frommi

Have you factored in the losses in SD and XCO?

I hedge out the currency in these situations and i think Japan is a good bet because a lot of japanese investors/pension funds are underweight in equities. So when inflation picks up its natural to shift to foreign investments, domestic equities and real estate. Any company with hard assets and producing things the people/world need are a good idea. But i would avoid companies that are only cash proxies, too. Think about how much money Toyota can earn when their costs go down because they pay Japanese wages and sell their cars in harder currencies. (or any other exporting company, perhaps Toyota is even a bad example. A business that produces only in Japan and sells everything abroad would probably be perfect.)

He said that it matters most in the long run. What i am missing is how in the world all the different ecnomies work together. At the moment we have a beautiful deleveragin in the US, but a deflation with austerity in europe and a debt bubble in china. Now is the US importing deflation through the currency and killing the beauty?

Thanks for posting. In the last year there where lots of companies buying back stock with debt, so is this good debt? :D From my view this is bad debt, because you have to repay it later and therefore earnings/fcf is lower in the future just like debt used for consumption. But on the other hand you buy an asset with income, so whats your view? What really makes me thinking is what Mr. Grant said in a presentation i watched last week, that the swiss central bank buys US equities with printed money because they have pegged their currency to the €. So they create assets out of thin air. Really strange thing to think about. The BoJ does it, too. And since they buy ETFs its probably not even stupid to just buy index funds yourself when all the liquidity goes into them.

Oh you are right, stupid little me should have looked up the definition of GDP earlier. Thanks for your enlightment. :)

I would argue the other way round, because we had the baby boomer generation there was lots of consumption growth and with rising debt you got more to spend at that time. (of course you borrowed consumption from the future). In your scenario when you produce more but don`t need it, jobs or prices get cut. The theory says these workers can now produce something else and therefore GDP rises, but does this happen in reality? And now the baby boomers go into retirement where they don`t help the GDP anymore, this should be a headwind for GDP going forward. (Visible in the workforce participation rate?) From 1980->1990 there were the baby boomers, from 1990->2000 there was debt balloning in the US, 2003->2007 we had a huge debt ballooning in europe, from 2008->2014 it was china. Now what comes next that lets the world economy grow?

Aren`t these comparisons with the past a bit misleading, given that we had population growth back then? Growth in real terms can only come from new consumers or more debt or not?

Does anyone know where/if i can look up insider transactions of australian or japanese stocks?

With the google translator (translate.google.com) you can even translate pdf files, just choose the translate document and then when the dialog pops up enter the link to translate. But it won`t translate pictures or pdfs that are too big. (I had some reports with mainly pictures, there is no chance to get them translated.) I found some english annual reports when searching via google "company-name english annual report", but that was mainly the slightly bigger companies.

I used http://www.tse.or.jp/english/ to find the documents and then the HTML links to have it directly translated in google chrome. Doesn`t work for everything, but i was mainly interested in the corporate governance filings to see insider ownership. But i think west and nate have access to english annual reports, there was a discussion about this in the Fujimak thread.

Ha, just as i read it, do we both suffer from home bias pessimism? ;D Are the americans in this forum worried about the us more than the eu?

Gio looking only at debt is looking at only one side of the equotation. Debt/GDP is what should matter, and when you can take on more debt that boosts GDP even more, than yes more debt can solve the problem. The only other solution is a default, but what do you think would happen when the US would do that? As long as real yields stay negative for a very long time we get the necessary deleveraging, so the US is right on track. Europe currently is not and when this continues will lead to further debt defaults in europe, which is stupid. We could simply do the same as the US/UK and win in the end. But our political leaders are to stubborn to understand that and i doubt that if Merkel/Schäuble stay at the helm that the problems in europe ever gets solved. The current nearing deflation in europe is just a logical consequence of the austerity policy. (And debt/GDP levels in europe are now even higher as before the last crisis.)

There were already plans for this i think it was at the start of 2013 where the us had these budget problems. The US is printing money since more than 100 years, has the US ever encountered hyperinflation? German hyperinflation had to do with debt repayments that where not in its own currency. Comparable with argentinas situation, but never with the US.

Thanks! Man, tap dancing into the future, this sounds like a very good world to live in!

Has someone thought about the consquences? Unlimited, cheap and clean energy ... My first thought is short coal mining, solar and o&g drilling (But oops, too late ;D). But what the heck can we produce that we don`t at the moment that takes a massive amount of energy to build and who profits from that?

