Cigarbutt

It seems this thread has been going on forever but here's some anecdotal information. We live in close suburbs to the Montreal area and our area has shown similar (although less marked) pricing trends in real estate versus some other parts of Canada (ie Toronto and Vancouver). Also, foreign capital is not a significant factor and zoning issues continue to have relatively limited impact. Our second-door neighbors recently put their house for sale (virtually) on a Thursday night at 20h. In the following minutes, there was an avalanche of interest with people being ready to pay variable levels of cash simply to obtain priority to have access to the owner and complete the purchase the next day! End result: the winner of the bidding war obtained one tiny and non-material concession in exchange for all the present owner's requirements including a 7% price over the listed price (which was very high to start with), a necessity to close the deal with official paperwork within 48 hours of listing and with minimal or no recourse from the buyer's point of view. When i talked to my neighbor yesterday (he made his money managing large real estate projects and investing in real estate, and he knows the local residential market well), he candidly said that he couldn't explain the frenzy (his word). He didn't seem to be aware that the Bank of Canada's share of total federal debt bonds increased from 15 to 40% in the last 12 months and that the BoC has "absorbed" 95% of all federal debt (bills and bonds) in the last 12 months and maybe i'm the one who worries for nothing when avalanches (man-made or natural) haven't occurred in such a long time. Still, i remember that we had visited that house in 1996 (it was new then) but had chosen the one two doors down. Then, we had negotiated the purchase over a period of three months (!) and the agreed-upon price was clearly at a significant discount to intrinsic value.

The work mentioned by KJP involved healthcare workers (certain risk to generalize conclusions) but the percentages mentioned involved both symptomatic and asymptomatic disease and the study was done at a time when the B117 strain was dominant in general UK community transmission. At this point (that may change over time), there is no definitive and direct evidence answering your question. When studies are made in initial vaccine trials, design setup involves to focus on efficacy of vaccines for individuals. Testing for efficacy against community transmission or the formation of clusters is a completely different ball game. At this point, given the well established efficacy of vaccines at the individual level, it would be problematic (one could say wrong) to set up randomized controlled trials with a control group not receiving the vaccines. Some suggest doing human challenge trials (there are many individuals ready to volunteer for that) but this is also problematic. So, to try to answer the question, one could use observational studies which are less robust and may take a while to accomplish at a time where the level of evidence for transmission (indirect combined with already established knowledge about other vaccines) is strong enough to use vaccines and inflect disease burden curves at both the individual and community levels. The community transmission evidence for vaccines from the past for example has been done for varicella. It's not surprising to find that transmission efficiency is in correlation to efficacy at the individual level (sort of the common-sense inference mentioned above). You may be interested to know that vaccines used for the HPV (vaccine given to young girls to prevent human papilloma virus disease, ie to prevent the sexually transmitted disease and the associated uterine cancer risk) is used based on that very premise (ie boys also get the 'benefit' even if they have no uterus). Does your question matter? i guess that individuals who are favorable to vaccines will not wait for such community transmission evidence. i also guess that it may matter for a very small portion in the hesitant group. However, IMHO, this argument (attempt at rationalization of a process that is not; BTW it's OK not to get the vaccine, whatever your 'reasons') is a typical exploitation of uncertainty and factors hard to prove/disprove when the underlying thought process has nothing to do with the specific question. This has been a recurrent theme with the virus ie the 'false-positives' and CT-threshold 'questions'. Science and beliefs (like oil and water) don't mix well together. The idea is to exploit the confusion related to uncertainty. This aspect was also well covered in the Galileo trial. And it took centuries for the water and the oil to (partially) separate.

