Spekulatius

Overall returns, net of overhead runoff and investments gains/losses, have been weak. If you back out the non-cash gain from the Quess' accounting reclassification, book value barely grew. It'll be hard to achieve the 15% BV growth that FFH has been targeting. I think the market is waiting for better results on the investment side before it'll revalue shares. Yes, book value growth has been subpar. This is the case with a lot of peers as well, I assume due to market to market losses from the bond portfolios. FWIW, I own quite a bit of RE and AXS as well.

I actually like COF (which has also been weak, probably due to the same issue, as they took over the portfolio from WMT) better, Stock is pretty cheap on a P/E basis (8x?) and their business is more diverse. Bought a few shares as an incentive to get to know the company better.

The struggle is real:

GOOG, FDX and FB.

SD is correct about employees / unions having representation in the supervisory board, but I don’t think it is a problem really. I think owners still have the swing vote and also unions (if they exist) in Germany are far more reasonable than they are in the US. In the past, union members have agreed to even drastic cuts, as they can look at the numbers and generally they make sure that the cuts are done in a for them agreeable fashion. It is correct that German companies are somtimes slower to make cuts than US companies, but thet difference to the US isn’t as large than it used to be 20-30 years ago. The bigger issue is not thet they can’t, it’s more a reluctance to do so. I would also argue that larger cuts may not be such a great idea in many cases anyways - I have seen many cases in my profession experience where employees had to be hired back shortly after cuts and considerable cost. Generally, you will find that German companies are more run on consensus (by managment teams, employees, input from bankers) than an almighty CEO as is somethings the case in the US, for the better or the worse. Just a different way to doing things. Also keep in mind that many German companies are multinationals and they will cut positions in the US just as quickly than an US company will do.

No issues on my end.

Disclaimer: German living in the US for ~20 years. In my opinion, the German sentiments for the most part just follows the US sentiment, except if there are specific issues in Europe (Italy for example). There isn’t as much of a shareholder culture in Germany than there is in the US. Many Germans don’t own stocks and those that do, own much less as a portion of their wealth. Most Germans don’t relay care if stocks are going down for that reason, also it may just be another thing to worry aboutt, which is something thet German are really good at. Owning stocks is considered by many a bit like gambling, or Spekulation (hence my screen name). German companies are run in a more clubby way, and for a strong consideration of all stakeholders (employees, community), so there is less pressure to perform for many family controlled companies. it’s a bit like Loews in that way. There are many mid/smaller companies in Germany that have top notch products and are world wide leaders in their respective fields - companies like Krones, Fuchs, Hella and many other which can be found in the MDAX. From time due to market volatility, there can be incredible bargains to be had in thr German market.

But why sell the German index specifically? This is my personal anti-home bias. According to https://papers.ssrn.com/sol3/papers.cfm?abstract_id=76248 Italy would work best, but i don`t think there is an active option market for that index. But when you look at the DAX holdings there are a lot of awful, overleveraged and cyclical businesses in it. The best is that no professional investor will ever use this effect, most investors i know laugh about it or dismiss it as a statistical fluke. (Should this change, i will probably reduce my position size) The DAX has been traditionally much more volatile than the US stock market. I think some future traders like trading the German Dax futures because of the high volatility, the time difference and the relatively high liquidity. The old saying still goes that when wall streets gets a cold, Frankfurt gets a pneumonia.

Hazelnuts aside, the country is actually improving in terms of foreign sentiment. While Erdogan is Crazy, he actually has released the Priest that was the reason for the US sanctions and the issues there seem to be at least talks about a similar issue with Germany. I also think they the recent issue with Khashoggi in the Saudi embassy in Turkey is clearly helping (and is exploited by Erdogan ). Like it or not, Turkey is a NATO country and is strategically very important and the NATO needs to think twice about the relations, as I am sure Russia (which has been historically an adversary) would appreciate getting closer and dominate the Black Sea. The EU Ned’s to cooperate with Turkey because they are a gatekeeperfor the refuge stream from Syria and because a couple million Turkish people live in Germany and there are close ties economically. So maybe this is not a total basket case. Not a big factor, I travelled to Turkey on business last year and was quite impressed by the people, there is a budding industry and some high tech there. The country reminds me a bit of California as well, as far as climate and landscape are concerned.

Bought some MHK (falling knife) and added to FDX.

Lower income people probably rent rather than own.

Stocks I find cheap: Automobile suppliers LEA, MGA, DLPH, HLE.DE Cars: FCAU, GM, BMW3.DE Insurance: FFH.TO, RE, AIG(?) Utilities/pipes : ENB Semi : NXPI, possibly many others Banks : GS, UBS (?), LYG, BCS Europe: KRN.DE, SIEGY and many others... Chemicals: EMN, BASFY The selloff reminds me more of 2015/16 than 2010-12. A lot of European stock are back to 2016 selloff levels and some back to 2013/14. My biggest concern is political/ trade issues Russia, Saudi Arabia, China, Brexit, Italy and perhaps even more so that we have seen peak profit margins due to inflationary pressure from labor costs, material costs, energy costs, trade tariffs etc.

