rb

I don't want to nitpick case I don't mean anything by it. About your figures.... I don't have a good data source about total stock market return (if anyone does please share). About inflation though, you're right about the 13 cents (not that that means anything). However that's 4.1% inflation not 4.4% - hey, you asked. Now that includes the 70s which had bad inflation and bad stock market. Just like anything involving statistics your start and end points matter a lot. if we were to look at the past 30 years ('85-'15) as opposed to the past 50, inflation becomes 2.7% and I think stock market performance becomes better too. I guess the biggest question is what will the next 30, 50 years or whatever look like? Is it like the past 30, the past 50, or something else alltogether? I don't think anyone can tell for sure.

The general idea is correct, but it's not as dramatic as the OP suggests. When talking about earnings there's a commodities story at play where Exxon, Chevron and CAT got smacked hard. Adjust for those and what you get is that earnings peaked in 2014, dipped in 2015 and recovered in 2016 to 2014 levels. Taking out the commodities story you get earnings growth on 2011-2014 of 20% as opposed to -7%. If you pay attention to AAPL, you notice that both the earnings dip in 2015 and recovery in 2016 were quite pronounced. Yes the stock prices did very well. But it's not a secret that the past few years have been very good for stocks. On the debt side once you make a few adjustments the idea is the same but the magnitude is less. The OP rightfully excluded banks and GE which would distort the picture. I also adjusted for MSFT and AAPL for whom this is not really leverage but rather tax strategy. Once you make those adjustments you get debt going from $495B in 2011 to $762B in 2016. And increase of $267B. Out of that $53B was Verizon who did it to buy 50% of Verizon Wireless so let's call that good debt. On the flip side Chevron and Exxon borrowed $62B extra likely driven by the hard times they're facing.... so i guess that's bad debt. Between Chevron, Exxon and Verizon that's 43% of the total debt increase. So if you account for a few special cases and stories again the magnitude decreases. Nonetheless the premise stands that these companies levered up over the past 5 years. A bit too much fun with the buybacks I think. The debt levels are still totally manageable for these sort of companies but probably less buybacks in the future. Bottom line? Stocks are kinda pricey now. I do want to thank the OP for putting in the grunt work of getting all this data together. It's helpful to have it all to play around to do big picture stuff.

Yep, that's legit. Fun fact though: be careful of charts that compare US and Canadian debt/income those measures are calculated differently and the Canadian measure shows higher.

Not for nothing but that chart is bullshit. Please elaborate. They throw everything and the kitchen sink, but it's for the whole period, so it's still useful to see the trend. Yea they throw the kitchen sink to make the number seem larger. Also the way the do it basically makes sure you double count some stuff for example renovations and maintenance&repair. There's gonna be double counting there. Also they make stuff up just to add it in there. Imputed rent for all homeowners? Really? First of all that's not even part of GDP. You can't add it to something and take it as a % of GDP. I'm willing to bet that in the transfer costs they include land transfer tax and that's also not part of GDP. In addition, they include housing wealth effect. There's no way to actually calculate that and also it has nothing to do with GDP. These are just a few things that are wrong with that. There are others. The thing is that Statscan actually measures and publishes housing activity in GDP. They do it very rigorously and properly. I think it's around 10% and yes that also on the high side historically speaking. But this guy chose not to use the Statscan numbers but make his own hocus pocus doctored measure to get a larger headline number so it'll me more flashy. That really grates my ass.

Not for nothing but that chart is bullshit.

Is it just me or Equifax is starting to look pretty good at these prices?

I think you're pretty on point here. A currency is a store of value. Bit coin is not - so not much of a currency. But if people want to trade baseball cards, who am i to stop them.

Well Berkshire's gonna take some hits. No way reinsurance escapes without paying out a good chunk. GEICO's gonna take a bath too. However, all of this is unquestionably really good for Berkshire.

Does anyone really know exactly what's on the books of any one insurance/reinsurace company?

Except that's not true either. For example, US trade surplus with Australia has widened significantly after the Australia-US free trade agreement went in effect.