How so? Total nonfinancial debt/GDP went from 344% to 350% in six months from 3Q13 to 1Q14 National debt is up from $11th to $18th in six years. Yes, leverage is being transferred from individuals to the state and that buys some time because the state can pay lower rates. But this can't be classed as de-leveraging unless, eventually, the deficit falls or GDP accelerates such that debt/gdp falls. Unfortunately we seem to be stuck in a rut where lower deficits kills GDP growth. But I'd love to know which paper you're referring to. I was referring to the paper in this thread: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/deleveraging-what-deleveraging/msg190809/#msg190809 From my understanding a part of the deleveraging process is that household/corporate debt goes to the government and is then partly bought from the FED, where it gets nullified as money printed. Of course this whole process will take decades to finish. I just have a limited understanding of all this, but in theory all the debt the government has that is already bought by the FED can be cancelled with one swipe (or a billion dollar coin pressed by the government). When you think about this, the US is not in bad shape currently, because it has all levers in its hand. Where as in the EU this is simply not possible, because the government and the central bank are not working together and are based on rules that where made in good times, where this scenario was not even thought of.

Thanks for your reply. When i view stocks as equity bonds shouldn`t the industry/sector the companies are in be irrelevant, as long as they are not cyclical and FCF is stable? In the end free cashflow is free cashflow or not?

Deleveraging in the us is in full progress when i remember the paper that was posted here last week correctly. Japan is on a good way with higher taxations and printing money at the same time. I am pretty sure this will work out very well over the next decades. Europe is the one without strategy and hope and china is a massive problem right now, i doubt that we will ever see growth rates above 7% there. India and africa are in my eyes the players where i have the most hope that they can create the next worldwide boom. Btw. looks like the US is now deleveraging via margin calls, too. :D

In the case of AIQ i took 66 million $ as FCF and 766 million $ as EV. They are not growing so its reasonable to assume that reported capex equals maintenance capex or not? Intralot looks to be cheaper, but a lot riskier. I calculated with 80 million € FCF and 630 million € EV. Ok thats a 12.7% yield. But thats still nothing that cries buy me into my face. Even at a marketcap of 0 € it is just a lottery ticket with a 15% FCF yield and no downside protection. When i look at my japanese stocks there are things that look cheap on every metric you use on them and trade on FCF/EV yields of 40-300%. And at the same time they trade below liquidation value. But i am sure i am missing something, because Packer is successfull with this kind of investing, but what is it? Packer i need your help :).

Sold KMI today. Makes no sense to hold if i can`t fully decide if its cheap or expensive here and i am not comfortable with my valuation on the dividend yield. I want to build a clean value portfolio at the end of october, and this has probably no place in it with its massive market cap. Also trimmed some of my put positions.

I shouldn`t overthink the things, you are of course right. So in the end FCF/EV is the metric that should matter. Now i really don`t understand why people think AIQ or Intralot are super cheap, because on that metric AIQ has barely an 8% yield? H&R Block or Verisign for example trade at the same FCF/EV yield, but are surely better businesses? Or am i doing something wrong?

I am recently scratching my head about that topic. So given two investments one where marketcap=EV and one where marketcap=1/3 EV and both trade at the same FCF/P. Which one do you prefer? (Under the assumptions that growth rates and FCF stability are the same) At first glance i would have answered the investment without debt because that trades at a higher FCF/EV. But the one with more debt probably has the higher upside or not? And when i compare that way, should i add back interest expenses to FCF? Capital allocation for the CEO of the indebted company is probably easier because all they have to do is pay down debt to get a higher FCF/EV, whereas the CEO of the company without debt has to make intelligent buyback decisions. Which one do you prefer?

For many members of this forum renting is probably the best option. I would only buy a house to reduce risk of doing something stupid with the portfolio, but then only when its a small part of my networth (and of course without a mortgage). The average family buys a big mac mansion and in doing so has paved the path to a wealthless future because they can`t afford to save more money and are stuck to the location (I don`t know how high the switching costs in the US are, but in germany you pay more than 10% transaction costs when buying a house). I am pretty sure that a cheap mortgage is counterproductive for them.

I have not heard Buffett say that he is expecting higher inflation ahead. But shorting rates is that kind of bet or not? When house prices don`t go up but down and your income is not growing its not a very good idea to do it. Taking on a mortgage to invest it in the stock market is playing with the risk curve and can get you deeply into trouble. Ask the japanese how good this idea worked over the last 25 years. (double whammy here, house prices fall and stock market, too.) I don`t think the us will go that route, but you should never ignore the possibility of it. So in my view this bet only makes sense in a inflationary world, so in the end it is a bet on inflation. So long as you understand what you are doing go for it, but always know the risks :).

Isn`t Buffet saying with this that he expects higher inflation going forward? I like Buffet, but his macro predictions where not pretty good in the past if i remember correctly.