rmitz
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Posts posted by rmitz
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A couple of questions to make sure that I understand what I am reading:
What makes the fed balance sheet go up and down?
does the fed have anything on the liabilities half of their balance sheet?
Where do the assets that the fed used to buy these interest bearing securities come from originally?
SmallCap
Here's a somewhat old but good primer on some of the Fed basics:
http://www.libertyunbound.com/archive/2004_10/woolsey-fed.html
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I fear that even on this Board we are getting suckered into Keynes's "beauty contest." The only question for us regarding Netflix should be, "Would I want to pay $8.5 billion to buy all of Netflix?" Everything else, i.e., whether the stock was up or down last week or is accelerating in some fractal-type way, is noise.
Unfortunately, the answer to that isn't all that clear cut. Private business purchases *do* still have to take growth rates into account. There's a lot of unknowable moving parts and factors in here. Personally, I'm no where near either side on this one.
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I did a rough recap of the companies listed...There were 12 stocks, or options in three, or more portfolios. The average return of these top 12 have out-performed the market by a nice margin over YTD, 3 Yr, 5 Yr and 10 Yr.
Here are top 13
BRK 14, FFH 13, JNJ 8, KFT 6, SD 4, SSW 4, BAM 3, Dell 3, LUK 3, PVD 3, SHLD 3, XOM 3
Top 13 Avg - YTD 4.6%, 1 Yr 7.2%, 3 Yr -4.6%, 5 Yr 3.2%, 10 Yr 8.7%
S&P 500 - YTD 2.4%, 1 Yr 7.8%, 3 Yr -6.6%, 5 Yr 0.2, 10 Yr -0.8
The favorites BRK & FFH quite a bit better better
Top 2 Avg - YTD 14.5%, 1 Yr 15.9%, 3 Yr 10.1%, 5 Yr 14.9%, 10 Yr 10.4%
The numbers speak for themselves...
This is kind of an apples and oranges comparison. With the later stocks, timing is everything in terms of the investment value. With FFH and BRK, timing is important, but their longevity can make up for buying mistakes over time.
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I think he should have defended the US CONSTITUTION by stating that these perpetrators, whoever and wherever they are, should be charged and tried for "TREASON" against the citizens of this once great nation. At the same time, he should support the dismantling of the central banking beast in the US who has had control of their FINANCES since 1913, and has only DESTROYED their currency value for nearly 100 years!
Has Charlie forgotten his own damn DEFINITION of INSANITY!
If found guilty in a court of law, they should be HUNG according to the LAW.
This is something GLOBAL THINKERS like Charlie and Warren would never suggest, however. They must think outside the US BOX, which makes their INTERESTS COUNTER to the citizens of The United States of America, notwithstanding Buffett headlines to the contrary depicting some NEBULOUS patriotism which isn't there!
That's because they've been captured by the international bankers, most importantly, those criminals at GOLDMAN SACHS!
Once Americans see these SCOUNDRELS hanging from POLES, they will believe in the VALIDITY of their system again, and get back to the HARD WORK ETHICS which once made them great! Lest there be no mistake about it, I include US POLITICIANS who had their hands in these SCAMS!
Have you forgotten the Nuremberg Trials, and its world wide psychological effects for satisfying the peoples QUEST FOR JUSTICE?
Seeing people who are responsible for The Peoples pain experience DEATH, will be very healthy for the US economy while extending like a contagion around the world.
We're all NOT O.K., as in, "I'm O.K., you're O.K."
IMO
I just gotta say this once. You should lay off the capitals and bold in your writing. It makes me feel like I'm reading Zippy the Pinhead.
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I've never understood why a specific metric like $/sq ft isn't more commonly used when talking about real estate prices and trends. It sure would remove a lot of the noise from the discussion...how useful is it to talk about median home prices if we don't know the physical characteristics of this mythical median home?
I very much agree with this point. I think it's the most important metric in valuing a home. However, there are some other variables that should be also be considered in conjunction with this metric; e.g., the $/sq ft for the total lot size and for the house size, the age of the home (this is important since old homes need much more maintenance), and the usable lot size (i.e., is part of the land on a hill?).