The EU won't fail. Sorry guys, but if this is why you think that the EU will fail or that it was designed to fail, you don't understand the EU or free trade's role inside the EU. The EU will adapt, it will evolve, some changes will be made along the way but it'll stick together.

Ok, getting back to the original promise of this thread. There is no way the RMB is 40% undervalued against the dollar. In fact there's actually little evidence that the RMB is undervalued at all. If the RMB would be undervalued these are the things we should expect to see (no order, just don't like the bullet fuction): 1. Inflation pressure in China 2. Rising foreign exchange reserves 3. Large trade surplusses Now about 10 years ago if one looked at China it was obvious their currency was undervalued. Their current account balance was about 10% of GDP - from an economics perspective that is insanely high. Inflation I think was pushing toward 10% and their foreign currency reserves were going up like crazy. Today China's inflation is around 2. Their current account surplus is 1.8% putting it in the same league as say... Spain, and their reserves went down by about 25% (close to 1 trillion) between 2014 and 2017. All of this points to the fact that the RMB is not massively undervalued. It may be off here and there like any other currency, but the signs point that it's somewhere around where it should be. By the way, for the people who are so fired up about trade deficits, you should be aware that trade deficits are generally driven by savings rates (internal factors) as opposed to trade agreements.

Reaching out to west cost members here. Please let me know what would be some middle class suburbs of Vancouver. Not poor, not posh, just regular middle class. If you know about Toronto, I'm thinking along the lines of Mississauga. Also what is a good site to find rental homes in the Vancouver area? Is it realtor.ca or is there some other site?

Thanks

Does anyone have a link or a suggestion how I could get/watch the whole interview as opposed to snippets that cnbc posts?

I'm wondering about that as well, but I figure that a more appropriate place for such discussion would be on another thread. Maybe the Berkshire Insurance Operations.

points 2&3 equally applied to cab drivers until 3-4 years ago. Changes are slow to come, but quick to materialise when they do eventually come. If big players find value opps, there could easily be a consolidation, just like in any other industry that develops technologically. The taxi cab industry is nothing like the trucking industry. In cabs the companies own fleets of cabs and the drivers lease these cars from the company as individual contractors. The trucking industry is mostly owner operators where the driver owns the truck. The raxi industry is taxed pretty heavily through licenses. Trucking gets a big subsidy in the form of infrastructure. The cost structure is very different as well. You can get a Prius for about 30k. But a class 8 truck will set you back about 125k. On top of that parts along with maintenance are repairs are way more expensive for trucks than for cabs. This causes the labor component of price to be significantly lower for trucking compared to cabs. I know little about the industry but read that for the same volume, train cost is 100$ vs. trucking 130$ (though trucks have the door-to-door advantage). If the driverless convoy eliminates both fuel and personnel costs, a 30%-50% reduction in expenses seems reasonable, which means cost advantage can flip. With coal, its volume comprises about 18% of BNSF's freight revenues, so that's quite substantial. Yet on the other end BRK compensates for that through its MidAmerican Energy sub and clean energy initiatives. Firstly, once you go the convoy route you loose the flexibility of trucking. Secondly, the 100 vs 130 train vs truck is incorrect. Revenue per ton mile for rail is about 4 cents. Revenue per ton mile for trucking is 12-15 cents. Thirdly, in terms of fuel efficiency the article was talking about maybe 10% increase in fuel efficiency with the convoys. Rails already use between 1/3 and 1/4 of fuel per ton mile compared to trucks and that gap is growing. Fourthly, rails carry a lot of stuff. I think about 1/3 more ton miles than trucks. You shift a meaningful amount of that stuff from rail to trucks and you'll see bunch of negative issues. An increase in congestion, crashes, and spills. Environmental effects from burning more fuel. Also a deterioration in infrastructure from wear and tear caused by trucks. US infrastructure is already kinda shabby. Who pays for that? Rail guys like Matt Rose and Hunter Harrison will make damn sure everyone knows why their roads are shit. Lastly, I don't see how Berkshire benefits through the utility unit from the decline in coal shipments on BNSF, much less offset those. BHE's utilities' compensation is determined by their rate base not their fuel mix. If I'm wrong and someone has a good understanding of this please let me know.