^i guess 'political' is the wrong word. If your conclusion is based on a belief or a set of ideological (and potentially dogmatic) ideas, it becomes very hard to 'argue' based on facts and sound analysis. Solid evidence is building, showing that the efficacy (from stage 3 trials) is materializing into efficiency in the real world (Israel and others). The evidence is also building vs a dramatic decrease incidence in developing the disease (viral load, symptoms etc) and so transmission significant decrease can be reasonably expected. In Israel (also seen in the US and locally in my area), the average age of hospitalized has gone down by 10 years or more, matching the age-related protocol (older to younger) and general 'permeation' of the vaccines for those who want them (favorable and hesitant-favorable reaching critical mass) into younger cohorts. For the US (see data below), there is a residual path to herd immunity and another wave forming. Note that recent data is developing and the following comments include a personal input taking into consideration hospital reality now (hospitalizations are rising and will rise for some more time). The rise in hospitalization rates in older groups is muted, essentially because most are vaccinated (also some people are dead already and cannot die twice) whereas the hospital rate for the younger groups (especially the age 50-64, incomplete vaccinations) is going up significantly. The Canadian data shows the same thing. CDC COVID Data Tracker Concerning a related topic, comparing Sweden to Norway/Denmark for vaccination rates shows a comparable pattern and it's a reasonable time for a post-mortem. Somebody did that (see herd Immunity section): Contrarians Risk Meeting Their Waterloo in European Stocks - Bloomberg It's necessary to look at the larger picture and Sweden has remained (marginally) more open and that may be related to some benefits (schools, social fabric, other health problems) but their covid health burden to aggregate economic costs represents (IMO) an opportunity to learn from a mistake. Sweden still did better than many relatively comparable countries (and my area) because of pre-existing social and institutional factors but i think they took a relatively poor path compared to immediate neighbors. All in all, vaccines are proving to be a very effective tool. For ivermectin and others, more work needs to be down but from an opportunity cost point of view at this point, ivermectin (and a few other options) look like rotten apples. Ivermectin, Convalescent Plasma and Hydroxychloroquine: One Year of Rotten Apples | Office for Science and Society - McGill University Final note: Thank you USA. Your country has delivered extra doses of the Astra-Zeneca vaccine to my area and, after quite a transparent discussion, people responded strongly to announcements and lined up to get it (vaccine made available to ages 55 and more). There is a lot of work going on about the platelet-related clot problem and there may be a very small risk (likely much lower than the risk to develop a a blood clot when taking a plane for instance).

^QE is simply an asset swap, a swap that doesn't square well with points 1), 2) and 3). There are no clear upper limits to QE as long as technical (financial plumbing) issues are adjusted (ie bank ratios etc) and unseen side effects remain unseen. Restraints at this level have to be intrinsic (the 1913 Federal Reserve Act is interesting in that regard). There are two 'monetary' cycles (the inner Fed to banks cycle and the real economy cycle) with an intersection in commercial banks and subsidiary dealers. The central banks are finding out that they have very little influence on the real economy cycle in terms of the banks' willingness to lend or of the real demand from market participants, apart from low interest rates which may be considered as a sign of sophistication or recklessness. i guess we'll eventually find out. The most sympathetic interpretation is that central banks' actions no longer have real effects but i wonder if real consequences are only delayed (this is typical for diabetics, drug addicts etc)

It's not clear if this is a mainstream topic or even relevant (and available time for this area is kept under 1%) but this is getting really weird. No? There's this recent piece which some may find interesting (it contains some interesting bank data and suggests an unusual solution) and which reveals how 'disconnected' (IMO) monetary authorities have become. The author (who likely is very bright and has noble intentions) basically suggests (to 'solve' the SLR technical features related to our new monetary era) to the Treasury to issue extra debt (overfund) to 'others' and use the cash in order to buy the treasury debt held by the Fed as a result of cumulative QEs. In the early 2000s, American monetary guiding lights went to Japan to tell them that they were extending and pretending.. https://voxeu.org/article/unstuffing-banks-fed-deposits-why-and-how

It is an odds game and you can make your own assessment. It's still interesting to see how people evaluate low probability events and how context matters. There is a lot of noise now (maybe some underlying signal) about the Astra-Zeneca vaccine and the related 'thrombosis' risk. If there is a causality risk, it is extremely low, much lower for example that the thrombosis risk that women get exposed to when starting to take the birth control pill. Many people are refusing the A-Z vaccine based on that specific risk. Do you know many women wondering about their thrombosis risk when taking the pill? Small addition: i just saw some work suggesting that many of the 'long-covid' population start to feel better after the vaccines. Humans are fascinating.

Isn't this statement reflecting the spirit of this (investment) Board in general? An interesting aspect (opinion based on interpretation of presently known facts) is that most people aged below 50 who are reasonably healthy and who get vaccinated basically are getting vaccinated for the benefit of others. It was something that Alexis De Tocqueville noticed when he visited early America (many people will tend to do the 'right' thing especially if they're not told directly to do so).

From the link: "Berkshire Hathaway is offering a five-year bond at 17-20 basis points over mid-swaps, which at current market levels is equivalent to a coupon of about 0.2%. The deal also includes 10-year, 15-year and 20-year notes, with expected ratings from Moody’s Investors Service and S&P Global Ratings higher than those given to Japanese sovereign debt." BRK has a better credit rating than the 3rd largest economy in the world.. In September 2019 when BRK issued yen-denominated debt, their 10-yr yield was at about 0.44% with the 10-yr JGB at -0.25%. Today, the JGB 10-yr yield is at 0.11 (with presumably a lower yield on BRK debt with same duration). The net position (investments in yen assets vs yen debt) is subject to change but the currency aspect seems to be at least 100% hedged.

