Uccmal

What's wrong with 407? Badly may be overstated. It makes money, but I cant get clear how well it does. The numbers are published. To me it looks like it is being bled dry. Mostly, I have been working on the premise that SNC is, and has had trouble getting out of it. There have been various attempted sales. The CCPIB has picked up stakes over the years but their target return is lower than a private company, and I expect they have reached their buying limit. Anyone who buys it doesn't get the same returns the initial buyer (SNC, Cintra) assumed they would get from the asset. So, they are stuck with it, and have no option but to make it work. In this low interest rate environment that is okay for now, but if their bonds have to be issued at a higher price then the squeeze could start. Since we have been operating in a declining interest rate environment since 1999 it hasn't been overly painful but the lack of buyers stepping forward to buy part of Cintra and SNC's stakes, that have been shopped, kind of indicates that they cant get the prices they want.

Are our memories that short? ETFs were tested and failed miserably: http://www.marketwatch.com/story/heres-what-may-have-caused-the-flash-crash-in-some-big-etfs-2015-08-25 That was August 2015! Just over 1 year ago. Off the top of my head, there are at least three potential issues: - liquidity of underlying doesn't match liquidity of ETF - prevents arbitrage from working properly - panic or flash crash uncertainty cause market makers and HFT to back away - prevents arbitrage from working properly* - 1987 style crash - where programatic ETF trading causes the underlying to crash. Setting off a vicious circle of selling. These issues are easily solved by: - avoiding stop loss orders - only buying most liquid ETFs with liquid underlying assets - buying and holding ETFs for multiple years to ride out flash crashes - structuring portfolio to survive flash crashes (avoid leverage, barbel approach, cash optionality) The market structure, including ETFs, is very fragile. Plan accordingly. * Interactive Brokers, for example, was unwilling to act aggressively during the flash crash because there is high uncertainty whether the exchanges will cancel orders. The arbitrage could blow up spectacularly if the exchange cancels half of the arbitrage arbitrarily and after the fact. * HFTs have crowded out Market Makers. Unlike Market Makers, HFTs have no obligation to operate in chaotic markets. Probably wasn't paying attention. Likely looking at what I could buy rather than a cause.

I suspect that those nifty features like air refueling, ability to withstand the EMP from a nuclear blast, ability to defend against missiles and ability to conduct a global war from 30,000 ft add a little to the price tag. In addition I suspect that a good chunk of the budget goes to the Air Force for planning, design of features, etc. That would be brown dollars not real cost since they'd still probably pay those people anyway even if they weren't working on this project. good point. I suppose someone will have to point this out to him at some point.

Your so living in the past.... :-) Hilary is gone, gone, gone.....

"$2.9 billion still seems like an extreme cost for 2 airplanes, but not sure where trump is getting $4 billion from (other than that he just makes half the shit he says up)." lol, Half... most? With most politicians you cannot often tell when they are full of it. At least with Trump we can assume he is lying, or exaggerating, until proven otherwise.

Selling of the fund but not the underlying? Market makers will make a killing arbitraging by buying units, converting to the underlying and dumping at market. Thats one outcome, and it would get arbitraged out pretty quickly. Probably happens more often than we are aware of. This is the sort of area that quants operate in. In general the heavy movement toward ETFs has not been tested in the markets yet. I would expect in a panic that they are going to exacerbate any volatility to the downside. ETFs have the potential to become the leaders rather than the followers in a rapid market swoon, wherein the selling of smaller etfs may actually result in the etf having to sell underlying stock which of course drives prices down further. Generally known as the law of unintended consequences, or too much if a good thing. In general I would expect market volatility to increase due to the ETF takeover. With conventional mutual funds and pension funds you at least had committees, mandates, and procedures to follow for market downturns. ETFs have removed that buffer. I dont expect the average investor to behave any differently than they always have - you know - buy high sell low. Added to all this is the reality that newer investors, including many on this board, have no experience with a serious market crash. The longer we get away from the last crash, the worse the next one is going to be. JMO.

