Gmthebeau
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Posts posted by Gmthebeau
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On 12/20/2023 at 10:12 AM, Gmthebeau said:
Everyone and their dog saying lock in long term rates here at 4%, but virtually nobody saying it at 5%. Rest assured the crowd always wrong, and we will likely see persistent inflation and despite Jerome salivating to cut rates, the 30 year will likely re-approach 5% sometime in 2024.
and here we go again. Everyone who bought the 4% being blown up.
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58 minutes ago, Ross812 said:
Value Act had a big buy into EXPE during the quarter.
This is interesting. I need to look into EXPE. ValueAct is very good.
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7 minutes ago, Castanza said:
I wouldn't say it's contrarian, but more of about risk management regarding trust. At least that's what the talking heads are saying. Primarily I was just curious what changed @Gmthebeau mind. Two weeks ago he way saying investing in any country that is at odds with the US is playing with fire; or that it's impossible for American investors to properly analyze Chinese equities....or that BABA specifically would go up only once the CCP takes all your money.
I'm just curious how someone can hold such a strong view and then when asked about a position the response is...."the sentiment changed on this forum." <--- that doesn't address any of the risks or opinions they shared (confidently) previously..
Frankly I don't believe them to be an honest person so I'll just disregard any of their posts moving forward.
The great news is I don't have to explain to you why I changed my opinion. I told you I did. I told you it was sentiment. You didn't like the answer. I don't care. You should mute me.
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2 hours ago, ValueArb said:
But I don't know what the catalysts can be for positions like BABA, other than its cheap. Burry did come out of currency trading where it was all technical analysis into deep value investing and never entirely shed the idea he could predict some types of price action. So it might be something like he's seeing something that he believes indicates that the outflows from BABA are ending and expects it to get added back to some large fund portfolios.
Exactly. Once there is nobody left to sell there are only people to buy. Everyone says they won't buy, but once price starts going up sentiment suddenly changes and people start buying. It's the reverse of Apple. There is nobody left to buy Apple only people to sell. Even with passive inflows Buffett just trimming a bit drives the price down.
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5 minutes ago, Castanza said:
Then why even post to begin with?
listen dude you just want to argue. I posted why I bought it you dont like the idea. I could give a shit what you think.
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2 minutes ago, Castanza said:
LOL sentiment from who? Every hedge fund is pumping China right now. If anything the sentiment is positive as Chinese equities are at 52 week lows.
Regardless of sentiment your initial comment has little to do with sentiment...
Sentiment from this board. Whatever man, I don't need to justify why I bought it to anyone.
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Just now, ICUMD said:
You've had a change of heart on Valentine's. LoL
Yea, the sentiment is to negative now.
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XOM leaps, JD, BABA, CLF, INTC
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Bought JD and BABA on the open today. Love the negative sentiment. Howard Marks is an idiot. China blows and going to zero.
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The sentiment on China is so negative I have to take another look. Dont like it when everyone comes around to where I was 2-3 years ago. Nothing changes sentiment like price.
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16 minutes ago, Gamecock-YT said:
is howard marks anything more than a talking head these days?
I don’t know. I could see how people might think that. He is definitely a value investor, who likes special situations, bankruptcies etc. he last owned BABA and sold out in Q3 of 2020 which is when it peaked. I find it interesting and I hate China -
9 hours ago, Saluki said:
I'm sure everyone enjoys today because in addition to being Valentines Day, it's also when the 13Fs are due. Has anyone noticed any big adds, or new names that aren't usually on the radar?
I'll start:
Pat Dorsey, who runs a concentrated portfolio with 9 positions, just added a 9% position in Danaher this quarter.
https://www.dataroma.com/m/holdings.php?m=DA
(He trimmed Meta, Alphabet and Smartsheet)
howard marks bought BABA and JD which is interestingstanley drunkenmiller sold AMZN and GOOGL completely and started selling NVDA
david tepper bought calls on ARKK
tom Russo bought UBER
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9 hours ago, RedLion said:
They can’t let the people know this is the plan. Otherwise they risk the reserve currency status. But I agree, how is it even possible to grow out of 120% debt to gdp without?
