thepupil

After 3Q the 2nd quarter of over 6% annualized share reduction + continuation in the 1st quarter shows that Berkshire is increasingly comfortable with a ~100% payou ration and capping the growth of excess capital (if the stock price is sufficiently cheap). think we knew this already, but it's always good to get confirmation. Likewise, we could comp BNSF to UNP and get a number of $120B or whatever, but it's also great to see that "pretty much a toss up" language from the GOAT.

we seem to be flipping between inflation and rates (which are obviously related), but one data point re childcare. the cost of childcare (albeit for those fancy enough to have a nanny which is not the general populace) is up 25%+ in DC area (in 1 year) if you're the typical yuppie scum household in our area, a $1mm house pre-covid is now $1.2mm and has 2x the offers/more competitive, and the nanny you were paying $20/hr ($44K/yr if you don't pay under the table), is now $60K/year. these are obviously rich people (or at least high earning people) problems, but there's definitely plenty of covid impacted stresses on the supply chain, whether that be lumber or nannies or whatever. TBD as to whether post-covid sees some mean reversion. https://www.whitehousenannies.com/for-families/salaries-fees/

I very rarely stumble into the macro land as I find ways to lose money in micro land, but the Fed seems to be doing a fine job keeping short term rates low. do they really mind if the 10Y goes to 2% and 30y to 2.5/3.0%? any problems with steep curve? I'm going on 8 years removed from being a bond trader so I don't pay attention to what the Fed wants the shape of the curve to be. the 3 yr yields 23 bps and 3m bills yield 3 bps, repo rates are 0, 3mL is 19 bps. 12mL is 28 bps. [this is fine dog meme]

I don’t think using look through earnings is aggressive, as long as one doesn’t then double count the stock portfolio. What’s more aggressive is to normalize the earnings power for interest rates without any other adjustments. He points out how much of the earning power this is so it’s easy to get rid of/not include. Overall, appreciate his work. EDIT: on second thought, this may actually not be that aggressive in that at reasonable earnigns multiples, you'll get a value lower than the actual cash amount.

Isn’t State Farm is a mutual? owned by its policy holders ; there is not publicly traded stock, right?

PINS is probably my biggest sin of omission. Early additions to Office as covid started heating up, was my biggest sin of commission. I was guilty of viewing covid as a shock that would end and something that companies would simply have to bridge through (so I was very focused on things like contractual cash flow and debt structure), rather than thinking of covid as a catalyst for long term secular changes. obviously the degree of those changes is still up for debate, but it wasn't going on in my head in late Feb / early march when i made some stupid and greedy additions to things down only a little bit, which hampered my aggression during the fattest of pitches. Not buying Pinterest in early April for a very reasonable price ($15 vs $80+ today) I put it on my to do list and never really dug. Should have prioritized it over other things. At the very least, I think the big picture was compelling enough for a starter position. 6x on a 2-3% starter would have been nice. I think it was hard for me to venture out of my comfort zone when I was in the trenches of real estate land and only just starting to recover from a 40% drawdown and giant change in fundamentals (and price) of everything i owned. Sent this to a friend on 4/4

Yea there was some discussion of this in a thread, I was thinking at one point that FAIRX would have to distribute JOE shares or sell, but that hasn’t happened and I ever dug in to find out the details.

i agree. without having ever spoken to the guy, my interpretation of events is that Bruce more or less gave up on managing a public mutual fund portfolio and got a consolation prize for a great run of a big (but heretofore neglected and unsaleable) slice of the redneck riviera. then CryptJOE went nuts and he's redeemed himself on recent performance metrics. I've been long JOE options and have made out nicely, but I don't really see any evidence of Bruce being a capable stockpicker or that he's doing anything at all. you can buy JOE or Fannie Freddie directly. https://www.fairholmefunds.com/reportsmgt 2019 Year End 41% JOE 38% Cash 20% Fannie Freddie 2020 65% JOE 20% Cash 10% Fannie Freddie

the bolded was wrong. if we assign credibility to the apartment REITs guidance (and assume no further degradation), NOI peak to trough is going to be more like 20%. since this post the apartment REITs returned 6-26% vs SPY of 56%, since I bought them the first time around, they returned 30-62%, but the S&P returned 77% (all rough figures, I've bot and trimmed them along the way as they've been volatile) despite the underperformance, I don't think they're super interesting today, own them in basket form in smaller size than peak. I think financing and capital market conditions have been wonderful, better than they ever have been for these guys, and the cities are showing green shoots (and sunbelt is going nuts MAA/CPT), but even assuming full recovery they're not super attractive, unless you give FULL credit for the private market sub 4 cap craziness going on. on the other hand, with single-family housing prices doing what they're doing, the value proposition of an amenitized $2,500 / month apartment is probably being further validated (if you want to live in these areas). and i do think multi-family is one of the few spots in real estate where it is a legit inflation hedge (1 yr lease length, 60-70% NOI margins, relatively low capital intensity (compared to office), increasing land/labor/materials cost increase cost of new supply)

