nafregnum
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Posts posted by nafregnum
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Interesting detail I heard this morning about inventory levels and discounting that's upcoming. Animal Spirits podcast today mentioned that some liquidator companies are picking up container deliveries directly instead of having those products flow through their intended retailers first -- that kind of seems like a bullish indicator for stores like TJ Maxx and Ross, but it also seems like there'll be some better than usual deals on appliances and such in another month or two, and Black Friday -- and that may push inflation down a little more as well.
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I think learning about Stoicism is a huge benefit to investing mindset.
- We can't stop strong emotion from happening during an emergency moment, but we CAN recognize when everyone is losing their head and ask ourselves whether panicking is helping the situation. I think Marcus Aurelius was caught in a squall at sea and everyone was freaking out and he was the guy who got calm first and helped everyone else to do what was necessary to keep the boat from sinking.
- Buffett's Inner Scorecard analogy seems like a pretty stoic concept.
- The practice of negative visualization (imagining what could go wrong) seems similar to Charlie's "Invert, always invert!"
- Focusing on those things inside our own control and not worrying about things outside of control -- that sounds so much like the advice to stay in the circle of competence.
I wouldn't be too surprised to find Stoic influences in the life of Ben Graham or his mentors. Ok, I just googled "Ben Graham stoicism" and found this nice essay:
https://macroops.substack.com/p/a-value-investors-guide-to-stoicism
(quote is from Graham's "The Intelligent Investor")
Quote“The investor’s chief problem – and even his worst enemy – is likely to be himself. (“The fault, dear investor, is not in our stars – and not in our stocks – but in ourselves” …) [Hence] by arguments, examples and exhortation … we hope to aid our readers to establish the proper mental and emotional attitudes toward their investment decisions. We have seen much more money made and kept by “ordinary people” who were temperamentally well suited for the investment process than by those who lacked this quality, even though they lacked an extensive knowledge of finance, accounting, and stock-market lore”
If you've already read Meditations, my favorite book on Stoicism after that one is "How To Think Like A Roman Emperor" by Donald Robertson. The Audible version is great for me because I love listening to UK accents and he sounds Scottish. It's got a lot of biographical details about Marcus Aurelius' life that brought him more to life. Some very good stories in there.
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From where we are today, which sectors will benefit most if inflation cools off? Housing because of the return of low mortgage rates? Tech?
Which will benefit most if inflation remains higher longer? Oil (think OXY) + financials (banks, due to higher rates)?
To use Parsad's metaphor: Which springs are coiled tightest right now?
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Thanks, by the way, to everyone in this thread as well as the energy sector thread and the inflation thread. I've gained a lot from your contributions and experiences.
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10 hours ago, Sinbius said:
Can we have a bottom without having tamed inflation (or being near to tame it)?
I really like this question.
I once read the market is priced for what people think conditions will be in 18 months. If that's true, I imagine we'd see a bottom after the first official readings show inflation cooling off. Mr Market will see a light at the end of the spooky Fed rates tunnel.
@Ulti contributed this link in the other thread about inflation, with some evidence that we may already be past the inflation peak.
https://ritholtz.com/2022/06/revisiting-peak-inflation/
Question is... will it be the real multi-year bottom, or a head fake? For example, there are 1M barrels of oil per day coming from the US strategic petroleum reserve until September 30. What happens to oil prices after that point? Will speculators pile back into oil and cause inflation fears to resurface?
I know I shouldn't enjoy thinking about the macro stuff this much. None of my thoughts are very original, but it's still pretty fun to dream up this big Rube Goldberg machine and imagine it in motion.
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Thanks for that earlier recommendation, @Spekulatius! I've been watching Station Eleven this week (finished episodes 5 and 6 last night) ... I might need to review some Shakespeare plots just to appreciate it better. The show has really grabbed hold of me -- I keep thinking, "I sure do appreciate civilization and the internet." Just imagining the trauma for all the pre-pans is super heavy.
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I wish I knew a lot more about the oil hedging that airlines and oil producers do.
About 12 months ago oil was $20 and now it's around $120.
During the lows you'd hope all the airlines locked in some extremely cheap gas hedges.
And now oil producers are going to to lock in at these highs.
