rb
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Posts posted by rb
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Look, if the US decided to go to a budget surplus along with Europe in order to actually pay back the debt, the S&P would be below $1000. If we find a way to maintain the current levered economic and financial system for another couple years, well maybe this little 10-20% correction is adequate for now. If we hit the inflection point I noted in my above post, or if the market loses confidence in the Fed, we will realize that in real terms, we already hit the highs for the next 15 years. In nominal terms, the Dow could be at a trillion in 15 years though. So I don't think this is straight-forward. It depends on your outlook and your timeframe. But I think everyone can agree that printing money and ever-increasing debt can not end well. It has to end horribly.
Well if the US did something like that maybe the S&P would be worth 1000. But I don't really see your point? Why would the US want to suddenly go to a surplus to pay down some debt? That would be horrible economic policy even as you put it. So in order to pay down a bit of debt, the US should cause horrible human suffering through unemployment, etc. Probably go into deflation, destroy the profitability of its companies and a lot of value... for what? to feel good that they paid down some debt? We could go around like this forever. If my grandma had wheels then she'd have been a bicycle but she didn't she had legs, and the S&P is not worth 1000.
Right, I didn't say it was worth less than a 1000, I said it was worth somewhere between that and a trillion. The center can hold for as long as there is confidence in currencies and the debt does not implode the economy. But to have Dalio start talking about QE again might make people wonder just how many QEs are there going to be and when does this end, does it ever end?
Let's just leave the valuation of the S&P to the side. At this point it's like saying it's between zero and infinity.
Now Dalio may be a smart guy but he's no oracle either. We may have another QE at some time, but so what? The CNBC crowd thinks that the FED is more concerned about the stock markets than the real economy. I hold the opposite view. The thing is that at this point I don't see why the fed should tighten - inflation is very tame. I also don't really see why the should loosen much - job growth is going at a decent pace, though there is a long way to go. If the current problems in other parts of the world spill into the US then they will probably loosen (so QE4) and that will be the right thing to do.
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I should end positively by saying that we can all make Alpha with good long-term value investing. I just would not count on a big wind at our backs - in real terms at least. This is what I have been trying to do and continue to do.
This is where I agree with you fully. The CNBC crowd is all about the FED. I think the community here can make nice returns without worrying much about all of that.
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Look, if the US decided to go to a budget surplus along with Europe in order to actually pay back the debt, the S&P would be below $1000. If we find a way to maintain the current levered economic and financial system for another couple years, well maybe this little 10-20% correction is adequate for now. If we hit the inflection point I noted in my above post, or if the market loses confidence in the Fed, we will realize that in real terms, we already hit the highs for the next 15 years. In nominal terms, the Dow could be at a trillion in 15 years though. So I don't think this is straight-forward. It depends on your outlook and your timeframe. But I think everyone can agree that printing money and ever-increasing debt can not end well. It has to end horribly.
Well if the US did something like that maybe the S&P would be worth 1000. But I don't really see your point? Why would the US want to suddenly go to a surplus to pay down some debt? That would be horrible economic policy even as you put it. So in order to pay down a bit of debt, the US should cause horrible human suffering through unemployment, etc. Probably go into deflation, destroy the profitability of its companies and a lot of value... for what? to feel good that they paid down some debt? We could go around like this forever. If my grandma had wheels then she'd have been a bicycle but she didn't she had legs, and the S&P is not worth 1000.
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Btw, for the people that may drive to the BRK meeting and are thinking of stopping in Dyersville for field of dreams there's a restaurant there Country Junction. They have fantastic beer (something hard to find in the area). The food's great too.
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Markets have been propped higher by central bankers (Yellen, Draghi, Kuroda). Have the markets come to realize the impotence of the central bankers? Or are the central bankers still capable of pursuing further with their financial repression leading to inflated asset prices?
I really don't understand why everyone jumps on the macro thing? Oh markets propped up, it's the ECB, it's the FED, etc. Why can't this be just the classical case of a stock market that got a bit ahead of itself and is correcting back to where prices should be like it did many times in the past.
Where do you think a fair price for the market is? S&P at 1,000? If stocks are overvalued by 10% or 20% what do you think it's more likely that the markets got a bit overexcited as they normally do or that there is an international central bank conspiracy to pull all the stops to push stock prices up by 20%? Maybe everyone needs to watch a little less CNBC.
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And just to end this with a way overly optimistic opinion: this has been happening due to lack of liquidity, no doubt thanks to recent excessive regulation. Maybe, just maybe it will cause some people to wake up and let the financial institutions do what they are supposed to do.
Why do you think there is a lot less liquidity than it should be under normal circumstances in a market like this? Do you see excessively wide bid-ask spreads which is the classical sign of lack of liquidity? Or do you refer to the fact that there may be less liquidity than in smooth markets? If so why do you think it is the fault of excessive regulation as you put it? Isn't it more likely that in the current choppy markets the HFT guys took the fake liquidity away? I don't see the legitimate market makers pulling liquidity from the market. Oh and btw, the liquidity that went away is unregulated.
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Well we're back to Oct 2013 prices for the Dow. If it drops another 10%-15% prices are gong to get very interesting.
The Dow is a price-weighted index, you should not use it for any macro analysis / comparisons at all.
