treasurehunt
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Posts posted by treasurehunt
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I was down just over 11% in 2022. My two biggest positions - Berkshire and Fairfax - did well, but not well enough to offset the carnage in the rest of my holdings. US banks, Chinese stocks like Baba and Tencent, and GOOG all dragged my performance down.
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A decent amount of AMZN and some DVN.
Would add to GOOG/GOOGL too, but already have a sizeable allocation.
Fine, I confess I also bought a bit of TSLA. Definitely more speculation than investment.
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5 hours ago, Cod Liver Oil said:
I think Goldman is like Harvard, its too culturally and politically enmeshed to go away but yes it is run for the partners and the public stub will never get a multiple.
This criticism of Goldman is fairly common, but how deserved is it? Goldman has traded at large premiums to book in the past, although not so much since the financial crisis (GS did trade at 1.5 times book in Q3 2021). So it seems bold to say that the public stub will never get a multiple.
I also took a look at the returns of the big US financials since Goldman's IPO in May 1999. I ignored dividends since I was just looking for a rough comparison. The table below has the summary. I hope I accounted for stock splits correctly.
Price 05/05/99 08/12/22 Split-adjusted Split Ratio Total Return GS $69.13 $358.08 $358.08 1 417.98% MS $41.17 $88.69 $177.38 2 330.85% C $363.66 $44.69 $8.94 0.2 -97.54% BAC $35.47 $32.44 $64.88 2 82.92% WFC $21.94 $42.58 $85.16 2 288.15% JPM $53.46 $132.88 $199.32 1.5 272.84% Not a bad result for shareholders, especially if the company is being run for partners. 418% over almost 24 years is just over 7% a year; adding dividends should get the total annual return over 8%. A respectable showing, I think.
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Just a few quick notes on Q3, before Viking gives us his comprehensive report.
Combined ratio in Q3 was only 100.3% despite Hurricane Ian. YOY growth in net earned premiums was still over 20% (about 22%). Combined ratio through the first 3 quarters was 96%. If Fairfax can maintain that, we might see 1 billion in underwriting income next year.
Interest and dividend income is currently at a run rate of 1.2 billion annually. Duration of bond portfolio has grown to 1.6 years from 1.2 years at the end of Q2. With more reinvestment in the next few quarters, interest & dividend income might reach 1.5 billion in 2023.
On the negative side, it seems there are issues with Fairfax increasing its ownership of Digit. So that book value bump might take a while. Also, it seems there wasn't much of a repurchase in Q3; shares outstanding went down by less than 1%.
Still, the future is looking good for Fairfax.
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I'm about 90% long and down 20% or so from the peak, but not feeling any real pain yet. The only exception is my allocation to Chinese stocks (Baba, Baidu, Tencent, BYD), where I am down big on the first three and feeling some pain because my conviction in these picks has declined. My investment portfolio provides the bulk of my income, so if the bear market continues beyond the end of 2023, I'll likely have some tough choices to make.
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26 minutes ago, TwoCitiesCapital said:
See, the issue is that it IS a big deal. The near bankrupting of the UK pension system in the course of 2 days should demonstrate that this is problematic.
You look at this in a vacuum and say "3% is nothing! We used to have 7% rates!" But you also had way less leverage/debt when rates were at 7%. We had incomes that were more reasonable to debt loads. We didn't have 9+% inflation breathing down our neck which meant there was flexibility in lowering rates if needed to. And you didn't have people/businesses/governments making long term decisions that were only reasonable if interest rates remained at 2-3%. 15 years of low rates and regular bailouts have coaxed people to continue to lever up because that's way less painful than delevering.
Federal debt in 2007 - 9 trillion
Federal debt today - 31 trillion
Business debt 2007 - 10 trillion
Business debt 2022 - 19.5 trillion
Household debt 2007 - 14.4 trillion
Household debt 2022- 18.6 trillion
Total 2007 - 33.4 trillion
Total 2022 - 69.1 trillion
Aggregate income/GDP 2007 - 15.7 trillion
Aggregate income/GDP 2022 - 19.9 trillion
Debt has more than doubled while aggregate incomes to service it have only gone up by ~25%. That is in no way sustainable and the delay in that reckoning is the only reason equities ever got to where they were to begin with.
The debt/income ratio didn't matter while the debt was being socialized by the US govt and floated at lower and lower rates as the cost of carry was dropping like a rock. But now rates are rising and are the highest they've been in a decade.
Suddenly people can't afford to roll balances forward at higher rates since incomes didn't keep pace...but the only way to put a dent in the balance is to sell assets in an environment everyone else is selling them too which begets lower prices.
This is what 0% rates for 15 years does and what raising them after that does.