Is this the kind of wild volatility that ends up bankrupting the insurers (is this all done with derivatives?), or are these financiers making money hand over fist and loving every minute of it?
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My hope for end-game is that they get to a cease fire before April. I can't predict much, but these two articles gave me some hope.
This one made me want to go eat at McDonalds. I think they're doing a class-act kind of thing to not leave all those 62k workers high and dry.
https://www.newsweek.com/mcdonalds-closing-restaurants-russia-will-keep-paying-62k-workers-1686052
This one gave me hope that they achieve a negotiated peace before the death count goes from under 10k to over 100k.
https://www.jpost.com/international/article-700677
And this one's for Putin and all other Masters of War. (IMO the best Bob Dylan cover ever)
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2 hours ago, Viking said:
Looking at Russian history one would have to agree with you. I was taught in university that what causes revolutions isn’t poverty or cruelty or terrible leadership. What causes revolutions are expectations and when they are not met. I wonder if enough Russians have had a taste of a better life that the coming economic depression creates the next impetus for change…
+1 for mental models
This is also in the book "Influence" by Robert Cialdini - the book that Munger loved so much he gifted it to all his grandkids, and gave the author 1 share of BRKA worth about $73,000 at the time if memory serves.
An example from the book was specifically about Russia:
“This pattern offers a valuable lesson for would-be rulers: When it comes to freedoms, it is more dangerous to have given for a while than never to have given at all. The problem for a government that seeks to improve the political and economic status of a traditionally oppressed group is that, in so doing, it establishes freedoms for the group where none existed before. And should these now established freedoms become less available, there will be an especially hot variety of hell to pay.
We can look to much more recent events in the former Soviet Union for evidence that this basic rule still holds. After decades of repression, Mikhail Gorbachev began granting the Soviet populace new liberties, privileges, and choices via the twin policies of glasnost and perestroika. Alarmed by the direction their nation was taking, a small group of government, military, and KGB officials staged a coup, placing Gorbachev under house arrest and announcing on August 19, 1991, that they had assumed power and were moving to reinstate the old order. Most of the world imagined that the Soviet people, known for their characteristic acquiescence to subjugation, would passively yield as they had always
done. Time magazine editor Lance Morrow described his own reaction similarly: "At first the coup seemed to confirm the norm. The news administered a dark shock, followed immediately by a depressed sense of resignation: of course, of course, the Russians must revert to their essential selves, to their own history. Gorbachev and glasnost were an aberration; now we are back to fatal normality."
But these were not to be normal times. For one thing, Gorbachev had not governed in the tradition of the czars or Stalin or any of the line of oppressive postwar rulers who had not allowed even a breath of freedom to the masses. He had ceded them certain rights and choices. And when these now-established freedoms were threatened, the people lashed out the way a dog would if someone tried taking a fresh bone from its mouth. Within hours of the junta's announcement, thousands were in the streets, erecting barricades, confronting armed troops, surrounding tanks, and defying curfews.
The uprising was so swift, so massive, so unitary in its opposition to any retreat from the gains of glasnost that after only three riotous days, the astonished officials relented, surrendering their power and pleading for mercy from President Gorbachev. Had they been students of history—or of psychology—the failed plotters would not have been so surprised by the tidal wave of popular resistance that swallowed their coup. From the vantage point of either discipline, they could have learned an invariant lesson: Freedoms once granted will not be relinquished without a fight.”
- Excerpt From: Robert B. Cialdini. “Influence: The Psychology of Persuasion.”
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17 hours ago, Spekulatius said:
@nafregnum Thanks, I missed that. Very important distinction.
I think Shell came under some heavy criticism. I just read that they've announced all profits from that purchase will go to Ukraine aid. It feels like poetic justice for profits from Russian oil sales to be flowing into Ukraine. At a minimum, there's t $28.50/barrel in profits because of the way it was sold.
At 7 barrels per metric ton, and 100,000 metric tons, that's 700,000 * 28.50 = $19,950,000 that Shell would need to pay out.
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5 hours ago, Spekulatius said:
Interesting. Shell buying crude for….$28.5/ brl from the Russians including delivery.
https://finance.yahoo.com/news/shell-buys-russia-flagship-urals-161930283.html
I don’t think the Chinese and North Koreans will pay more. If this continues, they are sooo screwed.
