Palantir
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Posts posted by Palantir
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I recognize there is minimal inflation today.
How does the Federal Reserve drain Trillions of liquidity when things turn around? Is it possible to do this without creating a crisis?
Who's the bidder for mortgage backed securities with 3% mortgages behind them if the Fed becomes a seller?
They can drain liquidity by raising rates, which will in theory not be for a few years.
Regarding MBS's, I don't see there being a problem for selling these securities. Many of them are liquid, and you have to keep in mind, they are constantly maturing and being replaced by newly bought securities, and that position can be slowly wound down in a combination of maturation and sales.
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I think hedging inflation is a poor idea, because we need inflation to happen first. Secondly, even if inflation does happen, many things can be inflation hedges, why silver?
According to Ray Dalio, gold performs well in deleveragings, is there evidence that silver behaves the same way?
You're summarizing a lot of what mainstream investors say about silver, however it's not in the form of a coherent argument, I think you should sharpen your opinion a little bit and present a case. (No offense btw).
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^Possibly could be the net-nets in Japan many value bloggers have been writing about.
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It's not that hard to see really...good company with very strong growth characteristics....
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I always assumed WEB liked Jack Welch.
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One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.
Interesting to find out about Mr Garcia Parames. Seems like a really intelligent guy, reading his comments from years ago on the Spanish Economy and its unsuitability to the Eurozone, and it seems very prescient now.
You cannot fault him for missing out on Inditex...value investors tend to avoid these mega growth stories, and Mr WEB himself has missed out on many of them....MSFT, AAPL, SBUX etc etc....
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BV is simply a reference point. It is not a proxy for IV, but rather a "floor".
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^ I was just thinking that as well. The buyback price is 81, it might be a good idea to watch closely, or better yet, sell puts near the target price.
Regarding Sandy, is it really a given though that BV will be lowered due to insurance losses? I would think that BV would grow (from Berk's other operations), but the growth would be offset by Sandy losses. Shouldn't we need an overall loss for the quarter to shrink BV?
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^ No...I figured it out....buying at IV ensures that your return is equal to discount rate if your growth assumptions hold. In that case, then a large margin of safety is not really that important I suppose.
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I understand it is arbitrary, but it is difficult to determine investments when you're trying to look years into the future. When you're doing deep value, you can put an estimate on the worth of an investment and something like a 40%+ discount in theory gives you a good chance of a good return.
I'm going to ask another n00b question. Say you buy a stock exactly at the intrinsic value estimated by the model, say your model assumptions are something like 8% growth and 10% discount rate into perpetuity. What is your expected return if you buy the stock? I suppose if it is expected to be high even if you buy right at IV, then a small discount for a great firm could be justified...
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I know that when you invest in deep value situations, you tend to look for firms that are trading about 40% below intrinsic value or so, in order to have an appropriate margin of safety.
However, if you're investing in a growth firm, a franchise with an economic moat that has a strong growth rate and expanding market share, what's the appropriate discount to look for? For example, I'm looking at Red Hat (RHT), and I've estimated the IV to be 60, but it is trading at 50....
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HPQ? Yucky.
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Yeah...but what's the point of buying these tiny firms? It's not going to make a material difference to Berk's position.
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Exactly, Apple is not about market share, they're making much more on every Apple product sold. Google on the other hand, is really about turning software into a commodity and using a large userbase to drive search. Different business models.
Think about it, Apple would gain market share if they slashed prices on their Mac products. They're quite expensive.....compared to my very good laptop which I got for $500.
I think Google has a much more serious threat in Windows Phone - they can replicate Google's business model.
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How about this, I'll flip it around. I could argue easily that every business that isn't going out of business has a moat. There's a reason they are still in business, customer relationships, a key plant location. A business with absolutely zero moat will be out of business soon as a competitor with the smallest semblance of a competitive advantage will take their customers.
I disagree. I think a "moat" is something that is personell-independent. That means, you can replace the key employees in a firm, and it is still likely to do well. KO springs to mind, AAPL does not really. This also rules out many other firms. Many businesses are kept in place due to relationships, as you noted, I don't consider them to have true "moats". What happens when that relationship frays?
I think investors blow competitive advantages out of proportion. If you read a 10-k there's a section in there for competitive advantages, note how all companies are able to come up with something. To investors some of these things seem phoney, like "the strength of our customer relationships", or "our customer service" or "our quality". Seems like something that can be replicated. I am not a professional investor, I've worked at real companies in the real world, and those things do exist. I've seen a number of contracts walk from one client to another when a sales person leaves. There are also tiny companies that seem to have no advantage, yet a sales person or CEO who knows everyone, and people use people they know.
I agree that investors blow it out of proportion, as I noted earlier. However, my opinion is that companies with moats are just really rare and rarely ever undervalued, and getting too fixated on the competitive advantage can eliminate many good investments.
I've been thinking about this some recently. Essentially a Buffett moat company is a leading company in industry. You have the Coke and Pepsi companies, Exxon etc. The truth is there is no secret sauce to their current success, they have one thing, inerta. When a company is so big is just continues to roll forward. Do you think that Exxon really has hired the 90,000 best and brightest? All companies supposedly hire the best and brightest, at some point the next person hired isn't quite as bright and so on and so forth.
As for moats, I think the true ones are found in smaller growing companies. I listened to an interview with the author of a book, Blueprint to a Billion recently. He talked about companies that grew from $1m in revenue to $1b in revenue in 10-15 years. These are the Starbucks, the McDonalds going from infancy stage to the industry leader. To go from $1m to $1b a moat has to exist.
I consider inertia to be a substantial moat, especially in a business where there is not substantial change. Companies with strong distribution chains can really crush competition using their size.
