StevieV

I thought they'd keep extending the duration. Not bad at all. Maybe not as cheap as it was, but hard to see how it isn't a nice holding from here.

At almost 2 hours long, I'm not sure I'll get around to watching this. However, if I skipped to the end correctly, it looks to me like they are putting "fair value" at $326/B share. Seems reasonable enough. I generally find the BRK "fair value" estimates too high, as in they give prices at which I'd never buy and at which I don't think you'd get a good return. I think it is more useful to figure out a "buy price" as in buy at this price and you have a good chance of achieving a good risk-adjusted return.

Well, now I know what you thought of the earnings report without asking.

I should clarify - I'm not asking for myself. I'm just curious if there are career paths people have taken that they'd recommend. The most common refrain from people seems to be: "don't become a ________". I'd love to hear opposite examples.

I have apparently run out of FT free articles. If I recall correctly, most of the reporting was that Kew left when the board wouldn't discuss his $300 million pay package proposal. $300 million is obviously a huge number, but probably not out of line for this type of position. The new CG CEO has a $180 million incentive program, so the board isn't opposed to a large incentive pay package. I think there was other reporting about him being pushed out as well. I'm out of Bloomberg articles as well apparently, but the part of the below article that I can see says Kew was abruptly pushed out. I don't know how accurate the reporting is and only the parties closer to this know for sure, but I don't think it is plausible that it was only a pay dispute. If the board wanted to keep Kew, I think they would have negotiated a deal. The targets are a huge factor in these incentive deals along with the headline numbers. The new CEO isn't getting $180 automatically; it requires 110% stock appreciation in 5-years. If Kew wanted a higher headline number, the board could have put a higher target - 150%, 180% in 5-years. In any event, neither here nor there at this point. https://www.bloomberg.com/news/articles/2022-08-17/carlyle-ceo-drama-exposes-fault-lines-between-old-guard-and-new?leadSource=uverify wall

I think CG is probably a good buy here too. They have some potential margin expansion and multiple expansion for the reasons n.r98 mentions. However, I also prefer KKR and APO, though I haven't compared particularly at current prices. The alternative asset managers have become more than just PE shops and I think management and longer term planning is pretty critical for the best outcomes. As these companies grow, they need to find new large areas to expand into in the next 5 year, 10 years and beyond. I believe that Bruce Flatt mentioned that the next 2-3 years of 15%+ growth are locked in and they are starting to work on the years after that. I think BAM and others are looking significantly farther after that. Marc Rowan at APO has a strategy. Many may think it is insurance, and it is, but it is also credit origination. Plus, he's chosen Australia, Japan and Europe geographically. Bruce Flatt (Brookfield) has a strategy and that is pushing hard into infrastructure, energy transition and, I believe, Asia. BX has gone hard into real estate and retail distribution. KKR is always talking about their proliferation of strategies. As I see it, everyone is trying to position themselves to be able to grow double digits not just for the next few years, but in 5 and 10 years, and hopefully beyond. I'm not sure who has the best strategy, but I think each company is pursuing a strategy. CG just really hasn't had the leadership stability for me to have as much confidence in the same. In 2018 they named co-CEOs. In 2020, Youngkin left and Kew was sole CEO. In 2022, Kew left and they have been without a CEO for a number of months. From my vantage point, I thought Kew was very effective. I thought it was a big mistake not to run with Kew and am concerned it was a personalities clash and not performance. That's just speculation of course. I mean, I listened to at least most available interviews and I'm not sure Kew and I would be best friends (that's not a knock on Mr. Lee - his public persona seemed perfectly fine), but I think he was doing the job and had the company headed in the right direction. I got off on a bit of a tangent there, but the point is that leadership is critical and CG hasn't had enough stability in the recent past. Here's hoping the new CEO gets them onto the right track.

What does the board recommend for young folks then?

Can you elaborate? Interested in what businesses, how started, anything else of note?

Carlyle Group (CG) reported this morning and is down pretty hard in the first couple minutes. I haven't looked closely at the earnings yet, but $4.34/share in Distributable Earnings (DE) for 2022. That is probably a bit of a cyclical high. Let's say very, very roughly normalized to say $3.5/share. On a $35 share price that's 10x normalized DE? Certainly a very undemanding valuation. We'll see what the new CEO can do.

CG has filed an 8K about the new CEO's compensation package. 110% price appreciation in 5-years for the top incentive. https://capedge.com/filing/1527166/0001527166-23-000007/CG-8K

Sometime in '23, or it might slip into '24, or a few years after that, or thereabout. Usually best to avoid being specific about these things. Myself, I'll leave the strong macro takes to others.

