KinAlberta
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Posts posted by KinAlberta
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I always enjoyed his writings. Learned a few things too I suppose. Inc Stmt vs Bsl Sheet perspectives.
In 2008/09 his video interview on banking and FASB is a classic.
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6+% change due to a change in politicians? Especially an anti-pure-capitalism/anti-free trade politician - surprises me how politics seems to equate so strongly to general investment performance.
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I'm wondering what the odds are that Buffett might 'retire' prior to a sale on quality companies or other major opportunities (likely recession driven) that he might buy with his ever growing cash horde. ...and if he retires one way or another BRK's share price might dip (as Buffett himself once predicted) and so the BRK cash could be deployed for buy backs...and if that isn't a consideration / competing opportunity in Buffetts mind. :)
Yes, useless speculation but my mind just does that. Sorry.
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We pay for the bare minimum cable. (And aim for that goal on most other things.) Will there be other ways to watch this?
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Interesting topic.
I hope inflation risk enters the discussion.
...and other liability risks.
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Ben, BP6,
I dont want to be seen as maligning those who choose to hold FFH. I do think that critical thinking is in order though. And you both have summarized the issues quite well. My history with FFh goes back to 1997 when I first bought shares around 350-375 cdn (cant quite remember and dont want to look it up). Not exactly a value investment at the time.
I learned an enormous amount from FFH, and by holding the stock. It also led me to this message boards predecessor, where like minded, value investors in training, were hanging out. We picked apart FFh and tried to understand everything about it, during the near death experience, and ultimately did very well.
Like any investment, those who invest in FFH get anchored to a certain way of thinking. None of us is immune to it. What I see on the FFh thread is a constant reset in what people seem to be willing to accept. As follows:
A few years ago the narrative was that the investment results were good, but the insurance results were poor. Now, the investment results are weak, but insurance results are great. There is alot of "if only they did this, or did that" returns would be better.
Another narrative common on FFH threads recently has been the: "they will do well in a market crash because they are hedged". But, this has changed.
Another common narrative is that over the long term FFH stock will do well. The long term, is long gone, and the returns are acceptable but not stellar. There are a multitued of Cdn firms with better long term returns over the last 12-13 years, and many more in other countries.
I just think people are too forgiving of FFH's foibles.
Its not that I hate the company or Prem (or that he even cares either way). I actually admire him, and the great company he has built, and am somewhat envious (in a minor non-negative way). I could never have accomplished such an incredible feat. I really wish they do well. Whenever, we hear about the hollowing out of Canada's business sector, because companies like Stelco, Dofasco, or,Rona get bought out, I love to point to FFH, BAM, and a few others who are buying elsewhere at dollar multiples above what Canadians think they are losing.
But I am a good passive investor, so far, and FFH doesn't meet my needs for returns, and isn't likely too, as best I can tell.
Interesting comments thanks. I too first bought FFH around the same time (around 1997). ...though lately, for the first time I can recall in years if since the 1990s I am completely out of FFH.
In the past I've been in and out of it but always held some shares. Compared to BRK or even say Markel, I've never had a great deal of confidence in it. I mentally place it down among Loews/CNA and Leucadia in terms of its willingness to make some pretty big but measured bets with high payoff potential but when the payoffs don't come there's nothing all too foolproof to them. BRK is more like a bank account - always building value even when the market doesn't price it in. FFH though seems to rely on turnarounds, etc. Its movements into India, etc. are great and not turnaround orientated. They are growth orientated.
I guess what I'd like to see in this forum is a thread comparing BRK to FFH (and others) in terms of what seemingly makes BRK such a sustainable economic enterprise, even in tough times, compared to say FFH where one feels that its gains are more 'luck' than calculation and deeply thought and considered foresight.
BTW - I am a great fan of Watsa but there's just something missing in comparison to Buffett. I'm just not too sure what.
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I've commented elsewhere that anyone picking stocks should put half of the contributions into a decent index and continue to do so. Maybe into separate accounts to pay taxes on each out of each account. (I wish I had, even though I put a large sum early on into BRK._
If you can continue to do 20% a year on your stock picking, what do you care if half of your annual savings is just floating along in an index. Huge outperformance over the index will swamp the index funds in short order and you'll be so wealthy that the indexed funds will just be a relative drop in the bucket.