^The fund and manager of the fund were interesting. The third party logistics operator ideas (and others) were helpful. But the exercise reminds of the phenomenon that occurs when there is an accident on the highway and when people not directly involved slow down (to watch). Some say they want to learn and others are just curious. But it's possible that there is a side of us that is affected by morbid curiosity. i guess that's the part that John doesn't appreciate. Some people call this rubbernecking. Rubbernecking - Wikipedia

More evidence if still unsure and if still open for more objective inputs. Interim Estimates of Vaccine Effectiveness of BNT162b2 and mRNA-1273 COVID-19 Vaccines in Preventing SARS-CoV-2 Infection Among Health Care Personnel, First Responders, and Other Essential and Frontline Workers — Eight U.S. Locations, December 2020–March 2021 | MMWR (cdc.gov) TL;DR version: in a selected sub-group, 80% will not catch the disease after one shot of mRNA vaccine and 90% after two shots, suggesting an important impact on disease transmission from the individual receiving the vaccination. There's also longer term results coming out confirming the mRNA vaccines' effectiveness and side effect profile. In many places, overall, hospitalizations have come down (although there is some reversal). What is being seen, on the ground and confirmed by data aggregation, is that the average age of hospitalized has been coming down and the proportion of younger cohorts vs older cohorts has gone up relatively (absolutely in some areas due to variants and incomplete herd immunity), which is another indirect piece of evidence that vaccines are working.

This is interesting. i don't hold banks now but have in the past (including smaller ones) and may again in the future. With regional banks (like real estate) there's the possibility that local knowledge of the market advantage may be superior to the economies of scale of the Big Banks. In general since the GFC, smaller, regional and 'community' banks have caught up to the big banks because their net interest margin has held up better, in large part because smaller banks have more flexibility in originating and holding real economy loans with larger banks being fed cash (parked at the Fed, yielding low IOER) and built-in expectations that a large part of their assets will be low-yielding 'safe' government securities. If you're interested in banks and the industry in general, the FDIC regularly releases data which can be helpful before going for specific targets. Examples below: 1-their last Q4 2020 release (see pages 19-26 for community banks; there is also a section showing ROAs and ROEs segmented by asset size) and 2-something they did on community banks. https://www.fdic.gov/bank/analytical/quarterly/2021-vol15-1/fdic-v15n1-4q2020.pdf https://www.fdic.gov/resources/community-banking/report/2020/2020-cbi-study-full.pdf i just spent about 3 minutes on the names you mention and Merchants Bancorp MBIN looks interesting.

There was a comment recently made by gfp describing how it has become more difficult to discuss potentially contentious topics. It seems like there are still many people on the fence on this vaccine topic (hesitant) based on rational and irrational thought processes. Here's an additional post that will try to control the personality disorder aspect and that will try to stay on the rational side of the debate.  :) Chances of death are very low but you can still get very sick and incur permanent damage to your lungs or organs. Even if you are healthy. Not just theoretical... Israel has vaccinated over half their population and haven't reported any issues.  The pharma companies aren't based there so they have no reason to lie about the effectiveness.  I feel at this point it's quite a remote chance the vaccine is more dangerous than covid. Workers in the research centres do have an interest to help foreign pharma look good and collaborate with them. Politicians who have spent public budget on this, do want to win votes (for the elections less a week ago, and the upcoming.). Medical system, which is obligatory, want to show how their ability to give shot is like the best thing ever. Talks have started about opening factories of pharma companies in Israel... Legislation makes it not obligatory to test for those who have taken 2nd shot, tests done by the medical system without impartial supervision, same goes with reporting side effects from the shots they gave, researches bomb the media with their predetermined conclusions... Now, the shots are likely to prove good. Decision in favor is easier to certain people, who are at a greater risk, and risk less by taking it (my parents took it for example. While I opted to declining it, as undoing vaccination is not possible.). But I believe that claiming Israel has no reason to show effectiveness of the vaccine is wrong, and there's very little control over it. Disclosure: i've followed the vaccine data from Israel to a reasonable degree and participated in an international meeting (mostly listen mode) involving a presentation by Dr. Asher Salmon (high level official dealing with international sharing of knowledge) 7 days ago. There are two questions: 1-Should i take the vaccine, on an individual basis? Hopefully, the info in this thread may help. 2-If, as a group, nation, horde or whatever, people 'decide' to go ahead for the population, what is the best way to go about it? Here, the Israel 'blueprint' may help. For question 2-, Israel had pre-existing institutions and processes in place and took many good decisions to make the process efficient. There is a lot to learn. However, their process has been associated with perceived, potential and very real biases. On top of what is mentioned above, Israel committed to buy large quantities at a high price, took on the potential liability aspect related to the virus and engaged in the sharing of all data with the companies selling the products. Checks and balances are necessary. IMO overall (they also had various problems), they performed very efficiently, including for the younger (and more hesitant) cohorts, for the distribution of vaccines and monitoring of results and side effects. @no_free_lunch Israel used many strategies including positive influence, mobile units, digital tools etc but there is a possibility that the use of centrally issued 'health' passports (vaccine certificates or equivalent) and green passes may raise some red flags in some parts of the world. Personally, i think this last part is going too far. Practically speaking, whatever the individual ideology, from the efficiency point of view, using the passport and pass system that Israel has put in place would have likely increased, on a net basis, vaccine hesitancy in the US (perhaps Canada as well?). ----- For the derogatory comments above, there was this blog today where a gynecologist in her 60s was commenting on the recent coronavirus events in Florida. She posted: "Everything you do in life has risk. The plane could crash, a shark could attack me, a bad fall could break my neck......life is too short." Based on a review of her credentials and using various tools related to patient satisfaction, it appears that she is competent but also has difficulty in establishing a constructive human connection.