I'm not using it for macro analysis. I'm using it for prices. :)
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Well I am looking for smaller companies in Korea. The big guys as you say are easy to get. IB also has single stock futures for a bunch (10 or so) Korean stocks but they also tend to be the blockbuster companies of Korea.
It looks like if we wanna trade something else we need to open local accounts. In the US you at least have Schwab and Fidelity - they'll fleece ya but if you have a good idea you can at least execute it. If you have a double in the making, paying an extra 1% is not so terrible.
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Well we're back to Oct 2013 prices for the Dow. If it drops another 10%-15% prices are gong to get very interesting.
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When I head a lot of soothing I hold on tight to my wallet.
It reminds me of a scene in Liar's Poker. They were in the training class and a Salomon partner was going around the class asking trainees if they bullish or bearish and they were all spouting all sorts of ideas all over the place. Then the partner gets to this Japanese guy who's sleeping. The guy wakes up and goes like "I'm always bullish!" and the partner is like "That's the right fucking answer!"
They're just trying to keep the party going as long as they can.
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That's true. They pump about 10.5 Mbbl, but only sell about 7. The rest they basically give away for free at home.
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Jus a couple of points.
kfh227: Saudi Arabia's debt is about $14-15.
Uccmal: Saudi Arabia only sells about 7 million barrels.
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Closed more IWM puts and bought JNJ and XIV.
Thanks,
Lance
Just wondering.. what's your reasoning for JNJ? I sold it a few years ago for about 15% less than it is now. I like their businesses but I feel they kinda lost their way.
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It sure seems like it worked out very well for an arranged marriage.
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I saw that article over the weekend. It's basically lazy journalism with a couple of buzzwords dropped in. I wanted the 5 minutes of my life back after I was done reading it. Considered sending an email to the author to tell him how much of an idiot he is and why that is. But I figured that it wouldn't accomplish anything and it would be more of my life wasted so I didn't.
There's may analyses infinately better posted on this board every single day.
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Glass Steagall was repealed long before the 2008 financial crisis. Banks owned all sorts of stuff: insurance companies, leasing companies, real estate, physical assets. I don't think any of them owned any real industry probably cause it was too boring for them, but I don't think that they couldn't.
Plus if you want to get a little creative you could argue that GE Capital owned the industrial parts of GE.
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Ericoploy, I don't think you're diverging from the issue at hand and I think you're pretty spot on.
One thing that I think you left out is Berkshire's ability to think independently. This also relates to your comments about the financial crisis. Most companies follow conventional thinking - the "smart thinking". Optimized capital structure, strategic capital allocation, etc. At BRK they don't do that they don't do that they're happy to have an inefficient capital structure (lots of cash, little debt) to protect the businesses. The capital allocation is opportunistic as opposed to targeted. And they're always ready to give up a bit of return for a lot of safety - hold treasuries even is you get a 30 bpts less in yield.
Most other cos and especially the banks went the completely the other way. Highly optimized capital structure - lots of leverage, VIEs, buybacks, the lot. They held mortgage bonds rather than the mortgages they actually underwrote to get a couple of extra bps, AAA rated structured finance vs treasuries for 30 extra bps. Anyway, the list goes on and on.
This is also an important part of BRK. They are greedy but not so greedy that they risk the company for a few extra bucks. The ironic part is that this sub optimal and opportunistic approach to capital allocation turns out to be more profitable than the efficient approach.
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Actually Buffet is a bit of a hoarder. He likes to hoard companies. He just does it at good prices not at any cost like other CEOs. The ironic part is that because he does it at good prices he can hoard more than the others. But between buying back stock and buying another company where the returns are similar it's clear that he would rather buy the other company.
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Me too. Would live to see it there again.
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Across all accounts I'm about 40% cash. The agony of sitting on all that cash over the past 2-3 years is starting to pay off. I can ease into this market buying slowly as it goes down and get invested at good prices. If the market changes its mind and head back up then I'll still have cash and some extra profits.
Whether you should sell or not, I don't think today's movement should make any difference. If you have overvalued stocks then sell them. If you have reasonably valued good stuff keep it.
The only difference bad markets make is give you an opportunity to upgrade the quality of your portfolio. I think that's what a lot of people on this board should be thinking of.
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There's nothing wrong with buying BRK at 13x
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My portfolio is stuffed with great companies that are nearly all trading well into bear market values. The only way up the quality curve is to sell JPM, WFC, RY, to buy BRK.
RY to BRK would be a big jump up the quality curve.
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Of course BRK isn't a cash equivalent. And I must say I like the weakness in BRK it's pretty good value at these levels.
I don't know about the thesis that they're low on firepower. They still have about 25 billion in cash available to deploy plus all all the FCF that comes in. That's what an extra say 4-4.5 Bn a quarter?
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BRK, WFC, PCP, PM
I find the soothing talk a little scary
in General Discussion
Posted
I don't see much of your point here about debt and deleveraging? You say of debt has gone up by >1 Tn! No deleveraging! Ok which debt? How much has GDP moved during that time? Debt has definitely gone up since 1920s too. Are we more leveraged now than then? You may want to pay closer attention to these things.
Btw, household debt to gdp has gone down from 98% in 2009 to 80% now. Sure looks like deleveraging to me. I'm not gonna spend time now pulling the corporate debt numbers but those have gone down too. So how exactly is deleveraging not happening?
Regarding financial repression as you put it, I see no shortage of sophisticated private investors lining up to buy US treasuries.