Cigarbutt

The critical variables defining that project now are: division, uncertainty and economic viability. The minority government adds some uncertainty but with the election, now the Parliament contains 278/338 elected under a banner that support the expansion project and 67,5% of the votes went to the two parties supporting the expansion. It also seems that (despite noise) a majority of British Columbians would support a well articulated project to get the deal going. I would that ingredients are present with a reasonable chance of a constructive and unifying outcome.

The following summarizes well the last restructured bail-out: https://www.reuters.com/article/us-wework-softbank-group/wework-board-accepts-softbank-rescue-deal-source-idUSKBN1X11JN Read somewhere this AM in the populace comments section: The departing CEO, on his way out, has negotiated a name change for the now qualified moonshot investment: YouWork/iRetire In debating terminology, this is like using an extreme example to make a point or to show how the opposing view is wrong. I would say this is not only entertainment but also history in the making.

https://www.insurancejournal.com/news/national/2019/10/21/545886.htm This is not going according to plan and there may be more than a fly in the ointment.

The issue is trust and is based on some kind of 'social' contract. I see your point in the above bolded part but, without taking the statement completely out of context, I submit that it may reveal an interesting aspect of your thought process. When I was in a learning phase which involved some kind of apprenticeship, one of my mentors used to say: "There is my way (the right way) of doing things and there are other ways. Do you think there are two kinds of humans? On a related note and going back to the climate change thing (also useful in investing, I would say), you may want to read an interesting book: https://www.amazon.com/Wisdom-Crowds-James-Surowiecki/dp/0385721706 The main idea is that crowds can be right and there may be ways to maximize that outcome for the public 'good'. Here's a relevant summary of the thought process: https://thinkbynumbers.org/books/wisdom-of-crowds/ You may find interesting that both 'sides' of the climate change equation (does it exist? is it significant? is it caused by humans? what can we do about it if?) suffer from criteria that can lead to failure of crowd intelligence. The best decisions seem to come when a diverse range of opinions, including experts and non-experts can be efficiently aggregated ("some mechanism...for turning private judgments into a collective decision"), without a hysteric component. Basically, this involves a tension between independence and cooperation. Let's keep the contest alive.

Pretty stunning, but most on this board felt it was a lowball at the time, and Fairfax/ABH (RFP)'s actions were super shady... and Fibrek board was ... something bad. :) First appraisal rights situation I had followed loosely, so I wanted to follow up. For those who had or still have an interest in the topic, here's the complete judgment: https://www.canlii.org/en/qc/qccs/doc/2019/2019qccs4003/2019qccs4003.html?searchUrlHash=AAAAAQALZmlicmVrIDIwMTkAAAAAAQ&resultIndex=2

Zerohedge and Mike Sherlock - you need better sources. I would say all sources are welcome but one needs to come up with some kind of a weighting factor for the quality of the evidence which requires to look at the raw data and methodology and also, perhaps after the fundamental check, to assess for potential biases and poor incentives. The Zerohedge link raises several interesting questions which have been reproduced many times by the skeptic side. For the wildfires 'real' data over the twentieth century, the data, as presented, suggests that present climate trends are perhaps irrelevant but raises also the possibility that fire suppression efforts have been too strong and have allowed for a build up of 'fuel', suggesting that the present rising trend may be more ominous, at least for a while. However, when assessing the value of the 'real' data, one finds out that the pre-1960 data used a different methodology and included an unusual amount of incendiary fires. The peak in acreage burned seen earlier in the 20th century also involved a different region of the US (southeastern) which suggests that perhaps apples are compared to oranges. I assume wachtwoord meant conformist (a person who conforms to accepted behavior or established practice) which refers to the authority bias that the author of the post wants to protect (the lazy collectivist) 'us' from but the misspelling suggests the possibility of a confirmation bias (the tendency to search for, interpret, favor, and recall information in a way that affirms one's prior beliefs or hypotheses). :)

To complete the picture, here's a quote from their 2000 annual report when the ICICI-Lombard 'venture' was first mentioned: "After about five years of watching the developments in the state owned property and casualty industry in India, Fairfax was able to announce a joint venture with ICICI, a dynamic Indian commercial bank, as the Indian government decided to open up the industry to foreign investment for the first time since 1972. The joint venture, called ICICI-Lombard, gives us a maximum equity interest of 26% (under current law) for a capital investment of $10 million. This project required a significant commitment from a Fairfax-wide team to complete. Congratulations to Chandran Ratnaswami, Paul Fink, Jim Dowd, Jim Migliorini, Byron Messier, Kim Tan and many others for providing this long term opportunity to Fairfax. We expect to be writing policies this year." So a spectacular result built from scratch and sold in waves. I've heard that there is a statue of Sir John Templeton in their head office and, given their historical investment style associated with marginal to spectacular successes and failures, Sir Templeton apparently has said, at some point, that an investment manager will do well if he or she is right at least 65% of the times. I've come to the conclusion that this benchmark needs to be met again in order to warrant a capital commitment and I'm still looking to be convinced. But thanks for the update and will look forward to your inputs.