Exactly, Italy has always had fiery politics. It amazes me that it runs as well as it does. A testament to the Italian work ethic. My personal impression from being there, for a month, a couple of years ago, is that everything runs 'Italian' style. Underneath all the blather and BS is one of the worlds stronger economies.

I really like this company. They are incredibly well run. I hold Bep.un as a yield play, run by its own CEO, but answerable to Flatt. I would buy BAM on a pullback. Its on my target list. Long term infrastructure investment and operation is a high level, tricky, and complex business. Being really good at it is hard, and BAM is good at it. It has taken Bruce Flatt years to assemble the skill levels necessary to do this well. It can be done badly so easily - Just ask the operators of Highway 407 across Toronto. The skills needed at a high level encompass financial, engineering, political, and legal. As long as management remains intact and keeps building a deep team they will do well. I think the CEO is humble enough to do this. And he has a really long runway if he stays on, at 51 years old. Dude apparently eats lunch when he's around, in the mall food court below the office building, with any employees who may be there.

Isn't it like 5 am in Denmark? Cheers, Al

I see Austria stayed the course this weekend. Maybe, just maybe, voters everywhere else are looking at the US muckety-muck, and realize that each of them as individuals can elect a creep, by accident. Speaking of Italian creeps; did Trump & Berlusconi ever hang out togeather? Funny, whenever I look to a comparable recent leader to the States' new Jackass, I think of Berlusconi. Voters are so stupid sometimes. God give me the strength to ignore these embarassments to the human species.

I see Austria stayed the course this weekend. Maybe, just maybe, voters everywhere else are looking at the US muckety-muck, and realize that each of them as individuals can elect a creep, by accident.

Alex Trebek, Joni Mitchell, Ivan Reitman; Elon Musk (sort of); Ted Cruz (kind of, and sorry), Mike Myers; Paul Anka; SCTV: Martin Short, John Candy, Harold Ramos; Rush; The Guess Who; half The Band; Sorry about Nickelback and Beiber

