LC

Sold the balance of my position in MMM. Nice gain over the last 1.5 years but the reason I bought (attractive 4+% dividend, below SP500 earnings yield) no longer holds (2.3% dividend, earnings yield about equal to SP500). The two most attractive investments to me are Citi and Compass Minerals, but I am wary of being too overweight. Would like to redeploy into Berkshire, Philip Morris, RELX, but not sure I can justify buying at these prices.

I have nothing valuable to add here, but holy shit, this thread spans hundreds of pages, over 6 years, for a stock that has barely moved.

I wouldn't call it a huge bubble. Here's the historical SP500 P/E back to 1928: http://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart Frothy? Yes.

I've argued this on other points, but I'm not sure I agree. A lot of society is pretty developed. We've built the highways, the dams, the housing, the utilities, the railroads, the oil rigs/drills, etc. From here on, it's mostly maintenance. And what we are building, we're building cheaper. Of course there's still other areas of the world which are under-developed, but it's shrinking every day. And now we're building robots to do all the manual work, so even the human capital element is decreasing. I think over the next 50 years, we're going to be less of a capital-intensive society. That's what I hope for at least. And that is one of the big reasons I think returns on capital (interest rates) are low.

Tough questions...I'll take a stab. Perhaps you get this bifurcated industry, where it consolidates into one or two giants on the B&M side, and one or two giants on the e-commerce side, for a given product class. So you have two options in terms of how you want to buy (B&M vs online), and then two options on where you want to buy within that category. The Coke/Pepsi effect. On the B&M side (in terms of who lasts), I think part of that consolidation is maximizing the retail footprint. Being really smart about what people are walking into the store to buy, and being really smart about store size and location.

To be fair, I think the reason a lot of people mention his name first is due to the fact that he is one of the most public figures in this community. The dude really puts himself out there. When he performs, everyone praises him. When he doesn't, he will be the first everyone piles in on. That's just how publicity is.

His letters are about as public as you can make them. The SEC requires/required accredited funds to have a separate log-in to access information from advertising (newsletters, performance numbers, etc). If you are accredited and contact Pabrai Funds to access the letters, I'm pretty sure they would grant access. This rule was loosened up a couple of years ago, so I'm not sure why most funds still use the password protection. Cheers! Speaking of letters, will you ever be making the 2016 Corner Market Capital letter available? :) Pretty sure Sanjeev can't himself, but you know, if one of his accredited investors happens to attach or link it...

Mohnish owes you a license plate.

Yea, I thought it was obvious we were talking about the net value of the float, including the invested assets and any underwriting profits. As you say not even an insane person would pay to assume just the liability. You need to be paid for that.

If the float is $100 but only $90 will be paid out, and you can invest it for an extra $5, why not pay $5 for it? Free ten bucks, no?

You think correct, here are insurance premiums received: 2005 - $21,997 2006 - $23,964 2007 - $31,783 2008 - 25,525 2009 - 27,884 2010 - 30,749 2011 - 32,075 .. 2016 - 45,881 I personally think the assumption being made is a decent one to make. History certainly supports it, both from a premium growth side, and the fact that Buffett has created one of the best insurance machines out there. IMHO and as you mention, only drastic technological changes will alter this trajectory.

I essentially agree with the rest of your post, but I am not so sure about this. I don't know the insurance business that well, but I would think that the profitability of new insurance business is somehow correlated to the current interest rate environment. When cash is cheap, lots of people can write business, which pushes down profitability (I could be wrong here). Buffett notoriously does not want to write unprofitable business. Here is the big assumption that Buffett makes: Owing $1 that in effect will never leave the premises –because new business is almost certain to deliver a substitute – is worlds different from owing $1 that will go out the door tomorrow and not be replaced. As long as new, profitable business can be written, for Buffett (or any other consistently profitable underwriter), this business is like having the ability to draw upon a negative-interest rate revolving loan.

It's value may change. All earnings are not created equal. If you think their underwriting earnings are more or less valuable than their investment portfolio earnings, then I would think their value would change.

I've got a couple of thoughts but it's a bit late here so I'll put one here and mull over the rest for tomorrow. The reason I took out the investing portion when comparing 2 insurance companies is this: Imagine an insurance company with negative underwriting profits. They are essentially a leveraged investment company. They pay X% for financial obligations, and try to invest to make X+Y%. The only value they add is via investing. Take away their investing arm, and they will eventually drown. So their only real asset is their ability to invest profitably. So why write insurance business? To grow AUM. So we can think of the liability associated with float as the cost for an investment manager to increase their AUM. So if we look at it from that perspective, let's go back to underwriting profitably. Imagine investing with a fund manager. You pay him a % to invest with him. At some point you will redeem your investment, but when is that a REAL liability to his business? I can think of 3 scenarios: -your clients will all jump ship in a crisis -your performance is consistently just plain bad and most importantly, -your cannot replace any leaving AUM Maybe I'm rambling but that's a thought I had.

Rb: I don't understand your point (then again I am pretty dense...) If we take your example of company A (underwriting losses) and B (underwriting gains) and simplify the problem: Imagine they both write their first business today. Let's remove all investments of the float, assume they only hold cash. Let's go forward 1000 years of this behavior, and then look at the companies. Company A will now be bankrupt due to underwriting losses. Company B will have printed money continuously. If we go back to time zero, we see the underwriting performance of A to be a huge liability which has wiped out the company, but a huge asset to B.

Isn't Berkshire generally posting underwriting profits, though? Their float is being paid for because they are better underwriters than other institutions. To other firms the float is a liability but for Brk it is an asset, or at least that is how I understand it.

Norm does the best shaggy dog jokes. Here's another great one: I sold SAN on (1) a comment that SD made in the SAN thread and (2) because I think Citi is also undervalued and has a better business. So I've shifted to that.

I'm always a fan of shaggy dog jokes, Norm Macdonald does it best:

Congrats Keith, about time!

Question for the board: I have probably 10? different accounts of various forms (Roth/regular IRAs, 401ks, regular brokerage accts) over a few different brokers (schwab, fidelity, vanguard, etc etc). It's a pain in the butt trying to navigate each one to view the overall performance of a various position. I have been using a spreadsheet and just entering each trade manually, but I am wondering if there is an automated tool or website that people use to make life easier?

I lean towards Poor Charlie's comment. I won't be managing anyone else's money. I'd want to sit down with someone who is a damn good stock picker/businessman, pick their brain for a few hours. Analysis by contrast: what do they do that I don't? how does their thought process differ? etc.

I haven't been to a branch in at least 3 years...

Bought more Citi today

Nyc/den

I agree with Scott. As to being an investment analyst...what do they do that you cannot do from your couch? The answer is not much. I took the investment knowledge, applied it to the modeling space. Helped that I had a background in some heavy math and stats. But overall a very useful skill set: my peers are math nerds without an understanding of the final implications. Have that understanding makes it easier to back into whatever problem we are facing. Also the ancillary skills are useful: communicating a thesis, distilling data points into what is coherent and important. These are useful anywhere.