rb
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Posts posted by rb
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Add me to the list of people that is amazed at the intraday recovery. I guess there's still a lot optimism in the market, buying the dip or whatever. The usual suspects are still running around - Netflix is up 4% now.
Also I think that with all the algos we have running around today the market movements will be more weird than in the past. It remains to be seen what will happen. I have a feeling that today will not the end of the story.
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AMTD just reported latency issues. This is yet another time when IB proves their superiority.
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You can buy anything...its like Thanksgiving Black Friday...only the wait was much longer.
Any ideas on which names have the highest bounce back potential? I am thinking BABA calls, JPM warrants, selling IWM/QQQ/SPY puts
This is not exactly Black Friday, more of a step in the right direction
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I don't think your computer is broken. Mine says the same thing. Plus DOW is down 4%. BRK down 4%, WFC down 5%
Oh and it looks that the market is recognizing the FFH hedges. They're only down 1%. Or it could be just Dazel buying stock ;)
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That was just a parenthesis. I could mention some more esp if markets drop ;)
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Ok, they're rebounding a bit but it's still a bloodbath in Asia. The US futures do not reflect such a dire situation for the open in the states.
I'm not as fancy with you guys with so many derivatives, just waiting for stuff to get cheap to buy. All I can say is that stuff still needs to drop a bit from where it is to get really interesting. Some names like BRK, ROST, DE, and WMT are closing in on that number.
My problem is that I'm running into position limits for BRK.
I may buy FFH. Btw, Dazel I think you're wrong. I think FFH will sell off, I got this feeling that FFH's equity hedges are not well known outside this board. But the one issue I have with the hedges ( and I know you'll disagree with me here) is that the only way they're of any value is if they're closed and collect some funds. If we stay on them and the market rebounds (eventually it will) and we're still holding them the gains will be gone.
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What does the buybacks have to do with the valuation. BK can do way batter doing distressed deals in a downturn that buying back stock. So if you can buy undervalued stock in a company that's adding crazy value why do you need them to buy back their own shares to make crazy profits?
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Mungerville, I totally agree with your approach of looking through everything. That's the way I try to look at it that way as well cause there's so many parts in there and none of them are like the other.
The one comment I would have regarding your thoughts are about your view on the equity derivatives. You're marking to some market the position. But those puts are European style and are so out of money that I don't see how BRK pays out any
meaningful amount on them.
All that being said having a rule of thumb about P/B to help with quick decision making may not be such a bad thing. I be it served a lot of people well. I just prefer the hard way ;)
Unrelated: I've re-done a deep dive on Geico for the past few days. It is unbelievable how good that business is!
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Fidelity doesn't have a brokerage in Canada
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I guess one way would be to open up an account in Korea.
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I'm so interested in ETFs (that would be easy) cause I don't like Korean baskets. Individual names is what I'm looking for.
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Does anyone know of any brokers or any way in which you could buy South Korean Stocks in Canada?
The closed I've found is IB which only offers single stock futures on a very limited number of names.
Any ideas will be much appreciated.
Thanks
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Roger Lowenstein - When Genius Failed
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The two column analysis is included in every annual report by Buffett. It was not just mentioned 20 years ago when the yield curve was different. I would assume the Berkshire insurance subsidiaries price their insurance contracts differently with short term interest rates under 1% versus 4-5% in the past. Following is Buffett's discussion of float in last years letter. He says the float liability is 'dramatically less than the accounting liability'. How much is dramatically less?
"So how does our float affect intrinsic value? When Berkshire’s book value is calculated, the full amount
of our float is deducted as a liability, just as if we had to pay it out tomorrow and could not replenish it. But to think
of float as strictly a liability is incorrect; it should instead be viewed as a revolving fund. Daily, we pay old claims
and related expenses – a huge $22.7 billion to more than six million claimants in 2014 – and that reduces float. Just
as surely, we each day write new business and thereby generate new claims that add to float.
