KinAlberta
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Posts posted by KinAlberta
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“ unfortunately ” ?
“As I look at the after-hours price, BRK-B sits at $173.50 - so the recent record is within sight, unfortunately.“
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Good article on Tilson and his shutting down of his hedge fund.
Kase Capital was down to $50 million, and the 1 percent management fee on the funds didn't even cover expenses.
A one man shop had overhead of more than $500,000 per year? I think I may see part of his problem.
Postage and printing alone can be a killer.
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I wonder if there shouldn’t be a cute phrase about the increasing discomfort with cash piling (up while investors increasingly view positive market returns as inevitable) to serve as s precursor to Buffett’s quip about being greedy when others are fearful.
Warren Buffett's Cash "Problem" Just Got $2.4 Billion Worse -- The Motley Fool
https://www.fool.com/investing/2018/06/08/warren-buffetts-cash-problem-just-got-24-billion-w.aspx
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Benjamin Graham only wrote six books and one of them was: “On Storage and Stability, a Modern Ever-normal Granary”. So I bought it and even skimmed through it.
I always find it fascinating to see where finance personalities find cause for market intervention, regulation, etc. It’s refreshing to see the rational pragmatic mind fending off and challenging what often tends towards impractical ideological or dogmatic thinking.
Anyway, are there a lot of parallels here between Graham’s thinking on commodities, the Federal Reserve’s approach to stabilization, supply management (in the news because of free trade talks with Canada) and protectionism?
Eg The US Federal Reserve massively expanded its balance sheet buy buying up a surplus commodity (crap worthless paper that no one wanted) and then either let it mature (kept it off the market) or will sell it back onto the market when prices have risen. They pumped money into the banking sector, established ZIRP, stabilized prices/interest rates, etc.
Supply management (Canada) - Wikipedia
https://en.wikipedia.org/wiki/Supply_management_(Canada)
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Family farms one of many concerns in unified fight against Trump's trade threats: Don Pittis
Abandoned farms are a symbol of the kind of market forces many rural (conservative) Canadians oppose
Don Pittis - CBC News
7 Hours Ago
http://www.cbc.ca/news/business/trump-tariffs-canada-1.4707631
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Everyone is talking about how great it is that Buffett is going to win his bet that the hand-picked hedge funds are going to lose to the S&P 500 index, but how about we ask some tough questions around here for once instead of worshipping a fallen god?
Let's face it, folks. Berkshire's 2016 growth in book value per share clocked in at 10.7% vs an S&P 500 that was up 12.7%. It was another year of ass dragging by Uncle Warren, not that we should be so surprised at that anymore. Berkshire has failed to compound book at a rate exceeding the market for four of the past five years.
It is not for Warren Buffett's lack of talent. No, rather it is because the glory of his past success has now become an albatross; he's stuck with a huge amount invested stocks of companies that used to represent the timeless quality of American business. The very best of the best.
The operative words are "used to." Now he owns a big slug of Coke, American Express and Wells Fargo with massive unrealized gains that he can effectively never sell because the deferred tax liability represents an obscene portion of their value. This float is supposedly not a real liability, despite the fact that it has shackled Berkshire with large equity stakes in declining businesses. Some are declining directly, like Coke, while the others have simply been eclipsed by a new breed of companies with zero capital intensity and nearly unlimited growth runways.
Maybe they'll do okay, but is it really any shock he's lagged the market when his internal R&D for understanding these companies failed? It's like in the new Cars 3 movie trailers where Lightning McQueen gets the shit kicked out of him by the new sleek, high tech race cars. My nephews will be so sad, but to me it's a great lesson that unless we constantly improve ourselves, we will become dated before our time.
The fact is that just like Lightning, many of the companies in Berkshire's portfolio are losing relevance in the modern economy, and in a market dominated by tech giants that enjoy economics that were previously not thought possible, they're likely to continue to do so. If anything, the trend will probably accelerate.
