dealraker

So you northern guys with some serious grievances...just come on down my way. Big Foot festivals (Marion, NC) are quite the fun, some - and maybe most - do actually believe in Big Foot-ers and whatnot. But then you also, if you make the mistake of going to the grocery store on a Saturday or Sunday may subject to swinging. No, not the in-the-sheets swinging, but more like in-the-streets. Huge groups of people organizing and creating their own fun events right in the middle of even upscale shopping areas, often roads and parking lots. Remember we are the bunch who have decided this stuff, while it destroys our traditions and such, is better than the other stuff. Anyway you won't be going in the grocery store on those days until the law comes to shut it down. But when the law is actually a support group - not shutdown supporters? Well, the complexity of the fun gets even more exciting.

Brown and Brown beginning of a write up - subscription is required for the bulk of it. https://www.mbi-deepdives.com/bro/

We have two 2500 category by my calculations- and subsequent recalculations in my town. Both owners, one a part owner, are in my investment club. In my 40 years of being in the club and 30 with them, no interest in the industry majors - although we do discuss their endless calls to purchase. I recently added to WTW in the $220 vacinity and BRP at $20.

As in investing, models lived successfully before me are what I try to mimic. The excesses, in this case exercise obsessions, isn't one that I've seen work well for the majority beginning in the 60's. I moderated, ain't it awful. Actually it is a blast to do less intense or time and feel like it is plenty.

My words too at 60! Now almost 70...I feel 70! Did do a 28 mile moutain bike ride in Dupont State Forest NC this week though. Back to the doc next week...again.

It is inevitable that we want to be experts on all things at all times, such that we write about hundreds of times to engrain whatever we're hyping even deeper. I was surprised, seems many business profit margins are higher with the current inflation? Gee-lee, I'm confused yet again. Guess I'll pick one of the hedge fund runners, the one who agrees with me (actually can't find one but...), and post-up his stuff. Like I wrote, in the late 1990's I met Jimmy Rogers at a local investment seminar. Tiny guy. He was on CNBC once a week back then, doing his world motorcycle tour and screaming commodities. I thought to myself, "He's the expert; I own Berkshire, AJ Gallagher, the railroads, equity exchanges, Brookfield, Markel, Fairfax, etc...and I am just another loser I guess." And Johnny Chambers was as popular as Elon is today. John was fighting the FASB on expensing stock options, he used them for all capital needs and expenses not just compensation. Some quarters this expense, that was inflow of cash, exceeded sales. And Jack? Damn he owned CNBC with 17-18% forever GE boasts. AI baby! Gunna take them big cap techs to 500% of GDP! They say. Where's Jimmy...and Jack? The whale sighting is always on the other side of the ship for most of us.

Although off topic here maybe, I also think Greg is right in so many ways. Seems the simplistic mode is too simple, that if we have inflation just crush the economy with rates that scare the living hell out of everyone. Really? We had years of thriving economy where the fed was so afraid to do anything even up to 1/16th % interest rate rise or whatnot, then obvious issues relating to all kinds of things jamming up the world...and that's when you raise rates? Really? Really? Really? Oh my! Hell, why not just shut down all the railroads for 6 months and set the prime to 20%? Then we can go back to start again, like 100 years ago or something. So higher interest rates solve the housing issue? Yeaboy, got it. Solved!

In recent times, last 2-3 months or so as more money comes in than goes out: BN OWL DPZ CBE ICE NSC LHX And yes I agree with Parsad as to recession. But I do what I know to do and just keep doing it.

change you've been a stopped clock for a long time. Eventually the hands will get to you!

During this time of truly unprescendented freakishly terrible economic malaize old damn dealraker was holding his nose, emmitting his cod liver oil scrunch face, screaming-pouting...even close to the level of the Disney grievance... (think silly please)... ...and buying a pretty significant amount of BN. After all the barking I've been doing you'd think that'd be the last straw. But along the way I've learned a lot about myself and that is: I don't know what the fuck I am doing. But it seems to work.