I'm curious what you mean: (i) the alleged symptoms don't exist or include arguably non-objective symptoms (e.g., anxiety), (ii) the alleged symptoms exist but there is no causal link between them and past COVID exposure, or (iii) something else? This was just an opinion (which will evolve with facts over time) based on a relatively limited set of covid-related inputs to help people gauge their odds with the vaccines. It's obviously a controversial and delicate topic... In a few words, the preliminary opinion is based on the fact that combining subjective features with nonspecific filters will automatically expose to the risk of over estimation about the real underlying issue. If you end up in the ICU for some time, don't expect to jump on your Peloton bike for a few weeks but it's harder (but not impossible) to reconcile severe and long-lasting symptoms when the person was initially barely symptomatic during the actual elevated viral load phase. Personal anecdote of questionable relevance: i was in Chicago a few years back for a conference and there's this guy presenting who asked participants to complete a self-survey which involved essentially subjective symptoms (pain, fatigue etc). It was revealed that most in the assistance met the recognized criteria for chronic pain and chronic fatigue syndrome as well as permanent disability (or to get an opioid prescription...). Most in the assistance were workaholics who did not perceive themselves as 'sick' but who regularly filled out disability forms (and opioid prescriptions) for others using exactly the same criteria. When something is in the eye of the beholder... KJP, it would be fun to triangulate intrinsic value for a specific investment one day. Who knows, the odds of this happening are not zero. The perspectives (inputs and way to derive outputs) you use make sense but there are many underlying assumptions with a wide margin so... The references mentioned show that risk with age increases exponentially and comorbidities also have added exponential impacts. If you use another perspective included below, one can easily obtain values in the ranges you mention. The reference below is based on "planning" scenarios and needs to be adjusted, including for individual adjustments to the virus as well as more 'collective' actions. See table 1. The main variable to adjust are the Ro number and the mean ratio of estimated infections to reported case counts, 11 with a range of 6 to 24. 11 is obviously too high for the purpose you are describing at this point: risk for somebody aged 40 catching the virus now. All that to say that it's hard to come to a precise number (a more precise number may be less accurate). Based on soft inputs, i guess the risk of somebody aged 40 with strong health has even lower odds than you mention to die if catching the virus now, with comorbidities really having a significant marginal impact. https://www.cdc.gov/coronavirus/2019-ncov/hcp/planning-scenarios.html Just in case you're interested and it's related to the one-in-a-million aspect, the reference i include shows (accepting some very reasonable assumptions and glancing at the scenarios) how the aged 49 and below have had to bear the cost of direct and indirect measures in order to alleviate the health impact on the 65+ group. With the debt issued and implied future taxation, it gets murky but it helps to understand this aspect of the polarization.

