plato1976
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Posts posted by plato1976
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4 hours ago, Spekulatius said:
Imagine going to a Costco in China Wednesday and a Thursday at the same Costco someone tests positive. Now everyone who works or visited the Costco (as a customer) within 2 days before an after the positive case needs to quarantine. That’s a story I was told from an manager whose company does business (with employees) in China this weekend over a beer. This is zero COVID-19 policy in China in practice.
I want to point out that it's not the quarantine at home as we understand. It's a quarantine that happens at specified buildings (transported by the government bus). First hand information as I can see from my wechat groups (relatives living in china broadcasting real time progress. )
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On 7/2/2022 at 7:19 PM, Parsad said:
Again, I wouldn't touch the currencies, but certainly would look at the infrastructure companies in blockchain and crypto. Look at Overstock.com, which I own a lot of now and will keep buying if it goes down further.
$1.1B market cap, profitable retail business, $450M in cash on the books, $2.5B in revenues, virtually no debt...essentially you are buying the company for $600M...a quarter of revenues...and that doesn't even include their huge blockchain investment in Medici Ventures LP...which could be worth $1B or $20B!
If that Medici option ever kicks in, it could be the cheapest stock on the market right now. In the mean time, just the retail business itself is worth 2-3x what it trades for right now.
Cheers!
Before the pandemic Overstock was traded below 10 and now it's still above 20 after the crash, what significantly changed during the pandemic as far as Overstock's business is concerned?
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8 hours ago, Spekulatius said:
Fed has 3 main priorities:
1) reduce inflation
2) Keep financial markets operating well
3) Employment
3) is not an issue right now. We have full employment. I don't see any issues regarding 2) in the US, but I think the massacre in EM and other currencies could be an issue in some countries with respect to their financial systems. I am not sure how much that matters to the Fed.
So focus is going to be on inflation until unemployment starts to creep up substantially. I think the Fed can lift interest rates quite a bit more before something breaks with 2) or 3). A mild recession (we are likely in one already) does not seem to affect labor markets much. I don't think some techie layoffs in cryptos really count, those people can easily get a job at a Fortune 500 company. Where things may get ugly is Emerging markets where credit could become very tight - that's where liquidity gets sucked out first, but that's not the Fed's problem until it affects the US economy.
How about Europe? I don't treat it as EM and I do think it concerns the U.S. Gov geopolitically, if not the Fed itself
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Does anyone know if this mentioned "MicroStrategy’s 0.75% convertible bond" trades publicly?
Where can I check this information
Thanks!
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not sure how many have thought about hedging the profits
It's fair to say the market is at least fairly valued. Let's say the long term rate will be permanently stuck below 1% for 10y and if we add 3% risk premium we get 25pe as reasonable for the market. Good bluechips with strong moat can have some premium and this put a cap at 30pe for bluechip with a little bit growth prospect (sth like Apple). Apple is already above 30 now. And this applies to most other new era bluechips
It's also fair to say that without the liquidity the market would have been gone that high. Both liquidity and long term rate are close to the extreme they can get (they can certainly go more crazy - rate can go to 0 or slightly negative, but I see that as the last leg). I am reluctant to sell my positions for two reasons: 1) most have good moat and in the long run they will still compound 2) most importantly, I don't want to incur the tax
So this leaves me with the only option. To begin to hedge. But I cannot find a good hedge here. Most leap puts are very expensive now (just check tesla puts...) I don't want to short anything in a straight way. I am actually thinking, if the main reason of this bull market is liquidity, is there a cheap way to hedge against the eventual liquidity ramping off? (I don't want to bet against the long term rate, imo the long term rate may just be stuck at a low level for a long time)
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why the insurance business is very well positioned?
low interest rate in general impairs the insurance business in overall
I would expect Berkshire's cash to be close to $150 Billion at quarter end. I would also recommend factoring in a return to pre-Trump corporate tax rates and the associated increase in deferred tax liabilities/decrease in book value and intrinsic value.
