UK
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Posts posted by UK
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https://www.wsj.com/articles/storm-clouds-not-capital-ones-ease-for-reinsurers-11567767780
"Reinsurers’ shares already have made huge gains this year. Arch Capital Group Ltd. and RenaissanceRe Holdings Ltd. are up 54% and 41% respectively. Arch Capital is priced at about 1.7 times book value, and RenaissanceRe is at 1.6 times. The latter is close to its highest level since 2007 on that measure."
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"Société Générale analysts calculate that the stocks most closely correlated to Treasurys are the most expensive they have been since at least 2004, when sector differences are stripped out. Meanwhile, the stocks that behave least like bonds are close to the cheapest they have been outside the 2008-09 recession"
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Just look at what multiples to BV SEB or Swedbank, even after the recent scandal, trades, while both also in negative/zero interest rate environment, and then compare them to german banks. Also negative rates, but very diffeent margins and valuatios. So perhaps interest rate environment alone does not explain such situation. Maybe competetive situation/market structure also matters.
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http://brontecapital.blogspot.com/2019/08/thinking-aloud-about-bank-margins-part-2.html
"But there are outliers - and some of them are surprising. The Irish Banks look in Ireland pretty darn profitable. The Scandinavian banks are alright too - despite (say) Swedish interest rates going negative before everyone else.
Even some French regional banks are okay.
And these banks are profitable even in a negative interest rate world.
Swedish banks faced negative rate early - and they came out kind of well."
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"Mr. Rehn said he didn’t rule out a move to purchase equities under the QE program, but that would depend on the assessment of ECB staff."
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“This huge world of investible assets has shrunk down to a small cohort,” said Savita Subramanian, equity and quantitative strategist at Bank of America Merrill Lynch. “We’re all in this echo chamber where everyone goes to the same dinners and drinks the same Kool-Aid.”
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What difference if you buy value or overpriced growth in a crash ? Didn't Berkshire get cut in half even In 99? Graham said during the great depression everything went down, even cash was worth less than cash . The best time to buy anything is when nothing is particularly inflated ?
https://money.cnn.com/magazines/fortune/fortune_archive/2002/11/11/331843/index.htm
"As for Berkshire's stock--well, it has certainly held its own recently. On March 10, 2000, the Nasdaq peaked (interday) at 5,132. That same day Berkshire hit a multiyear low of $40,800. Recently the Nasdaq traded for 1,270, down 75%, while Berkshire traded for $74,000, up 81%"
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Some early "winners" emerging, even before Maria: http://www.insurancejournal.com/news/national/2017/09/28/465902.htm
"Lloyd’s of London expects net losses of $4.5 billion from hurricanes Harvey and Irma, which analysts said would eat into the insurer’s capital and hit its profitability."
"Meanwhile, Beale said it was too early to assess losses from Hurricane Maria, which devastated Puerto Rico last week and which some analysts have predicted will lead to greater insurance losses than Harvey and Irma."
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Yes, recent history/longer term/on general you are probably right regarding their improving quality, but they just made "transformation acquisition" (and btw issued some 4.8 M shares to finance it) and added substantial new exposures for 1.3 BV, seemingly not cheaper than their own shares, especially considering that they are undervalued and know themselves better, and I am wondering, can we be sure that there will not be any really negative surprises, especially considering this:
https://www.fitchratings.com/site/pr/1029717
"At the upper end of that range this would be a record year for global catastrophe losses, which Fitch says, “could weaken capital at some (re)insurers and increase the risk of rating downgrades.”
Does anybody has any deeper insights into this and possible impact on Fairfax+AW? Maybe than, accidentally or not, this could turn out to be even better opportunity/cheap price? Or just nobody can know about possible event impact even remotely at this time? Why not wait than?
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If I am not mistaken in March of 2015 and 2016 they issued 1.15 and 1.0 M shares at 650 and 735 CAD or simple/unadjusted 1.31 and 1.37 PBV (on year end BV of the each year) respectively. Now supposedly they are starting to buyback the same amount or little more at the price 625 CAD at the same simple/unadjusted 1.34 PBV (on 2q 2017). So how it could be so smart thing to do? Isn't the awesomeness of this whole operation not bigger than the difference between issuing and buying back valuations?
Other question is if we can be so sure that underwriting track record of recent years will not be broken due to the recent events? It is a question for FFH experts, because I myself have no idea really about his, but FFH attained these underwriting profits while under really favorable circumstances and now I read that Maria alone could caused an estimated $40 billion to $85 billion in insured losses (but mainly in Puerto Rico and I have no idea if they do have any exposure there).
UK
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Question 7: What impact have the fixed income markets had on stocks?
WB: Interest rates are to asset valuation as gravity is to matter. It will take a lot of movement in interest rates (similar to Paul Volcker in 1981-2) before stocks are too high. The interest rates on 30 year Treasury bonds have declined from 14 ½ % to 2 ½ % from 1982 to 2016. Recently, the 30 year Treasury moved from 2.6% – 2.8%. Stocks are cheap if long term rates are at 4%, four to five years from now. “We are buying more shares than selling everyday unless interest rates move appreciably higher”. A profitable trade would be to short the 30 year bond and go long the S&P 500 (assuming no margin calls). But this is difficult to do on a big scale. Borrowed money causes more people to go broke than anything else. Charlie Munger has said, smart people “go broke from liquor, ladies and leverage”.
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Fiddler on the roof - If I were a rich man
:)
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PSX was indeed acquired as a spin off from COP.
If I recall correctly, at the time of spin off BRK held about 29 M shares of COP, so only about 14,5 M were acquired this way, the rest, or about 12.6 were bought additionally, probably by Todd and then it could be one of his largest position.
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Articles on Warren Buffett, Mohnish Pabrai and more:
http://business.outlookindia.com/content.aspx?site=2&issue=11071
Rotation out of momo/growth to value
in General Discussion
Posted
https://www.wsj.com/articles/values-rebounding-but-dont-get-your-hopes-up-11568462580?mod=rsswn
"This week has seen the biggest swing from momentum stocks to cheap value stocks since the 2008 bank bailouts. But it isn’t likely to last."