LC

What was your sell rationale on UMG?

Not sure as I write options on IBKR. Selling calls?

One of my more successful trades (emphasis on trade) this year has been selling OOM calls on LPX. Long the stock and periodically short and then re-buy OOM calls depending on the market. I'm actually hoping to get called out of the position as I'd rather own the REIT rather than the builders or suppliers.

I don't have transformation experience, but two pieces of advice: -need to have a team in place you can rely on -sometimes, a public execution is necessary

Every year the FRB manages the CCAR process, including publishing stress macro scenarios, under which the banks estimate their potential losses (and therefore capital needs). Well if I recall, the Fed didn't include their own massive interest rate hikes in their own stress scenarios. So you'll have to excuse me if I don't give a hot damn about FRB expectations.

Not sure I agree. The difference is this: Despite home prices crashing in 07/08, fundamental demand never dropped. People still need to live somewhere. Today, many corporations don't need office space. Fundamental demand may have shifted.

What is the end game for office here? Conversions to residential? That works in a handful of marquee locations, but not for the majority. And I imagine it's incredibly expensive: https://www.nytimes.com/2022/12/27/business/what-would-it-take-to-turn-more-offices-into-housing.html And office buildings look like crap. Character-less panes of mirrored glass and uniform windows. Thoughts and prayers that corporate tenants return? Well why would they? It's been almost 3 years of nationwide work-from-home or semi-WFH. I don't see that changing. It's cheaper, arguably more efficient, and well liked by most employees. And look at the cities themselves - they are blown out with crime and homelessness. Know anyone dying to move to SF these days? I don't. Someone way smarter than me has a great opportunity on their hands if they can figure out a (cheap) way to revitalize old office bldgs and make it a cultural part of urban life.

What retailers are you looking at, Sanj? Overstock doesn't seem to fit the bill you describe in your post.

Everyone “sees disruption coming” for these types of companies because they’re incredibly asset light.

Speaking of which: https://www.foxbusiness.com/economy/train-carrying-ethanol-minnesota-derails-catches-fire-forcing-evacuations-small-town

If you think the banks HTM book is a mess, wait till you look at the government. I don't think banks are such a black box. Yes, there is the question of loan quality through the cycle. But I think investors have decent insight into the loan book between all the resources available. Banks holding 2.xx% mortgages is really a nothing burger for the big boys. The Feds hold way more. So they are all in the same boat. And the Feds control policy. Another way to think of it: the entire world had 10 years of ZIRP to "disrupt" the banks: ultimately ended in failure for the incumbents. That's the sign of a decent business if you ask me.

I bucket my holdings: Berkshire/Cash Equiv: 24% Fairfax: 16% Banks: 6% (Citi, BAC, DB in that order) Real Estate: 21% Mainly the "Greg" portfolio + Clipper, but also stuff like PSTL O&G: 9% Mainly Petrobras, Oxy, Vitesse, Black Stone Other stuff makes up about 20%: MSG, Overstock, Nintendo, Tobacco, Davita, SNC Lavalin 5% is a merger arb bucket The portfolio got a bit out of control the past year or so with the volatility in the market - I plan on consolidating a lot down over the coming months.

Special dividends here we come, I suppose? These regulators are politicians first, and stewards second. On both sides of the border.

PSMT? Spek likes it. Not sure about cheap but maybe for the watchlist.

It has a liquor license already. Anyways these are pretty small projects compared to my investment portfolio and equity in the RE I own, and a large part of the reason I'm even involved is to help some friends and tag along on their professional "ride". But I will say it has been much more exciting and grounded to look at these local economics rather than trying to make some guess about recessions and interest rates and the length of the wrinkles on JPow's face QoQ, and whether that means good or bad things for BAC...frankly it's been a bit refreshing.

All 3 really came from friends - coincidental they happened around the same time. the pizza joint specifically, a year back my buddy was hired as a executive chef/GM at a local restaurant group, managing 2 locations. Well, the owners and existing management oversold his role and so frustrated, he quits and decides to spend the rest of the winter skiing. Calls up his friend who owns this pizza shop near the mountains, and asks if he can work some shifts after skiing during the day. well, turns out she’s looking to sell and asks if he wants to buy it. So he calls me, I manage the acquisition and here we are. We got the inside scoop before she listed it, bought for a friends discount as well. She owns 2 other bars and is building some mini casita/ bar&restaurant down in Mexico - needed cash quick and can’t spend any time in Colorado managing a pizzeria and 2 bars when she is trying to build out a tiny villa from scratch on empty land. I tried to buy the bars as well but those as you can imagine are her cash cows and easier to manage - she wasn’t selling. other 2 ventures are similar in that I knew folks for a few years looking to make a change, we figured out a way to do it profitably for all parties. That’s why I try to never turn down drinks!

