bizaro86

I definitely like the ability to read posts in chronological order. Some sort of "thanks" or "like" system would be a good idea. If you publish a leaderboard, that might incent quality posts?

My tips for getting kids to eat veggies (i have 2 boys age 4/6). I know new parents get 250% of the advice they want, but you did ask... - put it out every single meal. Preservance is key here. 1/3 is hard, and it does get easier. - put it out first, and when they are hungry. This worked really well with our youngest. He would be hungry and at the table for lunch, and I'd be finishing up the pasta or grilled cheese or whatever, and we just put the veggies on his plate and walked away to finish the other stuff. - let them help with it somehow, even just cutting a cherry tomato in half or "helping" peel a carrot gives them ownership - get the good stuff. My older son wouldn't eat tomatoes until we switched to a small farm-owned produce stand for them. They're way better, and now he has tomatoes, cucumbers, and carrots with every single lunch.

I never would have thought the market would rebound as fast as it did, but I still meaningfully bought equities in late March. A big decline has generally been a good time to buy stocks and reduce cash weighting, and the perfect is the enemy of the good there. Even a simple re-balance would have seen a bunch of equities purchased.

There is a difference between going all in and adding a few extra percentage points of long exposure after a 30% drop. Especially when you have a big cash position. The reason the market has been negative on BRK is that the "story" in the stock was that the big cash position would provide huge upside after buying low during the next drop. And then I believe WEB was a net seller during the worst of the draw down. If there is a second wave drop and he ends up deploying a big chunk of the cash that will be a double win - the profits on the investment plus the reputation gains (which flow to the multiple).

SD - I think this might be the best comment I've seen on here in quite some time.

The consensus seems to be that the value of the float liability is less than dollar for dollar because maybe it never needs to be paid back. If you invert that, what's the value of a cash asset that earns ~0 and may never be put to productive use? Possibly less than dollar for dollar is appropriate there as well. BRK sentiment is just far too negative right now, which is part of the reason I am buying LEAPS. The option prices say it all, such a low amount of volatility priced in. But we have seen BRK move huge amounts in short periods of time in the past and we will see it again. Not to mention the ridiculously low Price/Book ratio. I agree with this entire post, but especially the part about sentiment. I converted a big chunk of my BRK position from shares to LEAPs on Friday. 2:1 ratio of deep ITM calls to shares. If it continues to drop I'll do more. Biggest reasoning is I think risk of permanent impairment at the current price is very low.

The consensus seems to be that the value of the float liability is less than dollar for dollar because maybe it never needs to be paid back. If you invert that, what's the value of a cash asset that earns ~0 and may never be put to productive use? Possibly less than dollar for dollar is appropriate there as well.

bizaro86, not taking a shot at your thoughts on the float liability, but rather want to see if you can poke holes in how I think about it. I'll use a hypothetical company that is 100% capitalized by float as my example. Let's assume we issue a $1.0m policy at the beginning of every year that gets paid out at the end of the year. We take that $1.0m and invest it into Treasury bills at a 10% rate (day-dreaming over here, I know). Well at the end of the year we would have $0.1m in the bank, $1.0m in a Treasury bill, receive cash inflows of $1.0m for the new policy issued, and pay out $1.0m of insurance claims/expense for the beginning of the year policy (assuming cost of float is zero). In this situation, the equity holder would be able to receive a dividend of $0.1m, unencumbered by the float liability. We can have this same situation occur forever into perpetuity, collecting $0.1m every year. My question becomes, why knock something off of the equity value if we never have to truly pay back the float and it doesn't cost anything in interest? That's $0.1m in my pocket every single year, just as if I funded the company 100% with my own money. The risk of having to give back the float to its owner is more than the risk of having to give back the equity. Maybe that isnt very likely, but the probability is more than zero. Secondly, BRK doesnt own any theoretical insurance companies. In the real world, they have to hold regulatory capital to write insurance, and some of it is equity. So that $1 MM of float comes with some money as cash earning 0%. That equity could be earning more in non-cash investment. When Buffett is talking about how they need to keep $50 or $100 B in cash in case they need to cover a bunch of claims when equities do 30 or 40% drop, the opportunity cost of the float becomes pretty real.

