KinAlberta
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Posts posted by KinAlberta
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IMHO, pension assumptions are terrible. In the late 90s, at the tail end of a huge stock market bubble, return assumptions were generally increased. Hey, if the stock market has been returning 20%, why would you assume a 8% return, let's mark that baby up. Much better than contributing more.
Anyway, they are totally backwards looking and take no account of the present market values of stocks or bonds. That is the case even when you have a lot of supposedly learned professionals running things. I think mostly everyone on this board and elsewhere in the value investors universe thinks the market return is going to be somewhat challenged over the next 10 years or so. Equity markets are slightly to significantly overvalued, depending upon your metrics and analysis. The generational bond bull market simply has nowhere to go. As you say, 20/30/50 is going to have a heck of a time returning 7.5%. If 20% is cash, you need almost 10% on the 50/30 stocks/bonds. I don't think you'll get 10% in the S&P at today's prices and can't see how you'll possibly get that in the types of bonds this pension is likely to own.
FWIW, without looking it up, I think 7.5% is probably one of the more conservative projections out there. I think 8% is probably more common.
Not sure how that effects the company.
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.
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Maybe I don't get it since I am not American, but why does the place of birth really matter for a president? I get it that the constitution says that the president should have been born in the US (or apparently at least a US military base as John McCain was born in Panama) but is that really an important qualification for a president particularly given that it is, by definition, something that is out of the hands of the candidate and can therefore never reflect on his/her suitability? It seems really weird if a fantastic candidate is rejected purely because he/she was born when the parents were on an overseas trip or such.
I'm a "natural born Citizen" of the US and I don't get it either. The constitution says "No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President"
Why is someone who is born outside of the US definitely not a "natural born Citizen" of the US? As long as one of your parents is a US Citizen doesn't that make you a "natural born Citizen" regardless of your place of birth? Obama's mother was born in Kansas, that should be the end of the whole issue.
Well, it's not certain but part of my father's family tree may go back 300+ years in the US (so that should count for something) but my dad was born in Canada to an American parent, and so was I born in Canada, but apparently I could still apply and get US citizenship due to grandfathering of some old legislation.
So folks, when I run I promise to be nothing like your current two candidates. :-)
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Gary Gordon here seems like a pretty level headed guy. His latest article was interesting in drawing parallels with the pre-financial crisis situation with banks. Shows what people are thinking.
Note: It took a couple years but I'd say he's now firmly in the Hussman camp in terms of prospective returns. The banking sector's exposure to who knows, questions as to their "too big to fail" / bailout certainty and the fact that people own these ETNs should be concerning to those investors in my mind.
Probability: Should It Play A Part In Your Asset Allocation?
Sep. 27, 2016
"Still, would it be foolish to ignore the potentially devastating impact that an overseas financial crisis might have? Factor in the fact that Germany's largest bank is down 70% from a high and recently logged an all-time low. Worse yet, the German government exclaims that it has no intention of "bailing out" the troubled institution. If Deutsche Bank (NYSE:DB) is indeed headed for bankruptcy, what influential financial abroad would be next? Could a hardline approach against "too-big-too-fails" backfire the way that it did when Lehman Brothers folded in 2008?
Speaking of probabilities, I imagine that Angela Merkel and the Germany government will bail out Deutsche Bank if necessary, regardless of how unpopular the move might be from a political standpoint. The Lehman lesson exerts a great deal of influence, as does the U.S. Federal Reserve and European Central Bank. (Ironically enough, the recession prognosticating stock strategists at Deutsche - the analysts who I mentioned above - would get to keep their jobs.)"
http://seekingalpha.com/article/4008781-probability-play-part-asset-allocation
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Excluding the odd war, do Presidents actually have much power to change market economics, or is it only the perception of change that moves the markets.
That said, I used to be a cynic and think the Fed had only temporary, cursory influence outside of the rare short-term extreme initiatives like Volker took but otherwise pretty much sought to take credit (no pun intended) for 'nudging' changes in the face of natural market movements. I think I've been proven wrong over the last few years of ZIRP. :-(
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Win or lose Trump still has the better life than Buffett.