Well that's pretty condescending. I have a very deep science background, but I am also a pragmatist. Tell me Jeff, Do you have children? Do you drive any kind of car? Do you live in more than a one bedroom apartment? Do you fly? Do you drink coffee, eat food? In this world we need fossil fuels as we transition, and the need for fossil fuel based products will be with us a long time. Since Canada is uniquely suited as a provider of fossil fuels without the nasty social baggage of the mid east, and others, I think this is a good thing. And if you think turning over our energy security to someone else is a good thing then go live in the mideast, Nigeria, or Russia and see what life is like. And, we are reducing our footprint as we go, and rather rapidly. Ontario, like it or not has phased out coal power. The rest of the country is heading that way. Coal, if you read your science, Jeff, is the single largest contributor of greenhouse gases. Getting rid of this in favour of anything else is a step in the right direction. Oh, and then there is the issue of manufacturing, including steel, solar panels, and Teslas. It isn't solar that is providing the plastics, or energy, for these products. I dont know if you looked out the window today but there isn't alot of solar power going around right now, anywhere in Canada, and the Northern US. What works in southern climates is not necessarily the right thing for Canada, or the norhern US. Al, I'm sorry that it was perceived as condescending. English is not my first language and I can have some difficulties expressing strong ideas with the right tone. But I must admit that I am pretty tired to see some 1st degree analysis looking at really short term benefit on a value investing board where people should be able to think further than their little financial short terms benefit. People here are intelligent and it amazes me to see some weird view about climate change and environmental protection. And I must admit that Carboard doesn't show any tiny bit of understanding what is going on with climate change and it annoys me. When I hear about radical environmentalist and stuff like that, I always find that what is radical is to deny what is happening and keeping our head in the sand. Wanting a better world with less pollution and sustainable way of life dont appear radical to me! I must also admit Al that I really appreciate your contribution here and I do not challenge your background. To answer your question, we have one child, we live in a reasonably-sized townhouse in an urban area where we do shop locally most of the time, walking or biking. We commute by bus, metro and we have a car at home. It is a Chevrolet Volt, a plug-in hybrid which runs on both electricity and oil. Our electricity at home is provided by nearly 100% percent renewable energy. Yes we use energy, although I am always trying to increase our energy efficiency for our home and transportation, yes we do use some oil, and yes we travel by plane sometimes. I do offset all my transportation carbon footprint because of course, I still use some fossil fuels to live. I am not saying we don't use them and don't need them. They have been incredibly important and useful to humankind to get us where we are and I don't want to contest that. And I'm not saying the transition should be instantaneous. But I am trying to do the most I can to reduce my fossil fuel consumption and to accelerate the transition. The faster we will get out of fossil fuel, the better we will be. I just think that we should put a lot of energy as a specie to fight climate change and reduce our energy usage and transition to a post-fossil fuel world. I can not just accept that the transition will take time, I wish we could try altogether to accelerate it, because we don't have much time. The cost of inaction will be far greater than the cost of action, so why not put ou effort on this. I totally agree with you that it is not because a solution is good for a country or a region that is good for everyone. And of course we do not fossil fuels for plastic, but that is not the larger problem right now. In Canada, transportation is the largest contributor to our emissions, so I think that reducing our petrol consumption is a no-brainer. And concerning the pipelines, we do use less petroleum as a nation that what is produce already, so we don't need more. I am not asking to close the shop right now, but that is not possible to keep adding more and more production and emitting more and more greenhouse gas while we are also trying all we can to reduce our emissions. We will absolutely miss all the target and I am not really positive about staying under the already dangerous 2 degree Celsius limit. To quote Elon Musk, do we really want to do this big experiment, do we want to take that risk? Finally, concerning Canada and the Trudeau decision, a text in French for those who can read it that I mostly agree it and that summarize my thinking on this matter: http://ici.radio-canada.ca/nouvelle/1003083/trudeau-pipelines-extraction-avant-environnement-fillion And you know Al, and everyone, I would rather see Canadiens putting some effort to reduce the demand instead of cutting the supply. A consequent carbon tax, real objectives like really increasing the mass transportation and active transport share, a fast switch to EVs lie in Norway where the market share is over 30%, getting rid of coal like Ontario is doing, etc. If we were really showing leadership, I could be less critical of this Trudeau decision. But still I think that we a limited amount of capital, we should put our money elsewhere than in pipelines that will be there for 50 years when we have to be out of oil at this time. Hi Jeff, I get you now. English is my first language, and I have trouble expressing things without being a pr*ck sometimes. I dont disagree with most of what you have said. In fact in principle I disagree with the pipe to the coast. I am okay with US Canada internal pipe to secure our energy futures while we transition. Not only do I disagree with a pipe to the west coast, but I think it is a terrible business decision. It will take years to get permitted, and built, and we, or whoever finances it, is taking a huge risk of ending up with a stranded asset. Its going to get caught up in court anyway, just like Keystone will get caught up in Nebraska. Alberta has just pushed forward the mothballing of coal fired power plants and is going to be paying the companies to not produce. How stupid is that? We certainly dont want to end up on the hook to pay a Kinder Morgan for decades not to move oil. In my opinion Mr. Trudeau is sort of middling as a leader but that is what you get with dynastic politics. Essentially, cabinet approved this as a vote getting measure in Alberta. They can say they tried to get it done, but then not actively facilitate it. And frankly, Alberta knows they have to reduce reliance on fossil fuels to mitigate this boom and bust cycle. However, I have no problem owning stock in fossil fuel companies. It is a product we still need, and use in multiple ways. I also hold stock in two companies that are actively involved in renewables. I am quite happy to part with my oil stocks when the writing is on the wall. Chances are the companies will have transitioned in the meantime to energy companies. And finally, my families footprint is huge, relative to yours. Would I like to reduce it? Absolutely, but it is easier said then done. Having an electric car would help but were not quite there yet. Heating is problematic. Any alternative to nat. gas is very expensive. Flying is another problem, entirely. The near future is not showing me a lightweight way to power planes. I think getting the world off coal for power production is a biggie. And I mean everyone. The world is heading that way anyway, but it could be accelerated. I wouldnt buy stock in a coal company these days regardless of the idiot PEs intentions. Nuff said, for now. Cheers, Al

