Spekulatius

Normal human psychology. The guys buying at $600 were the ones selling at $350-400! This exchange made me smile. If there was value then there is extreme value now, even if covid-19 has permanently reduced the value of Eurobank, Recipe, Atlas, Bangalore Airport, etc. to a point below their current share prices. Context is important. All insurance stocks have been crushed in the last 10 weeks. Chubb was trading over $160 in Feb and now it is trading below $100. WRB has fallen from $79 to $51. The declines have been 35-38%. Fairfax has fallen from $625 to $350 a 44% decline. It also had a much larger Q1 loss and hit to BV. So compared to other insurance stocks the decline in FFH looks reasonable. The question moving forward is if you want to put new money into the insurance sector where do you do it? My vote, given the broad based sell off, is to put it into the highest quality names. My current picks are WRB and CB (two that i have followed for years and like). I agree - better risk rewards than FFH with other insurance stocks. I just bought some TRV yesterday and bought back some BRKB today. I don’t like the extended financial leverage that FFH shows at this point. We are looking at the biggest I Insurance even in history and you do t want to go into this with a leveraged balance sheet . We Heard- WEB very clear about this. FFH might not have liquidity issues (insurance companies rarely have those anyways), but regulators closely look at solvency of subs. Not to divert the thread, but I like CB as well. What I don’t like about them is they they have 1/3 of their equity (roughly ) in BB rated junk bonds (Vietnam ?) . I am not sure what their rationale for owning these is and I really don’t like insurance cos stretching for yield.

Very unusual. My ex-wife was raised by politicians and from a young age she was coached by her father to "admit nothing, deny everything, and never put anything in writing". This raises a child who cannot take responsibility. I think it's common in a lot of these powerful families and nurtures narcissism and sociopathy. Meanwhile Trump is talking about how unfair this whole situation is to him and how badly he's being treated in front of the Lincoln monument... Everyone is concerned about him suffering.

Pretty good article about NM dealing with COVID-19 https://www.nytimes.com/2020/05/01/opinion/new-mexico-coronavirus-curve.html

China has high speed trains. I have a pic with me on a Chinese maglev train going 431km/h. With such a speed and counting boarding etc, you are better off going 1200km in a train rather than an airplane if you have a direct train connection. The German ICE trains go 250 km/h. Those are good for 700km and they covers most of Germany. The US still needs air travel for coast to coast, but you could connect the East coast north East with trains, if you could create a high speed rail network.

How much intrinsic value will evaporate in those 2 years for shareholders? Yes, airlines may take on lots of debt and then keep paying those debts in the next 5-6 years. Just because they survive , will shareholders get richer? If yes, then by how much and what risk they are taking? I don't think he is thinking short-term here. I think range of outcome is wide. It’s not a matter if air travel comes back. It surely will. It’s a matter of duration of the current and if current shareholders will get impaired and what the economics of the business will look like. Buffet doesn’t know then answer and he realized that he didn’t get the deal that he thought he get when he bought into this. His process might have been correct and have worked out well in a parallel universe without the Coronavirus showing up, but it did not. So he makes the best guess and moves on. It is what it is.

The problem with anchoring valuation on interest rates is that stocks are a long duration assets and while you know rates are low now and perhaps for the next 2 years, you do not know what they will be in 15 years. If rates go up In due time any owner of stock or real estate for that matter to looking at significantly compressed valuations upon exit.

I am not sure that increasing prices at a time of lower demand is going to work. If that were to happen, I bet someone takes advantage of the combination of surplus cheap planes cheap capital and furloughed pilots and starts a new airline unencumbered by legacy issues. The industry being rational depends on capacity restraints , lack of new entrants and lack of competition. Also, how much business travel is really essential and cannot be done by other means? Business travel is one of the first things to get cut when the economy is slowing down or goes into a revision. Now ad rising prices to this and the incentive to save costs becomes even larger. I think the real essential travel will go on Netjets and private business jets, as you can avoid crowded airports and planes

So, here is Boris Johnson’s account: https://www.bbc.com/news/uk-52517996 The average guy in the UK would have had a different experience in the same situation. I think it is likely that the UK will invest more in their health care system going forward. Nothing convinces better than personal experience.

