Spekulatius

They should do infra. But they can't really do infra or anything economy boosting until the pandemic has passed. OK, they can actually throw money on producing tests and building ICU units in 2 days like China did... They could throw money at delivering meals to people who are out of work because of shutdown and quarantine (assuming there's a way to do it safely). Possibly would cost less and deliver more than just cutting the rates. BWDIK. Exactly--healthcare infra. Maybe subsidize delivery boys with sterile gloves on for groceries/restauarant to keep those places in biz. Problem is that Trump-Pelosi relationship has soured, but in a crisis might be repairable. I think that’s a great idea. Set up a system for restaurants to deliver food at no cost, or even pay for the food. It helps the restaurant and gives some jobs to people who are delivering. Most importantly, it would be safer than people venturing out by themselves. Same with for grocery delivery. Some large supermarkets can do it, but only in areas. The government may pay for the delivery as it makes it easier to put up with a lockdown and it is safer for everyone, including grocery workers. I bet that alone would be worth the cost. Better than a payroll tax cut or bailing out the cruise industry for sure.

He is putting a lot of effort into juicing the stock market, even though we know what the stock market can well take care of itself when everything is running along nicely. It’s his outer scorecard. The interest rate cut don’t surprise me, but the extend of it did. I expected a 0.75% cut, it they shot the entire wad. maybe we go negative next?

Explain to me what economic activity is worthwhile undertaking with 0% risk free interest rates can’t be done with 1%. Europe and Japan went this route and have nothing to show for it, other than the destruction of their financial system. US is probably next.

Futures are limit down, interest rates are zero. That went well. Bank stocks are not going to like this.

Insurance is more tail risk, but a lot of their wholly owned business are highly sensitive to the economy : Iskar (Tools, Peer would be KMT), PCP (aircraft, energy are main markets), Burlington (moves still a lot of coal and recently crude), retailers and then a portfolio chuck full with bank stocks thet were done 30-40%. I frankly don’t think they it is that great of a bargain here real-time to many other securities available right now. One can sleep well at night knowing that they do have a great balance sheet, stable utility and insurance earnings (Geico probably has a great year because people are driving less) and he might be able to snap up and elephant for a good price. There is a lot of value in that.

I think it's much higher than 2%. The reality is many people are sick and not dying of pneumonia - I would assume a portion of posters on this very thread are experiencing symptoms as well as the rest of the population, or had experienced symptoms in Jan/Feb and recovered. The first reported US case was January 21. This is an incredibly fast transmitting virus. The odds are, cases existed prior to Jan 21. And further, the odds are that the spread of this virus across the US was much faster than official reports claim. This is due to lack of testing i.e. lack of timely, accurate information. But ultimately, I agree w/ the principle of: better safe than sorry. For the obvious reason, and for the secondary reason as it provides a "trial-run" on a global basis for future pandemics. I am about 20% cash btw. If I didn't suffer from biases like anchoring and all that stuff I would think about 1/3 cash is the ideal amount right now. https://www.nejm.org/doi/full/10.1056/NEJMoa2001191 Question for you guys as I havent seem to be making any friends swimming against the tide! Above is the NEJM article on first case of corona virus. This is what I don't understand. First US case was January 20st, with 4 days of symptoms and as I have read this is a very fast transmitting virus. Some have said this is very fast, some fast, symptoms take a while to show up, agree. Please reconcile this for me. It has been exactly 2 months since this gentleman returned to the US from wuhan China. Is it out of the way to assume that there was community spread with this gentleman? 4 days of cough, fever, flew on a plane? Lets just work on that premise. Now I have become lost with all of the projections, graphs, charts, etc. Pick whatever model you want. My question is this: Its been 2 months since that virus was officially detected in a known area. I'm not aware of this so please help. Is there overload in the area where this gentleman was? Are there people dying? What does it look like? Are they running out of ICU beds? How is california? They were not far behind and have a HUGE population! I know there can be a delay in symptoms but isnt 2 months long enough for this virus to really get going, especially with lockdown, social distancing just happening now? The consensus for the origination of coronavirus is late November in Wuhan. It did not become a big deal until 2 months later. The way exponential growth works is that when you start with small numbers, it takes time for them to snowball into significant numbers. Once significant numbers are attained, then the growth becomes impactful and felt in a very real way. Berkshire Hathaway was a company not on too many people's radars in the 1960s and 1970s. Eventually it became impossible to ignore. Thanks, but I wasnt asking about Berkshire Hathaway. Can anyone else help on this? Orthopa, I am not an expert, but it is impossible to predict what happens when a single person gets infected. It’s jut random walk static’s, maybe that person is asocial and doesn’t have many contact and might remain the only person. Maybe this person is a social butterfly and gets into contact with a lot of people that are vulnerable and it spread like wildfire and he becomes the infamous patient zero. Just about could happen. The way statistics works it is easier to predict what happens when a larger number of people get infect (100 is probably a reasonable number) since the law of large numbers makes random fluctuations less important. I also think that 100 infections (based in some articles I read) in a cluster is the point of no return when an infection most likely can’t be contained any more because these 100 people generally have so many interactions during their incubation period that it is basically untraceable . Again, am not in the medical field or an epidemiologist, but just from a basic understanding of statistics, I think what I wrote is directionally correct. I also think Dallal is correct that the way exponential growth works, it takes time until the number is in the 100,000 or millions when it become really a factor in a country with the US population. If 1 million people are infected, chances are that each of us will know someone who is infected, if it’s just 10k, chances are that few of us are in the same situation.