As far as investing I just use a model that has worked for others, a bunch of them that I know or have known over time. I don't need to own any of the historical .03% 99% market cap money-makers or whatnot. Don't need the Amazon, Google, Meta, Microsoft...or whatever stocks to do very well financially. I don't give a flip about such studies, they don't affect me at all, absolutely zero relevance to me. Also don't need Bitcoin or the comparisons to what bonds are doing right now. Don't need to be consumed about beating the market; don't need to post up my yearly returns; don't need to believe the bounce or not believe the bounce. Don't need others to agree; don't need to be angry when they don't. Don't need to sell and run to cash; don't need to worry when the market falls 50%; don't need to own or not own the currently hot sectors such as AI. Don't need options, puts...calls; don't need leverage. Don't need to know when to buy and sell; don't need to know when the downturn is coming. Don't need one particular political party, both indebt us endlessly. Do need to invest; do need patience; do need tolerance; do need to avoid fees or things that get in-between you and the ownership of productive business. Do need to live a while. Love tollbooth (on a growing economy) companies. LOL. Love discovering models of life others have used that have added to the probability of the outcome I (you) desired.

The game, at least for me and my large family I'm in cahoots with, is that Buffett comment about (not verbatim here) "all weath is the result of buying business that imputs labor and materials of some value and spits out something of more value." That $ is capital to produce more capital. We also preach never leaving the game. In other words in my large extended family it seems at least to me, we don't discuss going to tax free bonds to "make it out of here" and such. While in the end I guess surely somebody if not everybody is gunna blow it, we like the idea of passing it foward or down. Just think, for some it is bonds and/or Bitcoin. Life is great...if you can stand it.

We have owned DHI within the lumber company builders supply since the 2001 or so period. Way up, way down, way up. Lowe's is by far the largest stock position there. I am part of the investment committee but my first cousin is the major and final say. He's what we here on COBF would consider less aware or less knoweledgable as far as complete financial knowledge. He uses Value Line and Morningstar a lot, but his performance is crazy good. CSX is the 2nd largest holding, he bought when they bought the rail line that the lumber co uses that borders the property, the old Winston-Salem Southbound.

"Folks" back in the 1980's, about 1981 if I remember correctly, like my father-in-law....well some bought 30 year treasuries yielding 15%. Do believe my father-in-law put his entire retirement account right there. Other "folks" like me were hunkered down in stocks in a trust...that I couldn't access and sell. I've suffered through the outcome too. Stocks just don't do well through inflationary cycles you know. At least that's what I'm told here repeatedly. In the meantime I still own my Berkshire, Coke, Pepsi, etc. as do my brother and sister. My recently deceased step-mom had no children of her own but her sister in Raleigh NC seems to be enjoying life these days. My step-mom was only 11 years older than me, her sister 2 years younger than me. That little sis and I were high school boyfriend/girlfriend for a while, we still find that quite entertaining to discuss - and the other family members too still remind us of the enjoyment they found with that. But anyway, for what it is worth, we were in the era of when trading stocks cost a lot of money, literally hundreds of dollars on a $5,000 trade. And all of us inherited a thousand less than that in Berkshire stock. Us poor "folks" just get taken adavantage of all the time. By the way, where I live? Every older person I knew owned Pepsi and Coke stock. How do I know? I know because everybody discussed holding those stocks and this was years and years of what I heard. Both somewhat "local" in nature back then, hugely popular. So "folks" all over were suffering that outcome.