He comes home to a supermodel wife, lives in a better city with a better view from his penthouse, doesn't need to justify to shareholders the use of a private plane or helicopter, homes & golf courses around the world, children are high-achievers, goes down in history as an elected nominee for a major political party, etc...
Whether you like it or not he is a success story.
Potential Trump University student.
"Better city with a better view"?
You're showing your personal bias. :-)
Plus Warren's been there, done that hasn't he? Plus, Warren's long had the option to live where ever he wanted. Trump though has likely had to stay pretty close to where his lenders, claimants and courthouses have been. :-)
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I'm so glad I'm a Canadian and don't have to vote in this election. As for trusting Trump in running Berkshire. I would be selling if that came to be as I don't get the impression that he sees anyone anywhere as a partner.
New Book Reveals Trump Is Actually Sleazier and Slimier Than We Ever Thought
“There is no moral core inside Donald Trump."
By Steven Rosenfeld / AlterNet August 19, 2016
David Cay Johnston has been one of the nation’s premier investigative reporters for decades, specializing in the ways government works for the wealthy at the expense of everyday Americans. He first met and covered Donald Trump in the 1980s. In his latest book, The Making of Donald Trump, he profiles the many ways the Republican presidential nominee has gotten wealthy by bilking others, colluding with criminals, evading prosecution, and romancing the press.
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'Terrible, terrible problems' if Trump runs U.S. like his business: David Cay Johnston
As Donald Trump campaigns for the U.S. presidency, everything from his taxes, to his net worth, to the deals he made, is a blur of contradictory numbers. David Cay Johnston shares his insights after following the numbers to understand the making of Trump.
http://www.cbc.ca/radio/thecurrent/the-current-for-september-29-2016-1.3783556
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Some Deutsche Bank Clients Reduce Collateral on Trades
William Canny
September 29, 2016
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Does anyone have any experience with ETNs?
During the global financial crisis I didn't buy one I liked because it was a note. The bank offering it was Deutsche Bank. (Which is now in the news with questions about its survival.)
I wasn't sure if my fear of a lack of guarantees was rational or not, but I've stuck to buying ETFs and avoiding ETNs.
http://www.investopedia.com/financial-edge/0213/etf-or-etn-whats-the-difference.aspx
https://www.elementsetn.com/ElementsETNUI/Morningstar-Wide-Moat-ETN.aspx
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I see that this thread hasn't been updated in a while. (Always admired Whitman and used to read everything he wrote. Haven’t seen much in years though.)
Also a truly classic interview had him, in late 2008 or early 2009 I believe, talking about the irrationality of the market panic, credit and bank share pricing and critically, pricing that wasn't factoring in all the flexibility embedded in FASB’s SFAS 157 / 159 derivatives marking rules, specifically the observable / unobservable events criteria. Recall that at the same time others were talking about such creative FMV adjustments like 'mark to maturity'. :-)
Also note that John Hussman pins the 2009 market bottom as basically the day or so surrounding the change to the FASB rule.
Anyway, here's a missing reference:
Marty Whitman’s 2Q15 Letter: GAAP Vs IFRS
By VW Staff on June 10, 2015
http://www.valuewalk.com/2015/06/marty-whitmans-2q15-letter-gaap-vs-ifrs/
one more:
http://www.valuewalk.com/2014/09/marty-whitman-third-quarter-letter-to-shareholders/
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I was going to use my dry powder in this downturn, but Hillary gave me a stand down order.
Which downturn? Did I miss anything?
I think he meant up-coming downturn, but he/it won't come because of Hillary. So there is a downturn because it's not coming up.
You know what I mean, eh? 8)
All I know is that in advance preparation for a downturn, I won't buy much into companies with a lot of dry powder expecting that one, the cash will protect their share prices, and two, they will actually deploy that dry powder. With only a couple exceptions, I got burned on both fronts in the 2008/09 market dip. My own dry powder (80% + cash by late '08) is what allowed me to buy more of the dry powder companies, among others. I was very disappointed in how little opportunistic behavior took place among the cash rich companies I held. It was like people that buy gold for crisis protection. The crisis hits and they are too afraid to sell it, thinking that the crisis will only get worse. So they forego revenue on the way up, then ride their commodity right back down. Same seems to hold for those keeping cash in the bank.