I think Buffett probably understands this, which may be part of the reason he's invested in Apple. It's funny to me, to watch so many people criticize him over this. Don't you realize that constant internal R&D is what made him so successful as an investor? Charlie Munger alluded to this recently, and it's obviously true. If he had never gotten beyond that Ben Graham mindset, he'd wouldn't be what he is today. If he never got past his "I don't understand technology" phase, his lessons could be relegated to the dustbin of history as dated and no longer applicable. That'd be a very sad thing to see, for a man who has contributed so much to the field.
What I care about is what Berkshire and Warren Buffett have taught me about human nature and the internalization of wisdom. All of those value guys shit talking Buffett because of his Apple purchase? They're so interesting to see; because they learned from him, and are now using his own teachings to reject him.
I want to touch on this, because I think it's probably the most underdiscussed aspect of investing and the art of learning it, and many other humanities subjects.
The internalization of wisdom can come with some horrendous side effects; in some cases, becoming a better investor actually cuts you off at the knees. I know this from experience, because I used to be a value guy that rejected growth. Out of hand. You're paying 100x EPS for that? You're stupid. Dumb. The history of investing doesn't support it. There will always be a better mousetrap. It'll never grow long enough to justify that value.
All of these beliefs were based on wisdom I internalized from the past. Buffett taught me how to become a business-focused investor, and he says he doesn't understand tech. It must be uninvestable. If my idol can't do it, how can I?
The key insight is that our progress as learners necessarily suffers from path dependency; from the time we are babies, we learn one new thing about the world, and build upon the foundations we were taught previously. But if those foundations are wrong, we are building a defective latticework that may serve to hinder us from future growth, even if it is sufficient enough to provide us with a decent result. Because wisdom is branching, having a defective branch not only stops us from learning positive mental models... the truth is, it can actively create negative ones, which can infect our other ideas.
In a previous thread I discussed how it can be useful to be wrong. If you block yourself off from one style of investing to focus purely on deep value, for instance, there's a pretty good shot you'll become good at that niche. But in doing so, you're foregoing potentially even more profitable situations by refusing to do the mental work required to understand them. Opportunity cost becomes a very real enemy, and errors of omission become more frequent.
The trouble is that this may be unavoidable at the outset. We all learn from each other; there is no one who is successful on this planet who has not built their foundation of wisdom on the ideas or work of others that came before them. It's made us an incredibly versatile and successful species, but it comes with one major downside.
The downside is that we don't always just absorb the wisdom of our teachers, but their defects too. Instead of letting Buffett teach us just about the business and investing techniques that have worked for him over the years, we might also pick up his aversion to tech & growth stocks more generally. And through social conditioning, over time that can become the accepted standard for being a value investor in forums just like this one. I like to call these Second Order Traits, because we pick them up by accident through learning from our predecessors and colleagues.
Smart people and thought leaders don't only have good ideas, or good traits; at the end of the day, their shit stinks too. By mimicking them, and by studying them, we can learn much about the world. Intergenerational transfer of wisdom has been a boon for society. But while we internalize what made those thought leaders successful, we can inadvertently internalize their mistakes that kept them from becoming as successful as they could have been.
The trouble with Second Order Traits is that they're hard to get rid of, once you have them. Path dependence being what it is, what we learn often ends up leading to the next subject we learn. I got hired as a junior investing analyst for an investing newsletter publisher, and because of that, ended up learning about marketing & copywriting in particular. Path dependence; learning about investing led to learning about marketing.
So it can be hard to go back and look at what we've learned, at what has been so successful for us... and admit that we're wrong, and that there are alternative, better paths. For years I refused tech stocks out of hand. It took some long and hard thinking, and direct and indirect guidance from investors who already made the transition, for me to get over that bias. I started investing in my own account in early 2008; it wasn't until 2014 that I really allowed myself to abandon this Second Order Trait.
It was so hard, because guys like Ben Graham and Warren Buffett helped inspire me to become an investor. They had taught me things that made me a lot of money, it felt like I was turning my back on them and my beliefs. But, because wisdom is branching, it opened me up to a whole new world of investments and I'm glad now that I bit the bullet and rejected that part of the value dogma.
