dealraker

The cloud is perceived an eternally astronomical PE sector. I disagree with this idea 100%, the same with cyber security.

A tad more than three years ago I made energy 5% of my stuff and it is more now of course. But I posted about it on a former Berkshire forum, that it seemed to me that Berkshire was heading that direction. A few posts, pleasant debate, and next thing I new my posts were removed and I was no longer on the forum. Yep, kicked to the curb for energy posts. What was allowed on that forum? That Buffett should be buying tech stocks of course and how out of it he was for not doing so. I was right back at the 1999 Berkshire annual meeting where endless "Why aren't you in Cisco?" questions...one year out from the 1998 annual meeting when all we got was questions of "Why aren't you in drug stocks?" Energy to me seems reasonably priced today still. Lots of earnings that don't appear to be headed for inceneration.

I'm not sure I know what I'm talking about here but corporate decisions such as this may be based on things not necessarily relevant to what most of us do as individuals. Although my family has gone subchapter S in one business with plans to do that in two others at some point...well, we just made some investment decisions that I don't think any of us even consider personally. I basically never clone Berkshire but I do follow basic trends that the investment trio seems to do.

Again, precisely. 25 times seems incredibly cheap to a tech valuation but nowhere else. But tech profits are growing slower than energy.

Oh my Greg, I'd just bought Highwoods this morning. My CPA friend and bro-in-law (they'd been chatting) called and said...

Before we made the lumber company a subchapter s corp we bought and sold Microsoft. We bought Microsoft at 10 times earnings LOL. So I know it is "THE CLOUD" and such, but for me it was also "STORAGE" - that exponential growth thing that too had near zero incremental cost that EMC Corp led back in the late 1990's. EMC routinely traded at 150 times earnings before (like Microsoft) falling to 10-12 times. These things do happen, a tad of history knowledge may be needed. But MSFT at 12 times would not even get level 1 in my surprise factor.

I co-wrote a 21 page document "The 12 Ways GE Misleads Investors" in 1999 with 4 other guys who I met in relation to Berkshire. GE was obviously fradulent but Welch's power was a wall of steel. Lord for me Blackberry was a disaster all the way, but one of the Outstanding Investor Digests was big on that so I may have gotten a lucky straw there. GE had one-time write-off every quarter for years. These often equaled net. Even if you were unaware that they were booking huge insurance profits in the same businesses where Berk and AIG were recording huge losses those one-timers were always there...and they were massive. That was a basic start for a basic understanding of financial statements even if other things weren't conceivable. Then there were quarters where stock based compensation equaled sales like Cisco. That tends to gain a rational person's attention.

Precisely my view.

I would reply that diversification would average those disasters out. But to any bare knowledable investor Blackberry was a joke; GE was just mind boggling obviously faking it in all its businesses; and in the early 2000's it didn't take any deep thought to clearly see irrationality in Kudlow's Cinderella economy/bank behavior. In any event I've not had such stocks (GE is a good example). My emphasis is that AJ Gallagher at sometimes 22 times earnings when growing 15% is not a sell. If it goes to 40-50 like GE and begins to offer-up some crazy income and balance sheet wierdness? Yea, sell.

The "mustable" here though is that you prepare for times of lower quotes, that like your home selling (your brain or your concept of value) to the bidder each day is an illogical valuation model. Bidders are cyclical, your house - your stocks - will get the cycle, they aren't immune. If you do this in advance, even if you end up thinking "I should have..." it does become tolerable. In my view tolerance of cycles and bids is the key to investing success. There's a reason the average fund investor gets a third of the average fund performance, it is simply intolerance for lower prices. What's the value of these things?