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I think it is very simple. Both the consumers and corporations are binging on debt. And it probably won't end well. Also Income stocks are overvalued. We pretty much have to wait.
I have to agree, yet, this is so widely known and expected, I just can't see any small change doing anything to market valuations. I think noticeable sharp corrections tend to occur when something broadly unexpected happens. After the fact the predictors of which are dug out of the woodwork and promoted in the media. Beforehand though, their warnings get ignored.
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Google news is pretty good too. You can limit time frame to last month.
Finviz seems better though.
Google news? Do you mean the one in Google finance? If so, I find that that is now cluttered with crazy garbage cutting its utility to me in half.
I used Bloomberg Professional for years. Now that had great comprehensive business news. I wish the had a low cost public version.
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They said the exact same about the National Enquirer for 3 months when they wrote stories about primary poll-leading John Edwards's extra-marital affair & love child. Who ended up being right there?
It's best to read it all and make your own decisions.
A broken clock is right twice a day. If they keep peddling these conspiracy theories , I'm sure some will ultimately stick. I hope you apply these principles in investing too. Just because you picked
a winning stock doesn't make you a great investor . In the long run your process will determine the results.
I always find it amusing to be lectured my someone with a fraction of my life experience. As far as my financial welfare please don't be concerned, I'm doing just fine.
Buffett reportedly reads extensively. He has a process and ignores a whole lot (macro forecasts, likely almost all all forecasts for that matter) but he's reported to read a huge, huge amount. I figure the trick may be to read, read, read, so you have a whole lot of exposure to what's going on in the world and maybe even be able to identify a trend early, but also so little surprises you. If you want to avoid mistakes and prevent being blindsided and ambushed by reality, you take it all in, but reserve judgement on everything you read. Scuttlebutt is just that, scuttlebutt, until confirmed.
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When it comes to insider trading reporting, all I think I know is that CFO actions may be indicative of something but not much else of value can be gleaned from the numbers.
However, what are your thoughts and experiences (and hopefully references to reasonably rigorous studies)?
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Skimmed something recently on seeking apha about bitcoin. Mentioned FMRO and possibly Overstock, one or the other seeking to buy free optionality on bitcoins future. Since it's so hard to predict the tech winners, finding sources of free stakes in various games might be a way to build a portion a portfolio to capture such dramatic change. Wasn't that how LUK lucked into investing in iron ore in Australia?
I'm back. Sorry, it's all rather off topic but here it is:
http://seekingalpha.com/article/4000580-invest-bitcoin-related-companies
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Are markets just so much more efficient now that almost every value manager (or most growth managers) can't beat the index? Or are we in a giant bubble due to QE? Something else? I know value managers under performed significantly back then for several years. A low cost S&P 500 index fund has been a monster the past few years. It's in the top 6% of it's peers for 3 years and top 10% for the past 5 years - even top 21% for 10 years.
Long ago, Buffett had a few things to say about performance vs the indexes:
Our Performance in 1961
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I have continuously used the Dow-Jones Industrial Average as our measure of par. It is my feeling that three years is a very minimal test of performance, and the best test consists of a period at least that long where the terminal level of the Dow is reasonably close to the initial level.
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You may feel I have established an unduly short yardstick in that it perhaps appears quite simple to do better than an unmanaged index of 30 leading common stocks. Actually, this index has generally proven to be a reasonably tough competitor.
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I do not present the above tabulations and information with the idea of indicting investment companies. My own record of investing such huge sums of money, with restrictions on the degree of activity I might take in companies where we had investments, would be no better, if as good. I present this data to indicate the Dow as an investment competitor is no pushover, and the great bulk of investment funds in the country are going to have difficulty in bettering, or perhaps even matching, its performance.
Our portfolio is very different from that of the Dow. Our method of operation is substantially different from that of mutual funds.
