james22

FRFHF @ $475

Quality Minus Junk http://www.econ.yale.edu/~shiller/behfin/2013_04-10/asness-frazzini-pedersen.pdf

VGPMX at 10-year low, 80% off high.

The long-lived exception: if wealth was such that risk or return didn't matter, could go 100% BRK/SV index fund or inflation-adjusted annuity/treasuries.

There's been an slow over-reaction for a long while already, purportedly due to concern over the transition. This is much more of an opportunity to go 100% into BRK. For those who would like to, can rationally do so over time. I'm one such, surely there are more out there. The headline like opportunity that you're talking about will be short-lived and the 100%ers are not likely in that pond. There not many arguments for 1 position portfolios, given the free lunch of diversification, I'd think there more headline-like than rational-over-time 100%ers. But just answering the posed question: nothing has yet happened that would put me 100% into 1 position, including the long-while BRK opportunity. Only something like the short-lived example would.

Even in today's overvalued market, I'd go 100% BRK if it dropped to book value with Buffett's passing as I'd believe it an overreaction soon corrected.

Being early is indistinguishable from being wrong.

Moreover, our impression is that equity valuations are actually only mildly less extreme “when you compare the returns on equities to the returns on safe assets like bonds.” The reason is two-fold. First, the “returns on equities” here are typically taken to be earnings yields, which as we’ve frequently noted, are affected by cyclical variations in profit margins that make them notoriously poor indicators of long-term prospective returns (see Two Point Three Sigmas Above the Norm and Margins, Multiples and the Iron Law of Valuation). Second, if one cares to actually examine reliable measures of prospective equity returns, bond yields don’t have a tight relationship with those prospective equity returns at all – as the chart below should demonstrate. The belief that equity valuations are “not so high when you compare the returns on equities to the returns on safe assets like bonds” is a common one, but is based on overgeneralizing a very limited period of history. Specifically, the “Fed Model” – the notion that equity earnings yields and 10-year Treasury yields should move in tandem – is an artifact restricted to the period between 1982 and 1997, when both equity and bond yields fell in virtually one-for-one lock-step – bond yields because of disinflation, and equity yields because of what was actually a move from extreme secular undervaluation to extreme secular overvaluation. The Fed Model grossly misinterprets this data as if it were a fair value relationship between stock yields and bond yields. The model had its origins in the chart below, which appeared in Alan Greenspan’s July 1997 Humphrey Hawkins testimony to Congress. Warning: The apparent one-to-one relationship between interest rates and equity yields embodied in the Fed Model is entirely the artifact of this single period in history. If one excludes the 1982-1997 period, the historical correlation between 10-year Treasury yields and 10-year prospective (and actual realized) equity returns is actually slightly negative over the past century, and is only weakly positive in post-war data. I realize that some observers will get upset about that statement, but it's just an empirical fact. The current 10-year Treasury yield says less than investors imagine about the valuation or likely 10-year returns of U.S. equities. I do believe that yields and prospective returns on stocks and bonds are likely to be correlated in strong inflation-disinflation cycles, but prospective equity returns have a far larger and more variable speculative component than investors seem to appreciate. http://www.hussmanfunds.com/wmc/wmc150511.htm

And of course after Greenspan's comments the dot-com bubble promptly burst...four years later. That was one of the implications in my comment. ;) Then six years later the Nasdaq was actually cheaper than where it was when initially made that comment. Is it a reasonable plan to hold cash until valuations are recognizably attractive? Given it make take another six years? Or is such patience inhuman?

VDH's rebuttal of Guns, Germs, and Steel: Carnage and Culture http://www.amazon.com/Carnage-Culture-Landmark-Battles-Western/dp/0385720386

It'll be interesting to see if the Harley-Indian rivalry splits or expands the market.

"Rice burner" and "crotch rocket" betray your sensibilities, you whippersnapper. And I recognize I'm in the minority, just correcting your market size estimate. HOG might be a buy, dunno. I only have the sense that their Project Rushmore has been pretty well received? But that may be only in the motorcycle press, who rate things that Harley owners do not (reference their like of V-Rod versus its rejection by the Harley faithful). And I could see Indian becoming a peer (but again, I'm not the target audience). What do you think of their bikes? Maybe Polaris is the better buy. http://www.forbes.com/sites/greatspeculations/2014/02/11/resurgent-indian-motorcycles-could-hurt-domestic-sales-of-harley-davidson/ http://www.bizjournals.com/twincities/news/2014/01/31/in-motorcycle-contest-is-indian.html?page=all