Something tells me that the idea won't be so popular in the US for several reasons. 1. The US is the land of the concerned mothers of something or other. This is why I still have to drive at 50 mph on lot of freeways in the US. 40 ton behemoths rolling at 50 mph by themselves is surely going to concern a lot of mothers. 2. You have the political BS. Lots of truck drivers in the US. 3. The whole industry structure would have to change. Currently in the US the majority (90%?) of trucks on the road are owners/operators. Now a trucker may be able to buy/finance and operate a truck. But the independent trucker is surely not going to be able to buy/finance a convoy. The cost savings may not be big enough to trigger a complete redesign of the industry. 4. While the self driving stuff will decrease the price gap between truck and rail, rail will still have a cost a cost advantage. All this stuff sounds cool. But really I think that the shift away from coal represents a much bigger and present risk for BNSF (all rails really) than self driving vehicles.

Well I though this was funny. https://www.reuters.com/article/us-berkshire-hatha-ratings-idUSKCN1B228N Basically since Berkshire doesn't get to buy oncor S&P wan't cut it's rating. Because 100 billion in your bank account is not enough to keep a AA rating anymore. There's a real pack of geniuses over there at S&P. ::)

IMO, it's about the same as day-trading in your RRSP. Day trading is not something that I do, but there are plenty of folks out there who have done a lot of it for a great many years. So, if you buy TD with T+3 settlement (or maybe now it's T+2?) and you sell TD a few hours later, you haven't actually created any phantom shares. The only difference with a Norbert's Gambit is that you buy on one exchange and you sell on the other. I'd be quite surprised to find that the brokers have not been in compliance for decades on this... SJ Ok, so I need to issue somewhat of a retraction on the issues I've raised regarding naked shorts and so on regarding the gambit. The issue arise because stocks would have different CUSIPs for the Canadian and US listed shares. Making them different securities. This was true a few years ago when I last checked. However, in preparing to respond to bizaro's post I went to check a few companies (RBC, Magna, Potash) and found that now they have the same CUSIPs and ISINs for both the US listed and Canadian listed common. In this case there is no problem - because they are the same security - and you can gambit away to your heart's content. I should add that I don't know whether there has been an initiative to normalize the CUSIPs for cross listed securities and now all of them have matching CUSIPs and ISINs. So I would recommend to double check that the CUSIPs or ISINs match on your favourite gambit stock.

Actually the CIPF is in pretty good shape. It has about half a billion in reserves. Maybe that does not sound like a big number but it's significant when you consider the actual payouts. In the past 10 years it had to pay out about 15 million for 4 broker failures. Since inception in 1969 it paid out about 69 million for 21 broker failures. In this light I think that 1/2 a billion is quite adequate. The truth is that broker failures just aren't that expensive. It's really only client cash that's at risk in a failure and in some extreme cases some stuff around securities lending. Yes. CIPF would be perfectly adequate for IB. You would need to burn through all of IB's reserves. Then CIPF. And with asset segregation, it is pretty hard to see how IB loses any significant client assets. IB invests its assets in 2 year U.S. treasuries. What's IB's Canadian client base? As a simple mental model, a loss of $50k for each of 10,000 clients would exhaust $500m of reserves...or 20,000 clients each losing $25k. What's the likelihood of a systemic event where IB and some other brokerage are both trying to tap into the CIPF at the same time? The scenario where there would be a failure would be some silly event in financial markets, or ridiculous financial malfeasance at IB> Keep in mind that what we're talking about here is that only cash balances are at risk. So IB's average equity per account is 200k. If 10% of that is in cash you're talking 20K per account. 50k is unreasonable. Also if you're talking max loss, you're talking about a malfeasance event where IB managed to burn through all of their capital and somehow managed to squander all of its customers cash which basically impossible. Then on top of that CIPF is supposed to run out of money because this should be an event of a magnitude that is 50x greater than anything that was ever experienced - as a reference MF Global cost CIPF about 2.5 million. Then on top of that Lloyd's becomes insolvent and defaults on the extra $2 million dollars per account coverage. Yea, I won't say that the scenario is impossible because risk people would always conjure something up. But at that point your securities are worth zero anyway so it doesn't really matter whether IB is alive or not. Are you following the facts or are you making up your own? My snide remark about making your own facts was related to the fact that in the risk world you can always make up a scenario in which even the best capitalized and conservatively run insurance company goes bust. Nuclear explosions, etc. Generally something resembling the apocalypse. However insurance is designed to deal with for lack of a better word (that is escaping me right now) "real world" situations. In that framework CIPF is well capitalized to deal even with the most extreme situations. In that framework total wipeouts of which you speak of don't happen. There are several reasons: 1. The business activities of the brokers do not predispose them to losses that large. 2. The regulator will wind up the broker well before it gets to that point. 3. There are several layers above that will absorb shortfall. The broker's reserves/capital, bondholder, uninsured client cash. All of this is born out empirically in the loss history of CIPF which I gave in a previous message. So based on the loss events CIPF is likely to see, it is well capitalized to deal even with the most extreme ones. However it will likely fall short if the rapture should come to pass.