However, if you are like most stock pickers, over a few cycles, or say 10-15 years, you'll see exactly what your after tax returns are doing in comparison to your indexed funds.
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I've noticed a noticeable amount (by definition) of insider selling among Canadian bank stocks recently. Not sure if I'm just sensitive to it or if it's a real change but someone may want to look at insider behaviour for hints as to the future.
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So if bidders/buyers push the Dow up to 30,000 in 'short order' (that's a highly scientific unit of time), then where is that money going to come from? If they are abandoning another asset class to do so, that may be the place to look for opportunity. If it's coming out of cash, then what are the consequences of draining cheap liquidity from the system? (...and the 2nd and 3rd order consequences?) Also, where are the sellers putting their money? Into other DOW stocks or somewhere else like cash?
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Here are a couple of interesting quotes from Prem regarding the rational for the purchase:
“The recent election . . . has a strong potential to make the business climate for growth great again,” he said. “We believe the US may see significant growth in GDP and our business in the US will benefit from any such positive development.”
Mr Watsa suggested that there could be more US deals in the future: “When the biggest economy in the world is on the way up we think the downside is significantly reduced and it becomes a value-oriented, stockpickers’ market. In the last few years we’ve played defence. We expect to play offence.”
He sounds like a cartain manic depressive fellow I want to sell some shares to... really strange.
Yea - This is getting bizarre. I don't have any issues with the acquisition in and of itself, but the 180 degree turn on the U.S. markets as the result of the election with no commentary on rising rates, falling liquidity, strengthening dollar, declining corproate profits, levered corporations, and valuations that appear excessive certainly seems strange.
If you read what he's said carefully, he hasn't done a 180 on the US markets but on the US economy.
The hedges were not mainly explained in valuation (e.g. CAPE, Tobin's Q) terms. They were explained in terms of protecting the company from another 1929-33 type selloff, which would have destroyed the company in the absence of the hedges.
They now feel that that kind of catastrophe has reduced in probability, because we have a quantum shift from a world in which politicians over-regulate and rely on central bankers to promote growth via leverage, to one in which (maybe) government gets out of the way and productivity drives gdp.
So the hedges have gone. Doesn't mean they think the market goes up. All they've said on that front is that it will become a stockpicker's market again. Value starts to win again.
I have a problem with this idea that productivity is suddenly going to go up and all ills are cured because of the election. This implies something along the following lines: As a business owner I have a project that I can execute that would that would improve productivity of my labor force and I can make me more money. Interest rates are low so I have cheap capital available. But I don't execute the project because I don't like the guy in the White House?
In addition economies are large and complex mechanisms. They don't turn on a dime. You don't go from deflation risk and possibility of a great depression just because you had an election. The risk of a stock market crash definitely doesn't go down after you've had a 100% or so rally in stock prices.
Others here have said things along the lines of just go with it and don't ask any questions or Prem has a master plan that shouldn't be disclosed, trade secrets etc. Please! Managements are accountable to shareholders. Strategies reflect management thinking and should be disclosed. More disclosure is required when those strategies go bad and when they are dramatically changed. Take Berkshire for example. Their strategy is well defined and well communicated. They say what they will do and do what they said and it works. The fact that the strategy is public doesn't prevent them from implementing it. If Berkshire did something radically different like go and drop 50 billion on airlines or buy Twitter you can bet we'd get a way more detailed and reasoned explanation then "Trump won the election - problem solved".
So in 2010/2011 the strategy was buy quality companies at attractive prices (remember the big 3?), hedge the long portfolio and hedge against deflation (a macro call since the hedges were outsized relative to FFH risk). This was based on a view the the economy will stagnate and would be at risk of recession. Ok this is quite reasonable for an insurance company in the 2010 environment. Then they go ahead and ditch the quality companies and buy duds. Ok maybe they've made investment mistakes we're all allowed one or two of those. But one should acknowledge the mistakes, learn and correct.