If you believe covid vaccines are not for you, stop reading. If you a rational doubts, there is interesting data developing helping to answer the following questions. 1-Are vaccines effective (to improve the odds at the individual level)? Data, including developing data (independent) in Israel which has led the vaccine distribution movement, confirms the very high level of effectiveness as suggested by 'company' studies. These results match the most optimistic expectations formulated during the course of 2020. 2-Are vaccines effective at the population level (to decrease transmission)? Given 1-the very long history of knowledge about vaccines, 2-the transmission characteristics of covid and 3-the high effectiveness of vaccines vs getting sick at the individual level, it would be reasonable to expect that vaccines would also significantly decrease transmission, a notion that is being validated as we speak. For example (not peer-reviewed but i've tried to destroy it and anyone is welcome to try to do so): https://poseidon01.ssrn.com/delivery.php?ID=937027118025005091073067095078088002047011046006095011102120117028037010025090023110111094031065085107074032014102125069108091076124027078095066122029081079068005084036106091061121068116068056013122001108037011005127001027066093124021087092084090108109010027001007090102079086075088093008100&EXT=pdf&INDEX=TRUE TL;DR: In UK healthcare workers, using the Pfizer vaccine: 70% reduction in both types of infection 21 days after participants received their first dose and an 85% reduction a week after receiving their second dose, overall, strong effect in the reduction of infection (asymptomatic and symptomatic). It's hard to isolate the effects of vaccines on the general evolution (many variables and the distribution of vaccines occurred during a 'natural' receding phase) of covid but data strongly suggests that the next (developing) phase will be much less impactful than it would have been otherwise. 3-Should there be a worry about 'sticky' vaccines and the introduction of vaccines during an outbreak? This is a theoretical consideration. However, covid does not have the characteristics that would support this theoretical risk (low overall lethality and highly contagious to start with). Also, this concern goes against the massive amount of knowledge that has been accumulated since medieval times about disease transmission dynamics ie the most effective way to prevent transmission is to prevent transmission. 4-Should there be a worry about side effects (including long term)? Short term side effects have been studied and are well documented. The risk of significant short term side effect is very very low. Long term side effects have been mentioned historically (autism, diabetes etc) but these hypotheses did not resist the test of peer-reviewed analysis or independent study replication. Vaccines act temporarily to produce an intrinsic response (like the many many other times when you are exposed to a foreign antigen which is an everyday-type of situation) and disappear after (the actual molecules get metabolized and excreted). Vaccines are made to be targeted and temporary in nature. The mRNA vaccines use DNA-type technology but this is simply a great example of human ingenuity to produce a better product and those vaccines, in no effective or coherent way, can be integrated into your DNA or modify (directly or indirectly) your own individual DNA. Of course, instead of going for your vaccine shots, you decide to go hunting with friends you may change the time-space continuum but that's a different (and alternate) story. Disclosure #1: i don't typically get the flu shot and i'm ashamed to say that i may have missed a shot or two for my kids so this thinking exercise feels like an independent one. Also, even if i could easily have gotten the covid vaccine (by a literal definition of rules or by bending the rules) and even if the vaccine has, in substance, zero benefit for me as an individual, i will eventually get it. My threshold will be when people at risk in my inner and outer circle will have completed their inoculations. Disclosure #2: Based on what i've seen so far, i believe that the vast majority of "long-Covid" cases have no objective basis.

FWIW, Regularly, a part of the dialogue involves people asking for vaccines in general or vaccines for Covid-19. Does it work? Is it safe? (Is it part of a larger plan?) Before answering and to prevent destroying the communication alliance, it's important to differentiate in which group the person belongs: 1st group: vaccine hesitancy In this group, an engaging conversation that avoids direct confrontation and condescending remarks can help (fact and evidence sharing meshed with the conversation can help people to think and perhaps come closer to the other side) 2nd group: (small minority 2-5%?, but growing in this era) In this group, the strategy used in the first group does NOT work and in fact has the opposite effect as there is a visceral tendency to recoil. This is also a feature in certain investment threads: Tesla, Peloton, bitcoin. i'm not saying people who are long (or short) these ideas are wrong (or right), i'm just saying that visceral responses often take a larger role than fundamental analysis. It's an interesting phenomenon. Sometimes, it's not clear where people belong and humor can be used for the evaluation phase and before using type 1 or type 2 strategy. Donuts can do the trick. Sometimes it's beer and pizza.

This is interesting. It looks like the regulators will collaborate for the technical adjustments but this is quite unusual. Under the previous era (no excess reserves), banks typically always had to monitor the quality (duration) of their deposits and could use derivatives to protect against an unexpected movement of deposits (and associated cash balance) with the run on the bank as the most extreme example but now with excess reserves and highly capitalized capital structures, apart from the SLR technicality, banks such as CASH have ample cash balances to deal with the expected short duration of a significant amount of 'deposits'. CASH reported that they will consider synthetic transfers (off-balance sheet) of some of their deposits (as part of the changing regulatory landscape). It's hard to guess the specifics of potential off-balance sheet transactions but, even if the deposit cost is 0%, the value of the derivative transaction would be positive (barely) because the matching cash asset is deposited at the Fed and pays 10 basis points. Funny world we live in. Just imagine if rates are pushed in negative territory. This is preliminary but CASH has an unusual setup for maturity transformation but perhaps the 'story' here is with the potential for non-interest income. This way warrant its own thread eventually.