I describe myself now as a hybrid investor, because I don't shy away from pretty much anything. I've read textbooks on bankruptcy law, stuff from Peter Thiel, Marc Andreessen and other Silicon Valley boys, and all of the classic value tomes. That's not to say that I'm without fault; I fuck up all the time. ALL THE TIME. And it'd be absurd for me to claim I've internalized all of the lessons these people have to offer just because I've read their shit.
But that's part of the system. When you do constant R&D on your investing style, you will fuck up. It's a cost of doing business, but net-net it has been very rewarding. That's why I think it's odd when people ask me why I'm always changing my style up, when what I have works for me. The reason what I have works for me is because I do change my style up and make investments in styles I'm not familiar with.
One of the biggest benefits of having a diversified portfolio is that it allows you to do more internal R&D on your investing process without betting the farm. If you have 20 positions of 5% each, it's not that big of a deal if you take a 100% loss on a few, because your winners are likely to make up for it. As a result, I actively look for unusual situations; no one stock is likely to make or break my returns at 31 positions, but the mental models I pick up from trying out so many different styles are likely to be useful. Some ideas lead to each other (FB led to GOOG for me) and it's a much broader universe to learn from.
Being a concentrated investor gives you more leverage to your favorite ideas. Being a diversified investor gives you more leverage to learning new investment styles without a lot of risk. You can do this without heavy diversification but the way my mind works, it's best for me to have a brokerage account that I can look at at the end of the day. It's real; those are the decisions I made, staring in my face every morning.
Path dependence in learning is a very real thing we should be aware of. All the time, we're picking up bad habits that are embedded inside good ones. And over time, unless we can cut out that cancer, those habits will stunt our growth.
I'm going to be straight with you. I don't really care about Berkshire or its ass dragging ways. It's a single digit percentage of my portfolio. Intrinsic value per share probably is growing at or above the market return, despite book. But it was useful for framing, and since when have I let facts get in the way of a good story?
Everyone is talking about how great it is that Buffett is going to win his bet that the hand-picked hedge funds are going to lose to the S&P 500 index, but how about we ask some tough questions around here for once instead of worshipping a fallen god?Scott, here’s a tough question. What has been in your portfolio (key contributors) over say the past 15 years? I think it’s important to include the last downturn because if not for the good fortune of government bailouts and FedReserve market meddling portfolio design and cash on hand matters most in downturns.
As for Gods. If I knew God existed and that it created the universe, I think I’d worship it even if it hadn’t done much since.
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$52 million! Paying taxes owing out of my salary or pension for those reinvested dividends would be a struggle. ;-)
It’s always easy to get very rich reinvesting everything in the stock market - when you do it on paper for propaganda purposes. It’s a bit tougher in the real world.
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Paying taxes owing out of my salary for those reinvested dividends would be a struggle. ;-)
It’s always easy to get very rich reinvesting everything in the stock market - when you do it on paper for propaganda purposes. It’s a bit tougher in the real world.
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Thanks for posting this information. That's very interesting.
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He leaves this comment pretty unsubstantiated:
"best portfolio of blockchain-related assets"
Overstock's Huge Upside Hinges On Blockchain;...
excerpt:
Forte’s bull case for Overstock is all about the company’s Medici Ventures portfolio of 10 investments related to blockchain technology. ...
“Given our view that not only is there tremendous value in its holdings, but it owns, by far, the best portfolio of blockchain-related assets among current publicly-traded equities, we believe the stock merits such a valuation,” Forte wrote in a Monday note.
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Imagine Buffett had died around the time that article was published. (It would not have been unexpected given all those Cherry Cokes and Dilly Bars.)
In 1992, his net worth was approximately $4.4 billion, placing him at #8 on the Forbes list. Had the Lewis article come out after his death, we might have had a dim view of Buffett's overall life. He had been criticized at that time for being a stingy billionaire who made relatively meager pledges to charity.
By 2006, it was about $46 billion, and announced the gift to the Gates Foundation. And of course it's still growing -- now $70+ billion.
Arguably, decisions made during the Salomon years, and similar ones, allowed the 10-(and greater)-fold size of the charitable gift.
