vinod1

I think and I read this somewhere that while AI generated code is probabilistic, the generated code can still produce deterministic output. Trivial example: Use AI to generate code a calculator. The calculator is going to be deterministic in its function. Vinod

It is wrong to think "how much are consumers going to pay?" Consumers are not going to pay much if any at all. It would likely be free to consumers. Enterprises are going to pay. Just like they did mainframes. Because, AI can help companies in a million different ways. We are way past the point of even asking this question. If you look at enterprise processes, it is riddled with manual drudgery, boring processes that can be automated. Health care billing itself is $100s of billion of expense that can be automated. That is one part of one industry in one country. You do not need any new advances in AI. Applying existing AI tech would get you there. The question really is who are the beneficiaries? Vinod

I will state my bias: very pro-Israel. I have been since I was 14 and that is for 4 decades. One of the dozen or so nations that I admire. US can easily win a war on any European country that it wants and occupy them, I assume you are completely fine with US doing that, because you know the European left wing is..... and to the victor belongs the spoils. Also it is the ancestral land of many Americans. That is the argument you are making with the above examples. Yes, these things happened in the past. We do not do these things now. Just as it is wrong to deny Israel the right to exist peacefully, the same rule applies to Israel.

The point I am trying to make is both sides have valid points on many issues. If you start with 7 October 2023, there is no moral ambiguity. Israel has every right to defend with every means necessary and do whatever it takes to make sure it does not happen. Israel is also unambiguously in the wrong with settlement expansion in the West Bank and East Jerusalem. But most issues at least as relates internally to US, the truth is somewhere between what the left and the right has been arguing.

This thread is like arguing over the decimals that come up when you divide 4/11 = 0.36363636363636... Left wing says "there is a 3 after the decimal" Right wing says "there is a 6 after the decimal" Left wing says "that is complete nonsense everyone knows that is a 3 after the decimal" Right wing says "that is what the MSM wants you to believe, there is a 6 after the decimal" Left wing says "You believe whatever Trump says, there is a 3 after the decimal" Right wing says "There is no point in arguing with someone who does not think there is a 6 after the decimal" Left wing says "Good. If you cannot see there is a 3 after the decimal I am glad to stop"

I have a dream that one day companies will not be valued by the yardstick of earnings, nor by the rivers of cash they return to shareholders, but by the share of the companies market cap to the US GDP...

I am including the hedging and short positions as part of the equity portfolio which to me is where they belong. With these the expected return from their equities is essentially pure alpha which as I calculated is not going to get Fairfax acceptable returns. My main point being, alpha did not play as much a role in their performance as their business model. Vinod

Quote Buffett Indicator and Ignore Every Single One of Buffett's Teachings!!!! You know, things like, ignore macro, don't predict markets, focus on the business....

Absolutely. It is unbelievable how much the insurance operations transformed. Before earnings releases way back in 2010, I would be praying for 102% CR. Even Prem used to brag about how the 102% CR was borrowing cheaper than the Canadian Govt! There is not even a glimmer of hope that underwriting would ever be profitable. It is all on investment results. Look at it now. I have to pinch myself to make sure it is not a dream. Vinod

I was talking more about Fairfax portfolio returns in the above post. My post above is trying to assess their portfolio performance relative to indexing. I first got into Fairfax (#1 position) sometime in 2005 and exited in 2011 ($418) Nov/Dec timeframe and bought again in size in 2022 (#1 position). In 2011, it had a snowball chance in hell of returning 15% with the assets/structure they had, now it is the other way around. Vinod

I did an analysis of Fairfax performance in 2015. I analyzed their results from 1986 to year end 2014. It is not as impressive as they make it sound. What the chart Parsad's slide above does not show is impact of portfolio allocation. Say if you have $100 portfolio and invested $10 of portfolio in stocks and they returned 15% but you reduced the stocks from $30 of total portfolio, the above chart fails to capture that impact. That is a very significant drag. Second, their bond performance is not really bond performance. It includes a whole lot of non stock non bond like securities. I compared their performance with what it would have been if they just indexed their portfolio. They added a whole lot less value than most people seem to attribute to them. What is really powerful is their business model. The weak underwriting used to be like a huge hole in their ship, but with that part fixed, just the way they structured the business would lead to good to great returns with just indexing of their portfolio. Vinod Fairfax Returns.pdf

I am thinking of AI evolution as one of two paths 1. Same as any new technology. The technology itself might be disruptive and many companies go bankrupt while many new companies go on to become huge. Agriculture, combustion engines, electricity, cars, trains, automobiles, Internet, mobile phones, etc. Society goes through a period of churn but new jobs and industries develop. Everyone adapts. 2. AGI. Large scale destruction on a scale like the Ice age. Say a company is close to AGI or something similar and it is located in one country. That country would now be able to hack and render every nuclear weapon system of other countries or in someway dominate the whole world in a matter of days. If we take India and Pakistan for simplicity, if one thinks the other is within a couple of days of such capability, it makes a lot of "sense" to use your nuclear weapons when you have a chance to keep the status quo. AI pundits are mildly helpful to read if we are on the #1 path above. If we are on #2 path, predictions are utterly useless regardless of the status of the AI pundit as the path would be so dependent on behavior of millions of people and it is utterly unpredictable. So invest as if we are in path #1, if we are in path #2, your investments are not going to matter anyway. Vinod

During the height of Covid, a family member who is a doctor specializing in infectious diseases stayed at our house for a couple of days when they got a break. The family member was furiously texting at 6 AM to colleagues who are covering patients in her absence. I commented that it must be tough to cover for her absence and the remaining doctors must be overloaded. She told me that they are chatting about SAAS stock tips! Vinod

11 years back I took a detailed look at the historical record of Fairfax investment returns from 1986 to 2014. I was trying to answer a few related questions: (1) What if Fairfax has just invested its stocks and bonds in an index fund right from the beginning, what would its returns have been? (2) What is the alpha Fairfax investment team is adding? How consistent is it? (3) And what can we infer about future returns, especially since bond market returns are going to be terrible due to low yields? I wrote as a blog post at that time in early 2015 estimating Fairfax future returns. This is old and fairly boring, but there might be someone who may find it interesting. The blog (and all 3 blog posts ) has been lost when I transitioned to a new hosting platform. Vinod At what rate can Fairfax compound.pdf

@Viking Thanks for pointing out the changes. You are probably correct and I need to update my views - just like your detailed analysis made me change my mind regarding earnings power. My portfolio returns over the last 4 years owe a lot to you. Thank you! Vinod