That said, Berkshire is as cheap as it has been in a very long time and the insurance business looks very very well positioned.
disclosure, long BRK, short SPX
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what's berkshire insurance's exposure to the pandemic?
I think geico is immune to it, but re-insurance can take a hit? but how?
Has anyone been looking into P&C insurance companies? They've been getting hit pretty hard in this environment. I've been trying to find historically good underwriters, ideally combined ratios of <95%. TRV, WRB, and AFG come to mind. The current interest rate environment is a bit worrisome though.
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I can see more and more residential and companies are shifting to install solar panels to supply electricity for themselves. Many of them gain "energy independence"
Won't this impact traditional utility business ?
Not sure if there is a quantification of this impact
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The heated up discussion about WFC and the increased number of ppl buying WFC here scared sh*t out of me
sold Prosus, purchased on 3/24 mostly, for a 40% gain. still "cheap" to 700HK/NAV but this is my way of sizing down the big cap tech exposure, selling out the chinese one. holding onto the other ones is hard given the absolute/relative valuations, but I'm doing it.
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this does look like a value trap to me at this point (together with most other big banks)
WFC
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Isn’t the portfolio going down further? Banks are sliding day after day, trumping the apple gain
Post earnings these calculations of what you get for free are growing. At 174/sh the market cap is 423b and cash is up to around 143b after selling the airlines, and the portfolio is in the 195b range. You get everything else for 85b right now, and if there are a few more weeks like this one where the portfolio value keeps going up but Berkshire keeps going down, maybe you'd get the whole company for free.
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As I said, most likely he bought nothing material
I bought more Berkshire b shares over the week.
No Berkshire Hathaway run-up in the shares this year before the annual meeting.
It will be interesting to see what Buffett bought and how the big businesses are doing.
However Berkshire shares are cheap and safe. :)
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Bank has been weak since the market low, and WFC was esp. weak.
High probability there is another leg down from this level
small add to WFC
Thanks
Lance
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In other words it's a financial discipline issue.
Is there any FCF focused energy company ?
what's the reason for the cost elasticity
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I don't even know how to value these big oils
what's the long term oil price should we assume? $40 ?
Looking at this from 10,000 feet, I see three things
1. Supply shock: Now there is an output cut from OPEC+. This indicates to me that higher prices are in the long run interest for these countries.
2. U.S. Interests: It's also clear that a thriving domestic oil industry is in the long run national security interest of the U.S, and this also requires higher prices
3. COVID Demand shock: This is what is keeping prices low for the time being
#1 and #2 will ensure to keep a floor on prices, so once #3 resolves isn't Crude likely to shoot back up?
We will see many bankruptcies among the U.S. producers. Those assets though will likely end up with the majors, who should be able to survive.
So then is a good investment idea to buy a basket of the majors at historic low equity values (XOM, CVX, RDS, BP)?
This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so.
How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though)
That’s the problem, I am not sure the model works at any crude price. Even the majors had problem living within their ash flows at $80-100/brl. The costs have shown a lot of elasticity , both on the way up, as well as on the way doen. Based on FCF, the majors were never cheap. You have to assume that the future is different than the past in order to be successful and more than just a higher crude price is needed.
Labor cost, day rate inflation. Marginal projects getting approved. It’s what happens in industries that like to play on the margin. Typically in the past there was a delay due to long project lead times, but when shale started to dominate, the costs and the prices track each other closer.
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what's the reason for the cost elasticity
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I don't even know how to value these big oils
what's the long term oil price should we assume? $40 ?
Looking at this from 10,000 feet, I see three things
1. Supply shock: Now there is an output cut from OPEC+. This indicates to me that higher prices are in the long run interest for these countries.