Irrresponsible and Unbelievable. I just talked with my brother in Germany. Germany is in a virtual lockdown. Some places area till open but practice social distancing and patrons at the coffee house sit a table apart. many places aren’t even open any more. His daughter has the final test (Abitur) next week Tuesday supposedly, but she isn’t even sure it’s going to take place or may be rescheduled. This brings life on hold , because without this Abitur exam passed, you can’t apply at the university. Rules are being made up as we go. Another interesting tidbit from my brother, who sells wood/lumber wholesale is that the Chinese are back in the market with huge orders. He can’t make sense of it, but heard from other folks in different trades that they apparently restarting their factories so there are orders for other stuff as well. Wood is dirt cheap so maybe they are taking advantage of the low prices or there is more stimulus? No idea, but interesting nevertheless.

Interesting - spat over US government attempts to entice a German biotech company working on infectious disease vaccines to develop a vaccine exclusively for the US: https://www.cnbc.com/2020/03/15/coronavirus-germany-tries-to-stop-us-luring-away-firm-seeking-vaccine.html #MAGA? I guess that’s the government equivalent of people hoarding hand sanitizer?

I wholeheartedly agree with this.

Let's push this idea further. There has been a financial environment shift since the 2007-9 episode in the P+C world with most companies adapting to the 'cheap' capital environment, settling with lower ROE and gradually increasing P/B ratios. During the same period, FFH reported a very lumpy ROE, with an overall slight underperformance overall based on that metric and the market perception is resulting in a declining P/B ratio. FFH continues to differentiate itself from the pack (float investment side) and the question is how it will perform going forward. An interesting feature is that 'cheap' capital has resulted in resistance to harden the market (ie tolerate higher combined ratios) and has resulted in very low returns on the fixed income side of the portfolio (float). https://www.macrotrends.net/stocks/stock-comparison?s=roe&axis=single&comp=WRB:TRV:CB Is FFH better positioned at this point compared to peers? Is the answer in the risk management section? I don’t think that FFH is position better than its peers. It has improved its underwriting to the point where it probably is in the better 50% bucket of the industry, but it’s not in the top 10% either. It’s the investment side where they have been lacking. They make very contrarian investments as detailed by Stubblejumper. It seems that they want to jump 10 foot hurdles, where a one or two foot hurdle would suffice as an insurance company. Stelco, BlackBerry, RFP etc are all deep underwater. Part of the reason is they their aspirational goal of a 15% ROE is just too high. TRV is an example that have a bit above underwriting and just takes whatever they can get in terms of investment returns in bond markets without taking much risk (equity and real estate seems ~5% of their float) and they can get ~12-13% ROA. Excessive capital is burned off via stock repurchases and some dividends, It’s a model that works and boring in a good sense. FFH Model has too much risk (as evident by the wings in book valued) for the returns it is generating.

https://twitter.com/reformedbroker/status/1238867417851461639?s=21

You can’t make this up. I am certain it is timed to get the stock market to close up, as the news conference started late at around 15:20 or so. Another positive news, I got this email today, which eases many of my concerns. Got to love NH - Boston is shut down, MA schools are shut down, the grocery stores are a zoo and overrun by the mob, but the NH liquor stores remain open:

In Germany, schools and Kindergarten are shut down. The main concern is not to get a repeat of Italy! With too many cases popping up in too short of a timeframe. Lots of companies there are shut down as well. Today, my sons school was shut down for a Clorox 360 cleaning, because of a pot COVID-19 case. Tonight, they sent an email that school is shut down for 2 weeks. I think we are close to a lockdown state, but I still got to go to work next week.