Your point that the increase in rates is a big deal might be correct, but your GDP numbers seem to be off. According to the St Louis Fed, GDP was 14.7 trillion in Q4 2007 and 25.2 trillion as of Q2 2022. So GDP has increased by 70% or so while debt has roughly doubled. Not great, but not as bad as you indicate.
https://fred.stlouisfed.org/series/GDP
Not sure how you came up with a 25% increase in GDP from 2007 to 2022; maybe your numbers are real rather than nominal?
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On 8/27/2022 at 9:25 AM, Spekulatius said:
My framework for foreign currency devaluation relative to the USD is to look at the inflation differential over time which means country X (in this case India inflation rate) - US inflation rate over longer timeframes (couple of years).
I took a look at how the rupee has depreciated versus the dollar over the last 20 years and compared this to the relative inflation rates in the two countries.
From the beginning of 2002 till the end of 2021, the cumulative inflation rate in India was about 241%. The cumulative inflation rate in the US was about 53%. So a 2002 rupee was worth about Rs 3.41 at the end of 2021; a 2002 dollar was worth about $1.53.
One USD was worth Rs 48 or so back in January 2002. It was worth about Rs 76 in December 2021. But based on the relative inflation rates, you would expect one dollar to be worth 48 * 3.41 / 1.53 = 107 rupees at the end of 2021.
There is a significant difference between 76 and 107, so just looking at relative inflation rates misses other important factors. Maybe relative economic performance is another factor to consider?
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3 hours ago, Viking said:
Why is ONE not buying all of Atlas? ONE already accounts for 24% of Seaspan’s business (its largest customer). ONE earned something like $6 billion in the last quarter so they can afford to buy whole company.
Maybe this has already been discussed, but I have been wondering how it makes sense for ONE to buy part of ATCO, let alone the whole company. Isn't most of Seaspan's business with direct competitors of ONE? In most industries, any company would be leery of doing business with a supplier owned by a direct competitor. Is this somehow different in shipping? Also, ATCO's plan was to transform into a general infrastructure platform. ONE seems to be strictly a container shipping company. But it could be that ONE has a grander vision for itself.
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There is a lot to like about Fairfax, and it is now my second largest position after Berkshire, but has anyone thought much about how the company will do if we get a sustained period of high inflation? There are some obvious positives like higher interest and dividend income, but what if they need to add substantially to reserves for existing long-tail liabilities? I am not sure how to quantify this risk, even roughly. Any thoughts?
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TGH, TRTN, AMZN, GOOG, JPM.
Sold some WPC to raise cash to buy these.
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7 minutes ago, Parsad said:
I would agree with you, but it is quite the coincidence that Fed assets matches the overvaluation/distortion exactly. If asset values rose with an increase in Fed assets, an unwinding will do what? The question is can they control the unwinding and interest rates in such a way as to make it painless or relatively painless. I find that hard to believe. Cheers!
Even the TMC/(GDP+Fed Assets) at 152.1% is at an all time high, so how do you conclude that "Fed assets matches the overvaluation/distortion exactly"? Doesn't the chart imply extreme overvaluation even after taking Fed assets into account?
Wabuffo's explanation is very sensible.
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Just now, treasurehunt said:
Interesting. I called Fidelity yesterday as well to tender the shares in my IRA and the process only took 15 minutes or so. Maybe your call paved the way for a smoother experience for me. Thanks, MMM20!
Forgot to mention - the Fidelity rep told me that they would not withhold any taxes on the deemed dividend.
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20 hours ago, MMM20 said:
I had to call Fidelity to tender my shares. It took almost an hour - they had to walk through the terms in painstaking detail and get multiple approvals. I'm guessing this will be enough of a barrier for many people that my chances of a full fill at $500 are higher than I thought an hour ago.
Interesting. I called Fidelity yesterday as well to tender the shares in my IRA and the process only took 15 minutes or so. Maybe your call paved the way for a smoother experience for me. Thanks, MMM20!
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Bought a bunch of FRFHF and tendered the shares in my Fidelity IRA. The Fidelity rep confirmed that they will not withhold any taxes on the deemed dividend.
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13 hours ago, DooDiligence said:
Selling AAPL in 2018 for a mere triple.
DooDiligence, don't feel bad, I sold AAPL in 2017 for a mere double. I was pretty happy at the time, having doubled my money in AAPL in less than three years...
My worst act of commission was buying a bunch of Level 3 stock some twenty years ago. The investment case was always dubious, but I was impressed by the CEO, James Crowe. Turned out that the "silicon economics" he touted so much wasn't very different from regular economics.
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16 hours ago, TwoCitiesCapital said:
Probably won't kill housing demand, housing prices on the other hand? A 30-year mortgage with less than 10% down is like 90% interest on the first few years of payments. A jump in rate from 3% to 6% nearly doubles that monthly payment assuming prices don't move.