Exactly I have never believed the FED is serious about bringing inflation back to 2 percent. Of course they are going to say that are but unless the bond market eventually forces them too they have no intention of it.
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33 minutes ago, coc said:
Practically every fraud is first caught by short sellers. This argument holds no weight. The SEC and Deloitte are sure as hell not out there calling out the Wirecards, Enrons, Valeants, Sino-Forests of the world.Exactly, but it's like talking to wall to fairfax fanboys. Reminds me of the TSLA crowd at the top
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1 hour ago, ValueArb said:
He's beaten the market by 100% over the last three years (and beaten market significantly over funds history) so I think he's figured it out. In the interview he's mainly talking about a 5 year stretch in mid to late 2010s where he did poorly every year, that's when he struggled to understand how things had changed. If you previously averaged over 20% returns for your entire career, it's a lot harder to realize you need to change your investing approach than if your career was more marginal before.
I really liked the interview and found it inspiring. It's not great for decent value managers who had to leave the industry, but the more money in passive vehicles like index funds and ETFs, the more opportunities for remaining active managers. Makes me want to read even more 10Ks.
Right I would think the market is becoming less and less efficient if most everyone is going passive.
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1 hour ago, Malmqky said:
Thanks for the positive contribution to this board.
Do you understand the report? It’s kind of a joke. A lot of these “issues” have actually been addressed by Fairfax. I don’t think this is a good faith report by MW…or they’re just misinformed. Guess FFH shouldn’t follow accounting rules..Also not sure why you’re bringing up a situation from two decades ago that was proven to be false.
Fairfax isn’t a fraud lol
I didn't say it was a fraud, nor did the MW report. They said it used iffy accounting to overstate assets and profits.
As far as the guy who said the prior lawsuit sued the short sellers into the Stone Age, I hope he realizes that Fairfax lost that lawsuit and it was dismissed.
I am done replying to this thread because to many people only want to hear one side of a story. MW has identified numerous company for many years that are frauds or using bad accounting so to simply dismiss it is stupid in my opinion.
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46 minutes ago, Spooky said:
If you don't know anything about the company why are you even posting here? Please at least bring some analysis to the table if you are going to post.
Bitter little man cuz your stock crashed. Ok, the analysis was 2 times accused of creative accounting just because you don't understand the analysis doesn't make it less useful.
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1 minute ago, StubbleJumper said:
The first time was 20 years ago, and the people who made such claims were sued back to the stone age. Muddy Waters has been much more careful about what they've written. There are no outright mistruths that I can see, just convenient misinterpretation and innuendo. Anyone with an accounting background will snicker about most of that document.
SJ
ok, good luck with your investment.
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8 minutes ago, StubbleJumper said:
Wait a minute. People "keep coming around?" When was the last episode of people coming around and making such claims?
SJ
This is the second time (that I am aware of). Most companies never have a first.
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In looking at his latest holdings Mr Einhorn owned NYCB. Perhaps his way of valuing companies just no longer works. The markets are forever changing. Passive has been growing for decades it isn't a new thing. Since GFC we had zero interest rates which changed the markets again.
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6 hours ago, Parsad said:
What? Have you actually read the report?
Key takeaways:
- Fairfax is GE, not Berkshire Hathaway
- MW believes that there should $4.5B in adjustments to assets on the balance sheet
- Fairfax is pulling financial levers to improve results and book value since 2018
- Fairfax has missed their ROE target of 15% for several years
Ok, the 4th one is pretty much a joke. Buffett and Munger have talked for decades about lumpy 15% versus an even 12% return every year. Fairfax is an insurance company that invests its float for income, so there will be volatility in annual returns. With that, you can get rid of the 1st one as well, since GE was engineering earnings to get a consistent annual return, not accepting volatile annual returns. I'm glad Block really studied GE!
