vinod1

The Mag 7 reported earnings of $550 billion in 2024 and paid taxes. It is as high a degree of certanity as you can get. A $ is a $ whether it is earned from AI or something else. Their track record has been quite good. Now, we have a technology that might have a massive impact on everything from jobs to companies and all the way up to nations themselves. There are only a few, I suspect fewer than a dozen entities in the world that can spend the amount of money these companies can spend on this technology. If these companies spend $2 trillion to have a shot at this technology and they waste half of it, it is still only 2 or 3 years of earnings that would be lost. Most of their investments can be used for their core operations anyway, so it would never be a complete loss. I am glad these companies are making these investments. Vinod

It did impact my child and many others. My child is objectively among the top 200 students in math in USA. It is child's passion. Child was denied admission to a STEM magnet school when the school board cancelled rigorous screening criteria a couple of days before (during the height of George Floyd riots), it was to be administered, and put in place policies that introduced randomness into the process on purpose. Child did not get in. Fortunately, they forgot to replace the process whereby students can again apply for 10th grade, and it had a rigorous process. My child got in through that. Child ended up being in the top 2% of this magnet high school and just started at one of HYPSM last month. Child would have been a layup for being admitted to this school for half a dozen reasons that I would not go into. DEI is the main reason that kept the child out in 9th grade. Many students like him were not admitted and many did not bother to apply in next year. These are students who are competing to represent USA in math and other science events. I went to many school board meetings, and the DEI nonsense they are spouting was pretty racist against Indians. They want to showcase how much they are fighting racism aganist whites and "white adjacents" (AKA Indians). My BIL is a professor at a university and he has to submit DEI statements before his application can even be looked at for funds for many projects. The project is in support of planetary defence (not exaggerating). Professors have to write how they are addressing DEI as a screen before they even look at the project for funding. Vinod

Hi Dalal, Please see my response to Eldad. Vinod

I am wary of using macroeconomic variables to infect the valuation of individual companies or make proclamations of bubbles for several reasons: 1. It never worked in the past. When it did seem to work, it is mostly because some other event outside of that macroeconomic variable impacted the market. Dot com bubble did not pop because Market Cap to GDP exceeded some percentage, but corporate scandals at Enron, Worldcom, 9/11, Anderson, etc. shed light on the bubbly nature of many dot com businesses and investors turned skeptical. Same with profit margins - they are supposed to be at 6.5% or "else capitalism is broken". Dividend yield of stocks is supposed to always be higher than bonds, etc. 2. We still do not yet have a good understanding of macroeconomic variables. Something as common as GDP calculation itself is highly subjective. If you want to take a look at GDP calculations and the discussions around what to include, read "GDP: A Brief but Affectionate History". We might be underestimating GDP for a whole lot of very benign reasons (no conspiracy theory). Google search had a dramatic impact that improved the welfare of a lot of people, same with Internet, mobile, etc. None of this is captured in GDP. Dont want to digress too much on this topic, but at some point we might end up revising what goes into GDP calculations. So why mix what you know with a high degree of certanity - current Mag 7 profits with something we know vaguely and imprecisely - GDP calcuations? My point being, don't use these percent of GDP numbers to influence your investment decisions. Vinod

Explain this to me: We have poor Mexican immigrants who cannot speak the language, cannot legally work in the US, cannot avail of any of the facilities in the US, are not eligible to work at 80-90% of the mainstream jobs in US, and dont qualifiy for any aid. Yet, these poor people are still able to find work, save money and even send it back to their families. They are able to sustain their families and their kids when they come over are getting educated and become employed and living nicely. You are saying that because someone's great great great great grandfather was discriminated against decades ago, is the reason they cannot earn a decent living in the USA? That is the reason they cannot study? That is reason they cannot get a job? Vinod

There is enormous pressure from social activists due to George Floyd riots. The liberals (I was a liberal, before liberals went off the loony extreme end) used that event to put pressure via social media by shaming these CEO's. It was sheer lunacy! If you had been involved in any sort of acadamic setting (children schools, colleges, etc), the amount of DEI nonsense that one encountered is immense. It is 100% DEI, 100% of the time. Anyone who asked a question about these is deemed a racist. CEO's and boards bent over backwards to appease them. This is one reason Trump was elected. People were just fed up with this nonsense. Vinod

You can extend to any field and any breadth of decision-making skill, you still end up with poorer outcomes if you have a DEI criterion. I am not trying to put words in your mouth, but what you are implying is: DEI is great whenever we cannot measure the outcomes. It is just bad wherever we can actually measure the outcomes. To me, it is better to put policies in place that reduce discrimination, but dont do diversity for diversity sake. It is like Berkshire board saying, look we need a couple of blacks, couple of hispanics, couple of asians and through in good mix of females. You cannot get anything that requires "breadth of decisioning" than Berkshire board I would guess. To me, that is going to lead to poorer outcomes. Vinod