I believe that is the reason given during the 2019 annual meeting. PSR is fancy jargon used by the RR majors for effing their customers. I think there's a balance there. The idea of scheduling trains to run at a specific time vs whenever the customer wants is probably less convenient for the customers, but seems fair. I dont expect the common carrier airlines to fly whenever its convenient for me. I either fly on their schedule or pay to fly privately. Railroads also have historically had a bunch of unnecessary costs in the system. As an example, Hunter Harrison moved most of CP HQ staff from expensive downtown office space to a building they already owned at the rail yards. I think the kindly neighbour vibe (from both WEB and the BNSF management) is ok, but there is some level of profit maximizing that is appropriate as well.

I'm not saying it isnt cheap (and I'm long) but if you count the equities you are implicitly including a bunch of the value of the insurance. There were over $160 B in liabilities related to the insurance operation last quarter. I get the concept of float, but I think treating that as equity (vs a long term cheap loan) is an aggressive way to think about it. If you wanted to sell the insurance cos without their financial assets but with their policy liabilities, you'd be sending a bunch of money out the door to get someone to take them.

Yes. Storage will sell into any near term strength whenever the front month gets close to or higher than the out months.

That while ago I think was 12 years ago. Maybe we can agree they were wrong. Yes, spigots can be turned on fairly easily. There's a lot of supply out there. If you're not talking about a massive increase in demand oil is gonna suck. Can you elaborate as to why you say that there is a spigot that can be turned back on? I listened to a podcast today with Art Berman today specifically saying this wasn't the case. Basically was saying new technology means shale wells deplete MORE quickly/efficiently and that it takes ~10-12 months to get newly discovered wells producing. So if we're not currently exploring/drilling wells, it'll take some time to ramp up to meet that demand once it does normalize. It definitely isnt a spigot, but I think 12 months is longer than it would take. Shale wells are in low permeability rock. The hydrocarbons dont naturally flow. That is why they require frac'ing. As an example, much of the Permian has permeability of say 10 mD. A hydraulic fracture has permeability much higher than that. It varies based in the size of the sand used and the closure pressure, but 10 D would be on the low side. So the permeability in the fracture is at least 1000 times greater. Flow rate is directly proportional to permeability for a given pressure drop and viscosity (Darcy's law). So at the beginning of a shale well's life while it is governed by the fracture flow it is 1000x more productive. This is a simplification of course, but the assumptions behind it aren't drastically wrong. A shale well quickly and easily produces the fluids that are within the fracture porosity, and then very slowly produces the fluids from the matrix porosity. So after a sharp initial decline you can expect low decline (at much lower rates) for a long time. Drilling new wells is required to access the initial flush production again. And that flush production is the only reason US oil production has grown so rapidly. That can be done quickly if a firm has licenses ready to go, especially given current availability for equipment and services. I think a 12 month response is slower than it would take shale drillers to ramp up once they decided to do so. The technical work is fast, and probably mostly done already as those wells were planned. There is no exploring for new oil phase here, it's all development drilling. What will slow things down is people deciding to drill (and fund drilling) again. They have been bitten so many times you'd think capital providers would have learned...

Compare the current vs prior year numbers by location. Of the 1,124 rigs dropped; 62% were from the US, 29% were international - but only 9% were from Canada. Very telling. SD That's just because the US and International have larger numbers of rigs. The Canadian rig count is down 86% year over year. That is worse than the US, which was down only 72%.

I think it's the same reason why the short threads on here often outperform- something is simple and works, what else is there to say? Something like the underlying causes of inflation/deflation is complex and fundamentally can't be proven. So it can be fodder for a never ending discussion. But buy decently located RE with reasonable leverage, let the tenants pay it off, end up rich, isn't very complicated, so there isnt much to discuss.

Is there a reason total US Treasury Debt is the correct denominator for this calculation? It seems to me that if the Fed buys a bunch of bonds and the Treasury puts that money in the economy, it isn't less inflationary because the Treasury borrows a bunch of extra money privately and spends that as well. I could totally be missing something, but wouldn't something like money supply be a better denominator?

I posted this in response to a question in the Canadian real estate thread about 6 weeks ago. Since that time, I have collected 100% of my May rents on time and in full. The Canadian government is basically floating my tenants, I think. Also since then, over 30% of my tenants have given notice they are moving out due to relationship breakdowns. That is insanely high, even with the same small sample size warning as above. I think it is very likely forced isolation has been pretty hard on relationships everywhere, and my tenants probably have less secure lives/relationships/jobs etc on average which has probably made the whole situation more stressful. Bizaro, I may have missed it, but how many units is your building? Trying to gauge the extent of the small sample size. Not a building, its condos in a variety of buildings. My kid who is learning to count couldn't count them on one hand, but he wouldn't need all his toes either.