Again, we are mentally in synch here, alwaysinvert. I suppose that some staff member regularly provides him the numbers, or per specific & ad hoc request. I think we should use market value of the holdings, not intrinsic value. If the market value of Buffets shareholding’s goes down, very likely the general market goes down too and other stocks competing for dollars to be invested in BRK will get more attractive as well. I wish I could mark up some illiquid stocks I own to fair value :o

Most reinsurers are down due to concerns about catastrophe losses. FFH has equity exposure on top of that. That said, I added a few shares at $483 today.

I really have given up almost upon trying to understand economics. I just try to observe and it seems to me that we are about to see higher inflation amd higher interest rates. I think thet all I need to know as far as investing is concerned. I suspect the effect changes are hard to product , because a lot them are mass physiological in nature and more determined by trend that the absolute numbers. I mean a 2% or 3% base interest rates shouldn’t really make any difference in rational business environment, where return expectations are mostly in the double digits anyways, but there is a psychological effect when interest rates are near zero for a long time and heaven forbit , they rise to 2% all of a sudden.

Pete, you can't hide your nationality! [ : - ) ] I’m not trying to. I’m just pointing out that the economic risk in the U.K. is not Brexit, it’s the very real possibility that our next Chancellor (finance minister) is a self described Marxist with Maoist sympathies. Possibly true. In any way, I will stay clear of U.K. stocks until this is cleared up. I own some Anglo US utility stocks PPL and NGG and I have heard this flares about nationalization, which from my perspective isn’t a problem, as long as shareholders are fairly compensated. I do recall the nationalization of French banks in the early 80’s, but shareholders then were fairly compensated in thet case, so from my perspective as an investor, it’s not a problem. As far as Brexit, I am sure in the long run, Britain will be fine, but it could be a tough 5 years after the Brexit occurs. I also think that London’s role as a financial center will be significantly diminished, but even that may be better for the UK in the long run.

I don’t think banks are going to crash in Europe, it’s more like a slow motion train wreck. The biggest problem are not bad assets, it’s lack of profits. A bank with a 2% or less NIM just doesn’t work very well, but they is what most banks have to content isn’t in Europe. it’s the same with some savings and loans, they can survive, but they can’t proper. the exception seems to be LLoyd (LYG) which has a NIM close to 3%. that extra 1% is a 50% higher margin than with a 2%NIm bank, which makes all the dollar difference in the world. Of course Britain is very likely going to see a hard Brexit and possibly a recession and after that, banking in London won’t be the same again, IMO. On rule I live by is they buying a bank stock is always a bet on the home region/ country economy. If the local economy/ country is not going to do well, the bank won’t do well either, even if it’s well managed. I think UBS is a differnt case, because it is 50% global asset manager, 25% Swiss bank and 25% investment bank, it should be less dependent on local macro than most other banks in Europe.

Good write up. Ubernsncertainly more than an app, it connects two pools,nahe driver pool and the rider pool, both of which benefit from scale and network effects. I certainly miswrote when I stated that it’s just an app, it’s more than that. I do think I am correct when stating thet autonomous vehicles are more of a threat to Uber and Lyft than they are a tailwind, because they negotiate the network effects from the driver pool, although this will take a long time. autonomous driving is probably 10 years out anyways.

Thanks for sharing above article, The scope of the fraud is true truly staggering and will be very expensive for the enables that are going to get caught. The EU has become much less forgiving to while collar fraud, tax evasion, and collaboration to stiff competition than in the past and the fines have become much much higher,

Also, Uber and Lyft have no advantage as it pertains to electric and/or autonomous vehicles. They have a user base and an app, that’s it. If a company comes out with an autonomous vehicle and they have capital and a user base like GOOG or Apple, they could put out Uber and Lyft out of business. There is no indication to me thet the benefit of lower cost from electric or autonous vehicles (if indeed there is one) will accrue to Uber or Lyft.

I somehow feel this thread has gone off track.

I think the ECB finally concluding their quantitative easing enables the FED to raise interest rates without the USD shooting up. The latter wouldn’t be good for the US industry. I think we are leaving the Goldilocks zone where we could have economic growth , no inflation and low interest rates at the same time. Now it’s one vs the other. We all know that interest rates are gravity for asset valuations , so higher interest rates will prevent bubbles from occurring. To better to deal with bubbles early on than to firefight the issue after a huge bubble has popped. I think Greenspan was wrong when he stated that he does not care about asset bubbles as long as inflation is low.

All I see is a lot of money vanishing without a trace. I think we soon have a new expression- getting “blockchained”.

Sounds great, where can you spend them? You can’t spent them, but you can fondle them on your touchscreen.

Pretty well thought out post. It certainly feels like there is a bubble in tech/ venture capital where it’s not even clear to me that the business model will allow profitability in thrnforrseeable future. Companies like Wework, Uber, Lyft, Tesla, Cannabis stocks, cloud and payment companies but also the self driving ventures come to my mind. most of this is equity, so a collapse should not lead to a debt crisis. I can see collateral damage in bubble area real estate (Bay area). Maybe just a other indication that we are late in the cycle.