So Spek...at some point in 2011 the lumber company which I am a shareholder of (a small one that I bought from family wanting to exit decades ago) owned Tractor Supply. We owned it because my cousin who is one of the two controlling shareholders had bought it. He manages the investments for that company, which is from selling the other lumber supply businesses decades ago. But anyway, we had a banker "expert" come give us some economic forecasts, yet another cousin who was big in the banking business thought highly of the guy, and he talked us "down" from our belief in Tractor Supply. So there we were, guys all over the buiding busness as to experience, guys who had been in the hardware business prior to Lowe's coming to town, and we knew that Tractor Supply was literally killing it in the areas where they chose to compete. Yet we sold our stock, LOL! The banker guy? Not many of us have paid much attention to him for a while now, but he's still out and about with his economic forecasts. And we? Well, I think we bought some more Berkshire or something, so we haven't exactly lost our money. But... For us little guys, and we are all little with tons of options, isn't there better stuff to listen to? I will listen to the guys today in the podcast as I drive to town and back. Life is just too complex for me! Just a story, but one to take note of.

Me too.

Every 10 years or so the financial press will stumble around and write something about insurance brokers. https://www.bloomberg.com/news/articles/2023-06-09/inflation-s-big-stock-winner-insurance-broker-arthur-j-gallagher-outperforms#xj4y7vzkg Or here: https://www.chicagobusiness.com/finance-banking/insurance-broker-arthur-j-gallagher-inflations-big-stock-winner

Reading this thread for some time has me thinking that we, those of us participating here, are different in the field of what information we use to make investment decisions. It really isn't so much something as simple as agreement or disagreement, it is or may be the personal nature within us as to what's relevant or not. I think we also as a group tend to differ on how long out we are peering, thus things that may be cruicial for some to take advantage of - or be fearful of - that others may just find somewhat irrelevant. Some may have to "keep score" more often, else possibly lose clients. Some are far less interested in the score on a regular - more often - basis. And we can and do have these differences on the very same choices of stocks. So it is interesting particularly if you seek to have others agree with you...because it won't happen. And it won't happen not because they necessarily disagree with you, it is simply that the information and the timeline that's so incredibly essential for your scorekeeping...well, it may be irrelevant for theirs. An example is that I never agreed/disagreed with the information change was presenting, I just do not and never have made a decision based on that type info. I can't, it isn't within me to do that. This isn't a put down of his presentations, they were quite enjoyable for me to read and think about. I read them all as a matter of fact.

It was just yesterday that we were immensely enjoying the change/Greg debate, change was doing 1000 word inflation doomsday warnings and Greg was responding with the standard Roy Kent (Ted Lasso) brevity. And now multiple trillions of upside later I was just now watching Roland Garros tennis, swapped over to CNBC and some guest money manager dude's telling us the AI tech rally is just beginning...the rocket ship is fueled for explosive upside. Damn...I just watch and read. I don't know nuthin'.

The question is will it ever get such that a Bruce Flatt interview gets past the word "trophy!"

This is a terrific thread on a fabulous board!

Right there with you spek on LHX.

In my view the reaction of an over-valued market will be for the most over valued and well-known stocks to get even more over valued. That's preciscly what happened with the dot.com bubble of the late 1990's, the big cap tech stocks soared to even new heights in 2000. It turns out this bunch may have been fully valued literally years earlier. So for years now those believing in Berkshire on the other Berkshire board I follow have in unison chanted loudly, "Berkshire is under valued while the S and P is wildly over valued." At the same time this discussion is happening those in the discussion have made it well known their picks outside of Berkshire and it is always an assortment - but not all of course - of Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla...the very core and dominating bunch of stocks these value investors claim is in aggregate over valued. It isn't surprising what's happening today with AI or whatever (I don't think investors in these stocks needed an excuse- they were going to get run up regardless) and it isn't surprising as to why Berkshire hasn't kept up with the S & P. To me it seems the big cap stocks of today in the S & P are more durable than those of the early 2000's. But of course I felt the exact same way about the big cap tech stocks back then. Time will tell. But one thing's for sure and that is the stocks racing ahead today are precisely the stocks you'd expect to race ahead. It is all investors are interested in for the most part. Everybody can retire on the same few stocks is the name of the game. Here come the studies that "this is the only bunch that's created value in the last x years" and whatnot.