I think you've still oversimplified things quite a bit. Is your driving time valueless? How about the costs in using a car at all? Proximity to stores, jobs, etc. are huge factors. How about the ratio of the $/sq ft against the local average wage? The build quality of the home (types of materials, craftsmanship factor) is also important. There are plenty of very old homes which remain in good shape because they were built well by someone who cared (with much higher quality materials than used today!), and the maintenance isn't really that much out of line with relatively new homes. Access to good schools, level of crime/quality of neighborhood, infrastructure quality, tax burden, ability to use property for other purposes...etc, etc. I'm sure I'm leaving a bunch out.
Some of these things become very difficult to quantify, which is why reducing value to a single number doesn't really work that well.
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This is going into my "too hard" pile for the moment. I'm going to need a good number of hours to read up on everything and I don't think I'll have that kind of time soon. My gut feeling is that it would be safer to look at the bonds as an investment, but I don't know about those returns.
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What would you tell that boy today?
Heh, if only.
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People interested in ag plays however, might take a look at VFF (Village farms International) - trades on TSX.
* Currently trading at about 3x FREE cash flow (pre-tax for the trailing 12 months) - has a moat in being the largest (North American) greenhouse producer and distributor of tomatoes, cucumbers, bell peppers. [i pretty much backed up the truck on this when at 50-60 cents (so <1.5x free cash) -- but at $1.15-$1.25 as of late it still seems very cheap]
* Uses about 1/5th the amount of water as field grown produce.
* Will eventually be building out their biosphere technology that to date is only being produced on a small scale basis - this new technology is world class churning out the highest yields in the world by a fair margin.
This definitely sounds worth reading up on. I have one semi-rhetorical question for you--how capital intensive is the expansion of the business? Is there anything that prevents the chinese from stealing these ideas and running with them? Areas of the world with limited water resources would be the biggest beneficiaries of this sort of technology.
As a cigar-butt, it doesn't have to be more than cheap, and all else being equal it sounds like it, but certainly a lot more research would be required.
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They have a real auditor and a growing cash pile. If the company was a fraud, there is no way in hell that Deloitte and Touche would not have unearthed the inconsistency in their findings.
A few years ago a Chinese company called China Expert Technology (CXTI) was discovered to be a fraud. They also had a brand-name auditor if I recall correctly (a member firm of BDO Seidman?). Here is how CXTI did it: The auditor signed off on their year-end financial statements, for our purposes this might be December 31, 2009. The subsequent quarterly statements are unaudited, so management can invent them if they wish to do so. The next audited financial statements for the year ending December 31, 2010 would not be due until March 31, 2011 or June 30, 2011, depending on whether the company files 10-Ks or 20-Fs. So, management has more than a year to put out fake quarterly financial statements in an attempt to get the share price up while disposing of their own shares in the company (probably without making the requisite SEC filings), and/or stealing the actual cash on hand.
I believe this is also similar to what happened with ETLT.
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This doesn't make too much sense to me, let's say Berkshire, when younger was an A or B company, even Buffet was willing to put 100% of his net worth into it, what's the point of having 5 positions of diversified conglomerates? The duplication of values would be so large as to give similar results to owning 1 good one.
From Buffett's perspective, Berkshire *was* his portfolio at the time (Not true, strictly speaking, but the general principal still holds). Since he has direct control of the capital allocation at Berkshire, it's just splitting hairs to say he has 100% of his assets in one "investment".
I think the 20% principal is just hedging for future change. Will people *always* be able to trust management at Berkshire? In 50 years? 100? 500? I wouldn't even bet that they'd be *around* in 500 years.
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Sorry Watsa, don't know how I missed dividends...as well as special dividends which may be very likely. Cheers!
Hahaha. I couldn't help it. We have clients exploring this...one client in particular just did a very large leveraged dividend (bullish sign).
There would also seem to be substantial incentive to doing those special dividends this year. I suppose it will depend on how comfortable companies are feeling.
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The saddest thing about this news is that what I consider to be a wonderful agm will no longer exist. I think this probably has to do with Charlie realizing his strength is decreasing? What do you guys think?
It's possible. I do wonder if there might be one more. It'll probably be mobbed, though.
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I would bet that where we each live largely determines how optimistic or pessimistic we are. We probably read the same blogs each day.
I live in Vancouver so I am optimistic. I am optimistic despite the fact that I agree with Munger's analysis regarding balance sheet recessions. You cannot read Hoover's auto-biography of the great depression and not worry about the parallels.