So how do you cope with the valuation thing that over time can both make you and also cause you to miss the Holy Grail? I'm not a good one to try to answer that. But here's a grand example: So I inherited Berkshire and so did my sis, bro, and step-mom. Mine and my bro's was in a trust with years before we could access it. And I'm employed by the guy who put my dad into the stock; my "dad" is my bro-in-law and my "mom" is my sis; my brother is absolutely non-$ focused, he would wear the same pants for 50 years if his wife didn't scream. And so lucky for me, my step-mom remarries the most successful property developer in my are who too is, and this was NOT common, aware of Warren Buffett. So... I am working for McDaniel Lewis and Co, a stock brokerage, and all I hear is "Why would you own Berkshire....it sells for 2 times book value so you can buy the same stocks Buffett has for half that price?" Years and years of that stuff, and of course I can't sell. Meanwhile.... $3500 inheritance marches up into 6 figures before I can put my little ignorant hyper active hands on it. But...family pressure...by then my brother-in-law's entire (already a wealthy family for a small town) owns the stock of Berkshire and it has become a religion in the family, a connection...literally a way of life. 20 years of three men go to Berkshire annual meetings. So what was obviously an over-priced stock allowed me to do all the things that ended up escalating financial growth. Using any logic at all, any common Ben Graham or Jeremy Grantham analysis, Berkshire was a screaming sell. Not now, but during its best years. Value Investing by numbers?

Yea, the cloud thing. Got the entire world's aggressive male bunch obsessed...salivating...spittin' out endless facts and data that mandate years of upside.

change, I haven't seen it posted elsewhere....but Grantham is out with yet another paper! Let that active economist mind of yours rip right on through it and let us know what you think!

Spek I tend to buy a bunch of this seemingly garbage stuff, but generally I let the stock flounder longer- sometimes years- before committing. Kind of the Boeing and GE thing. But then there is Teva. About two years ago I began nibbling at Teva, my threshold is (and this threshold is totally irrational I think) $8.50 per share. I've now got a slug of Teva and... (the story ain't anywhere close to done!)

StevieV keep the post for a couple of years as I'm thinking quite a bit differently. Last 2 decades is not where I come from though so that's an issue.

Posting on JOE this morning I couldn't help but think that may now we've gotten to the point of indexing the US ain't gunna cut it any longer, that getting returns is going to be quite the challenge. To me things like payments and media have attracted such interest for so long, how much more? Bitcoin's going to be a Tesla on self-drive whose technology has been corrupted, the ride will be wildass superb entertainment. Old dealraker, that's me, posted here that he'd bought GE and Boeing a while back; then there is Berkshire, JOE and such things. I think we are in a world of slow grind, that the returns will get difficult. Maybe GOOG and META notch up just on valuation? And banks, yea for whatever it is worth I thiink whatever the yield curve is we just got too down on banks. But the upside? Not much. But anyway, COBF is going to be a good place to get an idea or two. My personal portfolio probably doesn't have a snowball's chance in living hell of doing any better than low single digits for some time. I do own a bit of Fairfax...for a long time. Bought Baxter a few times lately.

To me it is always the same: There's fear times and in this setting the name of the game is bottom picking. If you do not obsess over the precise timing and duration of "the recession" and the "bottom" then you are simply NOT part of the game being played. Getting it right, just once, is a lifetime of achievement and publicity. Elain Garzarelli predicted the market was 35% overvalued in 1987 and instantly stocks fell 20%; she gained stardom; the market ended the year even higher than before her prediction but... ...she was paraded around by CNBC and others for a decade afterwards as the great forecaster....(you know....the one who got "one" out 100 calls correct). In generall the lowest bottom picker gets a good deal of attention, sometimes incredibly so. In the upside times? Hell, it is just names or sector. Get that right? Shit baby, it is endless stardom like you would never believe. Abby Joseph Cohen and technology? Oh my lord the woman was god, not for a couple years like Cathie, but for a damn decade! But actually she was terribly wrong for most of that period as per the "reset" that came. Not picking on women, but those two did shine...at least to me. Then of course there's also Harry Dent, the Harvard grad who can't get a single damn thing right on names, sectors, or bottoms---- but still got decades of elaborate praise and followers. He wrote best selling books that didn't have one single correct sentence. And then there's us long term investors who never tend to be in the right sectors on the upside and never even try to guess the bottoms. Ain't it awful?