Well that's pretty condescending. I have a very deep science background, but I am also a pragmatist. Tell me Jeff, Do you have children? Do you drive any kind of car? Do you live in more than a one bedroom apartment? Do you fly? Do you drink coffee, eat food? In this world we need fossil fuels as we transition, and the need for fossil fuel based products will be with us a long time. Since Canada is uniquely suited as a provider of fossil fuels without the nasty social baggage of the mid east, and others, I think this is a good thing. And if you think turning over our energy security to someone else is a good thing then go live in the mideast, Nigeria, or Russia and see what life is like. And, we are reducing our footprint as we go, and rather rapidly. Ontario, like it or not has phased out coal power. The rest of the country is heading that way. Coal, if you read your science, Jeff, is the single largest contributor of greenhouse gases. Getting rid of this in favour of anything else is a step in the right direction. Oh, and then there is the issue of manufacturing, including steel, solar panels, and Teslas. It isn't solar that is providing the plastics, or energy, for these products. I dont know if you looked out the window today but there isn't alot of solar power going around right now, anywhere in Canada, and the Northern US. What works in southern climates is not necessarily the right thing for Canada, or the norhern US.

I predict you're wrong. Bieber is Canadian. But whatever. Us Canadians are just glad he moved to the US. He's your problem now. Make with him what you wish. Sure but that won't matter after the U.S. and Canada merger in 2038. A joke I hope... or I will be getting my guns out.

Well, taking out 10% a year will kill you. As Jurgis said, something on the order of 3-4%. Of course, when you are making sure you are fine in the bottom 1-5% of outcomes, that means most of your actual outcomes will go exponential. That's why I feel like you either barely make it (or not) or you are incredibly wealthy. And the difference is a pretty thin line, so might as well be on the other side of it. That seems to be the way it works. People over at ERE (early retirement extreme) use firecalc which basically runs a hundred lines or so each representing a different start year, of real returns from history. If you stay above the line until your dead you are fine, well, except that your dead, but I digress. I lurk over there (ERE) from time to time.

Must be your guys fault. I didn't vote for him. I logged a protest vote with some other party.

Stoned again Scott?

Thankyou both. They were good reads. I love this piece: "Move on to failures of airlines. Here's a list of 129 airlines that in the past 20 years filed for bankruptcy. Continental was smart enough to make that list twice. As of 1992, in fact--though the picture would have improved since then--the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero."

R-O-I-C. So far, I haven't found any mention of ROIC in Norwegian's presentations. I haven't run the numbers myself, but it looks like they are buying growth and losing money after including Cost of Capital. Because they are willing to buy uneconomic growth, they can buy the newest, most fuel-efficient airplanes. -- Labor doesn't seem to be the answer (at least not directly). They try to circumvent unionization by outsourcing to 3rd parties. They hire pilots in Singapore. They setup their subsidiary in Ireland to avoid Norwegian labour regulations and taxation. So it seems like they are aggressive. And the regulatory regime is rightfully skeptical at Norwegian's aggressive use of loopholes. But beyond their labor arbitrage games, their labor cost advantages seem to come down to buying high-density 787s. If a 787 has two pilots, the airline flying with 344 seats is going to have a huge labor cost advantage over the one with 252 passengers. As I mentioned previously, that's not a sustainable advantage. Why aren't other airlines copying this strategy? The ROIC doesn't seem to be attractive. And they are leveraged beyond belief. This demonstrates why Airlines are a lousy investment, or at least a deep cyclical. Up starts come on the scene with regularity. I like West Jet as an example. They kept labour costs low, and flexible by using profit sharing to keep unionized labour out. They also ran with a bare minimum of planes in the air to meet their flights. Anecdotally, I was in Calgary a number of years ago, and we flew West Jet. On our return, there was a major storm in the east, a day and a half earlier. Our flight got delayed for 12 hours, at least. The reason for this was that a couple of their planes had been stranded out east. This put the entire system behind the eight ball. They didn't have any extra capacity in the system. Every plane they had was working all the time. Air Canada, on the other hand had no delays - they simply slotted in extra planes and staff, which of course costs more. West Jet could also sideline their labour without union repercussions. They kept every plane working non-stop. But this is not sustainable on a larger scale where the effects of bureaucracy start to take over. Right now, the major airlines we are discussing have a huge tailwind. They have been able to squeeze their labour force for a few years, have dirt cheap fuel costs, and have squeezed the customers. Rising fuel costs reduce profitability - you can add surcharges but customers will reduce the number of flights in the face of too much price increase. The honey pot of profitability starts to look pretty desirable to the labour force. Customers will push back: In the last few years we have had baggage fees added, and meals eliminated - when word around how well these airlines are doing there will be push back. These companies are at, or near, the top of the cycle in terms of profits. As with any cycle predicting how high it goes, or when it ends is tough.