2. U.S. Interests: It's also clear that a thriving domestic oil industry is in the long run national security interest of the U.S, and this also requires higher prices
3. COVID Demand shock: This is what is keeping prices low for the time being
#1 and #2 will ensure to keep a floor on prices, so once #3 resolves isn't Crude likely to shoot back up?
We will see many bankruptcies among the U.S. producers. Those assets though will likely end up with the majors, who should be able to survive.
So then is a good investment idea to buy a basket of the majors at historic low equity values (XOM, CVX, RDS, BP)?
This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so.
How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though)
That’s the problem, I am not sure the model works at any crude price. Even the majors had problem living within their ash flows at $80-100/brl. The costs have shown a lot of elasticity , both on the way up, as well as on the way doen. Based on FCF, the majors were never cheap. You have to assume that the future is different than the past in order to be successful and more than just a higher crude price is needed.
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I don't even know how to value these big oils
what's the long term oil price should we assume? $40 ?
Looking at this from 10,000 feet, I see three things
1. Supply shock: Now there is an output cut from OPEC+. This indicates to me that higher prices are in the long run interest for these countries.
2. U.S. Interests: It's also clear that a thriving domestic oil industry is in the long run national security interest of the U.S, and this also requires higher prices
3. COVID Demand shock: This is what is keeping prices low for the time being
#1 and #2 will ensure to keep a floor on prices, so once #3 resolves isn't Crude likely to shoot back up?
We will see many bankruptcies among the U.S. producers. Those assets though will likely end up with the majors, who should be able to survive.
So then is a good investment idea to buy a basket of the majors at historic low equity values (XOM, CVX, RDS, BP)?
This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so.
How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though)
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JPM just said it would suspend dividend if situation turns much worse
WFC, WFC January 2022 27.50 calls (purchased last week around 5.95), FRFHF.
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why much larger?
OPEC+ sources said they expected total global oil cuts to amount to more than 20 million bpd, or 20 percent of global supply, effective May 1.
It should be clarified the voluntary actuals cuts are way below that number.
the rest of the so-called "cuts" are economically driven cuts by higher-cost producers that no longer have a viable option.
Bottom line I guess it doesn't matter, the Kingdom and Kremlin's intend was to have some supply-side destruction through economically driven cuts by higher-cost producers.
5 years down the line, I suspect the duo will be looking at a much larger, centralized U.S.-based oil and gas industry.
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There is a very big chance that Berkshire didn't take adv of this market melt-down in any meaningful way, and came out to surprise shareholders greatly
Maybe Warren learned his lesson not to speak too soon, for better or worse. One other difference is how swift this down draft has been. It could be possible Warren needs more time to buy and will speak out when he's done or certain his elephant isn't available. In 2008 he spoke out after he had already made the big purchase.
How do people know Warren isn't accumulating at the moment? Just because hes selling airlines doesn't mean he can't be a net buyer overall in stocks he probably views as being able to weather this environment much better ie banks possibly. He's not gonna come out and tell the world it's a good time to buy and have the markets take off on him when he can only buy a certain amount every day. For most people if you weren't buying when the markets fell to 2200 on your own you have no business buying at 2700 just because buffett gives you his blessing. He gives his advice annually and that should be sufficient enough to make our own decisions. We shouldn't need him to go on air everytime there's some panic so he can calm us down.
The thing with berkshire is they're not looking to buy and sell stocks. They're looking to acquire companies to increase cash flow. It's one thing to buy apple and collect 1% in dividends and another to get the entire company and decide what to do with all the cash flow. He's holding cash for that purpose. I'm sure if he didn't have to pay a premium for an entire company he would have bought something already. That's not the case for berkshire. So they pick away at stocks while waiting for the elephant
One thing that really annoys me about Buffet in the last 2-3 years is his constant preaching that stocks are not expensive if interest rates stays low. At the same time, Berkshire was building a war chest of $100bn of cash. It's one thing when Bill Ackman says that stocks are cheap with interest rate being low. It's another when it is the icon of value investing pretty much saying that paying 30x FCF is okay due to low interest rates.