Vancouver is great because it is a crossroads. I hear about investors who are now experiencing full on housing bubble in India and India doesn't even have easy mortgage financing yet. One house went from $700,000 to $1,250,000 over the last year. (I bet I know where the QE money has gone.) Yet the seller wants to invest the proceeds near Houston!
Definitely some truth in here too. I, personally, don't really see the bad economy, except in the headline numbers and statistics, and maybe the occasional human interest piece. I live in Pittsburgh which has been slowly recovering from the departure of most of the Steel industry for many years. Things have pretty much continued with barely a pause. There was very little of a real estate dip here because there was never really a boom in the first place. Some articles place the local real estate market here as the best in the country (the raw numbers are no better than they were, but when you're playing football against a guy with one leg, you can do OK). The city finances still suck, but many other places are now much worse.
So whatever happens in the economy, mostly just affects my mind, not my life.
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I think apathy rules in this day and age. The stock market is frowned upon, and rightly so. The everyday investor, the baby boomer crowd, has zero interest in stocks. The market is messed up, with the machines at the helm. There isn't blood in the streets--the streets are empty. Money is pulling out of equities and flooding into bonds. There is no trust in Wall Street because the game is rigged. Throw in a plethora of macro issues and you have a market of disinterest. People are saving, not investing. That can go on till the street(Wall Street) bleeds. That will be the time to buy with vigor.
The thing I've been wondering, is: What's going to happen with those people who got burned in the stock market when they get burned in the bond market too? Because of the way bond funds are structured, it's not like just holding long bonds and eventually getting your principal back. The MTM loss will be psychologically shocking.
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I also own PVD. I think I found out about this based on posts on this board??? May have been you???
I like the moat of the business. Chile is growing fast (some say its very overheated), but long term should be solid. I picked up around 46. Earlier this year. At 54 now, +$3 dividend.
Nope, wasn't me. I'd never discussed the company here before. I think I bought originally around $24, and sold around $40 to raise capital during the downturn. Of course there were dividends in there too. I re-bought at $15 during March 09. I'm not totally convinced it's a great investment at these levels. The reason I continue holding is that with the basis so low, I figure sitting on the dividend generating power is totally adequate. It's also not a large position, and I'm pretty sure that we won't see that kind of price again (unless the company itself is having bigger problems). That said, I should be doing a valuation to determine when I would need to sell.
I do also appreciate the Chilean economy, and think they are the best place in South America to be doing business. My original thesis for PVD was definitely tied to the anticipated bright future of Chile, as a way to get involved in a foreign economy without being in an index fund. On the drawbacks, there are some structural benefits to PVD in particular that can change over time, and the actual earnings of the company are significantly tied with overall market performance. I was a little surprised by that last time, but I don't think they would be in the situation of the company itself being at risk.
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This means that the concept of needing a powerful PC to get work or play done will become obsolete for most consumers.
For example, I used to use Microsoft Excel to track my investments and for my number crunching. Now I use Google Docs, which runs through the browser. I only need a very simple machine that can run my browser (Firefox) to get most of my investing work done.
It's important to note that today's web browsers require a pretty good chunk of horsepower; and as more functionality goes online, complexity will continue to increase in that area.
While it has gotten more efficient, running javascript in the browser is still a lot more computationally expensive than running native code. I haven't run tests, but certainly it takes more computing power to run google docs than an older version of MS word. It has always been somewhat frustrating to me that MS Office 97 did everything I really needed and ran quickly on a simple pentium laptop...while today's software would not even start on a machine with only 64M of ram. [MSFT has made billions on locking people in to an upgrade cycle they don't actually need].
So while huge number crunching may move away from the desktop, those "lightweight" interfaces aren't necessarily that lightweight. Just *try* running Firefox or Safari on a machine only a few years old.
The general point is that it seems that computing capacity has always increased to fill whatever you've got available, and I don't really see an inflection point yet. There are some possible ones, but nothing that is a done deal.
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ATSG (Largest)
BRK.B (Common and 2012 LEAPs)
FBK (Recent)
PVD (Have owned twice since 2006--picked it up this time in March 09)
LRE
BRFS
TPL
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No -- he pulled completely out of the market...well known fact by anyone who has spent the time to study Buffett.