Q: How do you know you made a mistake? A: Maybe you didn't. Maybe you got out when YOU should have. My biggest selling mistake was in late 2009 and 2010 when I sold my calls on HD, SBux, and Axp rather than calling the stock and holding. There was a very messy backdrop but I wish I had held. I had Ge and WFC as well which have not done nearly as well, but probably better than some of my later investments. You really need to define what kind of investor you are. Later Buffett: buying compounders, where there is supposed to be no sell decision even though he gets caught sometmes. Walter Schloss: He bought cheap and set sell targets. He did better than 15% for eternity for his partners. He would always sell at the target. He stated that if they kept going up that was okay, and the next guy needed to make some money too. He wanted companies to suceed. There used to be a class where he lectured posted in the Ben Graham value investing school website. My goal after 2013-14 has been to try and buy compounders when something has gone wrong (macro or micro) and never sell. I am pre-identifying them so I can buy when they get cheap. addendum: I took a quick look at tse, nc, and pcln. Two look to be fairly cyclical (tse, and nc), and pcln is to my mind unpredictable, operates in a commodity style envrionment. So, I believe you did the right thing, if its any consolation. Sometimes, what I will do in these situations is to take money off the table as I go. 16% in a year, while holding all that cash is nothing to sneeze at.

I don't think that pilot costs are a very high percentage of the overall costs. Then all you need a couple of accidents to put a lid on that idea. Also we went down from 3-4 pilots to 2 pilots per plane and the economics of the industry didn't really change. I think if we're talking about mass transportation drones as the cure for airlines we're really grasping at straws. I would have a very hard time getting on a plane that was being flown remotely (if the pilot has no skin in the game & is having a bad day...) I have a hard enough time with planes as it is. :-) And I have similar concerns with driverless anything.

I dont think markets do sideways for very long. I dont see anything on here that looks flat: http://www.macrotrends.net/2324/sp-500-historical-chart-data