Then we get back to the hedges. The economy in 2014/2015 was different that the one in 2010. They look at the facts and decide that the hedges are still appropriate. They don't take even a reduction. Now you get the election and it's 180 change? I'm sorry but "Trump won the election - problem solved" is just not good enough.
Actually, an economy can turn around very quickly when the animal spirits are unleashed and the correct policies are enacted. Thomas Sowell describes that in an older interview with Peter Robinson in Uncommon Knowledge that you can download or watch on Youtube. I believe it was Harding, though my memory fails, that basically did it and the economy turned on a dime with a year. And he states it's been done before.
And to your point about a business owner not doing something because you don't like the guy in the White House, that's a bit simplistic. It's not the person but the policies and philosophy and it's ramifications that would gives them reason to pucker up and freeze. It happened to millions of us who were extremely wary of risking capital with such an anti-capitalist/socialist in charge.
So you were "wary of risking capital" due to macro concerns?
That reminds me of Grantham's attack on 'value investors' by highlighting what animal spirits brings to the table.
(I should also mention that Buffett has said that value and growth are; 'two sides of the same investment coin'.)
GMO letter, Page 6, April 2010
Part 1: “Friends and Romans, I come to tease Graham andDodd, not to praise them.” (On the potential disadvantagesof Graham and Dodd-type investing.)
Jeremy Grantham
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The Letters to the Investment Committee series is designed for a very focused market: members of institutional committees who are well informed but non-investment professionals.
page 7:
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...when reasonable calculation is supplementedand supported by animal spirits, so that the thought of ultimate loss which often overtakes pioneers” – and nearly always overtakes Graham-and-Doddites – “is put aside as a healthy man puts aside the expectation of death.” You only undertake dramatic initiatives of the type that create the Microsofts or Apples of the world with a heavy dose of animal spirits. If you Graham-and-Dodded it, you would never do anything spectacularly successful.
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When you buy a stock, because it has surplus assets or agood yield or a great safety margin, you are really making a bet on regression to the mean. We are really counting on the fact that current unpopularity will fade, that the current problems in the industry will dissipate, and that the fortunes of war will move back to normal. Well, as aprovable, statistical fact, industries are more dependably mean-reverting than stocks, for individual stocks can on rare occasion, permanently change their stripes à la Apple. (Or is that à l’Apple?) Sectors, like small caps, are more provably mean-reverting than industries. The aggregate stock market of a country is more provably mean-reverting when mispriced than sectors. And great asset classes are provably more mean-reverting than a single country. Asset classes are the most predictable of all: when a bubble occurs in a major asset class, it is a near certainty that it will go away. "
https://www.scribd.com/document/30407102/GMO-Grantham-Quarterly-Apr10
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This (see below) is my experience with his writing style. Still Came away with some interesting new perspectives.
"This book is a convoluted mess of ideas and made up words with a loose and lousy sentence structure. Taleb made a fortune betting against the market, a few times. He does not have anything great to offer here. Recommend reading Dan Kahneman, Nate Silvers, or Sam Harris for substance. "
https://itunes.apple.com/us/book/antifragile/id522380506?mt=11
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Well, there's also..
"Trump did not say why he believes the planes will cost "more than $4 billion." Boeing says currently has an Air Force Once contract worth $170 million."
and "So far the Air Force has budgeted $2.9 billion through 2021 for two new Air Force Ones, which will replace the aging pair of blue, white and polished aluminum 747-200Bs serving the President. "
$2.9 billion still seems like an extreme cost for 2 airplanes, but not sure where trump is getting $4 billion from (other than that he just makes half the shit he says up).
Gold plated toilets & 18th century French furniture...
I'm not so sure about that. Maybe updating the 1970s Boardroom Style.
Photos Inside Air Force One: Obamas, Bushes, Clinton Share Ride to Mandela Memorial
By ABC NEWS Dec. 11, 2013
http://abcnews.go.com/Politics/inside-air-force-obamas-bushes-clinton-bond-mandela/story?id=21177264
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Not sure if this has been posted anywhere yet.