I think he is buying. With that said, he did tell the world that he was buying in Oct 2008...in which the market drop another 20%+ after.
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A few bad news related to this name, not sure if fully priced in:
UK banks halt dividends due to gov pressure. They are reasonably capitalized so not sure if US banks will follow
2. I think more importantly, there is some worry about mortgage impairment recently that's getting intense. Seems we need to regulator to lighten up some regulation so banks don't need to take a big hit to their capital when they provide some relief to borrowers in temporary difficulty (like 3 months) -- without it banks may dive
WFC
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If the 10y stays at today's level, what's the fair value of a big bank? 1x tangible? 1.5x?
Today was a tremendous buying opportunity. This thing is worse than flu, but not by all that much. In many ways it's not as scary as flu because children are not dying.
I thought today of searching for a largish population where everyone was tested for the virus and where healthcare access was poor. Here it is:
"Of the 705 passengers who tested positive for the virus on the Diamond Princess, six died -- which is a death rate of less than 1%. All of the patients who died onboard were more than 70 years old."
https://abcnews.go.com/Health/early-mortality-rates-covid-19-misleading-experts/story?id=69477312
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Isn’t cast precision part of the manufacturing ? Double accounting?
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To me, the following paragraph is the most relevant one for an average Joe:
"here’s a pathway towards financial independence.
1. Work hard, get an education, develop a valuable skill. Munger didn’t start Facebook from his dorm room or trade penny stocks in high school. He served in the military, earned a law degree, and went to work everyday for years. At this point, work means exchanging your time for money, but hopefully at a good hourly rate.
2. Use that work career and save up 10x living expenses. Munger called himself a “cautious little squirrel” saving up a pile of nuts. He dutifully saved his salary while supporting a family and kids (and some other personal family drama that a luckier person wouldn’t have to deal with). I don’t think you’ll need 10x if you don’t have a family to support.
3. To accelerate wealth accumulation, you can now take some more risk and start some sort of business. You need something that scales, something that’s not paid per hour. Munger did real estate development. If you look at people who got wealthy quickly, nearly all of them are business owners of some type.
4. At some point, your investments will enough money to support your living expenses. This is financial independence. It doesn’t matter what you do during the day, as you earn enough money while you’re sleeping. However, many people choose to continue doing one of the paths above: (1) employee-based career, (2) active business management, or (3) actively managing their investments.
"
Say now you passed stage 2, how should you move to step 3? I think many folks are facing this choice. Many do stocks but I don't think for most ppl it's a good choice for step 3 b/c
1. it's not scalable
2. it usually doesn't provide stable income
3. it's very dangerous to use leverage on stocks
Munger did real estate development at stage 3. I still think real estate in some form (agency, re-modeling, rental business of some sort of...) is still the best choice for stage 3 for most ppl
Any other suggestion?
That's true and on retrospect my comment was a bit harsh. I don't think the mental latticework whatnot is useless - it certainly is not. Combining disciplines can and has produced novel ideas and inventions.
But - I think if we are going to look to examples of that for emulation, we should pick from successful ones that truly embody the principle. Elon Musk for example build a payment processor and now look what he is doing. Or Bill Gates who built one of the greatest companies and now charitable funds.
CM, while certainly a great guy and teacher, did not (as far as I know) take his investment billions and develop some incredible technology elsewhere.
And to be fair, he is an incredible investor and in my opinion that is enough in itself to deserve acclaim - but to characterize him as some polymath investor-philosopher...this is stretching the hero worship a little too far for my taste. Of course I still asked him to sign a copy of his book for me! ;D
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This is motivated by the biography thread :D
Munger may say "the decline and fall of the roman empire" ......
Yuval's "Sapiens:" also came to my mind but it's not a typical history book
China
in General Discussion
Posted
Well said