And in the meantime when prey is running frantically anything with animal instinct turbocharged with envy is going to pursue. Let's enjoy watching and/or participating in this chase of Bitcoin.

This morning about 10 bought even more of BAC and WFC. LOL! Have added about 10,000 shares of BAC in the last few weeks. Doubt I've had any co-conspirators on these "deals"!

So as far as holding stocks for longer term I sort of watched a guy in my area who is now 62 take over his family insurance agency from his father while still in his 20's. He's in four towns now and has 70-some people working for him. He routinely makes $200k type donations to things like greenways/trails/parks/amphitheater's and I've been known to be his partner in these. But in any event he no longer works day-to-day, his sons run the businesses. So he and I are both avid cyclists and we hang out often, vacation together a couple times a year and such. But during the day-to-day life I consider myself and he in the same business, my donations of course are mostly personal and his via both his business and Erie's joining him, but still it feels the same. We are both riding around during the day messing with things or networking here or there to do this or that, but in our heads we are in the same business and think the same. So anyway what I am getting to is that he probably has compounded his net worth via that insurance agency/brokerage by somewhere over 15% annually for years and years. And yes he gets calls as he says "every week" from one buyer or another wanting him to sell out. He refuses of course and he's leanerd a tad from Charlie (dealraker) in that a merger made me far better off than would have a sell. He thinks, probably accurately, that I have more money than he does. So basically each time the market, in his case the buyers offers, come along that they are likely 20 times plus earnings to my friend? He isn't selling. And so why should I as a stockholder of something like a bunch of successful insurance brokers? You (I in the case) have a good business, partial ownership, and every day someone is offering to buy you (me) out....right? As I wrote to the change/Greg debate, a delighful debate by the way, as to interest rates/recession/inflation (and I was being independent but basically agreeing with Greg)....to hell with all that talk about macro stuff.....just tell me when I'm supposed to sell my business if it is a good one. My view is simply never. The chance of getting it right...meaning cashing out, paying taxes, finding something else or waiting till the big downturn, is so remote at least for me that I'll never attempt it. That given, I'd have probably sold Microsoft if I owned it recently...and I would have surely sold Tesla last year...and I'd dump any SAAS stock I owned today. But things like Lowe's (15 pe) and the insurance brokers....or ICE or CME? I just don't see the sell panic at all. Hell take a nap, another cycle will already be in process. Rambling.

Something I sense you are pretty good with Greg. I tend to buy decent businesses at decent prices and that's about it for me.

Yea Spek I am pretty much out of it as I got one from merger and bought the others just once each and that was long ago. So yea they were cheap during Spitzer's raid but probably not much since. I was just rambling, thinking out loud.

So just off the cuff today I thought some about a few of the recent Merrill Lynch and Morningstar reports I've read as to the insurance brokers. What is interesting is that I tend to always think Wells has price targets and growth rates on the brokers that are simply too high. They tend to often have ratings of 1 or 2 on the brokers which of course is basically buy. Merrill and Morningstar both basically always, and when I say always I mean ALWAYS, think the insurance brokers are over valued. And honestly my view is with these over valuations. But of course I never sell the brokers. Merrill is particularly low on price targest while Morningstar just basically keeps 1 or 2, sometimes 3, stars on the brokers. So reading between the lines, because Merrill and Morningstar always consider the brokers over valued that means they've missed about 25 years of 15% annual growth and you the investor, if you followed their ratings, would have missed those returns. So yea, I tend to agree with Merill and Morningstar...while I fortunately own the stocks. Damn! Life is complex. You can be right I guess all while being damn wrong, and visa versa? Hell, I don't know. I just thought about this, the way it has been for me seemingly forever now, and how silly it all seems. Is it a good business that can grow at 15%? If so then how much focus do you want to place on whether it's "fair value" is 15 times earnings or 20 times earnings...or maybe even 22-23 time earnings? What the hell?

We, a group decision, had (the investment is within the builders supply) decided to go to an emerging market thing rather than HOPE. But we've added to both Cathay and East West. Haven't looked at HOPE in the last few days but will now.