A counter to: Inflation means panic from equities. Not my work, but I've debated/sponsored the model with the author. Conversely, when you get a certain earnings yield from equities, it tends to be inflation adjusted on average over time. If nominal earnings are rising at 5%/year in a 2% inflation environment, you can generally expect nominal earnings to rise at 7%/year in a 4%/year inflation environment. To a first approximation, equity earnings yields are on average inflation adjusted: changes in inflation do not hurt your wealth. That's assuming you are using a cyclical adjustment--obviously both earnings and prices do go up and down in the short term. The exceptions are * when inflation is so high that the economy breaks, but that's pretty rare. * Some specific firms are unusually sensitive to inflation, and others are unusually resilient or even "antifragile". But on average it's a wash. If there is any inflation over ~2% in future, a 5% earnings yield from a slate of equities is much more valuable than a 7% coupon from a fixed income instrument, whether bond or preferred. Value Line currently covers around 240 stocks with P/E under 20, projected EPS growth rate over 10%/year, and projected annual total returns over 15%/year. I would not put much faith in any of those numbers, but it seems not too hard to put together a broad portfolio with an earnings yield over 5%. Your slate might not beat the broad market, but you'd be relatively immune from the risk of permanent capital loss from having a wildly overvalued portfolio--and the risk of inflation. Inflation will drive down the apparent book value of physical earning assets in real terms, but that is no reason to suppose that those assets will have any lower real return. In effect, inflation will (on average) cause reported ROE and ROA to rise. (same real return on same real assets, but understated asset value). If a machine makes 20 widgets an hour, then the price of everything (including new widget machines) doubles due to inflation, it can still produce 20 widgets, not 10. The real return on that asset is unchanged. The apparent return (naively calculated ROE in nominal dollars) doubles. A much better line of reasoning goes like this: assume we have broadly-based inflation of (say) 10%. The purchasing value of a currency unit falls. Everything goes up in nominal price, but the real price of everything stays the same. All salaries go up a nominal 10%. All product and service selling prices go up a nominal 10%. All energy and material input prices go up a nominal 10%. The inevitable consequence is that profits will go up a nominal 10%, and margin percentages will remain unchanged. So, it is clear than in the case of evenly distributed inflation, real profits will be unaffected. So the things to concern yourself about are only the company specific exceptions, and the smaller effects. The main company specific exception is debt, which is fixed in nominal terms. Companies with net debt will benefit from the erosion of the real value of their debts, and companies with (say) bond ownership will take a hit. There are also effects because changes in inflation hit different companies at different speeds, which mean inputs and revenues may mismatch for a while. This is largely a function of pricing power...everybody will raise their prices, but some companies will feel free to do it sooner than others. Some companies will have distortions in their reported earnings, quite separate from possible distortions in their real earnings. Railroads are the usual example: they have massive long-lived assets requiring maintenance capex, so their accounting depreciation will substantially understate their real economic depreciation: the replacement cost of a worn-out piece of track might be a big multiple of its old depreciating book value in current nominal dollars. In other words, reported profits will be higher than true profits (owner earnings). A lot of what looks like expansion capex will really be maintenance capex. Another accounting quirk is the book value of real estate, which will cause firms with land to have book assets lower than their true real value. But, the base line situation is inflation is pretty much a wash for real corporate profits, with the caveats mentioned above. (on average across the economy but not every specific firm, after cyclical adjustment, and not inflation so high that the economy fails) A rise in inflation often coincides with or precedes an earnings recession, but that will pass. Once the dust settles, companies in general keep on making real profits on about the same old trend. This makes sense in theory--if everything else goes up in price the profits will too--and matches the historical data.

We've survived Waldenstrom's thus far and other health excitements what would have ended us long ago without the evolution of science. To say the least I differ from my favorite poster on COBF, that's Greg, as to the Covid vaccines. I'm first in line, I probably would last all of 1 day if I got Covid w/o the vac.