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Our job is to pile up yearly advantages over the performance of the Dow without worrying too much about whether the absolute results in a given year are a plus or a minus. I would consider a year in which we were down 15% and the Dow declined 25% to be much superior to a year when both the partnership and the Dow advanced 20%. I have stressed this point in talking with partners and have watched them nod their heads with varying degrees of enthusiasm. It is most important to me that you fully understand my reasoning in this regard and agree with me not only in your cerebral regions, but also down in the pit of your stomach.
For the reasons outlined in my method of operation, our best years relative to the Dow are likely to be in declining or static markets. Therefore, the advantage we seek will probably come in sharply varying amounts. There are bound to be years when we are surpassed by the Dow, but if over a long period we can average ten percentage points per year better than it, I will feel the results have been satisfactory.
Specifically, if the market should be down 35% or 40% in a year (and I feel this has a high probability of occurring one year in the next ten--no one knows which one), we should be down only 15% or 20%. If it is more or less unchanged during the year, we would hope to be up about ten percentage points. If it is up 20% or more, we would struggle to be up as much. The consequence of performance such as this over a period of years would mean that if the Dow produces a 5% to 7% per year overall gain compounded, I would hope our results might be 15% to 17% per year.
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Ft. McMurray's wildfire could be tied to El Nino. Not sure what La Nina could do.
Total worldwide economic losses for first half of 2016 at US$70 billion, up US$11 billion from 2015 half-year totals: Munich Re
July 12, 2016 by Canadian Underwriter
“The main losses drivers were powerful earthquakes in Japan and Ecuador, storms in Europe and the U.S., and forest fires in Canada,” Munich Re said in a press release.
Toronto-based Catastrophe Indices and Quantification Inc. (CatIQ) has estimated insured losses from the Fort McMurray wildfire at $3.58 billion, while Property Claim Services estimated last month the fire would cost the Canadian insurance industry about $4.6 billion.
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It might be more interesting and maybe even more insightful to look at the auto market in terms of high-end vehicle prices, numbers or whatever, and not used prices of Camry's etc. I think its the high-end that attracts the more careless, levered purchases from among those that come into new money (fracing/fracking workers, etc.), higher cash flows, etc. in bubble sectors.
I may have mentioned this somewhere else on this site, but I live in Canada and it's population is roughly 1/10th that of the USA. So a general rule of thumb I always used was simply to multiply by 10 or divide by 10 to get rough equivalents in either country. It worked for a lot of things. Consumers in both countries are generally the same and want the same things.
However, I once figured out that the number of Hummers being sold in the States wasn't 10 times greater, it was 100 times greater than in Canada. Incredible! Shortly after I first heard the concept that Americans 'were using there homes as ATMs'. So rightly or wrongly I connected the dots and added one more piece of anecdotal evidence to the idea that a market collapse could occur.
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Reminds me of the Buffett talk on Long Term Capital Management. (Hilarious that they called it "Long term")
If Warren Buffett ever writes a book it will be called: "Why smart people do dumb things" Buffett 'couldn't imaging an equation where it made sense'.
So start watching at the 15:55 minute mark:
Warren Buffett speaks with Florida University
or start watching at about 3 minute mark
Warren Buffet y LTCM Inversion 2/9
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With cars, people only need one or two vehicles. They don't buy 8 or 10 or 20 on spec as they would in a housing bubble. Moreover, after the 2008 crisis banks have recapitalized and are apparently much tighter so I can't see a domino effect reoccurring due to auto loans. I wouldn't see this as a canary in a coal mine.
What I've never seen discussed in terms of the 2008 housing crisis (2007-2011?) was what happened to the overhang (if there was one) in investor owned housing. All the focus was on the poor people that got sucked in by teaser rates and then couldn't handle the resets yet one half-successful but over-levered investor could easily equal 10 poor credit buyers. Moreover, cities had massive overhangs of unfinished condo units etc.* so I wouldn't have been surprised if there were thousands upon thousands of people that went under by leveraging up to buy multiple rental units that couldn't be unloaded to meet their cash flow needs.