A Buffett interview
Buffett after Trump win: '100%' optimistic about America
CNNMoney
Oops - I see it warranted it's own thread here:
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And now for something a bit lighter. :-)
A very horny Dinold Trump:
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yes, thanks
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"most conservatives (including Trump) have no understanding of [blah, blah, blah, our hateful lunacy])"
Thank god for that at least.
Hilarious - "Listen 24 Hours a Day."
I can't imagine listening even one minute of one day in my life, let alone a marathon 24 hour session. :-)
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hey all:
I was on the West side of Detroit the other day...
I saw an impromptu Trump rally at a busy intersection. There were at least 100 people, with most of them being women. Some of them were pretty darn good looking too! They were holding signs with "Women for Trump", "Hillary for Prison" and things like that. Cars were honking wildly and it was borderline pandemonium. Very, very high energy level.
What is really interesting is that it was in Livonia. Livonia is a "better" suburb of Detroit. It is a "new money" type of area.
On the other hand...
In the Grosse Pointe area, most of the yard signs are for Hillary. What is interesting is that the Grosse Pointe area is OLD, established money. It is very, very upscale suburb of Detroit. I guess the Grosse Pointers see Hillary as part of the establishment?
"Some of them were pretty darn good looking too!" ...and this observation means what? :-)
Sorry, forgive me but I'm a Canadian and I don't fully understand US politics. I can only guess as to what the presence of a high ratio of pretty darn good looking" women, in Detroit, might mean.
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I'm certainly no expert on politics but I think that globalisation, immigration and growing inequality are serious issues
IMO there's only one issue people really care out of three above: growing inequality. If this was solved - not easy, but if - the globalization and immigration backlash would go to the fringes at most. Same with racism and nationalism. People hate immigrants and foreign products mostly because they feel they are poor and immigrants take their jobs/wages/etc. This happens much less if society is prosperous. (And we could argue that Europe really needs immigrants with its aging and declining population, but try to tell this to Europeans right now...)
Unfortunately, you might be right that situation won't improve and we will continue to have the demagogues running the racist, nationalist and possibly authoritarian tickets. We can only hope that Europe doesn't get too many of such elected. I'm more optimistic about US for now - situation here is IMO is better (even with Trump candidacy), the society more diverse, more multicultural and more accepting (even with the anti-Mexican and anti-Muslim rhetoric).
A very interesting read. I'm just cherry picking below - because I'm Canadian. :-)
Restoring America’s Economic Mobility
September 2016 • Volume 45, Number 9 • Frank Buckley
Frank Buckley
Author, The Way Back: Restoring the Promise of America
"...
Readers of Umberto Eco’s The Name of the Rose will have encountered the word palimpsest, used to describe a manuscript in which one text has been written over another, and in which traces of the original remain. So it is with Canada, a country that beats the U.S. hands down on economic mobility. Canada has the reputation of being more liberal than the U.S., but in reality it is more conservative because its liberal policies are written over a page of deep conservatism.
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Whereas the U.S. comes in at a highly immobile 0.47 on the Pew mobility scale, Canada is at 0.19, very close to Denmark’s 0.15. What is further remarkable about Canada is that the difference is mostly at the top and bottom of the distribution. Between the tenth and 90th deciles there isn’t much difference between the two countries. The difference is in the bottom and top ten percent, where the poorest parents raise the poorest kids and the richest parents raise the richest kids.
For parents in the top U.S. decile, 46 percent of their kids will end up in the top two deciles and only 2 percent in the bottom decile. The members of the top decile comprise a New Class of lawyers, academics, trust-fund babies, and media types—a group that wields undue influence in both political parties and dominates our culture. These are the people who said yes, there is an immigration crisis—but it’s caused by our failure to give illegals a pathway to citizenship!
There’s a top ten percent in Canada, of course, but its children are far more likely to descend into the middle or lower classes. There’s also a bottom ten percent, but its children are far more likely to rise to the top. The country of opportunity, the country we’ve imagined ourselves to be, isn’t dead—it moved to Canada, a country that ranks higher than the U.S. on measures of economic freedom. Yes, Canada has ..."
https://imprimis.hillsdale.edu/restoring-americas-economic-mobility/
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Not sure if this was already posted but it's a good commentary...