My wife went to the hospital for work today and they are obviously preparing for the storm. Most patient have been moved out and every elective procedure is postponed. The hospital is eerily quiet , she said she has never seen it as quiet before. Even the lights are dimmed. The calm before the storm. Hopefully our system holds better than Italy.

Yeah, I opened a small limit order for GOOGL before the press conference which filled almost at yesterday closing prices and then it ran up 7% during market hours. Mr Efficient market at work obviously. I think I want to own stocks just from 15:30-16:00 in the future. Why bother holding it the rest of time with all the risk that comes with it?

GOOGL and TRV

Cash is roughly 30%. I have various accounts to, I don’t keep track of it too closely. I was at 50% when I went bananas selling more than aweigh about, but then bought back too early. Should have just sat it out. I am Down less than 20% from the peak, but it it feels bad enough. The stock sales are clearly liquidity & index selling driven, so my thesis is that there will be amazing bargains available at some point. Look at 100 year copper prices to get some clues. Oh, the Dr Copper thesis? I guess we still have a lot of air underneath Cu prices, as they were below $1/pound for long periods of time., but I am not sure if that what you are referring too.

Cash is roughly 30%. I have various accounts to, I don’t keep track of it too closely. I was at 50% when I went bananas selling more than aweigh about, but then bought back too early. Should have just sat it out. I am Down less than 20% from the peak, but it it feels bad enough. The stock sales are clearly liquidity & index selling driven, so my thesis is that there will be amazing bargains available at some point.

I am not afraid of the stock declines, but I didn’t sleep well this night (first time) and worried about two things : 1) Health my family and elderly parents. My live in Germany and are around 80 years old, prime targets for the Virus so to speak. Same for my mother in law who live on the Bay Area, CA, which is already crazytown. 2) I am concerned about a deep recession and possibly the financial system cracking. Today’s Fed action was very telling as it seems that banks or other actors are short on cash. We saw already Boeing drawing down their credit lines as an indicator and financials falling like they go outmoded business next week. Looks just like September/ October 2008 to me. I bet banks need all the liquidity right they can get. Same with the energy sector which looks doomed to me and will have many companies blowing up, including perhaps some integrated second Tier players. Was a net seller of stocks today (sold in the mini bump following the Fed announcement ). Not fun. The only sale that Made Green was from my Tequilla Stock (CUERVO.MX) and that stock isn’t even cheap.

Just got back from work (yes I am still going to my office) and hat a chat with our supply chain manager who was back at the office too (he was off Office out last week). He told me that Trump‘s speach last night caused a lot of trouble that he has been working last evening too fix, because of confusion that the ban on flight might also affect trademark good. It seems that our POTUS stated that all to Europe are halted, but what he really meant and apparently later clarified in tweet is that it only affects people traveling and not the trade of goods of course, but many didn’t get that part of the message. Life goes on (he was a lot on the phone this AM), but of course none of this is helping. Tomorrow we have a visitor from France (no idea how we got there ) with a full room of people bd there were some haphazard safeguards (signing a form that you don’t have fever) which seem more like legalese BS, but doesn’t really do anything to make anyone safer. Interesting times.

Risk-free + risk premium. In 2016, it was around 5% at a 2% risk-free rate. Maybe it's dropped to 4% or 3% as risk-free has gone down. Or maybe higher as risk premium goes up. You can run a sensitivity. The same way negative interest rates in Europe and Japan affect equity valuation. Zilch. If rates go negative and valuations do not move, private equity will have a bonanza in the US. I think they will be licking their wounds for years, after we get a downturn.

Sounds like a good idea, but that’s not how it works.

Angling for Darwin awards. I couldn't be more delighted with our fearless leader. Everyone stay healthy, including our president. Potus seemed shattered in tonight’s speech, very atypical for him.

Angling for Darwin awards.

That would be $38. We are pretty close. but then, we also have VNO at 50% of NAV. Choices, choices. Maybe I'm overthinking it, or perhaps biased in the first place, but Im paranoid that forcing everyone to work from home will awaken a sleeping giant. Especially all those dinosaur companies who still currently shun the idea. Once they see how easy it is to make that transition perhaps this presents problems for traditional office assets. Retail will at least see folks come back. Who really wants to go back to the office? Works better for some jobs than others. I also support manufacturing , so I need to be on the floor sometimes. Then there is the informal exchange that happens because people run into each other or keep over coffee even. A lot of these will be missed when everyone works from his little home island. And how do you get to know people even if you only work remotely? I think a combination of both is ideal.