Slide #4 of MW's report shows how Allied put pressure on Fairfax and they wrote a 107% CR in the year acquired. Then I guess somehow, Fairfax finagled a 97.3% CR since. Last I checked, writing below 100% was the target for insurance companies, not what they necessarily wrote historically. Again, not sure why he brings up Allied, since CR's are well under 100% for the last 5 years.
For mispriced assets:
Recipe
- They talk about the $15.30 takeover price for Recipe being artificial...well they have to talk to the PCAOB about that, because under IFRS fair value tests, the last market price or takeover price is what they have to use.
- They say that PWC restated goodwill and intangibles in 2021 compared to Recipe's previous auditor KPMG. Although, they don't note that PWC also restated the 2020 goodwill and intangibles for Recipe. So there was no real net tangible gain after acquiring Recipe if you simply look at Section 12 in the 2021 FFH AR showing total goodwill and intangibles for Recipe in 2020 and 2021 since the increase would have also been reflected in the restated 2020 financials for FFH in the 2021 report.
Quess
- They argue that Quess was deconsolidated to create an artificial accounting gain. You can look at that whatever way you want. It was treated fairly under IFRS. Again, if there are issues, it's a PCAOB issue.
- Also, they don't account for the fact that Indian companies have not transitioned yet to IFRS and there might be adjustments in valuation between Indian Accounting Standards and IFRS.
EXCO
- They say it is overstated by $220M or so on the books. I'll leave it to someone else with more understanding of the long history of EXCO to comment.
Grivalia/Eurobank
- Essentially saying that Eurobank overstated goodwill by $62M...you can quibble this whatever way you want, but $62M is barely material here relative to Eurobank's equity and assets.
Riverstone
- Suggested that the sale to OMERS and then subsequent sale from OMERS to CVC Capital was financial engineering to hide losses at Riverstone and show a profit at FFH. Yes, OMERS took the risk of buying Riverstone simply to help out FFH. Not that anything like that could risk OMERS entire being as a public pension plan, cause sanctions and fines against the investment team at OMERS, bar those managers from working in the industry, and possibly lose their CFA/Advisory designations. Sure, let's help a friend out with some financial chicanery and risk everything, including our reputation.
- As an aside, they mention that CVC Capital acquired Riverstone from OMERS with asset note guarantees by Fairfax for 4 years...they also suggest that the associate shares Fairfax put up as collateral were simply stuffed into Riverstone to hide paper losses on those associate shares. The funny thing is, most of those shares have recovered significantly since the pandemic and Fairfax would have been able to book tons of paper gains if they held those shares. No comment on that of course!
- Also no breakdown by MW's if any losses have been paid on the 4 year guarantee!
Fairfax Africa/Helios
- They state that Helios was booked at $5.25 USD while the price on the date of deconsolidation (December 8, 2020) was $4.04 USD. No mention that the stock traded up to $6 USD on the days after December 8, 2020. Total gain...$43M...on $21B of shareholder equity.
APR Energy
- They say that Fairfax sold APR to Atlas (a friend) so they wouldn't have to show a loss. Hmmm, funny how FFH hasn't bought it back, nor the fact that David Sokol and Bing Chen were willing to destroy their reputation solely to help Fairfax out.
Bizarre Take on Prem's sale of Atlas shares - Prem sold shares of Atlas at the $15.50 tender offer and accepted the same number of shares from Poseidon...simply to align himself with the $1B investment by FFH into Poseidon. MW's states without any real issue of criticism that they don't understand why Prem would sell ahead of the minority shareholders. No idea what the argument is here.
Eurolife/OMERS transactions - again, I'll leave this one for Fairfax to comment on, because there are a number of transactions that make it more convoluted than I have time to examine it. Essentially, MW's says that there was a $262M gain that should not be on the books. Ok, again that is 1% of shareholder equity and one tenth of what they will earn in 2024.
Brit/Odyssey/OMERS transactions - MW's says it boosted book by $421M when portions of those were sold to OMERS because the remaining amounts were now carried at fair value. They say they were essentially financial transactions to boost book with a call option to buy back. Not sure how this is any different than any company under IFRS boosting liquidity by a partial sale of a fully consolidated entity. Berkshire, Markel, etc would all book this the same way.