Why CG? Seems like perhaps the cheapest but most uncertain among the big alts.

Eh, I got a kick out of this.

Is Fairfax cheap today? I think it still is, but it's up 37% in the last 3-months, so not nearly as cheap as it was. I don't think anything too surprising company-specific has happened in the last 3 months - just the market waking up.

I'm not either. Fairfax is going to trade opposite the market? I wouldn't think so. Like last year, Fairfax may be able to break free from trading with the market, but I don't see why it would trade opposite.

I'm definitely for safety, but I think this can be a really high bar for someone starting out. If you wait until you have several years of expenses saved up, that might take someone out of investing in their 20s.

Almost every year there are reasons to be bearish. Usually pretty good reasons. Probably ones that could persuade me. I pretty much have to put that aside and acknowledge that an investor should have a bullish bias. US companies want to make money and I think they will likely make money over time. Are public US companies going to be worth more or less in 5-years, 10-years, 20-years? Well, then, is the S&P 500 index going to be up or down in 5-years, 10-years, 20-years? It's fine to be cautious. It's fine to be bearish. It's just that being bearish is swimming against the tide over longer timeframes IMHO. So, the average bull will do better than the average bear. If you want to be a bear, you have to overcome that. At least that's how I see it.

dealraker - can you expand on this? Is it that you think most of these won't do well from today's level? A few will drag things down? Some of each? MSFT at 25x still too expensive to do great? I think that's a fair thought.

I don't know. I feel like this could have been and probably has been said lots of times over the last couple decades. Look at SPY's top holdings today. Apple, Microsoft, Amazon, Facebook, Google, BRK, TSLA, NVDA, JPM in the top 10. TSLA's in a tough spot valuation-wise, but overall I think those things provide a return.

I read that Powell claims +$10 oil = +0.2% inflation. WTI increased about $25 from '21 to '23, which would equate to about 0.5% contribution. So, not huge on a pretty decent increase in oil prices. Last year WTI was about $95. WTI could average $105 this year and it's impact on inflation would be a negligible contribution + 0.2%. That's assuming Powell's rule of thumb is accurate. In any event, I don't think $100 or a bit $100+ oil would be inconsistent with inflation coming down fast this year.

Multiple expansion will be gravy. That's always a nice setup. If you get just the growth of the company, that's a nice double-digit return. Buying at a multiple where the most likely scenarios should be at least a stable multiple and a good chance of multiple expansion. "Dec 31, 2023 BV = $855/share" - Small typo here. I believe you meant 2024. I only mention it because it tripped me up for a second.

I think you have to call PCP bad rather than just mixed at this point. Buffett called it a mistake at the price paid. There was certainly some bad luck.

Anybody want to argue that BRK is a buy here? I don't think it is. I like BRK. It offers about the steadiest equities return I know of. But, as with most stocks, you need to be careful about purchase price. Call it overly simplistic if you like, but I like to buy at 1.3x book or less. At that price, I think you've got a very good chance of getting at least the growth in book value as your return + some potential multiple expansion. Investors have been given the chance to buy at 1.3 book or less pretty regularly. As of right now, BRK has outperformed the S&P 500 by almost 30% over the last two years and is trading a 1.5x. I'm holding onto the position I have, but don't think this is an attractive time to buy.

KKR out with a new "teach-in" presentation this week. I have to take a closer look as I am not entirely clear what is going into their valuation frameworks ($7+ of DE in 2026 - slide 8; $6 of "earnings power" today - slide 131). For the DE, they suggest DE x multiple. I usually see people value KKR as DE x multiple + book value or some % of book. Off to a quick start - Up 15% YTD. https://irpages2.eqs.com/download/companies/kkrinc/Presentations/KKR Teach-In - January 2023.pdf

If the Fed's goal was to cool things down, then they've already made a lot of progress. We already had 2 quarters of negative GDP. The fed is estimating an anemic 0.5% GDP growth in 2023. Some excesses have been taken out of the stock market, not to mention the crypto market. Housing prices have definitely cooled. I'm as skeptical of the system as anyone else, but the Fed may actually be just trying to calm inflation. Will the overshoot or undershoot? I don't know. I also don't know what tradeoffs they are willing to accept. If combating inflation means some increased unemployment, I think the Fed is ok with that. Where the line is and when they decide they've accomplished their mission, I don't know.