The Russell 3000 endured a 33% drawdown, then went up over 80% from there, and is up by 24% since this thread was started. Market timing is hard. Hope RuleNumberOne is doing well and compounding on the mid 50’s.

yea, I'm adding to duration, bought a 2050 zero @ $55 / 2% just now for a very small portion of my parents portfolio. I try to replicate the duration of a decent bond allocation w/ less than 10% of the portfolio in order to maximize convexity and keep a big slug of cash around, so this means zero's and quasi perpetuals. Right now have about 6% in century bonds of universities (MIT Caltech Bowdoin) and some shorter Harvards/Princetons and am going to average into duration as it sells off w/ 30 year zero's. that 6% probably roughly has duration of 30 ish so 2 pts of duration on the whole portfolio. Total bond index has duration of about 7 so that my portfolio of zero's and centuries should have the duraiton of about a 28% bond allocation that's diversified across the curve. there's a curve bet in there of course, but I'm okay with that. I want the most convexity, least re-investment risk and most deflationary punch possible. combine this with a prepayable 30 yr fixed mortgage and your left long rate vol and convexity (which they just took out at 2 7/8%)

I'm just pulling it off bloomberg. I think we can both agree that rising rates/inflation is not good for owning utility equity which is a low growth long duration asset. But I reiterate that if you see the rate rollover risk with this company as being a dealbreaker, you will see this risk with almost any company. that's your preferred way to invest and I that's perfectly fine, but I'll feel a need to contradict it when you cite it as a reason for not looking at something, particularly when it looks like the exact opposite (ie the company has an opportunity to decrease its cost of debt as high coupons mature, ie the 9% of 2021 issued in 1991 are refi'd and become 3.25%'s of 2050). If the curve shifts 300 bps up, they'll probably still decrease their WA coupon over the next 5 years. If you think the curve shifts more, that's a macro tail scenario. all portfolios of risk assets and bonds would likely suffer from that. I'm not saying that won't happen, but it'd hurt the vast majortiy of risk assets in a big way.

this company has a WA maturity of 16.5 years and a weighted average coupon of 4.5% and is a low spread IG issuer. the weighted average coupon for debt expiring in the next 10 years is 4.9%. I stand by my characterization of your macro view.

LearningMachine is somewhat obsessed with the risk of rolling over debt at higher coupons and has a much different than market view of interest rates. I think most would look at the debt stack here and conclude the opposite. NWN's lowest coupon is 2.82% and highest coupon is 9.0%. Its spreads range from 86 - 150 bps and prices on the bonds range from $101 to $144 because of the well above market coupons. Maturities are well laddered. About 60% matures in 10 years or more. The coupons over the next few years are 9%, 3.1%, 3.5%, 5.6%, 7.7%, 6.5% , 7.0%, 3.2% , 7.0% (that gets you to 2027). I would wager with 90% probability that interest cost will decrease for this AA rated regulated utility company, if not significantly. I admittedly don't know how passing on interest cost/savings to customers works at utilites There is a remote chance he is right and these are below market when they roll, but this is a tail macro scenario that applies to all companies with debt that isn't super long term.

so just glancing at the financials over 2010-2019 years: Revenue / share: $30--->$25 Operating income: $6--->$4.8 NI : $2.7-->$2.4 Divvy 0.43 / q to 0.48 / q it doesn't seem to be growing at all, whereas utilities index (and of course Berkshire Energy) are actually growing. with an additional 10 mins of work it seems like the big underperformance is warranted. Any thoughts Castanza?

Yea, seems delightfully boring way to make 5-7%/year, quasi bond / widows and orphan type stock. Why is it down 40% in the past year and at 2010 prices. This is much more than XLU. I’m assuming it’s a “natural gas is going away” sell-off, but is there something more

Who would have real money at robinhood?* *Watch IBKR go bust now as punishment for my snobbery

This one specifically (and the part 2). I watched a little bit of his live streams but they’re really long. I’m happy for the guy. I hate the whole populist kill the short sellers narrative but this guy is hilarious and got the big things right.

Loved this description. With the DOXXING of DeepF---Value as a CFA, investment advisor, and value investor, does this change your opinion at all? This seems to be a deep value play by DFV, Scion, Chewy guy, combined by some reckless shorts more than a pump-and-dump. Now the charlatans like Chamath, Portnoy, and Elon are piling on. But it started as a really smart deep value trade not a pump-and-dump. Roaring Kitty/DFV is awesome. just watched a couple of videos where he describes his style. nice, humble, student of the game who tonned it and made $13-$40mm+ for himself. to me that's the coolest part of this whole thing.