Clarification: It was $28.50 below benchmark Brent crude price, not $28.50 per barrel.
Shell bought 100,000 metric tons of Russia’s flagship Urals crude on Friday, according to people familiar with the transaction. It paid $28.50 a barrel below the price of international benchmark Brent crude, the widest discount on record.
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I've been stewing on this question and following threads like this with interest. Thanks to everyone for your thoughts here. Below I probably sound pretty bearish, but there's a big difference for me between feeling worried and feeling certain enough to take action. I'm currently at 9% cash... Whatever happens this year and next, I wish everyone here good success.
Recently I listened to a very interesting book called "I am a Strange Loop" which focuses on feedback loops like when a microphone and speaker are too close to each other and they generate that horrible high pitch screech because the two are "feeding into" each other.
Another feedback loop mentioned by the author is the idea of a best seller list for books. Many people buy books on the NYT Bestseller list simply because the book is on the list, which helps fuel the book to climb higher in the rankings. Publishers know this, and will spend a lot of upfront money to promote a promising title, hoping to get onto the list and ride the inevitable wave of popularity.
Looking at the last few months and my own thinking, I'm finding reasons to worry ... just thinking about other things I've read by people like Buffett & Munger, Howard Marks (in The Most Important Thing), and Jason Zweig (his chapter commentaries in The Intelligent Investor) ...
Buffett: "The future is never clear; you pay a very high price in the stock market for a cheery consensus." also "Be fearful when others are greedy, and greedy when others are fearful."
https://money.cnn.com/data/fear-and-greed/
I keep telling myself I'll wait until people are feeling especially greedy to sell out of some of my most overvalued positions, but when they get up again I keep feeling too greedy, thinking "I'll wait until tomorrow or the next day to sell it." and then they move down 5% or more and I go back to "waiting" trying to catch a top that eludes me yet again... so my own behavior is starting to make me think I'm too optimistic.
Marks said somewhere that if he could know just one thing about a stock before he buys it, he'd like to know precisely how much optimism is already priced into it. I can't find the sentence now, but a lot of similar sentiment is in this memo: https://www.oaktreecapital.com/docs/default-source/memos/2015-09-09-its-not-easy.pdf
Chris Bloomstran just took a close look at the ARK fund's components:
Jeremy Grantham gives interesting details about how some previous tops died, not like a balloon popping but like air leaking out of a balloon. He called it "confidence termites" in this recent podcast interview (from Aug 5th)
https://moneyweek.com/investments/investment-strategy/603678/jeremy-grantham-podcast
[ below is what I found interesting from Grantham -- he describes how the risky junk loses the most value first, and then you may see "confidence termites" eat away at sentiment like a feedback loop ]
Grantham: The history books are pretty clear, there doesn’t have to be a pin. No one can tell you what the pin was in 1929. We’re not even certain in 2000. It’s more like air leaking out of a balloon. You get to a point of maximum confidence, of maximum leverage, maximum debt, and then the air begins to leak.
And I like to say, the bubble doesn’t reach its maximum and then get frightened to death, what happens is the air starts to leak out slowly because tomorrow is a little less optimistic than yesterday. And gradually, people begin to pull back. And the process is very interesting, in that before the end of the great bubbles, and there’s only been a handful, so we can get carried away with over-analysis.
But before the great bubbles ended in 1929, 1972, and in 2000 in the US, the three great events of the 20th century, there was a very strange period in which, on the upside, the super-risk, super-speculative stocks started to underperform. They never do that in between, ever. And then suddenly, it starts. So, you go back to 1928, the JACI Index, the low-price index, and the S&P were up 80% in 1928, and then the S&P was up, say, 40%. That’s what it’s meant to do.
And then in 1929, the S&P went up another 40% before crashing. The low-price index started early in the year to go down. It couldn’t even get the sign right. It had a beta of about two, and started to go down, and the day before the crash it was down over 30%. Nothing like that happens again until 1972. And let me point out that 73/74 is still the biggest decline, adjusted for inflation, since the Great Depression. It was 62% in real terms.