Sunday, October 2, 2016
Some comments on the New York Times story about Donald Trump's tax returns
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Okay - I do not know whether Donald Trump had the wherewithal in 1995 to bear $916 million of losses personally. But I doubt it. (If he did his financial career is different from what is popularly accepted.)
So the alternative is the debt was forgiven in some way. But then the story the New York Times is running is wrong - because the $916 million of losses would not have survived the debt forgiveness and hence would have wiped out his NOLs and thus he would not be allowed to shelter his income for the next 18 years.
Unless that is there is an avoidance scheme the New York Times has not worked out. Those schemes go by the name of "debt parking".
Debt parking
Here is how debt parking works. ...
Now if Donald really has all those tax losses its pretty clear that the debt must be parked somewhere.
There is a vehicle out there (say an offshore trust or other undisclosed related party effectively controlled by Donald Trump) - which owns over $900 million in debt and is not bothering to collect it.
I do not have the time or energy to find that vehicle. But it is there. ...
http://brontecapital.blogspot.ca
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I bring this up again because it concerns me that when someone like petec asks a legitimate question they may not be aware of Value^2's history of mudslinging towards FFH. Because of that, some may legitimately assume that Value^2 knows what he is talking about.
Don't worry about me - one sentence was all I needed. I'm a big fan of constructive, fact-based criticism of my positions. That comment was neither.
Though I seldom offer up facts of any kind, I too am "a big fan of constructive, fact-based criticism." I find it much easier and quicker to talk in wistful, airy-fairy terms. :-) However I try to avoid sharp critiques because that usually just points out my own ignorance. So, speaking of which, Value^2 mentioned FFH dilution. That's an interesting angle. Does anyone have the stats on that readily at hand?
As for my financial interest in FFH. I've owned it off and off since the early to mid 1990s and have held some of shares for near two decade long stretches of time, and periodically it's been a significant position. Today I own zero FFH shares.
That said, I am very interested in rational fact-based valuation commentary.
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For members of a site called: "Corner of Berkshire and Fairfax", I would expect to see a lot of Berkshire and Fairfax positions. :-)
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What are you folks debating? Gates and Jobs are even on the list provided.
I'd rate Musk as the most successful as I think he'll go down in history as bringing forth the most inspiring positive changes.
The others are closer to those seen as riding this or that technological, political, financial or other trend. Musk has done this too but through considerable more creative innovation. Bezos won't get much credit for 'just being faster off the mark' on retail innovation, even if it could have taken years before someone else saw the opportunity he saw early.
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As an aside, back as far as the 1970s Buffett's has been making interesting comments on excess pension return projections. Some googling should bring up the discussions.
The interesting things is that these issues been around since 1970s and mentioned multiple times in 1990s, 2000s, now 2010s. And very few companies (none? does GM count?) have gone under.
Not saying to ignore pension issues, but so far and at least for big cos, the issues seem to have been contained or maybe kicked down the road. Apart from situations where the co was going under for other reasons already. FWIW.
It sure would be interesting to see how companies dealt with the earlier 'gaming' of expected returns.
I'd guess firing older workers, attrition, offshoring, mergers, conversion of pensions, etc. I don't see any great downside for management to over promising on this front.
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Just throwing in one here. The first book on Buffett I read. One of the first books written about Buffett. John train had mentioned him too.
Anyway, it's interesting that there are no decent reviews of this book. I guess it predates the Buffett writing bonanza.
1 cent used. A good value buy.
Warren Buffett: The Good Guy of Wall Street Hardcover – September 30, 1992
https://www.amazon.com/Warren-Buffett-Good-Wall-Street/dp/155611334X
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
Posted
I picked up some shares FNMA a number of years ago and basically ignore it. A total gamble based on court cases so I don't spend two seconds following it beyond reading maybe two or three articles over the years. Since's its OTC I can't hold it in my registered accounts.
So, now, as a Canadian that can't buy this in my registered accounts and I can't buy US mutual funds, I'm just wondering if there's away for me to get an indirect/diluted exposure in FNMA and/or FMCC preferreds? Are there any publicly traded US firms (closed ends or something) holding nice large positions - or Canadian mutual funds, etc.