Housing prices will probably be affected if the 30 year fixed rate goes from 3% to 6%, but the monthly payment won't come anywhere close to doubling. The monthly P&I actually goes up by just over 42%, as you can verify using a mortgage amortization calculator. When you add in insurance and property tax, the percentage increase in the total annual expense of owning the house is even less - perhaps around 35%. If you look at interest alone, that would be close to double in the early years, but I am not sure why you would look at the interest payment in isolation.
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First, $2bn of TRS on their own stock at an average price of $372 vs $1.4bn at $343 in the 4q. By my maths that means they added $600m at $460 per share. Is that how it works?
I get $600m at about $440 per share. (2000*372 - 1400*343)/600 = 440.
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Has anyone done the math of what Buffett's average cost per share for the buybacks last year?
218.62 on the B-shares
80,998 A share equivalents for $24.7 Billion. 5.2% share count reduction for calendar year 2020.
December average basis was 225.73 and he was willing to pay higher average prices, continuing through the first month and a half of 2021.
I get $203.30 when I do the math ($24.7 billion divided by 1,500 x 80,998)
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Bumped up my FRFHF position by 15%. I think there is a decent chance that Fairfax will have a few very good years starting in 2021.
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Wabuffo,
Based on your posts here and DJCO's 10-Q, I calculate that as of today DJCO has total investments of about $280 million compared to a market cap of roughly $366 million. Did I get this right? I was wondering if DJCO is a cheap way to invest in that particular basket of stocks, but it doesn't look that way. I have no opinion on the value of DJCO's business, so the market cap would have to be close to total investments for me to consider it.
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" total fatalities from COVID-19" is an undefined term where so many fatalities have co-morbidities and are associated with elderly
Sure, but part of the point in looking at all causes mortality is to sidestep such semantic questions. If you see a lot more people dying in March and April of this year compared to the same period in the last five years, you can reasonably attribute most of the excess deaths to COVID-19 (assuming you don't find some other global phenomenon that could also be a cause). I mean this in the very basic sense that these deaths would not have occurred if not for COVID-19. A few of the excess deaths -- such as a higher number of suicides? -- might be due to the reaction to COVID-19 rather than to the disease itself; and some deaths could be due to folks with other conditions receiving worse care, as Dalal pointed out. Still, I find the excess all causes mortality data to be a decent way of estimating the impact of COVID-19.
disagree insofar as mistakes in public policy are being based upon this mistaken view of covid impact. using same analysis, we should shut down country because of prostate cancer, since most every elderly male dies with prostate cancer.
I am missing something about your point; I can't quite make sense of the prostate cancer analogy.
Just to be clear, all I am saying is that if we expect X people to die based on past experience and in fact X+Y people die, and the only significant difference between the past and the present is COVID, then we can attribute Y deaths to COVID as a first approximation. How does this imply that we can attribute a ton of deaths to prostate cancer because a lot of elderly males have prostate cancer?
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" total fatalities from COVID-19" is an undefined term where so many fatalities have co-morbidities and are associated with elderly
Sure, but part of the point in looking at all causes mortality is to sidestep such semantic questions. If you see a lot more people dying in March and April of this year compared to the same period in the last five years, you can reasonably attribute most of the excess deaths to COVID-19 (assuming you don't find some other global phenomenon that could also be a cause). I mean this in the very basic sense that these deaths would not have occurred if not for COVID-19. A few of the excess deaths -- such as a higher number of suicides? -- might be due to the reaction to COVID-19 rather than to the disease itself; and some deaths could be due to folks with other conditions receiving worse care, as Dalal pointed out. Still, I find the excess all causes mortality data to be a decent way of estimating the impact of COVID-19.
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Interesting article on excess deaths in March and April in several countries that were hit hard by COVID-19: https://www.ft.com/content/6bd88b7d-3386-4543-b2e9-0d5c6fac846c This article is not behind a paywall.
The conclusion is that total fatalities from COVID-19 are likely much higher than reported deaths, even in developed countries that have good reporting systems.
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The sniffing initiative seems to have been a good idea like a month ago (but also then very non-scientific and arbitrary). By the time this gets any traction, we will have widespread serological tests anyway.
We may have widespread serological tests in the developed countries soon, but I doubt they will be available worldwide. So this initiative might still be very useful for less developed countries.
Energy Sector
in General Discussion
Posted
I agree with you that the energy transition will be a slow affair and that it makes sense to be bullish on oil. I am not so sure about metal prices going higher than people can imagine; maybe lithium, but I have a hard time seeing any other metal being in extreme undersupply. I think Mark Mills overstates the case for minerals.
Here's the Economist on Cobalt (might be behind paywall): https://www.economist.com/finance-and-economics/2023/02/16/cobalt-a-crucial-battery-material-is-suddenly-superabundant
Even the case for extreme shortages in lithium depends on sodium ion batteries taking a long time to ramp up, I feel. CATL is planning to start mass production of sodium ion this year, so this is not a slam dunk.
https://www.nextbigfuture.com/2022/10/catl-will-mass-produce-sodium-ion-batteries-in-2023.html