In 2011 or 2012, or somewhere around that time, the law of large numbers was thrown out for exactly these companies on this forum. "These are already hundreds of billon dollar companies, do you really think they would go to trillion?" And here we are. The last 15 years we have witnessed companies growing from already large bases at extraordinary rates. In ways most of us thought is just not possible. If the last 15 years were such a surprise, there is an even chance that it might be true going forward. Vinod

I fail to understand where diversity for diversity's sake is good: 1. Say you are building a missile defense system against hypersonic missiles, what you need is skill in physics, fluid dynamics, metallurgy, etc. 2. If a neurosurgeon is needed, I want their expertise to be in neurosurgery. 3. A pilot to be skilled in flying. 4. A teacher who is good at teaching. If you qualify for any of the above with any filter other than the specific expertise, you end up with poorer outcomes. All the above are real world examples of recruitment policies that DEI had an adverse impact on that I came across. Vinod

I don't think complexity is the reason. There are a lot more complex companies for which analysts have detailed reports. I think it is underfollowed for a couple of reasons: 1. It is unconventional. It does not align with how the other P&C companies operate. And unconventionality is a significant source of value generation. 2. It does not generate much investment banking fees I think. They are the ones coming up with creative ideas, not the investment banks! This is similar to Berkshire before the year 2000. Vinod

Thanks Greg! I like your idea about researching autographs to find ones with the most value. Vinod

Greg - Thanks for the advice. I would try to get it from PSA or Steiner. Since there are 550 photographs, does authenticating a small sample of say 20 photographs sufficient to give credibility to the whole collection, or does everything need to be authenticated? Vinod

schin - Awesome you got Buffett's autograph! I was always thinking that if I ever got interested, he would be the first person I would start with. Yes he sent it to the White House. He is very persistent. If he does not get a response, he would send more background information, enclose copies of relevant autographs, etc. Since he can send copies from the 60s, 70s, and 80s, he ends up getting a response. If he does not still get it, he asks PM or President of India to recommend! Amazingly, they seem to comply to his requests Except for communist/dictators leaders, he got response from pretty much everyone. He is mostly interested in political figures, the only exception are the astronauts, the most famous of whom are Neil Armstrong, John Glenn, Alan Shepard, and Buzz Aldrin. He does not seem interested in recent ones. Vinod

Hi Vince - Thank you! Will do that. I live a couple of miles from their HQ.

LC - Great idea about authentication. Getting even a few certified I think would go a long way. Thanks Vinod

Hi Vince - This is really great advice coming from someone who is in the field. Thank you! Extremely helpful. He has been using "archival" quality sleeves that I sent, but those are from Amazon. Would check out gaylord. It looks like most of the appraisers are not photography related. Any suggestions in this regard? Thank you, Vinod

Thank you all for the helpful replies. Parsad - Great idea. Never thought of that. Blugolds - It was easier in the 1960s and 1970s it seems as people were more willing to send when they got a letter from a small village in India. Now it is more difficult. He usually encloses 3-4 copies of past letters that are relevant. So for Obama he sent copies of Keneddy, Regan, Clinton autographed photos and letters. Lord Mountbatten had an official policy of not sending autographed photographs, so my father wrote a letter to the President of India asking for his recommendation and the President of India at that time wrote out a strong recommendation letter requesting Lord Mountbatten and then he got the signed autographed photo. I was reading this letter last week when we visited India. My father is very persistent that way, writing multiple letters, asking for recommendations, etc. His one complaint was that he never received a reply from any communist country leaders. The only exceptions were Gorbachev and Castro. Right now they are stored in a 2 inch zippered binders. Like in 10 or 12 of various kinds of these types of folders. I need to find a better way. Especially worried about the chemicals in the sheet protectors. He applied to the Guinness book of world records and they are scheduled to validate this in the next couple of months. ValueNation - I need to put a bit more thought into preservation. My father is very simple and modest and makes do with whatever he has. So he did not spend much on these at all. Thanks Vinod