yes

Actually the CIPF is in pretty good shape. It has about half a billion in reserves. Maybe that does not sound like a big number but it's significant when you consider the actual payouts. In the past 10 years it had to pay out about 15 million for 4 broker failures. Since inception in 1969 it paid out about 69 million for 21 broker failures. In this light I think that 1/2 a billion is quite adequate. The truth is that broker failures just aren't that expensive. It's really only client cash that's at risk in a failure and in some extreme cases some stuff around securities lending. Yes. CIPF would be perfectly adequate for IB. You would need to burn through all of IB's reserves. Then CIPF. And with asset segregation, it is pretty hard to see how IB loses any significant client assets. IB invests its assets in 2 year U.S. treasuries. What's IB's Canadian client base? As a simple mental model, a loss of $50k for each of 10,000 clients would exhaust $500m of reserves...or 20,000 clients each losing $25k. What's the likelihood of a systemic event where IB and some other brokerage are both trying to tap into the CIPF at the same time? The scenario where there would be a failure would be some silly event in financial markets, or ridiculous financial malfeasance at IB> Keep in mind that what we're talking about here is that only cash balances are at risk. So IB's average equity per account is 200k. If 10% of that is in cash you're talking 20K per account. 50k is unreasonable. Also if you're talking max loss, you're talking about a malfeasance event where IB managed to burn through all of their capital and somehow managed to squander all of its customers cash which basically impossible. Then on top of that CIPF is supposed to run out of money because this should be an event of a magnitude that is 50x greater than anything that was ever experienced - as a reference MF Global cost CIPF about 2.5 million. Then on top of that Lloyd's becomes insolvent and defaults on the extra $2 million dollars per account coverage. Yea, I won't say that the scenario is impossible because risk people would always conjure something up. But at that point your securities are worth zero anyway so it doesn't really matter whether IB is alive or not. Are you following the facts or are you making up your own?

I'll leave aside the flash crash stuff. I'll instead focus on the spread which some people seem to realize and you captured it perfectly. That spread is an illusion. Especially when you send a marked order. When you look at the spread it always looks like a 1 cent spread to the naked eye. But when a market order hits, the market dissapears for a few nanoseconds (not detectible to the naked eye) and you get a shitty fill. Those costs add up by the way. Now some people may be ok with that, but I personally don't like bottom feeders picking my pocket by attaching themselves as leaches to my trades.

Are you a fed or something? Department of Finance maybe? Nope, I'm not a fed, nor do I work for Finance or National Revenue if that's what you're worried about. I'm just a guy who has a good understanding of how markets work and what happens behind your screen. I figured I'd share that information since it may be beneficial to some people that would come across this thread. I'm sure some people that try to do the gambit don't realize all the thing that are going on behind the scenes and I'm sure some of them may not be very comfortable doing naked shorts in their RRSP.