skanjete

I had even more respect for Charlie than for Warren... RIP "It's not supposed to be easy. Anyone who finds it easy is stupid"

what he's saying is : if you have stable cash flows, you take on leverage when money it's cheap and pay it back at a discount when the sh*t hits the fan.

Concerning AEP : Last week, Madam Lim Siew Kim, who through Genton controlls about 51% of the shares stepped down from her chairman role and board, as well as the board of all the subsidiaries. Does anyone have an idea what this could mean? I have an idea, but I don't want to biase anyone. PS. the share is very, very cheap at the moment.

You've got to take the dividends over the period into account, and the payout ratio used to be more important than now. In any case, it's clear that AEP has a very respectable track record, although quite volatile. But what are you actually trying to prove here?

@Dinar : did you ever see some cash from Berkshire? AEP shareholders got something else : the stock price end of 2000 was 0,43£ (with net debt), now 8,5£ (with net cash). The two are not to be compared, but AEP had a way better return than Berkshire over these years. About the cash : AEP is steadily investing the cash that comes in. If you take into account the minorities, they had net debt in 12 of the 21 years. That being said, management could indeed do some more effort to get a correct valuation from the market.

One of the most insane valuations is Anglo Eastern Plantations : Marketcap : 410m US$ Net cash : >252m US$ EBITDA : +/- 150m US$

The letter certainly isn't what is was anymore. It used to be a platform for Buffett's teachings, but I have the impression that Buffett the teacher is gone. This has been the case for some years now. Up to say 5 years ago, the letters always contained some in-depth analysis of a subject from an original and very rational angle. There was always something to be learned, but this is no longer the case. Actually, you would learn more today if you read his 1980 letter (a great one about impact of inflation on equity values) instead of his 2020 letter. Same with his interviews. His answers are more vague, more predictable than they used to be and very often repeat expressions and viewpoints from the past. Actually, Charlie kept his originality somewhat longer, but I had the same impression from his Q&A in the DJCO AGM. It's a pity, but that's life.

You have to appreciate the irony of it all : with their wild speculation the Robinhood investors are cutting off the branch they're sitting on. They are destroying the means (Robinhood) they're using to "destroy the hedge funds and the system" and so ultimately themselves. The brokers halt trading to protect their business and thus their clients. But these clients are now outraged because they think the brokers are just protecting the enemy and don't realize THEY are being protected from their own stupidity. This whole story makes me even more concerned about the market than I already was. And I'm already sitting on 50% cash.

Could it be that Buffett is hedging against a Biden election win? If Biden wins the presidency it's probable the tax cuts from Trump will be reversed. So it could make sense to cristallise the historic profits in some stocks before year end. By selling f.e. WFC, he is offsetting the huge wins in WFC with losses elsewhere while at the same time keeping his bank exposure by buying more of BAC, a bank which he intends to keep anyways.

Writser, I recently sold out as well. The Belize economy is very much depending on tourism, and the current Covid 19 crisis will no doubt cause a lot of trouble. I can't really assess whether the take-over from Scotiabank is a transaction out of strength or weakness. In 2009 they used a similar tactic with a cashbox in Bermuda, (which offered a great merger workout opportunity at the time), but that was more out of survival than anything else.

It's striking how people try to find reasons to rationalise their own bias. Munger's message in the interview doesn't align with someone's bullish view, so their reflex is to find reasons why Munger is wrong and they're right. If someone like Munger comes to tell me he's got a different opinion than me, my first reflex would be : "Ouch, where did I go wrong?"

Terry Smith is a good investor. Seemingly the best part of the company he managed for years (Tullet Prebon) was the pension fund. ;-) The results for Fundsmith have been attractive since inception. But it seems a big part of the results came mainly from valuation and multiple expansion of somewhat higher company profits. So, it looks a little like the nifty fifty era. This thing could go in reverse as well I'm afraid.

It's very dangerous to try to shrug off Munger's and probably Buffett's prudence or conservatism as a consequence of their age or personal financial needs or even legacy. If the situation would call for it, I am certain they would swing for the fences. Look at what Buffett did in september 2008 or Munger in March 2009. All-in in a very short period of time. I agree with them that the right time for investment hasn't come yet. The risk/reward just isn't there. A few weeks ago we had a low point, and some traders thought there was a good trade to be made, and they did, but Buffett and Munger aren't traders. They buy to keep. And from that perspective, the time to buy hasn't come yet. I've lived through quite a few cycles, and have never seen a true bottom with market sentiment as it is right now. I get constantly phone calls from people who have zero experience in the stock market with questions how they can and in what they have to invest. Brokers can't handle the applications from small investors and I read a broker had to cancel 40% of the applications because the appliers didn't have the necessary knowlegde to open an account. At a true bottom, almost nobody, and certainly no amateurs are interested in stepping in. I mean, look at the S&P500. About 10% lower YTD. I can't comprehend this. The economic damage is real. Talk to a business owner instead of a stock trader and you get a real view of what is happening. There is an enormous value destruction going on, and no Fed or government is going to compensate this. It's a simple fact that people in lockdown aren't producing any output anymore. That output is gone forever and won't be compensated, no matter how much money they print. Millions of people and businesses are surviving right now by eating up their reserves. These reserves are gone and not available anymore to consume or to invest after the crisis. The compounding effect in the economy is working in reverse at the moment, and it is not that easy to turn it around again. So I think the economic consequences will be felt long after the virus has been contained. In these circumstances, a 10% correction from the rosy times earlier this year look a little paltry. Besides, I can't image a bull market of more than 10 years stops with a crash of 35%, only to resume 4 weeks thereafter. The imbalances are not cleansed out of the system. Look at Tesla : everything comes to a standstill, but the share price is up 70% YTD? So we have time to see this thing evolve. There's certainly no need to rush in and the true long term opportunities will come. In this, I am completely on Munger's page.

Thank you for posting this. This is really fundamental and well thought-through. There were some considerations I hadn't thought about before and were illuminating.

It's a pity, really. I had a lot of respect for him. But now, his excellent long term track record will be greatly diminished because of an ill-timed exit at the worst possible time.