So the question to everyone who's looking for moats is this. If you can get good at identifying a durable competitive advantage why are you investing in $10b companies that have limited growth. Instead why not look at these tiny companies in a startup stage, if a moat exists you could make 100 or 200x your money rather than 15% a year.
I am long Neustar (NSR) for that reason....let's see how it goes...
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I think the concept of a moat is a little overblown, especially by beginning investors. IMHO very few businesses truly have economic moats, and yet many businesses do just fine. Coke is said to have an economic moat, but that doesn't mean Pepsi cannot do well...
The following is a summary of what I read on the internet:
In technology, the message seems to be "software replaces hardware" and basically specialized hardware providers are going to be replaced by generic boxes where software does the work. For example, a mechanical clock is replaced by an electronic clock - a box with a circuit in it, or a CRT TV replaced with a computer monitor - a box with a computer in it. I could find more examples, but I think the idea is that whenever you need specialized hardware to manipulate information, software will do that job in the future.
Intel's strength is that a lot of software is written for the x86 instruction set, but in the future it is likely more and more software will be independent of the processor platform...
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In the US there seem to be two tickers for Fairfax - FFH and FRFH, what is the difference? Sorry for the n00b Q.
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Basically what I think is that value investors tend to look at a large pile of liquid assets on the balance sheet as somewhat of a "backstop" - basically, "even if things get really bad, at least I'll be able to buy the cash and get the business for super cheap".
Or another way some value investors look at troubled firms is - "yeah sure the business has problems....but it's still really cheap."
I don't think that works here, as firms can very quickly destroy value and this margin of safety that might be apparent can evaporate. I think in businesses with rapidly changing technology, you should focus on buying good businesses that you expect will do well over the long term and are going to increase market share. But that's just IMO.
Say INTC FCFE drops to half its normalized value - say roughly 7.5B/annum...is this still a good value? That's what I think could be a realistic outcome - Intel simply shrinking into a smaller firm.
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To paraphrase Mr. Munger, BRK’s success lies in their abilities (his and Mr. Buffett’s) to constantly shift capital from failing businesses to thriving businesses. And I tend to believe it is true. Mr. Schumpeter’s “creative destruction” is becoming more and more relevant in today’s hyper-competitive world, and the best way to deal with this reality is to embrace and to apply Mr. Munger’s lesson.
I see those outstanding managers you referred to as a part (maybe the most important part!) of each thriving business Mr. Buffett acquired. But neither Jain, nor Abel, nor Nicely, nor Weschler have ever applied Mr. Munger’s lesson. At least, not to such a complex organization as BRK is today. Each one of them knows extremely well his own business… but what about the remaining 74 businesses of the BRK family? Can you be sure whoever succeeds Mr. Buffett will be able to take the right decisions in shifting capital among 75 different businesses? And among all the other acquisitions that will come in the future? It will be a collection of businesses studied and put together, during the course of a lifetime, by an extraordinarily gifted individual… his successor’s task won’t be an easy one!
In my opinion capital allocation is the easiest part of the business, and I feel there are many people in Berkshire and outside Berkshire who can take that role. I don't feel Mr Munger is correct - IMO Berkshire's core strengths are in its operating businesses and the fact that its huge float allows them to invest with free leverage. Those things will not change with WEB's absence.
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I think that's just the wrong way to look at it. Firms with declining moats can waste away their cash, and destroy value very quickly. I think it's a mistake to only look at it because it is "cheap"...rather you should focus on business model going into the future, that's where the margin of safety is. If you find strengths within Intel's business model that you feel will create value in the future, that is a different story.
Are you long INTC?
EDIT: I think MSFT is actually cheaper than INTC. It is trading at less than 10xFCFE, and you also have to take MSFT's 65B net cash pile into account.
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Not sure about HPQ/Dell, but INTC to me would be a high quality with current headwinds.
If you find a reason why they're not please state them.
Its difficult to find a leading high cash generating company at the current respective prices. keep in mind INTC is 10X the value of ARM (which receives a very high valuation).
Simply put, I see a contracting "economic moat" for Intel in the future. "Industry leading" position can be very ephemeral in this space.
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what if Warren passes but Munger lives another 10 years?
Then we should probably all buy DJCO aggressively after market corrections. 8)
To paraphrase Mr. Munger, BRK’s success lies in their abilities (his and Mr. Buffett’s) to constantly shift capital from failing businesses to thriving businesses. And I tend to believe it is true. Mr. Schumpeter’s “creative destruction” is becoming more and more relevant in today’s hyper-competitive world, and the best way to deal with this reality is to embrace and to apply Mr. Munger’s lesson.
This is actually what Munger has been doing with DJCO for some time now.
What is Munger doing with DJCO? I'm curious to hear your opinion of its future prospects. I'm a shareholder, who really bought it as more of a cash cow + portfolio basis.
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Why do you feel there was conflict between Ajit Jain and Hamburg?
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The ones you listed are good names. Then there's the crowd that likes INTC, HPQ or DELL, but I'm pretty shy about tech.
I see your point...but it is highly questionable whether INTC, HPQ, and DELL are "high quality" names...
Physical Silver
in General Discussion
Posted
I think you're focusing too much on the "balanced budget" part. But you do have a point that persistently running a deficit and financing it via increasing the money supply is going to be inflationary. Let's say the economy gets heated up, why don't you feel the Fed can drain liquidity? The fed has such a huge balance sheet right now that releasing these (liquid) assets would do a lot in addition to adjusting rates. (Fed can also sell its gold holdings if inflation rises too much).
Basically my opinion is that the Fed has a much easier time of fighting inflation than fighting deflation.