And in 1972, the last up year, the S&P outperformed the average Big Board stock by 35%, approximately plus and minus 17 points. The average stock was going down steadily all year, and the S&P was going up. Nothing like that happens again until 2000. In 2000, in March, the great TMT bubble starts to peak, and Pet.coms get taken out and shut.
And then in April and May, the junior growth. May/June, the middle growth. June, July, August, the Ciscos. Cisco was the biggest company in the world for eight minutes, I like to say. And the whole TMT block, that was 30% of the market cap, was down about 50% by September.
The S&P was unchanged. Unchanged. Which meant that the remaining 70% was up 17%. That is an amazing deviation. So, bang, bang, bang. It’s only happened three times. It happened leading into the great air leaking out. And finally in September, the confidence termites, as I like to think of them, reached the broad market, and the entire 70% rolled over like a giant iceberg, and down it went, 50% over two years.
And so, where are we today? Those three deviations, by the way, 1929 was eight months, 1972 was 11 months, and 2000 was six or seven months. And on February 9th, the Russell 2000, which had had a crushingly good year, wiped out way ahead of the S&P from March of 2000 until February 9th, way ahead of the NASDAQ. And the S&P has continued on its merry way, having a nice bull market.
Even after yesterday’s great rally, the Russell 2000 was decently down since February 9th, the NASDAQ is five points ahead of it, and the S&P is ten points ahead. This is getting to be a pretty good down payment. It’s February, March, April, May, June, July. It’s five months. I would say this is tracking quite nicely.
And the confidence termites started, once again, exactly where you would expect, they started with my favourite biggest holding, personal holding, QuantumScape. QuantumScape, a solid-state lithium-ion battery company I bought into eight years ago, as a green venture capital. They came as a SPAC, came at ten, went to 130.
At 130, it was 52 times my investment, which is pretty nice. It was also $55 billion, bigger than GM, bigger than Panasonic, if you want to think batteries. There’s nothing like that to compare to in 1929, by the way. The scale of that. They’re a brilliant research outfit, and I’m happy to still hold a quarter of my… But they don’t have a product for four years, and they have no trouble telling you that.
So, here is a research lab that will have no profits, no revenue for almost four years, selling more than GM. $55 billion, give me a break. Anyway, that started down. It’s now down 80%. The SPAC Index is down 30%. The SPACs have started to dry up. Bitcoin, 62,000 to today’s, after a nice rally, 31,000, half price. Tesla, 900. Down to 650.
This is the classic pattern of start with the most speculative, the most heroic, and work your way down carefully until finally you’ve reached the market. I would say it’s lasted longer than I thought. Why? Two reasons. One, the vaccine was simply bigger and better than anyone expected, and we produced it quicker, it was more effective, particularly Moderna, Pfizer, than anyone had ever hoped possible, really for any vaccine of that kind.
And the other reason was the speed and size of President Biden’s stimulus package. He came in with such a roar, and bang, you’re suddenly talking trillions of dollars of stimulus. Those two things, of course, were bound to increase confidence, bound to increase the money in the hands of individuals. Individuals, because of Trump’s stimulus and because of Biden’s stimulus, have been dripping in resources, and they have bought into every setback.
And they’re buying all the crazy stuff, the meme stocks that are just jokes, where they’re whipped up into a frenzy, and they’re buying them just for fun, it seems, ten times more than any underlying value.
And, by the way, every indicator of that craziness, this is a record, this is more impressive even than 2000, and that was more impressive than anything that had preceded it. But the craziness that we have seen in the meme stock, companies being bought on no earnings potential, on no underlying reality, is just amazing.
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On 7/2/2021 at 2:03 PM, LearningMachine said:
What do folks think Li Lu means by following? Is he saying Chinese indexes are not good to invest in because China hasn't yet "entered the modern age," or is he saying they are good to invest in? Chinese indexes haven't gone anywhere over the last 10 years. Wonder if it is because companies have been making false accounting statements/projections, companies have been printing shares, CCP hasn't been letting companies exercise pricing power, new companies have been entering at a fast rate & increasing competition, existing companies have been expanding & competing too much, P/E multiples have compressed, or something else? Has anyone looked into it?
I think I found the answer to your question about what Li Lu meant - there was a Q&A session afterwards where he says this:
https://www.longriverinv.com/blog/qampa-with-li-lu
Question 11. You said earlier that index investing can be a suitable choice for the average investor so long as the index reflects the overall economy. Assuming passive index investment funds continue to occupy a larger and larger share of the market, what consequences do you think this will have?
