Jurgis

This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::) TL;DR: If you assume a 25x multiple at exit and unchanged long-term earnings potential then nothing matters. I should just remove my post and leave your TL;DR. 8)

This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::)

I'd be interested to hear what long term compounders are trading cheaper than last March and at substantial discount to IV. 8) I guess EXPE is but it was cheaper in November and without virus overhang for near term business. Me too. Even summer 2019 was cheaper and Dec 2018 was much cheaper. In Addition, we now have a Real problem with the economy that we didn’t have last year. A selloff always offers some bargain, thats true, but it was way more true in Dec 2018. I agree Dec 2018 it was much cheaper. It is mostly due to my portfolio allocation. I had sold a bunch of stuff in Nov/Dec of 2019 as the expected return on many of my investments went down to mid single digits and I am sitting on a lot of cash going into this week. I was looking at O&G and other dreadful things to invest and still did not find much. So last week is a life saver. Nothing new. A bunch of banks that I sold became at least reasonable enough to start adding back. Also bought Booking. Smaller positions in Rolls Royce and Carnival. Vinod Thanks. I bought some JPM and BKNG too.

I've been wresting with the idea for a while. But I'm not so sure travel related small (and even larger) businesses will be affected. My thinking goes that if people are cancelling their European and other overseas vacations because there are cases at their destinations or because they're afraid to share a tube with 400 other people they may instead stay stateside and go on a vacation here. Instead of not going on vacation at all, they may get in their car, do a day of driving and spend time at a destination that never saw a Chinese person. It's a lot safer that way. If it actually turns out this way, there may be a bumper year for domestic travel related businesses. Anecdotally, I have friend who is going on a cruise ::). Also have a friend who's going to GDC 2020. OTOH, there was a scheduled international company-wide event that got cancelled - no travel. I was going to China in May. Haven't cancelled yet. Airlines have cancelled flights to end-of-March only, so I'm waiting for extension of the cancellation to get full money back. Also to see what's China travel advisory level is by the end of March ( https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/china-travel-advisory.html ). Likely won't travel. Have couple potential international trips in July... we'll see how things go by then. None of these trips will be replaced by domestic travel. :)

I'd be interested to hear what long term compounders are trading cheaper than last March and at substantial discount to IV. 8) I guess EXPE is but it was cheaper in November and without virus overhang for near term business.

Go Bill & Melinda! 8)

Yes.

Everyone expecting BRK to be buying back tons of stock this week: prepare to be disappointed. Buffett does not like to buy back. And he definitely does not like to buy back when market/stocks drop and he might get bargains in stocks he wanted to buy. My prediction: minimal buybacks; maybe some investments in other stocks/maybe not.

This is what a competent response looks like: https://www.cnbc.com/2020/02/28/trump-chief-of-staff-mulvaney-suggests-people-ignore-coronavirus-news-to-calm-markets.html Coronavirus is not the reason to panic. More deadly is brain rot virus that has taken over the world with numerous cases reported in Washington, D.C., Moscow, and other capitals. What's worst, it's spreading over Internet! The only way to be safe is to unplug your ......................................................................................

Buffett directly said that he won't acquire an airline. But hey...

If we knew, we'd be rich. © Warren Buffett.

OK, I'm gonna go full kook on this and dial it to 11: Coronovirus is definitely CIA weapon to destroy China, Iran, and Italy (for not leaving EU!). I also know what happens next, but probably I should leave that for the black swamp aka Politics section.

Halfway down. I can access/use one account and cannot access another one. Yeah, they should fix their shit together.

There is this thread and some reports/links in it: https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/pfic-classification-for-us-investors/msg260920/#msg260920 It's possibly not definitive though. FWIW.

Realizing the cap gains sucks though and is a huge hit to return. As I've said in other threads, Buffett's saying to sell never makes a lot of sense in taxable accounts. Paying cap gains taxes makes it just so much harder to outperform an index.

Don't look for earnings growth in wholly owned business segment... Nothing said about Kraft Heinz in letter. In AR, there's this:

Sure it's very likely PFIC. Only matters if you hold it in taxable accounts. Does not matter if you hold it in IRA. Thanks! Did not know that. I tried to read up on this but not many links other than an EY document. I would research this more. Do you think it is a pretty straightforward one that it is not taxable in a 401k or a Rollover IRA? Vinod I believe that PFICs are not an issue in IRAs and likely 401(k)s. But I'm not a tax professional. I am just random guy on the Internet. Please verify this with real tax professional.

For a change something investing related: a16z thinks that AI startups are worse than SaaS startups: https://a16z.com/2020/02/16/the-new-business-of-ai-and-how-its-different-from-traditional-software/ There's also a TechCrunch article that's a follow-up: "Do AI startups have worse economics than SaaS shops?" However, it's behind their premium paywall. If anyone can get a full article, shoot me a message. I'm interested. (OT: I searched for the article using the title. OMFG, there's like huge industry of sites that just copy shit from TC and post it on their sites. I did not realize this was a thing.)

Sure it's very likely PFIC. Only matters if you hold it in taxable accounts. Does not matter if you hold it in IRA.

Isn't DCF - or just valuing on CF basis - for insurance companies inherently wrong approach?

Same answer as on the other thread minus ISTB: MINT, FLOT, BSV.

MINT, FLOT, BSV, ISTB

"Constant effort is life's greatest shortcut." https://www.cornerofberkshireandfairfax.ca/forum/books/peak-secrets-from-the-new-science-of-expertise-anders-ericsson-et-al/ ... here goes the "minimal input" part... :-\ 8)

What do people think about GPOR 2023-2026 bonds? Trading at ~22% YTM ($65 on 2023s). http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639579&symbol=GPOR4303427 Cashflows for GPOR don't seem to be horrible although they are spending most of CF to acquire additional properties. A big question is whether they are forced to acquire or are doing it opportunistically. Is the company really as distressed as bonds seem to imply? Edit: it's pretty clear that the panic is due to natgas pricing falling to floor and expectations that it will be given away for free in foreseeable future. GPOR production is almost purely natgas, so there's that. Any other ideas for energy sector bonds?