So, in 1992, should he have "impaired" his wealth-generating machine by acting more "moral" to satisfy Lewis and us?
Philosophers and children are good at coming up with ethical rules that we all agree with. We all talk about behaviors being objectively "good" and "bad," and pretty much think we know what they are, in the abstract. People in real life find out that rules are abstractions, and that there are always trade-offs (benefits and costs), and outcomes and consequences.
(My filter for all this is Kurt Vonnegut's lecture on storytelling published in his semi-memoirs "A Man Without A Country." Buffett's story could have ended in 1992. But it didn't. As Vonnegut says, "The truth is, we know so little about life, we don't really know what the good news is and what the bad news is.")
Well said. Thanks for the comments.
"theory and reality are only theoretically related" -Robert Grossblatt
"Love of theory is the root of all evil" - William M Briggs
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Once in a while, anyone should look to see if their theories have any value. Hussman has been wrong for so long, I wonder why anyone listens to him. Even if what he predicts does end up happening someday, someone would be richer by not having listened to him at all than by having listened to him. Opportunity costs are real.
The problem with perma bears in a world where stock markets are up way more than they are down on average over the long-term is that it leads to something like this:
"This is a fake market, a house of card, it'll crash any day now, look at these charts and metrics, better stay cash and/or short"
*market doubles or triples over many years*
"Any day now the big one will come!"
*Market falls 20%*
"This is the big one! The 50%+ drop, great depression, here we come! I'll just wait a bit more before deploying capital..."
*Market bounces back*
"This is a dead cat bounce, it'll start falling again any day now"
*Market keeps growing for a few more years before another 10% correction*
"The big one is coming any day now! We're still too high on the CAPE, look at the gold ratio, these debt levels... Someday I'll get to invest that cash at great depression levels!"
*years pass*
Meanwhile, someone who started with the same capital and just rode it all out in great companies generating good returns is probably 10x richer than the permabear.
Hussman has a strong belief that valuations matter. Similar to Graham’s nonsense that in the long run the market is a weighing machine. This underlying faith in investors someday suddenly coming to some sort of quantitative value based assessment of the market they invest in, is constantly being brought up by value investors. I think Jeremy Grantham correctly surmised that the weighing machine proposition is just a belief in regression to the mean.
Here again (see below) I’d say this common view is wrong, and is basically nonsense. The idea that valuations will only appear in the long run, that a look at the long run somehow a series of presents will change into a useful measure of value to influence investors to act accordingly is nonsense.this somehow out of an analysis of a series of prices which will average volatility right up to the last or most current point in the analysis . If capital flows always drive valuation in the short term, they therefore drive valuations in the long term. There is no long run weighing machine. Simply put, we can only live in the present and we can never escape the present to live in the mystical long run where suddenly valuations become apparent.
The Danger on Which Gurus Agree
“Bill Ackman ...wrote in his early 2016 letter :
We believe that it is axiomatic that, while capital flows will drive market values in the short term, valuations will drive market values over the long term. ...”
https://finance.yahoo.com/news/danger-gurus-agree-180442861.html
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"Block chain is essentially the new dot com. " - SharperDingaan That may very well be true - or just "a flash in the pan".
Interesting article (second link below) showing the 'sloppiness' of those rushing to seize the moment and of course - a whole lot of money.
BTW, I have shares in Leonovus - have had some for a while and the addition of blockchain tech (as with OSTK, etc.) adds a secondary lottery ticket to the package. The latest rise is purely a mania for what can only be described as pure speculations. In fact, that's why I decided not to start a dedicated Investment thread on this little speculation as it has zero the intrinsic investment qualities that would align it with anything respecting the agenda of CoB&F. Hey, I'm early to such games - as back in the day I even owned shares in JCI Technologies (an early Torstar, Southam jv). It was so early to the internet that even Wikipedia has deleted its page for lack of links and Wikipedia's editors not understanding the nature of the early internet itself. :-)
Warren Buffett retells the story of the dead oil prospector who gets stopped at the pearly gates and is told by St Peter that Heaven’s allocation of miners is full up. The speculator leans through the gates and yells “Hey, boys! Oil discovered in Hell.” A stampede of men with picks and shovels duly streams out of Heaven and an impressed St Peter waves the speculator through. “No thanks,” says the sage. “I’m going to check out that Hell rumour. Maybe there is some truth in it after all.”
http://nudges.org/2011/04/14/warren-buffetts-joke-about-herd-behavior/
bolding above is mine
NextBlock Global Failure: Bad News for Canadian Blockchain Stocks?