I liked this annual meeting too Less frills, more substance. I also noticed how long he dwelled on the Great Recession. And while he said, “Don’t bet against America, he didn’t bet on American stocks either. As always, watch what they do more so than what they say. In Buffets case it’s actually quite congruent.

How are you getting 15% with portfolio investments returning 2.5%? I understand you are using $255 stock price as your capital base, but are you taking into account interest expenses, corporate expenses, preferred dividends? Even 3.5% pre-tax return does not get me to 15%. Vinod Not portfolio investments. Fairfax has $1500-1600/share in float/equity/debt. A net 2.5% return in those figures is $37.50/share at the low end. On a $260/share price, that's 14.4% annualized. I'm not talking about portfolio returns, just that they need to net only 2.5% on the total of float/equity/debt after expenses. It doesn't seem like that should be a high bar, particularly if insurance (what the equity/debt supports) is performing well. If people don't seem convinced of 2.5% net on those various forms of funding, then who the hell was buying this at $500-$600/share when the various forms so funding were the same, but the bar for acceptable performance far higher? Normal human psychology. The guys buying at $600 were the ones selling at $350-400! We just heard from Prem in the annual letter that Wade Burton has averaged 19.8% annualized since 2008 for Fairfax, and we all know what Brian Bradstreet can do...yet we're worried that they won't be able to achieve 3-4% annualized on the portfolio over the next 10 years! The only concern would be if we see a massive LA earthquake or the worst hurricane in history in the Gulf Coast this year on top of everything going on. I'm betting against those two happening! Cheers! Ever so optimistic. I haven’t seen many great things coming to shareholders of financials after they drew down the credit line. Better allocation on the investment side would be great, but first they need to get rid of the existing stuff, which is mostly impaired.

I think he pretty much said as much, either this meeting or in the interview he did prior. I also agree here, he did seem exceedingly worried. But he made it clear that he knows just as much about this virus as we all do - so perhaps he is more worried about the economic fallout vs. the virus itself? But that view doesn't make total sense either in the context of buffetteer's point #2: "2. Berkshire at 185 is now equally as valuable as at 220 a few months back therefore impairment of actual long term value of 15% more or less so far from corona. " I feel like the value of a lot off business has been impaired and while prices are a bit lower, they are not cheaper. He also mentions a lot of uncertainty and a wide range of outcomes. So with a margin of safety concept, the threshold to actively buy something is higher if you can’t really estimate the value of what you buy. I really enjoyed this online only shareholder meeting more so than all the others before. The question were much better on point and there was much less cheerleading and more substance.

Every defense business or even supplier to defense business is essential.

I expected that he is selling out of airlines. He clearly decided that they are a different deal now then when he bought them. I think that a fair statement. I suspect it doesn’t just apply to airlines though.

I find it interesting they Buffet stopped buying back Berkshire shared on March 10. it can only mean that there must be something that really concerns him. My guess is future liabilities from the epidemic, but theta just a guess. I think there might be great opportunities in insurance near term,, either organic or inorganic via acquisitions.

3 trial results came out the same day: NIH ACTT trial - discharge in 11 days vs 15, mortality 8% vs 11.6% in Remdesivir vs control arms ( so reduced morbidity, second order effects on reducing overburdened health care systems) https://www.niaid.nih.gov/news-events/nih-clinical-trial-shows-remdesivir-accelerates-recovery-advanced-covid-19 SIMPLE trial - 5 days and 10 days use showed no significant differences (so can be used in shorter course). IDK why they did not release any data about the control arm in this one, I thought it had it... https://www.gilead.com/news-and-press/press-room/press-releases/2020/4/gilead-announces-results-from-phase-3-trial-of-investigational-antiviral-remdesivir-in-patients-with-severe-covid-19 China Remdesivir trial 237 patients data - no significant mortality benefit https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31022-9/fulltext As far as the twitter poster goes, one point well taken is that the next population to study in trials would be earlier start of treatment (now that we have same day per testing) and high risk non-hospitalized patients (somehow delivering at home maybe). Sarilumab phase 2 data also came out, with phase 2 outcome met and phase 3 trial focusing on critically ill patients only where potential to reduce mortality is being seen. Thirdly a lot of attention is going towards the prothrombotic effects of the virus as well as proning early. Stacking all of them and what we know about the virus after all this time, I think mortality will be lower in the future, although a little bit lower not a lot lower (just my opinion). Thanks for the comments. I agree that treatment is improving (and has already) and mortality will be lower. Even though we go down the path of herd immunity , I think there is a huge benefit of getting the perhaps inevitable infection later rather than sooner.