If you want to call a massive position in Berkshire (et al) plus the investment of Berkshire's funds in fully-owned businesses, 100% cash, then so be it. It is true that by 1969 he had moved Berkshire out of all its marketable securities positions (Berkshire 1969 annual letter), but those were being at least somewhat reinvested in other ventures.
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I love this quote, its one I reach for when my knees get a bit wobbly - Warren Buffett - "An argument is made that there are just too many question marks about the near future; wouldn't it be better to wait until things clear up a bit? You know the prose: “Maintain buying reserves until current uncertainties are resolved,” etc. Before reaching for that crutch, face up to two unpleasant facts: The future is never clear and you pay a very high price for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values."
Let's remember that Buffett moved entirely to cash in the late 60's/early 70's -- brilliant move.
Well, except he didn't do that. He was in Berkshire at that point, and that was the vast majority of his holdings. And lest you think that's misleading, he was also actively investing from within Berkshire at that point.
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Any study of Graham would conclude that he would not be buying a stocks at the moment -- the margin of safety is just not big enough. Schloss "liked to buy stocks below book value" -- do you know how low the market would have to go in order for quality companies to be trading below book value. The margin of safety currently offered by Mr. Maket is not near enough for Schloss either.
We own three stocks under book. In fact, our largest holding is a small-cap company that is relatively well-known, yet not a single person on this board, or its predecessor, has ever talked about it from my recollection. It trades at about 8.5 times earnings and less than 0.85 of book...and book is undervalued! Cash flows are consistent, little debt and it's been around a long time. Yet not a single person has ever talked about this company. Schloss would be buying stocks today...but that's because he would be doing more legwork and research than everyone on here. Cheers!
I should *hope* that someone doing this as a job rather than a hobby can spend more time on the research than I can. :)
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The Kyle Bass video could be summed up: don't spend more than you make. How much will GDP have to grow to meet current and future obligations and why rmitz would you assume that entitlement costs will be lower than estimated?
If the GDP is the same or lower 20-30 years from now, there must have been a measure of deflation. In broad strokes, this affects the entire economy. I don't actually believe that will happen.
Just as others are arguing that the level of corporate profits as a percentage of GDP is unsustainable [i have no opinion on that issue], so likely is that expected level of health care spending as a percentage of GDP. It's obvious there will have to be changes along the way, and we have a LOT of time before the chickens come home to roost on that issue. The world, the whole environment is going to change in that time period, making precise predictions pretty fictional. So the point in general is, saying that that fictional predicted value amounts to a specific percentage of current debt...just doesn't make sense.
Do we need some amount of more discipline in government? Absolutely. Is it the end of the world? Hardly.
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rmitz, why will GDP be higher?
Over 20 years, I think it would be extremely pessimistic to think that GDP will not be higher. That said, if GDP is NOT higher, likely the projections for future estimate costs for the entitlement programs are too high, so the percentage would be lower either way.
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Reasonable observation on the surface but if the government wasn't running a budget deficit equal to 14% of GDP, we would be in a depression and corporations would not be better off. A 14% annual budget deficit is not sustainable and as a result, the current economic environment (which gives the appearance of relatively healthy corporate sector) is not sustainable. Given that inflated and unsustainable government spending is keeping the economy afloat (barely), risks related to house, credit derivatives, stocks, debt still exist and in fact are greater than before (in my opinion), given that there is now more debt in the system. Total debt to GDP now equals 358%, greater than the 290% level at the end of WWII.
This debt number is misleading at best. 358% is only true if you count very long term commitments to Medicare and other entitlements, which are not current debt at all. There are three good reasons. 1) The programs can be changed long before the debt is a significant issue. 2) While the debt is higher right now, it's also nowhere near as high as Japan or a bunch of the european countries. The basic point here is that debt is sustainable for a lot longer than most people expect. 3) The GDP will be higher by the time these expenses actually occur.
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Watsa,
If dealing with Deflation were so "simple" then why hasn't Japan done anything like that for the last number of years?
SmallCap
The problem is Japan is already a nation of savers. Most of them would have just put the money back in the national post office / bank. In the US, you can bet that most people would spend it, at least after clearing out their debt.
Biglari Holdings Amends Compensation Plan
in General Discussion
Posted
That's the number of shares.