No. Only the many (not everyone) on Japanese cruising bikes might rather a Hog if they'd cash, but not Ducatis or BMWs. (Ducatis are for many on Japanese sport bikes and BMWs for many on Japanese touring bikes, if they'd the cash.) Yes. The crotch rocket gets old after you turn thirty. I had a Ducati , pretty much solely because I could get it for $12 grand versus $16 - 20 for a similar used hog at the time and it wasn't as embarrassing as a rice burner. I also had a 600cc honda CBR when i was a baby. Got married an now I drive an SUV.... None of the others are aspirational bikes, at least in the states. Finally, no posers in America who have never owned a bike, go and buy Ducati gear to wear just for the brand associations. Really? Because I'm 51, been riding for over 40 years, commute daily, tour twice yearly, and take a (track) class about every other year on Japanese sport bikes, plan to go European when I'm back in the US full-time, and I'd quit tomorrow if I had to ride a Hog.

No. Only the many (not everyone) on Japanese cruising bikes might rather a Hog if they'd cash, but not Ducatis or BMWs. (Ducatis are for many on Japanese sport bikes and BMWs for many on Japanese touring bikes, if they'd the cash.)

Reflect your belief that is attractively priced? Or are dollar-cost averaging? I think it is attractively priced… As a very long term investment and if a more difficult environment awaits us. In case something goes wrong with this global deleveraging, and we actually get to see deflation or a stock market that goes down and stays down for some time (or both), FFH imo might truly succeed in compounding at 15% annual. If FFH compounds at 15% annual, there is no reason why 10 years from now it won’t trade at the same multiple it is trading today. This of course would mean a 15% CAGR for my investment. Of course it won’t happen if central banks succeed in resolving our debt situation without any harmful consequences, and if the stock market keeps marching upward undisturbed. Gio Thanks, Gio. I may be anchored on my failure to buy at $500 in Jan (went away for a long weekend thinking I'd a limit order in, returned to find I didn't), but it doesn't seem so attractive today. I'm open to the argument that any reasonable price is attractive enough for the unique protection FRFHF provides. But while I expect central banks to fail, I do also expect Fairfax will drop initially with the market before the realization it is what Fairfax is positioned for. I'll likely wait like netnet and hope for your buy to drop the price.

Reflect your belief that is attractively priced? Or are dollar-cost averaging?

Thought experiment: how would this "merger" have been reported if you swapped the popular, cuddly Warren Buffet with Gordon Gekko? No-doubt critics would have recalled his audacious acquisition of Heinz two years ago. Next the sad tales of fired workers and shuttered factories in order to recoup the 40 per cent he paid above the decade average sector ev/ebitda multiple. Having squeezed Heinz's ebitda margin to 28 per cent (the global sector average margin is just 11 per cent) the story turns to Gordon's attack on Kraft. Goosed earnings on a 14 times multiple unfairly justifies taking control of the merged company (Kraft makes almost twice the revenues and more profit). Questions would have swirled around the sustainability of Heinz's opex cuts and the fate of Kraft's 22,000 employees. But it's Warren, not Gordon — so such a narrative is unimaginable. http://www.businessinsider.com/warren-buffett-gordon-gekko-comparison-2015-3

Another take: http://davidstockmanscontracorner.com/thank-you-fed-warren-and-jorge-are-thrilled-by-another-play-in-the-casino/

...what used to be called the Buffett premium is turning into a Buffett discount as Warren gets older and people are fearful of the future. http://www.gurufocus.com/news/130239/alice-schroeder-on-the-buffett-discount-in-berkshires-stock-price

http://davidstockmanscontracorner.com/wall-street-hack-dick-bove-bloviates-no-30-yr-fixed-mortgageswo-freddiefannnie-so-what/

Klarman: To the extent possible, find and retain like-minded shareholders to liberate yourself from short-term performance pressures. New here, but thanks, Sanjeev.

New money provides action enough.

Ditch the Good, Buy the Bad and the Ugly ...GDP growth doesn’t matter for stock market investors. http://www.gmo.com/websitecontent/GMO_Quarterly_Letter_4Q14.pdf

Updates?

...observations based on an examination of the past 30 years of stock performance and oil prices: "Since 1973, the economy and stock market have danced to oil's tune. Sharp rises in oil prices have led to recession/stagflation and plummeting stocks, while declining prices or prices that are just mildly uptrended have led to good times." http://www.amazon.com/Oil-Factor-Protect-Yourself-Profit/dp/0446694061/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1228652995&sr=8-1