The most hilarious section of the analysis is Fairfax's accounting adjustments for Digit in 2021/2022 and the use of the FFH swaps. They say Fairfax began booking the gains on valuation of Digit later than they should have by a quarter so that they could juice the results for those quarters. Yet, the irony is if they had began when MW's suggests, then the gain in book value would have been inflated for 2021, a year which they say Fairfax was inflating gains widely through their transactions. They also note that they haven't made any adjustments to book based on the value of the swaps! In terms of a downward valuation of Digit that they suggest...I'm not sure I agree with the number, but Fairfax may have to adjust that based on prices for all fintech companies in India. Depending on markets, it could just as easily be valued upwards again. But I'll leave it to the auditors on this...I'm certain Muddy Waters has no clear idea either. Even MW notes that Sequoia invested $3.5B into Digit and relegates it to Silicon Valley's lack of discipline.
Here's another big one that you can argue either way. They say that under IFRS 17 Fairfax received too much in adjusted gains. That their adoption gain divided by contract liabilities was about 6%...higher than the industry. Yet, they don't note that Fairfax also generally books higher redundancies on statutory capital compared to the industry and it is around that 6% mark. Could FFH book that more conservatively...sure. Did FFH book that accurately...yes.
Farmer's Edge - another one that I'm not 100% up to speed on, but it's a $71M adjustment according to MW's. That's in the negligible territory when you look at $26B in equity.
Lastly, they suggest that the 46% acquisition of Gulf Insurance is the latest piece of financial engineering by Fairfax and they purposely overpaid at 2.4 times book for the new stake. Yet Gulf made $125M in 2022 and 26% would be about $58M. The $860M cost amounts to about 15 times earnings. Which isn't expensive when you are paying up for a leading, quality insurer. One which also had a closing condition that the $2.00 per share price could not be lower than the 6-month moving average market share price leading up to the closing of the deal. Thus why the premium offered was 100% to market price rather than 60-70%...to ensure the deal would close and KIPCO couldn't walk away.
Anyway, I'll leave it to brighter minds to approve or disapprove of the MW report. But to lackadaisically say that an ex-partner of the audit firm sits on their BOD's is somehow irregular and that what happened in the past regarding the short seller attack and financial restatements without even glancing over the facts...well that's just bloody lazy analysis!
Not too mention the liability that the auditors could be exposed to, Fairfax could be exposed to, employees jobs, shareholder's account values...does anyone really think that Fairfax and the auditors would risk all of that for plus/minus 2-5% of book value?!
Cheers!
maybe. I am not familiar with the company. I am familiar with the idea when people keep coming around saying your accounting practices leave something to be desired there is usually something to it.
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I just watched his CNBC interview and skimmed his report. Reasonable people can disagree on the value of assets. He seems to state some of the assets in question and there is a lot of asset shuffling going on. Reminded me a bit of a John Malone type situation. He made a good point how a former audit exec from the auditor is on their board. This would seem like a conflict. I also understand short sellers attacked them previously and they did an accounting adjustment to restate financials after that ~ I guess saying it was unrelated. Uh huh. Hard pass for me.
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I don’t own Fairfax, and have never studied it, but Muddy Waters is not a fly by night smash and grab operation. They have a very long history of under-covering companies that are complete frauds, although typically these are Chinese companies. Looks like his says this was overstated by 18%, and it dropped 12% today. Worst case scenario is another 6% if he is right and quick upside back where it was otherwise. I might initiate a position tomorrow if it flushes more.
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21 hours ago, Gamecock-YT said:
At the time of his death, George Carlin's net worth was estimated to be $10 million. His wealth was accumulated through his successful career as a comedian, actor, and author.
what are you selling today?
in General Discussion
Posted · Edited by Gmthebeau
RXRX @ nearly 100% gain. Will look to buy back at lower levels.