Here is another controversial take. Remdesivir May be worthless. Don‘t have an opinion either way, but it looks the poster may have some valid points. For various reasons (intravenous applications in 10? Doses ) it is unlikely a game changer anyways. https://twitter.com/markhoofnagle/status/1256242036015063042?s=21

A bit more GD and restarting TRV.

If this talk becomes more prevalent and Trump picks it up we are going to see a couple of limit down days in a row. Treasuries will get absolutely destroyed with obvious consequences for the financial system.

Yes, I think that’s essentially correct. Due to different starting points and vulnerability, the same thing did not work in Italy , Spain so more stringent measures had to be taken to get the situation under control. I would call Sweden a success in a sense that their citizens support their strategy and the cost has been in their opinion ( which is really all that matters ) acceptable.

Looks like some contingency are put in place after all by our supreme leader: https://apple.news/AYVZcXZ0WSNCZ9DfJmFf3LA

Haha,self interest? He owns business as well that are closed right now.

Bought a bit of GD. I felt the guidance was Ok and the valuation is pretty good at ~ 11x current (post COVID earnings)- Also added a bit more Vivendi.

The market has provided ample opportunity for those who missed this in March to cash out with the S&P now where it was in October 2019. There should be no valid excuse for these people if they lose their shirts. https://www.wsj.com/articles/coronavirus-turmoil-free-trades-draw-newbies-into-stock-market-11588158001 “I feel like everything that I buy, I watch pretty closely and if it’s something that’s not doing well, I’ll generally try to put [that money] into something that is doing well instead,” https://www.bloomberg.com/news/articles/2020-04-29/firemen-and-romance-writers-faces-of-a-fierce-rebound-in-stocks “I’m a complete noob when it comes to stocks,” the mother of high school senior twin boys said while sheltering at home. “It’s not thousands and thousands of dollars that I invested, but it’s a start. We’ll see what happens. I hate to say it, but it’s like gambling, isn’t it?” More accounts were opened and dollars invested at E*Trade in the first quarter than in any prior full-year period, according to a company statement. The brokerage added 329,000 retail accounts and over $18 billion in net retail assets. Haha who would have thought that having everyone stay at home and enjoying free trades supports the stock market. Seems to me that we need everyone to stop working via a forced lockdown to get the SP500 to new heights. Apparently, the economy isn’t needed any more.

The China study did not show statistical significance and it was in patients with severe disease. The NIAD ACTT study (Not necessarily in as "severe" patients, but hospitalized ones who have imaging findings or need supplemental O2 or a few other criteria) did not show statistical significance in mortality, but did show reduction in time to recovery that was statistically significant. Unfortunately does not seem to be a game changer based on the NIAD press release (study hasn't been published yet), but so far Remdesivir is the only drug that has been shown to do something in a RCT in Covid (unlike Hydroxychloroquine/Azithro), so it's something I guess. So the ACTT shows that it works in patients, but not necessarily severe ones (per inclusion criteria at https://clinicaltrials.gov/ct2/show/NCT04280705). This may indicate that Remdesivir works if administered earlier, before the disease becomes severe. The problem with this is that Gilead has indicated that it takes a lot of resources and time to manufacture doses of this medication (I believe their estimates are to have enough for hundreds of thousands of rounds of treatment this year) and if we are not restricting Remdesivir to only severe patients but giving it to everyone hospitalized, we may not have enough of the drug because that is a fairly large number of patients... The problem that I see with Remdesivir application early on is that it is administered intravenously in 10 dosages. So it is only something that can be done in a hospital setting (or equivalent ) and not very conducive to early intervention.

Another way to look at this is that interest rate for MXN is currently 6.5% vs nearly zip for USD or Euro. This means that forward looking Mr Market expects the Peso to lose ~6% annually relative to the USD or Euro.