NOVEMBER 7, 2017
For example, HIVE Blockchain Technologies Ltd.’s (TSXV:HIVE) stock price has dropped more than 40% from its 52-week high of $6.75 during the past two trading sessions alone after the company revealed that it will release 24,636,705 common shares from lockup, a week earlier than planned, at the open of the market on Wednesday, November 8, 2017, which HIVE said will allow for more market liquidity.
"And another popular Blockchain name, Leonovus Inc. (TSXV:LTV) has seen its share price slide 19% from its 52-week high of $0.70 during the past couple of days."
https://smallcappower.com/news/market-news/nextblock-global-ipo/
IBM Has a New Blockchain Idea: Tracking Marijuana Sales
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The Case Of Wilbur Ross' Phantom $2 Billion
http://www.forbes.com/sites/danalexander/2017/11/07/the-case-of-wilbur-ross-phantom-2-billion/
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Yes, thanks.
I've actually got OSTK.
(I own an inconsequential amount though.)
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Is anyone following Blockchain technology?
If so, I hope you will share any stocks that you own or are are looking at that are beginning to employ the technology.
(I'll share mine later.)
Also any good lay articles on blockchain (outside of bitcoin usage).
What's Holding Blockchain Back From Large-Scale Adoption?
SEP 21, 2017
More Mainstream Companies Invest In Blockchain
March 17, 2017
http://www.nasdaq.com/article/more-mainstream-companies-invest-in-blockchain-cm762121
Bank of America Has Filed for Over 20 Blockchain Patents Already
Aug 11, 2017
https://www.coindesk.com/bank-america-filed-20-blockchain-patents-already/
Also links from the same page above:
"Nov 1, 2017...
British Telecom Awarded Patent for Blockchain Security Method
The U.K.'s largest internet and telecoms provider, BT, has been awarded a patent for a method to prevent malicious attacks on blockchains.
Oct 30, 2017 ...
Sony Seeks Blockchain Patent for User Authentication System
"Electronics giant Sony has proposed a two-part blockchain-based multi-factor authentication system in a new patent application."
11 Blockchain Technology Stocks
https://investingnews.com/daily/tech-investing/blockchain-investing/blockchain-technology-stocks/
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Not sure if this is related but I'm seeing the message quoted below on https://finance.google.ca/.
I assumed they were shutting down the service but is it just a brief interruption? If it's permanent, can anyone recommend another simple but decent free stock tracking service? Yahoo Finance? Others?
"Google Finance is under renovation. As a part of this process, the Portfolios feature won't be available after mid-November 2017. To keep a copy, download your portfolio.
[/quote}
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Jeremy Grantham has also spoken up a few times about the problem professional managers face in having to satisfy their clients by capturing every last percent of the upside while protecting capital.
Five!!! Five (5) years of fishing. :-)
bolding is mine:
Warren Buffett--In 1974
Swing, You Bum!
Buffett is like the legendary guy who sold his stocks in 1928 and went fishing until 1933. That guy probably didn't exist. The stock market is habit-forming: You can always persuade yourself that there are bargains around. Even in 1929. Or in 1970. But Buffett did kick the habit. He did "go fishing" from 1969 to 1974. If he had stuck around, he concedes, he would have had mediocre results.
https://www.forbes.com/2008/04/30/warren-buffett-profile-invest-oped-cx_hs_0430buffett.html
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https://www.gurufocus.com/news/580392/john-hussman-hedging-and-opportunity-costs
It appears to me that you have to assume much more frequent corrections than history provides to do well with excessive hedging. At least his AUM has been killed, if I was him, I'd feel horrible. Alternatively, I'd write weekly letters to keep my delusion alive. He could create two separate funds, one long, one short, and give options. However if he did this, he'd have to come to grips with reality, that evidently wouldn't do.