Li Lu: This is a very interesting question, although perhaps less relevant in China because index funds do not yet comprise a large part of the market. The situation is also different in China and the US. In China, because we haven’t yet fully implemented [an effective system of corporate disclosure], nor do we have a strong policy for de-listing companies, our indices do not fully or fairly represent the underlying economy. I think that the regulators will address this in the coming years. We have transformed from a manufacturing- and export-led economy into a consumption-led economy. In this new era, the means of financing may move from indirect finance to direct finance. The role of the stock market will grow in importance, and this will require attracting more and more people to participate in it. But if we want more people to participate, we will have to better control the market’s gambling and excesses, and increase the part of it which focuses on investment. The best, fastest and biggest way to do the latter is through index investing, which means making indices better reflect the underlying economy. One possibility would be to develop a good ETF to do so. But there are many man-made factors involved which make this not the easiest course of action. The best approach is to therefore use a market-based solution [and enhance regulation] so that the existing indices become more representative. This is China’s challenge.
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As far as I can tell, it still doesn't really have the "alerting" type stuff I want -- the GuruFocus watch list will email when the price of something in the watch list changes by 5% or more in a day, or if trading is more than double the 30-day average volume. I'd love to see notifications of insider buys/sells, as well as buys/sells from 13F reports.
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The best I've found in the last couple days has been stockrover.com -- in addition to some strong screener functionality, you can make watch lists and then see all kinds of comparable columns for the companies in the list - you can also chart all the stocks in a watchlist as a group. I really like being able to move columns around and sort by things like "5 year Price/Sales range" as in this screenshot.
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https://www.forbes.com/sites/woodmackenzie/2021/06/17/how-high-can-oil-prices-go-in-2021/
Interesting tidbits, if I understand the article correctly:
* The first half of the year used up 100 million barrels of the inventory buildup that happened in 2020. By the end of the 2021 the inventory will be reduced another 100 million barrels, under pre-pandemic storage levels.
* "OPEC+ is currently revelling in higher prices and recouping some of the US$335 billion of revenue the group ‘lost’ last year when the market collapsed. A Brent price in line with our 2021 forecast of US$69.30 would lift OPEC’s revenues close to 2019 levels on 10% less volume."
... So, as it appears to me, back in Nov 2014 OPEC flooded the market in order to try to kill North American shale, but it only partly worked. OPEC was willing to push prices down when they were swimming in money and could deal with some short term pain. But now the incentives are different: after losing $335B in 2020 they actually NEED their oil to be more profitable in order to recuperate. Having OPEC "aligned" at least in the near term seems like a nice environment for unhedged producers like Obsidian Energy.
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Is there a killer app in the "Watch List" category?
I've heard investors say they build a list of all the companies that meet their criteria which they'd be happy to own at the right price. I'd love to do the same thing, but I'm doing too much of the tracking in my head.
Here are things I wish I had:
* I want to know when insiders are buying or selling companies in my watch list, like in an emailed report
* Notifications of significant price or volume movements (gurufocus.com watch list currently satisfies)
* Simulated "Morning Newspaper" view of recent news stories about any of my companies
* Notifications of buys/sells by 13F "Super Investors" like the list of folks on dataroma.com
* Notifications of dilution / buy backs.
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59 minutes ago, Gregmal said:
Yea I am not an expert on energy/commodity but have been spending some time on the stuff for a few months now once it became obvious the tailwind. If you want to go multi bagger I think stuff like BKEP is interesting, as is EPSN. RIG has also had a ton of insider buying and is the definition of a high leverage bet. Dont know a lot about Obsidian other than the great stuff SD has contributed. You could also just buy OTM LEAPs on higher quality stuff as well. My preference at the moment is go big or go home type stuff because this isnt really stuff I want to own forever. Certainly wouldnt be investing in it for 10-20% annual returns.
16 minutes ago, SharperDingaan said:Depending on your risk tolerance, look at both CVE-T, and ESi-T.