I posted this in response to a question in the Canadian real estate thread about 6 weeks ago. Since that time, I have collected 100% of my May rents on time and in full. The Canadian government is basically floating my tenants, I think. Also since then, over 30% of my tenants have given notice they are moving out due to relationship breakdowns. That is insanely high, even with the same small sample size warning as above. I think it is very likely forced isolation has been pretty hard on relationships everywhere, and my tenants probably have less secure lives/relationships/jobs etc on average which has probably made the whole situation more stressful.

Most modern engines with modern oil can go way longer than the manufacturer's recommended oil change intervals. I look at oil changes during the warranty period as primarily an investment in maintaining my warranty. After the warranty is over, I space them wider (and only by mileage). There is an agency problem. Most consumers dont check the recommended service interval prior to purchasing a car, but the service interval makes a big difference to dealer profitability. So the manufacturer has an incentive to keep it shorter than necessary. IIRC, once BMW started including oil changes the service interval increased quite a bit.

Except it seems that most places drivers drive for both Uber and Lyft. So if Uber builds a network of drivers with density it doesnt seem like they have a way of keeping their competitors from using the same driver network to take share.

I thought Masa was just misunderstood in his own time - like Jesus and the Beatles?

I'm originally an oil and gas engineer by profession. Investing using that knowledge has been not helpful however. Easily my biggest loss was a large position in the distressed debt of a junior oil sands company. I believed there was a relatively simple solution to the issue they were having, that they would implement it, production would grow, and they'd be able to refinance the debt. I still think that solution would have worked, but they either didn't think of it or ran out of cash prior to implementation. Either way I loss 100% of the investment. Compounding that money at the same rate as the rest of my portfolio since then produces a very painful result. I was both overconfident and wrong, and the overconfidence caused me to size the position too large.

But how much would rates have to go up before regulators moved? If the 5 year goes from 0.3% to 6% that would exert a lot of gravity on income stock valuations, but I could see state regulators saying that 10% is still an acceptable ROE.

I'm gonna disagree with all three: IBKR - they are nickel-and-diming their customers like there's no tomorrow. Pay for quotes, pay trade commissions, pay if you don't have enough trades per month. Some of these may have been removed, but because of competition and not because IBKR are good guys. So zero loyalty to IBKR, screw them. DIS - I think the park prices are ridiculous. High-speed internet - most countries have much cheaper high-speed internet than US. US monopoly pricing sucks. Shrug. I would pay more for all three of these services. Part of it for some of them is being non-USA. IBKR is much better than competitors here in Canada - no free trades for everyone here. Given how fast their customer base is growing it seems I'm not the only person who feels this way. I also think Disneyland is great value. Tickets are expensive, but a lot is included as well. Different strokes for different folks, but enough people agree with me that they keep raising prices and attendance still grows. Obviously we'll see if that holds post covid, but I think it will. High speed is likely colored by being outside USA. I pay $105 CAD (so under $80 USD) for 300/30 high speed, basic cable, and a home phone. I would pay much more than that just for high speed if necessary.

ALX

Okay, I think perhaps I should have titled this as "Businesses That Choose To Completely Monetize" Perhaps this is me getting older and increasingly appreciate Costco and Visa/Mastercard. It's appreciating that you don't have to extract every last cent. Recently, my wife and I have had a lot of restaurant and construction employees who can't pay rent. We choose to work with them and decided that life is too short to be a-holes. The point of the thread is to identify companies that have monetized every last cent. My theory is that the companies that somehow manage to charge a 10% gross margin and pay their employees a livable wage, i.e. Costco, can thrive for a very long time. Invert this and the companies that makes one of their constituent, customer, supplier, etc unsustainable in the long run will likely face structural issues. I think QSR franchisors are great restaurants. But the franchisees are really suffering. At some point, this will come to bite the franchisors in the butt. I think this is a great insight. Any business that isn't completely monetizing its pricing power has a huge moat. It makes it very difficult to compete with them, because a new entrant would need to either offer more or charge less, and the lower-than-possible margins make that hard. A few other things I think fit this model: -Interactive Brokers - their margin rates are way lower than the competition. They could raise them and still be by far the lowest. But their margins are still good. -Disney Parks - they have discovered pricing power, and raise ticket prices every year. The parks are still always packed, so they are under-doing this. This is weaker than the other cases mentioned, imo. -High speed internet - I would pay more than I do right now for this. A lot more. Maybe competition keeps this down. There are two sets of fibre to my neighbourhood (one telco, one cableco) so there are two choices for true high speed.