Injection site pain (from the physical presence of the liquid injected) is quite common (and variable) but systemic effects (immune response) are felt only by a minority of people. And there are always outliers. Statistical outliers are often the most interesting people (situations) but often outliers are not true outliers, they are simply data looking for their distribution. :) Apparently many people worry that the vaccine does not work if no significant side effects are felt. It's like the widely held belief (when i was young) that a cough syrup works well only if the taste is awful. When my kids were younger, i realized that the taste of cough syrup had considerably improved (bubble gum taste etc) but i think many people still believe the bad taste part.

My wife and I were fine after the first Moderna shot. After the second dose we both had effects, her's much worse than mine. We had gotten our shots in the morning and I didn't sleep well that night. I think I woke up 20 times and could not get comfortable. The next day I woke with a headache and felt like I was coming down with something, but I could function. The second day I was much better, the effects about 10% of what they were the day before. For my wife she didn't feel well for two days with her symptoms being more severe than mine. This is a well known side effect profile (more side effects, more pronounced and lasting longer) with the second dose. It's actually a sign that your immune response (protection) is building. An interesting feature in many places is that (given the spread that has occurred) many people who are being vaccinated have been exposed to the virus already and it is expected that such a pre-exposed population is more likely to suffer from side effects. An interesting aspect which is being documented with the CV vaccines is that the increased delay (vs studied delay and initial recommendations) between the two doses is actually associated with a stronger (and likely longer lasting) immunity ('booster' effect). Local reactions to vaccines can be quite marked (pain and skin changes at injection site) for certain vaccines (ie tetanus shot) when immunity is already present. Keep a record for your next emergency room visit. There are 'biological' explanations behind this phenomenon but it's basically the inverse of the law of diminishing returns (on certain incremental capital).

In that exchange, there was this component of the response: From Mr. Buffett: "Very interesting, the rating agencies — at least one rating agency — said they didn’t want to give us any credit for that asset in there [ie a 100% capital haircut], although if we had 20 percent, like we had had earlier, they would have given us full credit for the market value. I didn’t push them too hard on that." This is called financial and thought process independence on a large scale. In Q1 2020, the mark to market change in equity positions at NI was simply huge (21% decrease in surplus) but its capital position was still nowhere near being challenged. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/2-us-p-c-insurers-combined-for-48b-plus-decrease-in-net-unrealized-gains-in-q1-58638162 i wonder if the value of this optionality is underestimated at this point.

https://www.breakthroughfuel.com/blog/precision-scheduled-railroading/ After reading this, I would be surprised if BNSF addopted the PSR schedule... lowering service quality to improve profitability while simultanously restricting future growth seems agains BRK ethos i guess one has to delegate to top management in these cases because there are trade-offs and what works for a company may not work for another. i've followed 3rd-party logistics intermediates (eg CH Robinson and Expeditors) and it's an area (supply chain management) that is tricky to manage. i remember for example the trade-offs when CH Robinson described the dynamics of a truck route and multi-stopping vs costs, pricing, efficiency and customer satisfaction. Hunter Harrison's name has become synonymous with the PSR logo but maybe he was just a great operator. Here's a student-level answer and the risk-based evaluation varies from state to state so.. The regulators will reduce capital according to various perceived risks including for investments held. Then they compare this net surplus to underlying insurance business (policyholder perspective). The regulators typically have a schedule, for example, that shaves off capital (0.023 to 0.3) from bonds and preferred stock according to credit grade and adjusted for diversification. For stocks, the capital penalty is typically 30%. The regulators are not in the business of revaluation or reacting to mark-to-market moves. i assume they take the BNSF stake reported at book value and remove 30% from that in order to define the risk-based adjusted capital. For NI, it does not really matter since they are so massively over-capitalized.