CVE is generating 1B+ of FCF/quarter, will be selling non-core assets, repurchasing 10% of its shares (COP holding), and restoring its dividend over 2H 2021. Choice of shares or warrants. ESI has acquired 2 other drillers within the last 15 months, has one of the largest high efficiency drilling fleets in the business, supply for this type of rig is tight, and demand has already driven day rates up 2-3K. And this is before M&A, as buying reserves is currently both cheaper and faster than drilling for them.
Thanks a lot to both of you for these other names to check out -- since my "bet" is for recovery in oil, then maybe stretching it across a basket of these names will be a little less risky than if I plow it all into Obsidian (already took a 3% position there)
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You just had a long and brutal winter in the space. Widespread, decade long period of layoffs, plant closures, and bankruptcy. For good measure covid crash buttfucked the remaining brave souls...negative oil? Who'da thought? So there was a mega washout. Now, supply/demand out of whack from covid shutdowns and supply chain issues. Now throw in rapid reopening, stimulus money, demand for travel, building/renovations, and consumer products. Add in for good measure all this stupid ESG stuff and very hostile government attitude towards production/drilling...less drilling going forward against big demand.
Thanks a lot @Gregmal I've been thinking similarly about Oil. Good solid reasons demand should remain strong.
I got unbelievably lucky about 4 years ago in buying a small position in Enphase (solar stuff) when I saw Dan Loeb had bought a chunk. It turned out to be my first (and probably only ever) 100+ bagger. Now I'm considering whether to sell and just put those winnings into Obsidian Energy because I think Enphase won't double from here within 12 months but I think I agree with @SharperDingaan that OBELF it has a fair chance of doubling from its current level.
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32 minutes ago, Gregmal said:
Energy/commodities too.
Oh darn. This is something I wasn't very aware of -- is there another thread or someone I ought to read more of to get a good understanding of what might blow up in Energy? Do you mean a bubble in all energy, or just in "Green Energy"?
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13 hours ago, longterminvestor said:
Mr. Buffett and Mr. Munger have always been quoted as saying "No company ever went out of business having too much cash", however they forgot to mention what to do in an inflationary environment.....Schiller P/E at these heights scares me for sure. Where do you put money?? I just keep saying to myself, trust quality and invest in great businesses - things will be good over the long term.
I've been working my way through Chris Bloomstran's yearly letter -- he said something on twitter about it being a little crazy that the market cap of Berkshire at 630B is basically the same as Tesla and also Bitcoin, and it got me interested to learn more about how he thinks. The current Semper Augustus letter is 114 pages long and I'm almost finished -- I like his writing style, and it feels like at least half of the whole letter is dedicated to looking deeply at Berkshire (it's like a 31% position in his 260M portfolio according to 13Fs) -- The thing I like most is to see Warren buying back shares a lot more than in previous years. Chris gives the full history of previous share buybacks and other times when Warren used shares instead of cash because he saw the shares as "worth more" (overvalued vs cash) -- the GOAT (greatest of all time, WEB) successfully used the right tool for acquisitions in almost all cases, and only bought back shares when it was most rational to do so -- the fact that GOAT is buying back shares now makes me want to sell out of everything I hold which I believe to be "fully valued" or "overvalued" and put that all into BRK.B shares and go back to my usual inactivity. The fact that he's repurchasing shares currently/recently is a big green light. He at least makes an argument that the stuff selling at the highest Price/Sales multiples have a really hard time outperforming in the following 20 years (pages 53 to 56 or so if I remember)
https://www.semperaugustus.com/clientletter
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The wazoo commercial still makes me laugh! I never forgot that one.
I've been reading Chris Bloomstran's yearly letter, and he makes some data-backed arguments that we're pretty much in year 2000 territory again. Looking at TSLA valuation, and looking at how many companies are being sold at more than 30x sales, and how well those have done for people in the past, it's sobering. Combine that with Michael Burry's tweet that he believes we're in the largest speculative bubble of all time, in all asset classes, by two orders of magnitude.