Absent the value nirvana period of out performance during the dot com bust, his ex hedge results would be quite mediocre although above average.
I don't want to be negative but he holds a unique space in which he's frequently referenced/held in high esteem yet steals money from his mystified investors..... I don't think that's too strong a word. It's difficult to find greater atrocities even if his hedges created a 50% out performance next year, excluding those temporarily lucky fresh investors.
Finally, he could offer a t-bill fund in which the mgmt fee is = to the t-bill return and give his investors some relief. Hopefully, he wouldn't hedge the US govt...... one can dream.
If he quits, I think that would be one of the greatest indicators to hedge or raise cash in one's portfolio.
Yes, I totally agree.
What never seems to get recognized is Hussman's incredible sense of fiduciary responsibility. It's very much like he's being investing a widow's money all these years - but being relegated to a market of equities. The rest of the world always finds ways to justify any level of risk taking in any market. Hussman looks at worst case scenarios and probabilities. His problem being that he can't seem to accept the fact that emotions, perceptions and many, many relativistic factors rule and the data thus evolves.
"Indeed the temporary breaks in the market which preceded the crash were a serious trial for those who had declined fantasy. Early in 1928, in June, in December, and in Februrary and March of 1929 it seemed that the end had come. On various of these occasions the [New York] Times happily reported the return to reality. And then the market took flight again. Only a durable sense of doom could survive such discouragement. The time was coming when the optimists would reap a rich harvest of discredit. But is has long since been forgotten that for many months those who resisted reassurance were similarly, if less permantently discredited. To that the Times, when the real crash came, reported the event with jubilation would be an exaggeration. Nevertheless, it coverted it with an unmistakable absence of sorrow." ― John Kenneth Galbraith, The Great Crash of 1929
“The worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable.”
― John Kenneth Galbraith, The Great Crash of 1929
108-year-old investor: 'I doubled my money in 1929 crash – and I'm still winning'
Investment veteran Irving Kahn, who has weathered every financial storm since the 1920s, reveals everything he has learned
“Investors must remember that their first job is to preserve their capital. After they’ve dealt with that, they can approach the second job, seeking a return on that capital.”
...
“We basically look for value where others have missed it. Our ideas have to be different from the prevailing views of the market. When investors flee, we look for reasonable purchases that will be fruitful over many years. Our goal has always been to seek reasonable returns over a very long period of time. I don’t know why anyone would look at a short time horizon. In my life, I invested over decades. Looking for short-term gains doesn’t aid this process.”
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Advice for investors who go it alone
Mr Kahn said: “I would recommend that private investors tune out the prevailing views they hear on the radio, television and the internet. They are not helpful. People say 'buy low, sell high’, but you cannot do this if you are following the herd.
“You must have the discipline and temperament to resist your impulses. Human beings have precisely the wrong instincts when it comes to the markets. If you recognise this, you can resist the urge to buy into a rally and sell into a decline. It’s also helpful to remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.”
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I noticed something today for the first time while re-reading Berkshire's most recent 10Q (while stuck at the Social Security office waiting room for 2 hours..)
On page 39 of the PDF 10-Q from Berkshire's own website, the company notes that starting in 2018 they will adopt a new accounting standard that will reclassify the net unrealized gains for investments (presently reflected in accumulated other comprehensive income) to retained earnings instead.
The important part of this, as I understand it, is that going forward the changes in both realized AND unrealized gains in equity securities and certain other investments will be included in the periodic Consolidated Statements of Earnings.
Berkshire notes, "We do not expect the adoption of this standard will affect our total consolidated shareholders' equity. However, it will likely produce a very significant increase in the volatility our periodic net earnings given the magnitude of our existing equity securities portfolio and the inherent volatility of equity securities prices."
So - economically, zero change. But the headline earnings reporting is going to be a mess some quarters. Too bad.