Sam Altman is an interesting fellow and belongs to the school of thought that says that productivity enhancements are not adequately measured (the productivity paradox question). According to him, the traditional GDP measures should be adjusted upwards to reflect the higher value that main street consumers are getting. So, according to him, inflation numbers of the last few years should be adjusted downwards. ??? Next time you meet a main street consumer who is concerned about healthcare, education, child care bills, tell him/her that. The dual consumer inflation is not a new concept, it's been developing for years. It's the balance and sustainability of those diverging factors which is interesting. Mixing consumer and asset inflation confuses the picture. For consumer inflation, the dual concept applies directly to the origin of labor. When the labor is cheap and outsourced, expect deflation. When the labor is domestic and expensive (the 'growth' sectors of developed countries), expect inflation. Productivity gains in agriculture (from basics to robots and AI) are nothing new. Starting in the 1920s in the US, productivity gains have been impressive and quite constant, resulting in an about CAGR 1% price decline for food. The share of consumer budgets devoted to food has constantly decreased since then. The reason why a relative plateau is occurring is because people have been allocating a gradually larger share of their food budget to food prepared outside of home (now about 50% of the food budget). The latest productivity enhancement in that sector is that instead of people taking their car to go to a restaurant, a car is used to bring the food home (and an application is used instead of a dumb phone). The real story though for the main street consumer is the asset inflation story and begs the question: "why do people and nations accept inflation if it's so negative?". Below are numbers for which the methodology can be questioned and 'adjustments' could be considered but there is a clear trend. To derive an idea of what it 'costs' for a median household to buy a median house in the US, ratio of median household home price over median household income: 1950:2.5 1960:2.4 1970:2.0 1980:2.7 1990:2.6 2000:2.2 2010:4.5 2020:4.4 The story is complicated by many issues and housing (land) supply is important but, clearly, something else is going on. 2020 was a very interesting year because house prices increased significantly in correlation to rising median income (largely because of debt-financed government transfers). To derive an idea of what it 'costs' for a median household to buy a unit of the stock market currency, number of hours necessary to buy a unit of the S&P 500 index: This is basically the stock market cap to GDP that Mr. Buffett has described as a potential tool but with a more human touch. There are several 'problems' with this measure and it has not been a good short term predictor but, clearly, something is going on. Going back full circle, according to Sam Altman, the main street consumer should be happy to recognize that divergence between the value of assets and the value of earning power is not that significant because the main street consumer should recognize that his or her earning power should be adjusted upwards for the pleasure derived from access to Netflix and Facebook. Ultimately, Mr. Altman will be right and Malthus will be wrong again but it's mesmerizing how the asset inflation has occurred and how the frog, so far, has decided to remain in the warming pot.

^Triangulating a few methods and adjusting for KSU specifics and control premium, i come to a 130-135B for current relative valuation for BNSF. KSU has some significant differences. Question: But is this implied 'value' appropriate to: -help derive current IV for BRK? -assess the return on the 2010 BNSF investment? -decide if railways are an opportunity now? My answer is a humble no, at least not quite. In the last 10 years or so, return on major NA railways were derived from: -top-line revenue growth (low) -decreasing operating ratios (1-OPM); i think this was a major insight by Mr. Buffett in 2010 when he bought for 44B ie the expectation that efficiency gains would be realized -lower tax rates -lower interest rates -buyback activity (this will always look good when share price and multiple expand) -multiple expansion Since 2010, the multiple on railways earning power has doubled and explains a significant part of the return, reflecting underlying growth in operating earnings. Efficiency gains are still possible but it will be hard to obtain the same rate of improvements. In sum, many tailwinds could become relative headwinds and wonder if there is a rearview mirror issue here. And of course some of the above drivers are correlated so.. It's interesting to note that the KSU purchase is financed two thirds with CP stock.. We know Mr. Buffett would not sell BNSF in the open market now even with present valuation levels and the 2010 looks impressive, timing wise. https://www.fastgraphs.com/buffetts-burlington-northern-santa-fe-move-foreshadowing-the-growth-of-american-rail/ Disclosure: i've had CNR on a watchlist for more than 20 years and still hope to catch it at some point. Also, BNSF seems to be going against the current by staying away from the 'PSR' strategy. i understand that you don't need a name for an effective strategy but i've been struggling with this aspect.

^Starting in the 60s, real price appreciation started becoming significantly and sustainably positive, a trend that hasn't subsided. In the 60s and the 70s, the key underlying factor was a demand-supply mismatch and high or rising 'carry costs' can be compensated by faster rising underlying asset value, in proportion to the leverage used, if you can keep it. Other factors that helped then were relatively balanced real wage growth (about CAGR 2.6% real between end WW2 and the mid70s; that changed after...) and then women massively entering the labor force. The upward trend in real estate real prices since then is fascinating (even corrected for larger homes). Apart from demand-supply mismatch, other factors that have become significant are very significant direct and indirect subsidies for home ownership and ultra-low interest rates. It's interesting to note that even if mortgage rates are ultra low, real wage growth has remained quite anemic and this explains the diverging house value to income trends that characterize most developed nations to varying degrees. i think the central authorities call this the wealth effect and, so far, people and nations are buying it. Intrinsic value question: what should the home ownership rate be these days?