It seems like a bubble to me. They let TSLA into the S&P 500 and it's one of the biggest components of the S&P now, hugely overvalued as it is.
https://www.semperaugustus.com/clientletter
https://static.fmgsuite.com/media/documents/2bde00e4-7037-4c39-beb8-9946b2b2dce3.pdf
( If you only read a couple pages, go for 50 to 52 about Tesla's valuation, or 53 to 56 about some research he did comparing outcomes for stocks trading at >10x, >20x, >30x sales about 20 years ago and how they've done since. Spoiler: buying high is always a bad strategy )
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Interesting times. I'm having fun just daydreaming about this. I'm probably way off the mark, but it's still a fun combination:
1. Berkshire has a mountain of cash.
2. First level thinking: Holding cash going into inflationary period is a big scary no no. Berkshire's big cash position perversely contributes to negative sentiment. In a time when the Schiller P/E is 37.47 and S&P P/E is 44.88, we see BRK.A at a much lower P/E (yahoo finance says 6.30, how is that right?? Another site says 28 ...)
3. If Buffett buys a whole bunch of stocks now, and then inflation causes interest rates to rise then he loses a lot of the value of the cash he spent on stocks since the higher interest rates will make the price of those stocks go down. First rule: don't lose money.
4. Buffett has a special relationship with his loyal shareholders. Wants to reward them, but not with dividends because that's not tax efficient for long term shareholders.
5. Warren Buffett Filing Indicates Berkshire Hathaway Bought Back $6 Billion of Stock in 2nd Quarter
6. Plowing some cash into buybacks rewards his long term shareholders: They get bigger pieces of all those great businesses which will succeed during inflation. Float shrinks at the same time profit numbers (due to inflation) will be larger. Who knows: Maybe shrinking the cash mountain will eventually solve the sentiment problem of #2 above, but by the time those First Level Thinkers get excited about lower-cash Berkshire, earnings per share will be much higher due to reductions in shares outstanding?
As I said, I could be way off -- please punch holes in this and help me get some more Elementary Worldly Wisdom
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https://twitter.com/ChrisBloomstran/status/1407440728570183680
Interesting thought I found on dataroma.com commentary tab, from a guy I don't know, Chris Bloomstran. The replies he got on twitter made me laugh a bit, and reminded me of the recent Michael Burry quote:
"People always ask me what is going on in the markets," the investor tweeted. "It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude. #FlyingPigs360." -- https://markets.businessinsider.com/news/stocks/big-short-michael-burry-twitter-return-biggest-market-bubble-ever-2021-6-1030524823
---START OF TWEET---
Mr. Market values $BRK.A $TSLA and #Bitcoin at nearly identical $630B market values.
One is up 20% YTD, earns $45B on $250B of sales & $450B of equity.
One is down 12%, earns $1B (maybe) on $36B of sales & $24B of equity.
One is up 12% and will never produce sales or earnings.
Mr. Market is rational at times and manic or depressive at others. What’s his state of mind now?
Investors should have an idea of expected return from holding each of these for the next decade. Speculators require a greater fool. Does a $630B valuation embed a margin of safety?
Food for thought:
Berkshire COULD pay its cash as a dividend, turning a 10% ROE to a 14.5%.
It COULD give 10% (or more) shares to insiders.
It COULD use its cash to buy back shares. The stock would at least double.
How many CEOs would do these things?
How many already have?---END OF TWEET---
I also noticed a news story about Berkshire having bought back a chunk of shares recently. I remember when Allan Mecham made a killing by loading up on Berkshire when he knew its share price was at the point where Warren would be buying back -- buying BRK.B shares when Warren Buffett is buying shares back seems like such a no-brainer compared to buying Tesla or Bitcoin right now. I do not see an "almost guaranteed floor" underneath either of those.
Warren Buffett Filing Indicates Berkshire Hathaway Bought Back $6 Billion of Stock in 2nd Quarter
Is The Bottom Almost Here?
in General Discussion
Posted
I think all time highs won't be back so soon either. 1) Interest rates are higher and we won't be back to ZIRP this year. 2) Ukraine war and European energy's spooky disharmonious conflict hell ride coming up this winter. 3) Oil, which won't get cheap unless national recessions kill demand because supply is constrained by green dogmas.
Almost a year ago, in the thread "THE TOP is coming" there was the idea from an interview with Jeremy Grantham that referenced 'confidence termites' which would cause the risky stuff to start trending downward while money moved into safer places, until even the safest places would be sliding downward as well.
Now I find myself wondering what sectors will bounce back first as confidence starts to build...