* I believe at the time I read where Miami had 13,000 or was it 30,000 unfinished condos when the collapse occurred. anyway, it was some amazing number of units under construction in anticipation of the bubble getting even bigger.
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He's saying that people are buying other (worse) companies for worse valuations at the time they could buy easily analyzed (by Buffett himself) BRK at 1.2-1.4 book.
At least that's my interpretation. :)
I somewhat agree that if you buy non-BRK, it may be worthwhile to compare it with BRK and decide if the non-BRK is cheaper and/or better company than BRK. Otherwise why buy the non-BRK?
That's pretty much it, though I'm not suggesting that they necessarily buy BRK either. They may not only be buying other companies for worse valuations but they are performing worse valuations in determining the value of others, but then relying on Buffett's price for bRK. I'm just thinking there is some kind of disconnect in reasoning going on in the market, simply because Buffett laid out his price for BRK, and only BRK. They are accepting his reasoning for BRK valuation but not using it elsewhere. (Is it that they think a 1. whatever P/BV pricing/margin of safety methodology could only apply to BRK and not say a GE.
A Buffett quote, 2000 AR:
“Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to the amount and timing of cash flows into and from the business.”
I'd say, unless the cash flows are quite stable and predictable.
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So, this may have been discussed elsewhere but did Buffett put as much of a ceiling on the price as a floor? i.e. Are you using lower standards on other lessor quality companies while waiting for Berkshire to trade close to 1.2?
In other words, what other companies (with comparable and predictable earnings power, product durability, "fortress like balance sheet", etc.) trades close to a P/BV ratio that Buffett would see as a decent buying price? And if if does, are you buying?
Here's an article from 2011 somewhat in line with my thinking on this (though I'd wonder if the quality companies in the S&P outweigh the failing companies to the extent that 1.1 or especially 1.2 would be low enough)
KinAlberta,
We discussed on the 6th of August in this topic.
Thanks. Also, I couldn't find the right words or example but I'll take a shot.
It's not just the idea of a ceiling on BRK specifically, but that a very well thought out "rule of thumb" is being used for a great company that doesn't seem to come close to being applied to many other companies.
I.e. If there were two identical companies, twin sisters, out there and solely because of what Buffett said about his, it was trading slightly over his P/BV pronouncement, but it seems that in today's market the twin sister would happily be trading at say 50-100% more expensive ratio.
It all seems to throw sand in the face of the efficient market hypothesis. People that would buy BRK instead are doing a poorer analysis on other companies and choosing to pay relatively more for them, all because of the asymmetric information out their which is solely Buffett's idea of a great value. :-)
Sorry, for the so poorly expressed thoughts.
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So, this may have been discussed elsewhere but did Buffett put as much of a ceiling on the price as a floor? i.e. Are you using lower standards on other lessor quality companies while waiting for Berkshire to trade close to 1.2?
In other words, what other companies (with comparable and predictable earnings power, product durability, "fortress like balance sheet", etc.) trades close to a P/BV ratio that Buffett would see as a decent buying price? And if if does, are you buying?
Here's an article from 2011 somewhat in line with my thinking on this (though I'd wonder if the quality companies in the S&P outweigh the failing companies to the extent that 1.1 or especially 1.2 would be low enough)
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I think I'm finally giving up on Yahoo Finance( ya, ya, most of you probably dumped Yahoo a long time ago, LOL) - the new format stinks - laced with ads and useless articles and video clips.
Thinking of moving to Google finance. What do you use as a homepage where you can start the day with a look at the markets and news?
You're right, it has really gone to shit lately. Maybe VZ will restore some glory. You can get a quick update on moves and similar scan of relevant breaking news using seekingalpha's portfolio feature.
They're all going downhill. BBC, Bloomberg, etc. have all added big useless token photos. It could be an article on the decline of text and they'd put a big picture of a "A" or something useless up.
Would you trust Donald Trump to run Berkshire Hathaway if you were an investor?
in General Discussion
Posted
Seems like the insider trading scandal didn't stop there. There's the little thing about hiring someone from the DNC after they were outed as an inside 'traitor'. :-)