At first glance, I think this is a nice idea. Just to confirm your 7% cap rate math, is it something like this 1.2 billion debt 0.98 billion equity 2.188B EV Existing Income Portfolio NOI = 122 million 122 / 2188 = 5.4%cap rate using only existing estate w/ corp overhead of 14mm/year 108 / 2188 = 4.9% cap rate w/ corp overhead. but there's a 394mm development pipeline that's 80% pre-let which is non-income producing. Given the degree to which this is pre-let, we may assume that they'll at least generate their cost on this investment, so if we back that out from the EV 2188-394 = 1794, which gives you a 6.0%-6.8% cap rate (depending on whether you count overhead). Alternatively, if you assume they'll make a 6.0% yield on cost on the development, that will get you into a mid-high 6% cap rate as the development NOI comes in line over the next 3 years. So you're buying a portfolio of 93% occupied 7-8 year weighted average lease office in mostly Brussels and Flanders at a 5-7 cap (depending on what you want to count/not count). The debt cost 2% and is 90%+ fixed rate so you have close to an 8.5% yield to the equity, much of which is returned to you in the form of the 7% dividend. On the risk side, leverage is reasonable at 40% of management asset value and 55% of the mtm enterprise value. this is in a NIRP environment. seems pretty reasonable to me. The belgian 10 year yields -0.36% and the 2 year yields -0.7%, so there's negative hedging costs (though I probably wouldn't hedge since I don't have a lot of euro exposure and would just take on the currency risk.

if you really want to go crazy all the HK property stocks are "cheap", though my only exposure is ownership of Hong Kong Land at an effective NAV multiple of like 0.2x via Jardine Strategic. I'm sure all the other HK landlords are just as cheap (CK Asset may actually be interesting given it has very low leverage and owns things like british pubs and aircraft leasing and infrastructure so not just ?HK property, not reaaaaly my bag though). the two Superman stocks (1 HK and CK Asset) are like a hodge podge of everything hated in the world: mainland china, hong kong, UK, real estate, energy, infrastructure (not hated as much), etc. Mitsubishi Estates owns the best CBD real estate in the world in my opinion (Maranouchi District, near the palace in Tokyo http://marunouchi.mec.co.jp/en/photo/), but it's a giant Japanese company w/ all that implies. With dividends reinvested, it has returned -0.7% since 1988 :o

see slide 38, Paris CBD is marked at 3.1% cap rate and Paris Resi 3.2%. I'm not saying that's "wrong" given where rates/vacancy/whatever is, just saying that when you're buying 30% LTV 3 cap stuff at 70% of NAV, you're paying a 4 cap. One thing to be mindful of is lease structures vary across countries so all cap rates/ NOI’s are not equal. British office leases, I believe, put more of the cost burden on the tenant, and kind of resemble NNN leases. HK leases whenever I’ve looked seem much shorter and HK buildings have the steamiest cap rates in their NAVs. I haven’t dug into French/Gecina. The NYC model is mostly “modified gross” where certain costs are passed through to tenant.m, but you have some gems like ALX Bloomberg tower where more like NNN. ARE and BXP have a fair bit of pretty long duration NNN like structures, one of the reasons ARE trades so dear. https://www.gecina.fr/sites/default/files/2020-07/gecina_-_earnings_at_june_30_2020_-_presentation.pdf

Gecina uses <4 caps for its NAV(IFRS so book = mgt NAV, kind of), at least when i looked at it briefly. While this may be the market for Paris office and apartments, when you have low leverage and extremely low cap rates, a 30% NAV discount isn’t necessarily exciting. Its EV is down 13% sinc e 12/2019 and most leverage is corporate level IIRC (that should be fact checked), whereas in contrast something like VNO’s EV is down 30%, has mostly secured/non recourse debt, and started the year at a bigger NAV discount (though NAV has fallen more) I’m not dismissing the idea. I spent <1hour on it 6+ months ago.

I don't think that is necessarily true. I think what you are seeing is rebalancing between funds and OTC put assignment. he got more shares put to him. he now owns 25% of the company, all in simple long stock form (no options/swaps). “On January 6, 2021, the Reporting Persons restructured and rebalanced its investment in the Issuer,” according to the filing On January 6, Pershing acquired shares via the obligation to purchase common shares pursuant to previously written and reported put options which expired on Jan. 6, the unwind of 3.5 million previously written and reported put options expiring in 2021, and the purchase of shares of common ctock, according to an amended 13D filing The previous 13D/A filed on June 5, 2020 showing Pershing’s 19.9% stock ownership also referenced 32.5% beneficial ownership, an amount reflecting a case where all put options were exercised

The above setup describes EQR and ESS though ESS is exclusively west coast and EQR is west coast plus NY heavy. If you take the 30% down and replace it with 10% and insert sunbelt/southeast for geography, then you are describing MAA and CPT. Given that multi family is more uniform and fungible than say malls or office (which are extremely asset specific), I think a basket approach makes sense as long as you trust mgt and want to own in the various geographies. There are obviously differences but the general set up for all of the blue chips is kind of the same. Or you can go smaller/ more levered / family controlled with NEN/ CLPR. I sold my NEN at a 30 % loss in the throes of covid and bought the blue chips and haven’t looked back. Dabbled with CLPR.