpha folks to value it at a 10% yield for an 20 bagger at $80 (though it'd be at 4x intrinsic value then). probably worth a few 10's of bps and nothing more. also my super in depth work on VAL has rewarded me with 25% over my 8 long days of hodling a huge 50 bp position. *I dug up an old model from 6 years ago and may not be properly pricing it myself, but i assure you mine is better than 99% of BPT's holders 2021: $60 2022: $65 2023: $72 2024: $78 2025: $86 2026: $94 2027: $101

y'know just your everyday guy with $2-$4 million bucks taking $10K starter positions measured in bps

@Gregmal you have done it again! Boring Shit Capital Partners now if only I could send you a tip for naming my firm.

hmmm, I do not know and will look into it. It was top of the line (all poured concrete (no wood or block), all impact glass, overengineered) when they built it, but that was 20 years ago. in maryland, I pay a hilariously low 9 basis points / year relative to home value. It seems so low i regularly check to make sure it's adequate replacement costs and all that stuff. Through GEICO, but actually Homesite.

I doubt there's a 13-F, because according to 10-k it doesn't look like AAPL owns any equities in its "marketable securities" see page 40 of the 10-K, just a bunch of short term fixed income. there's one vague "non US government securities" but I think that means foreign fixed income (like gilts or something) https://www.bamsec.com/filing/32019320000096?cik=320193

whoa! that's cheap in florida. my parents pay about 1% of property value (couple miles inland on east coast)

I am 106% invested at this time. In practice, that means I have ~70% of my portfolio that's 100% long (IRA's plus an unlevered taxable) and 30% that is 120%. Even then the margin requirment on the account w/ all the leverage is about 40% of NLV. several of my holdings are excessively capitalized w/ 10-30% of their equity in net cash and I have a 6% position in PSTH, so overall net exposure is lower than 100%, but I do have 3% or so in options, 2/3 of which are calls which provide additional upside/leverage. Overall the portfolio "acts" like a slightly levered long portfolio. 100% of my paycheck goes straight to the portfolio. <100% goes out as a margin loan to pay the bills. Always be buying. No market timing. this is what works for me. others can disagree.

Some anecdata from my neck of the woods https://www.redfin.com/MD/Chevy-Chase/23-Primrose-St-20815/home/10640879?utm_source=ios_share&utm_medium=share&utm_campaign=copy_link&utm_nooverride=1&utm_content=link $360K 1983 sale price $2.7mm 2017 sale price $3.7mm 2021 list price $4.5mm Sold $900/foot The home was renovated in 2018, but not structurally, new systems/refresh/kitchen, no more than $500K at most It's starting to feel a bit bubbly. EDIT: you can actually see the old 2017 listing photos on redfin and compare.

ha, there aren't any inspections anymore, here. when we bought 2019 there was no such thing as an inspection contingency, but now in many cases, there's no such thing as a pre-inspection. In 2019 at least you could pay the $600 and know what you're getting into. Now ya just gotta put in the offer. All cash, no contingencies, no inspections!

Castanza, I am so impressed. the reason i buy RE through interactive brokers is that I have no earthly idea how to do any of that type of stuff and find it so intimidating. I have zero handy-man type of skills, much less gut rehab.