If our revolving float is both costless and long-enduring, which I believe it will be, the true value of this
liability is dramatically less than the accounting liability. Owing $1 that in effect will never leave the premises –
because new business is almost certain to deliver a substitute – is worlds different from owing $1 that will go out the
door tomorrow and not be replaced. The two types of liabilities are treated as equals, however, under GAAP."
The way I see it is that the float liability is worth about 60% of the face value.
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More BRK
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If (us) Americans were smart we would welcome this chance to keep our precious resource in the ground and over time use up everyone else -s oil. I think Charlie Munger made this point. Its not going to go bad, keep it in the ground. Capitalism dictates otherwise though.
Very well put. Probably that would be the smart thing to do. Plus developed countries are at a disadvantage in extractive industries compared with EM countries due to higher labour costs. But also as you say you cannot make a capitalistic point to sit on an asset when you can make money off of it. Future oil prices would have to be astronomical in order to make sense in a DCF.
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That's nice but I think that history taught us that OPEC is really unpredictable so I don't think anyone knows what's gonna come out of these things.
But since we're speculating I'll throw in my 2 cents (why not right?). I don't think the Saudis are gonna cut. It doesn't make sense that they've started this shit storm to back down a little later when some get upset.
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I didn't want to start this thread in Investment Ideas because I didn't do a deep dive yet on this name so I can't provide much insight.
That being said I think it starts to look interesting here after taking a 50% dive off the 52 week high. While I don't think that the commodity parts of the business are that enticing, the Engineered Products division now makes up abut 1/4 of revenue. The Engineered Products division is similar stuff to PCP.
Since it's trading at book I don't think the price is very high.
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I must say I like the way you're thinking. Though we can probably all agree that history has proven that Texas oilmen never really learn anything.
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I think that the assumption that BRK hold the float in cash or near cash in incorrect. Yes, BRK tends to have a lot of cash around but why should we assume that all that cash is the float as opposed to the idea that some part of the cash is float and another is holdco cash waiting to be invested?
WB said that because of the insurance cos he wants to have at least $20B in cash, let's say that that he would be really comfortable with $30B and call that float cash. In 2014 the insurance cos had $27B of fixed income. That's $57B of cash and fixed income against a float of $84B so about 2/3.
I think that making the assumption that all the float is cash or FI significantly understates the value creating characteristics of the insurance cos and thus their overall value.
Also why would you count the float liabilities at face value when they are so long dated?
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I agree with this somewhat, but I have a hard time thinking anyone will let it get that bad - the Middle East needs the money to fund social programs. As the price stays lower, they have to pump more and will still be missing the target for funding those social programs while using up a limited supply of a valuable resource. I can see them holding out like this for a year or so - showing the industry who is boss, pushing companies into bankruptcy, curtailing capital spending, forcing consolidation, etc., but I can't see this being the long-game for the middle east which must know that they need these social programs in order to prevent regime change.
I don't understand this view that the Gulf states have to stop their craziness because they have to fund social programs to stave regime change.
If one looks at Saudi Arabia, a quick calculation shows that if they don't cut funding to any social programs and continue to keep oil prices at these levels they will run budget deficits of around 10% of GDP. Now Saudi Arabia basically has no debt and it has a savings fund roughly the size of GDP. National savings rate in Saudi Arabia I think is also around 40% of GDP.
I don't see why a country with finances like these cannot run 10% deficits for a few years. Oh and other Gulf countries like Kuwait and Emirates have their finances in even better shape.
Edit: The Saudis also have ways to also lower that deficit number without impacting social services. They could slow down arms purchases or build a few gas power plants just off the top of my head.