It's funny - Donald Trump gets elected president, rates rise to where they were at the beginning of 2016, and everybody is back on the "runaway" inflation argument even though nothing has really changed on that front. Donald Trump isn't printing trillions more dollars. Donald Trump isn't personally giving everyone in the U.S. a raise. Donald Trump hasn't weakened the dollar to the point where import costs are soaring. I know what rates and currencies have done. I've witnessed and watched it. I also know that global central banks have spent trillions over the last 5 years trying to generate inflation and have collectively failed so why do we think D.T.'s election portends a great impact that tens of trillions of dollars failed to achieve? The way I see it, there's three possibilities: 1) Donald Trump is a REAL game changer and we're going to see inflation that was not achievable under coordinated central bank action OR 2) We were on the cusp of inflation regardless because inflation is a monetary phenomenon OR 3) Nothing has really changed and the rates market will resume they're downward trend once markets figure this out D.T.'s spending package hasn't been approved, and if it is, is for $1T over 10 years. We've seen 10x that amount in global central bank action over the past 6 years with near 0 impact on inflation thus far. Further, the spending demographic shift of retiring boomers cutting back is still a drag on growth and inflation for the next 2-3 years, minimum, as is the lack of corporate investment over the past decade. Dollar strength is also disinflationary for all the goods we import (A LOT) as well as corporate profits. To the second point, banks are still sitting on tons and tons of excess reserves and most of the money the Fed has printed is not being circulated. Any money that is being circulated in financial markets is being pulled back as the Fed is hiking rates, long-end rates have risen to 2015 levels prior to the January/February panic, and the dollar is hitting 13 year highs. The velocity of money is still falling, real economic activity is still contracting, and the inflation we're seeing is off a low base AFTER oil prices hand tanked 40-50%. Of course we'd expect this figure to accelerate some once oil prices steadied/rebounded just because of the slow inflation in other things like rents. So that leaves us with the third option. As we've seen many times in the past (i.e. taper tantrum, the end of each Q.E. cycle, etc) the markets are over-reacting and likely to come back down. I would not be at all surprised if rates make new lows over the next 2-3 years and D.T. fails to prove the panacea that 10s of trillions of dollars in printed money couldn't achieve. Having massive amounts of debt is deflationary and every day the world has more of it than it did the day before. D.T.'s plans call for even more. Deflation is still the threat - especially in the event of a recession. Very good post. IMO, this whole bull market is built on a house of cards. To add to this: fuel prices. These added 400 B per year for the last two years to the US economy and presumably a lesser amount to the EU. As energy prices rise, which they will, with or without OPECs cooperation, any benefit of stimulus will be counteracted by higher input costs everywhere else. Call me cynical but at some point in the not too distant future the 'backtracker' is going to be in political hot water, and everyone will be distancing themselves from him. Sorry, but a 70 yr. old huckster doesn't change. The markets were highly valued before the recent run up. So, is deregulation , tax cuts, and stimulus plans, already in the market prices? If the backtrackers plans dont come out perfectly, the sh*t hits the fan. He is fighting a demographic storm and the decendance of the USAs economic power all at the same time. I mean, aside from Canada and Mexico, does the rest of the world really care if the US goes more protectionist? Trans Asia/EU/Africa trade is huge and self sufficient without America's involvement. I dont know what this means for Fairfax and their macro bets. They may still be right on deflation. I just dont think they are very good at this, because you cant be good at it. Three or four times lucky in 30 years doesn't make a track record.

Air Canada, for example, is up 1000% in the past 5 years. So, it can be attractive if you time the cycle correct. The question is why NOW. Most people would agree that airlines are at or near a cyclical top. To me, the airlines look very expensive today. They must see something we don't. Right? If you time the cycle right. Had you got in in early 2009 you had 4-5 years of pain to endure. I personally dont know anyone who can endure long term pain like that. It works okay in a Schloss- Graham situation but as a large enough holding that might really move the needle it would have been torture. The other thing about Ac is that in 2007-08 the stock was higher than it is now. And it pays no dividend (at least right now). So, had you invested at the top or near top of the cycle you would be down 30% on inflation, and god only knows the opportunity cost. I dont see how the big US guys are any different. I looked up all four of the others and the charts mirror AC's. Delta, luv, and AAL pay paltry dividends, and UAL has none. It is interesting how the stock charts lag the price of fuel. Fuel up, then the stock price drops. So, we can expect airlines to come off as fuel prices rise, perhaps? As to the unions. It isn't just the pilots. Its every union that works in an airline. Everyone in baggage, mechanics, and other services need to be heavily trained, skilled, and bonded. They may not have had bargaining power for awhile but they will have it now. There is a notion going around that costs may come down should planes be piloted from the ground. But there is still an added layer of labour in a different area, that costs just as much. And pricing power would erode with automation. They would save on per diem costs for pilots, but thats about it. Pure and utter speculation: Buffett is prepping to buy Southwest and trying to obfuscate his interest. I agree, alot easier to buy a diabetes drug provider.