Smells like an opportunity generator. :-)
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A few times a year I just google EV/EBITDA to see what shows up. Today's search yielded the article below. The fact that its about SocGen research caught my attention.:
EV/EBITDA ratio for the MSCI AC universe is at the highest level in more than two decades
By Rupert Hargreaves on April 10, 2017
...
EV/EBITDA is very high – SocGen
Equity investors may be celebrating such a strong first half equity market performance but SocGen’s analysts urge caution. The team notes that such a strong equity market performance coupled with a continuing buildup in corporate debt and sluggish profits growth has pushed stock valuations up to historical highs. The current median EV/EBITDA ratio for the MSCI AC universe is close to 12, the highest level in more than two decades. The median reported P/E is around 18.5 below the two-decade high of around 21.
Still, while markets may look cheap on a P/E basis, according to SocGen’s figures, based on historic performance the average one-year ahead excess returns over US 10 year Treasuries for the market coming from a starting EV/EBITDA ratio of 12 or more is less than 2%. As the note concludes, “if you think equity deserve a risk premium then you have a problem.”
“The question then is does valuation matter? The answer depends on..."
http://www.valuewalk.com/2017/04/equities-evebitda/
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More references to Klarman
Paul Tudor Jones Says U.S. Stocks Should ‘Terrify’ Janet Yellen - Bloomberg
Excerpt:
Managers expecting the worst each have a pet harbinger of doom. Seth Klarman, who runs the $30 billion Baupost Group, told investors in a letter last week that corporate insiders have been heavy sellers of their company shares. To him, that’s “a sign that those who know their companies the best believe valuations have become full or excessive.”
Share sales by insiders outstripped purchases by $38 billion in the first quarter, the most since 2013, according to The Washington Service, a provider of data and analysis on insider trading.
Klarman also noted that margin debt -- the money clients borrow from their brokers to purchase shares -- hit a record $528 billion in February, a signal to some that enthusiasm for stocks may be overheating. Baupost was a small net seller in the first quarter, according to the letter.
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maybe the wrong thread for this but here's the 2017 FPA letter.
Note the comments in the letter on the market and ETFs being weapons of mass destruction and the insider selling.
"...we say the time to be fearful is now.
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What are management teams doing as stock indices continue climbing higher? Evidently, they are selling. According to Vickers Stock Report’s latest count, insider sales were eleven times larger than purchases – which amounts to a 3.5 standard deviation above the mean.5 Another research firm, Washington Service, reported that both total insider buys and the ratio of buyers to sellers were at their lowest points since at least 1988 (29 years). To put it in perspective, there were 3,200 insider buyers in November 2008 and only 279 in January 2017.6 In the face of these cautionary signs, what are the investors doing? The investors are so excited about the market that margin debt hit an all-time record in February 2017. They borrowed $528.2 billion against their brokerage accounts.7 Margin debt was also at peak levels in 2000 and 2008. Since 2009, global investors decreased their cash positions to a two-decade low and increased their stock weighting by over 60% (almost no change in fixed income).8
...While this part of the cycle can be frustrating for value investors like ourselves because our hunting grounds shrink, we hold firm to the belief that stock prices cannot remain untethered from fundamentals indefinitely. Ultimately, we believe that the higher stock prices rise without improving company fundamentals, the harder they will fall. ...
Energy investments
...Let’s end with some simple math to better illustrate why those concerned with today’s oil market concerns may be missing the larger picture. On the demand side, the ..."
http://www.fpafunds.com/docs/hc_capital/fpa-capital-fund-commentary-2017-q1.pdf#page=2
Commercial real estate accounting
in General Discussion
Posted · Edited by KinAlberta
An interesting read:
The Bigger Short
By: Jon Schwarz, Ryan Grim
April 20 2021, 4:00 a.m
https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/
Referred to in the above article:
Is COVID Revealing a CMBS Virus?
23 Aug 2020 Last revised: 1 Dec 2020
John M. Griffin & Alex Priest
University of Texas at Austin - Department of Finance
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3671162