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Thanks! I appreciate the comments. Not trying to be disagreeable, as I definitely respect your view. I also don't think its an especially good idea to buy low quality oil names (I own zero oil stock right now other than my employer's in my ESOP, which I sell ~once/year). My only contention is if you want a highly leveraged bet on oil prices, the junky names are better. Based on how much costs have come down on the projects I work on, I suspect oil prices might be a "lower for longer" phenomenon, although a rebound to $60 is probably required for supply to start really growing again. I say that, but I've been in the industry long enough to know I can't predict prices.
CNQ is on my watchlist, I bought calls in late 2013 and made a bit of money, but if it ever gets to truly distressed pricing it is definitely something I'd add. I have a lot of respect for how they run their operation, and think they're the only operator in Canada that comes out of every downturn better than when they went in, which is a big benefit in a cyclical industry. They're not trading anywhere near where I'd consider adding though. (And working in oil and gas right now is giving me a new appreciation for cash as a portfolio component!)
Bizaro, I don't think you're disagreeable in the least. Actually I think we see things the same way - maybe there are a couple of shades of gray around the fringes. From what I understand both of us think that the crappy producers and the high quality ones are overvalued in this oil price environment. I also think prices will be lower for a while. This will probably put some (maybe more?) of the marginal high cost producers out of business. I'm not that familiar with the lower quality US names. But oil cos in Canada that were trading based on the dividend but had to issue shares to fund the dividend are toast IMO.
Also I think high quality names will come out of this better, but the investment proposition will be much more attractive if XOM would trade around 50 and CNQ around 20.
My posts result from the fact that I am a greedy bastard. I don't think that the long term price is going to be around 40. So I want to make some money off of that. But it's frustrating. I can't see how, because I also share the view that that prices will stay low for a while. So the low quality guys aren't that cheap, the high quality guys aren't that cheap, and the physical stuff will eat most of the profits with the negative carry in the medium term. I just can't see a way to make nice safe money and it's frustrating.
Maybe the best thing is to give it time and see if better opportunities present themselves.
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You see that's the same question I ask myself all the time as I like to buy more. Also 1.4 P/B pre PCP deal is not the same post PCP deal. But also one must ask oneself where is the line, what is a right BRK. I'm pretty sure I can't just be 100% though that has worked out very well for some people in the past.
I have an extensive finance education and I know that those Portfolio classes didn't teach me anything. We as value investors have to figure out these thing for ourselves.
Who knows, maybe CoB&F will get a Nobel Prize
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This sounds like a case study for Fooled by Randomness. If you look at the returns from a selection of other big cap names from that period, you will find that a return of 100% is unexceptional. Compare with UNP, WFC, BAC, AAPL, GOOG, AMZN...
The real insight in this case was that the risk/reward was dramatically skewed, relative to the market. Allan Mecham had this insight. He borrowed on margin and made BRK 60% of his portfolio. Rainforesthiker had a similar insight.
Of course you can capture the "value premium" without any special insight. That is a perfectly rational way to invest.
You make a great point - at least mathematically speaking. But that's neglecting the margin of safety thingy. At that point in time I also considered all of the (except BAC and AAPL) and looked very deeply into UNP, WFC, and GOOG. I didn't want to get GOOG (of course a mistake in retrospect) and I thought that I get enough of UNP and WFC by owning BRK. I didn't look up how much each of those went up compared to BRK, but my margin of safety in my decision of BRK was pretty large. Much larger than it would have been with any of the other names. That helps me sleep at night and I like a good night's sleep.
Also my decision wasn't really an accident. You named a few companies that performed as well. I can probably name 100 more that didn't, so what's so random about that? I don't decry any people that made any money with any of the other names. So what's wrong with a situation where you make a lot of money, safely, in a way you're very comfortable with? Why do I need to worry about the market in a situation like that?
What are you buying today?
in General Discussion
Posted
I don't know whether it'll go lower or not. My guess is that it will. Still some stuff became decently priced so I picked up some. while still keeping a lot of dry powder.
I think one way for one to gauge whether they know or not what the market will do is how the felt today around lunch if they weren't quick on the trigger this morning.