Point is Buffett has been in a few key businesses the majority of his career, in, out, and back in of others, and gave up on still others. So maybe 1 stock but quite a few businesses. Anyways it’s a moot point but in general I think Buy and hold works for the index. Selling fax machines works until it doesn’t.

Well, may be more accurate to replace the word "stock" with "business"

Bought a skiing & fishing outfitter, pizzeria & bar, and HVAC commercial route. I definitely do not run the shop - I had 3 individuals ready to take over (exec sous chef, HVAC contractor, and a fishing/ski guide). All with 10+ years of corporate experience in a larger market (greater denver/front range) who we are able to install running the majority of the operations in a smaller area (mainly summit county). We bought the outdoor shop and pizzeria at 1-1.5x last year earnings. The HVAC we bought the existing book of business (stable for 5+ years) for 2x earnings. All 3 operators get to move to summit county under workforce housing (less housing expense for them), earn more $, and run their shop with partial ownership (and some oversight). The ski shop is a bit key-man risk as the guide business will probably be a wash: old customers may fall off but our operator will bring his book of business from the front range area. The pizzeria/bar looks very good as the old owner/operator has no actual chef and also was running 3 different foodservice businesses so didn't really have the time to dedicate to it. New operator will be able to improve the menu (see: add salt), expand hours, and manage more events/catering. The HVAC business we bought a commercial book which should remain stable as the old owner will stay on for 6 months, new operator can manage a separate crew for residential runs, and I know a few multifamily developers in summit/grand county who will give us their HVAC business (and also run their catering through us, and provide cheap housing for the 3 new operators). As a kicker both the outfitter and pizzeria have a surprising amount of cash sales which the prior owners pocketed - so when I say I bought at 1-1.5x earnings, it's even cheaper as there are cash sales unaccounted for. When I bought I just considered it a wash: any cash sales were zero margin and just went to the operator as their "salary". In reality that's probably not the case and should provide additional earnings. Just provides some margin of safety.

I kind of agree with both Viking and dealraker. there’s another active thread “who do you follow”. I had a post drafted which I didn’t submit but it went something like, “I follow people who own/have owned businesses themselves.” I just bought into 3 small/mid size businesses in Colorado. I am not thinking at all about what I can sell my shares for. Why? Because at a minimum I am going to earn 50% of my purchase price annually just doing nothing. Instead I am thinking how to earn 75-100% by generate more revenue and optimize operations. These businesses aren’t a huge portion of my net worth but they are a big portion of my mental energy. So i am watching that basket very closely.

How do you reconcile that with Berkshire owning a held-to-maturity’s worth of BAC?

I do not think the FRB will be easing much from here. My guess is a few (1-3?) more hikes (to really fvck with us), then they hold steady for a while. I'd say we're going to have to make money based on earnings, not multiple expansion. (doesn't Jpow know I can't do that??? )

Who would be a stable counterparty for such size? Other banks? not that it matters, I don’t think: BAC is sitting on a 110B mark to market loss on its HTM portfolio If they had hedged any of this, the offsetting gains on those derivatives would show up as income in their OCI. Instead their net change in derivatives for last year was a 10B loss.

I can't speak for other banks but the one I am most familiar with is pretty good for one reason: They are so freaking backwards and people heavy, that they can't HELP but review every decision with a huge committee and take the most pansy-ass approach. And the regulators have pounded pounded pounded into their heads the need for "conservatism". So every decision is viewed through that lens. And the people making these decisions are total Karens (male and female version) with zero skin in the game except career longevity. So they just say, "is this a conservative decision?" If not, they don't do it. And I don't mean to be critical: it has it's benefits. Suboptimal allocation in good times but I would be surprised if major cockroaches emerge. Although I am not as close to the hard lending decisions as I used to be, I l kind of look forward to see how the big boys fare over the next 6 months. I think a lot of these fintech/SketchBanks will take some hits, but the over-regulated, people-heavy major banks will actually come out a bit stronger and be able to pick up some of the wreckage.

How likely do you think the deal close is? Particularly with respect to timing. The other deal I am tracking is TD Bank/First Horizon which is delayed due to regulators dragging their feet: https://www.commercialappeal.com/story/money/business/2023/02/10/td-bank-first-horizon-merger-delayed-regulatory-approval/69891953007/#:~:text=First Horizon and Toronto-Dominion,27%2C 2023.