My father has been collecting autographed photographs of world leaders since 1962 and continues to this day. He has autographed pictures of Dwight Eisenhower, John F Kennedy, his wife Jacqueline Lee Kennedy, brothers, Kennedy's family pictures with children, Neil Armstrong and entire group of 30 astronauts who trained for the lunar landings, Lyndon Johnson, Nixon, Ford, Carter all the way to Joe Biden. Other world leaders include Yugoslavia's Tito, Anwar Sadat, Yasser Arafat, French presidents from Charles de Gaulle all the way to Macron, several British prime ministers from Harold Wilson to Sunak, all Indian prime ministers & Presidents, Fidel Castro, dozens of other European leaders from almost all of the countries of Europe, Taiwan's Zhou Enlai, Dalai Lama, Pierre Trudeau all the way to his son, Willy Brandt, Gorbachev (none of the other USSR leaders have responded to his many letters), almost all Isreali prime ministers, and I am missing a ton of other world leaders that I do not remember of the top of my head. How my father got started is an interesting story. My father was pulled out of school at age 14 to work in his father's shop. My father was very interested in education and to overcome all his objections, the deal he entered with his father was that he would work from 9 AM to 6 PM in shop but he would get a teacher to teach him english and other subjects in the evening for an hour. When my father asked his teacher how he can improve his english, he suggested writing letters to world leaders asking for their photographs. He has been continuing this hobby since 1962 to this day. He has a collection of about 550 photographs, all autographed and with original letters of response with their signatures and postage in many cases. There are many interesting tidbits along the way 1. He sent 2 lbs of mango jelly to John F Kennedy when requesting his autograph and he got a very detailed letter thanking him for this. 2. He asked Neil Armstrong to get photographs of his buddies as well, since sending a letter from India to all of them is expensive. Armstrong then got 30 of his mates who are training with him for the Apollo mission to individually sign each of their photographs and a group photograph, all autographed and send them as a packet. What a great guy! He is a hero in more than one respect to my father. 3. When my father wrote a letter to Kazakhstan president, he instructed his ambassador in India to personally contact my father, invite him and hand deliver the autographed photo! Can anyone who has some idea of these kinds of things give me an idea of what these are worth if anything? Not for selling or anything like that, but it might give him great satisfaction to know that they are worth a lot of money. But I do not want to misrepresent it either. Thank you, Vinod

You called it!

PSA - Please stop pissing off the market gods!!

I fail to understand why people need to be so hell-bent on supporting one side or the other. Can we not analyze them in the same way we analyze companies? Does no one even try to be objective anymore? Trump has been right on a lot of the big things - immigration, trade policies, China. Of course, how he implements these things is in a completely idiotic way. Democrats have been too elite, ignoring the real issues of the common man. To Trump supporters, he can rape their wife and daughter and their response would be "Do you think Biden would have been better? At least Trump used a condom and sent flowers." This is the kind of cuckish support that is amusing to see. Like when Trump called Ukraine president a dictator, they immediately start calling him dictator when they have never ever referred to him that way in the past. This applies to left as well, supporting you know BLM protests in middle of Covid ignoring safety protocols they themselves insisted on, etc. Can we start calling it as it is, even if they are the team you are supporting?

I do agree. Buffett has been a bit too careful about his image so as not to appear ruthless and it has been a drag on Berkshire. Especially in the last 10 years, he has been a slight drag on Berkshire, either in ruthlessly reducing costs, allocating capital far too conservatively, and, in general, not driving growth in IV as hard as he would have if he were younger. Vinod

Every company goes bankrupt without exception. We can and should keep an eye out when things change and act accordingly. Funny you mention GE, even way back in 2001 many were warning precisely about the risk that eventually blew up. It was no surprise at all.

90x BV sure, but we should be talking about more realistic cases. I think many of us bought in the $450-$480 range a couple of years ago when BV is like $480ish. Say it spiked to $900 immediately, I would have been tempted and most likely would have sold off my entire position at that price. But instead it went up gradually while the improvement in business fundamentals are becoming more visible each year. Even as it climbed it is still quite attractive so I was able to hold on and even add to it. If I find a business that is going to grow at high rates of return I would want it to remain at a reasonable price for as long as possible. Imagine Buffett selling Geico because someone offered to buy it at 4x BV or whatever he paid soon after purchase.

To me in both Berkshire and Fairfax you have a few things that make concentration in these stocks less risky in addition to having fantastic business models: 1. Owner operators who have their entire net worth and reputation in their business. 2. A keen eye for risk and a worrying mentality about every sort of risk in both these CEO's and likely down the chain of command. Many other CEO's who are owner operators do not have this. 3. Businesses that have multiple prongs with subsidiaries that have plausible ring-fenced aspects to them. They might have correlated risks but they are very likely to survive multiple major hits. 4. Periods of turbulence is precisely where they shine. IV might actually compound faster during those times. Even a huge stock price drop would be taken advantage off. So I am happy to concentrate in businesses with these kinds of characteristics. Berkshire does not have the upside anymore to make concentration worthwhile. Also I think it is never ever possible for an outsider to know all aspects of the business. Even for a tiny company, you do not know if the CFO or CEO is up to to some mischief. So you need to look for other things like the above to be able to concentrate. And a guy like Viking to patiently hammer home the value! Vinod