The "we will have to refuse deposits" narrative may be a negotiation tactic and reflects the tight space for banks in terms of core profitability. Starting in 2017 (with the timid attempt to tighten), the Fed started to increase significantly the yield (following the effective fund rate) paid on excess reserves and this, compared to underlying funding cost of deposits (using MMDA "high-yield" as a reference point which did not really increase significantly), banks were able to earn up to about 200 basis points differential in 2019 on the excess reserves part of their assets. During 2017-2019, excess reserves were still a significant part of total assets and this helped significantly for the NIM and ROE measures. But with 2020, this free-lunch type of return is gone with IOER being lower than median deposit costs for big banks. A way to deal with this may be inspired by what the BOJ has been doing for a while with negative interest rates and their three-tiered excess reserves system. The BOJ has adjusted the interest actually paid on reserves in order to help banks. With short term inflationary pressures, the banks are being financially repressed and maybe they can negotiate some kind of CPI-related yield on at least a part of the excess reserves (which are not leaving anytime soon).

... I don't know much about plumbing, but this guy seems to think the opposite: ... i don't think the interpretation is correct. Here's the SLR definition (by and large): The supplementary leverage ratio is the US implementation of the Basel III Tier 1 leverage ratio, with which banks calculate the amount of common equity capital they must hold relative to their total leverage exposure. Large US banks must hold 3%. Top-tier bank holding companies must also hold an extra 2% buffer, for a total of 5%. The SLR, which does not distinguish between assets based on risk, is conceived as a backstop to risk-weighted capital requirements. The 1.6T the Earl of Crayon refers to seems to be the amount of "space" that was created in banks' balance sheet when the Fed allowed to exclude the holdings of Treasury securities and cash/reserves to be included in the denominator.* It's been reported that almost all banks currently meet the SLR requirement (it looked bad in Q1 2020 with many banks getting uncomfortably close to the 5%). It is estimated that the SLR ratio at banks will fall by about 90 basis points as a result of the expiration of the exclusion at the end of Q1 2021. It's hard to explain why the Fed decided to let the exclusion expire because it's only a technical feature and by doing so, they are injecting a dose of uncertainty vs banks and the intent to accept deposits or to participate in the repo financing activities. It seems that the Fed responded to pollitikal pressures that wanted to keep the banks on a tight leash. Frankly, it's bizarre but they are the ones who painted themselves in a corner. Just for fun, here is some data about excess reserves (this may be just noise and only interesting for those with an unusual interest in these topics but this may be history in the making): From February 26 2020 to March18 2020, amount of systemic bank reserves created (as reported): 269B (!) From February 24 2021 to March17 2021, amount of systemic bank reserves created (as reported): 832B (!!) In the last week: 447B (!!!) FWIW, it's hard to 'see' through the technical noise that may happen but, on a net basis, it seems that this will ultimately drive the demand for Treasury securities at the systemic level. *This is really fascinating. The Fed (in collaboration with...) has been forcing banks to hold more capital and (since the GFC and now accelerating) has forced banks to stuff themselves with a huge amount of Treasury securities (in 2020, the largest 8 bank holdings increased this asset line item by 42% to 1.19T, with 41% of the increase by JPM) and, with the Treasury issuing record amounts of deposits, the Fed tells the banks (by not extending the exclusion) that they have to watch the growing size of their balance sheets as a result of growing holdings of Treasury securities and cash, arguably the safest and most liquid instruments in the world! ??? The notion of balance sheet 'space' created by the exclusion is also fascinating when seen at the systemic level (banks can make individual changes at the expense of one another). Without money creation, all the banks can do is to perform asset swaps (sell a Treasury bond for slice in a CLO for example) and then their risk profile would increase. The banks are kind of stuck. In Q4 2020, Bank of America disclosed that loan growth was down from Q3 and it appears that money creation from loan growth at the systemic bank level (real economy stuff) continues to be disappointing. Most money creation is driven by the Treasury so that the only significant asset that could be used to fill the exclusion 'space' was new cash issued by the Treasury! ----- Going back to a more mundane conceptual plumbing example, it looks like part (the real part) of the financial plumbing is getting clogged and the central plumber's solution is to keep flushing and now they are threatening to shut the cover. What could go wrong?