Let me correct that for you. Libertarian Science The belief that government intervention can put science in a box and limit progress. Nice one. :) Not only that, remember it's the government that mainly funds science so they can certainly bias its direction as well. So, if the issue is for the government to control, direct and introduce bias as a primary driving force, how do you reconcile with the following: 1-federal funding of R/D per GDP has been decreasing, 2-federal funding versus corporate funding ratio has been going down and 3-federal funding to environmental science has not increased despite the dogmatic and alarmist take described above? https://www.aaas.org/sites/default/files/2019-06/RDGDP.png https://www.aaas.org/sites/default/files/2019-06/USFund1.jpg https://www.aaas.org/sites/default/files/2019-06/Disc-1.jpg Disclosure: I think a balance between corporate and public funding allows to find a compromise between basic research which is necessary for long-term outcomes and also produces constructive surprises, and more applied research with potential short-term applications and profitability. A constructive discussion may help to help define that balance, governance and incentives but I don't understand how undermining a model that has worked so well can not result in less progress or even regression.

A similar paradigm has played out a few years ago with the ozone depletion challenge. The science was relatively uncertain and diehard skeptics as well as paid consultants by vested interests suggested that the ozone layer depletion and hole concepts had natural causes unrelated to human activity (or CFC compounds) and that nothing could be done to change the outcome. To figure out the best outcome, people came together, determined a reasonable course of action and the ozone depletion has reversed and it looks like it will re-normalize in a few decades. These slow evolving challenges need slow thinking but sometimes decisive actions. https://en.wikipedia.org/wiki/Ozone_depletion https://en.wikipedia.org/wiki/Montreal_Protocol https://theconversation.com/the-ozone-hole-is-both-an-environmental-success-story-and-an-enduring-global-threat-100524 "The Montreal Protocol was the first international treaty to address a global environmental regulatory challenge; the first to embrace the "precautionary principle" in its design for science-based policymaking; the first treaty where independent experts on atmospheric science, environmental impacts, chemical technology, and economics, reported directly to Parties, without edit or censorship, functioning under norms of professionalism, peer review, and respect; the first to provide for national differences in responsibility and financial capacity to respond by establishing a multilateral fund for technology transfer; the first MEA with stringent reporting, trade, and binding chemical phase-out obligations for both developed and developing countries; and, the first treaty with a financial mechanism managed democratically by an Executive Board with equal representation by developed and developing countries." (my bold) Since then, some 'statisticians' have built models to show how many lives were saved by lowering the incidence of malignant melanomas (skin cancers) in relation to the application of the Protocol. One can criticize these models as to how many lives were saved but I can live with the potential range of outcomes.

A way to make up your mind may be based on instinct, gut feelings, superficial or technical aspects but like value investing, it may be helpful to, if the topic really interests you, to take a look at fundamentals. Just like going through 10-Ks and coming across various opinions, a healthy dose of skepticism is necessary and echo-chambers are to be avoided. Incentives also matter. Do you still believe in your institutions? It seems that trust has gone down and the pendulum has been swinging to a somewhat darker age context but below is a reference that was produced by your 'deep state' but I find it has value. It describes the historical context and evolution of the scientific position on the topic and addresses concerns mentioned by posters above. There is no certainty here and you may want to define yourself a margin of safety. The scientific approach for such a question cannot be purely experimental. The meta-analysis field is very credible and is a way to combine findings in order to increase or decrease the weight of the evidence. On a weighted basis, it is getting warmer and human activity has been a significant contributor. https://fas.org/sgp/crs/misc/R45086.pdf You may also want to follow Mr. Bill Gates on his blog (do you think he is a nutty and fraudulent ideologue?) and read his upcoming book on climate change to be published in 2020. Given the intellectual challenge by the younger generation and after having looked at the relevance of these changes in relation to potential investments (ski resorts, PG&E), I've been impressed by the longer-term trends and how non-linear changes could occur. My thinking has evolved significantly after looking at fundamentals here. BTW I have appreciated that my climate has been getting warmer and my summers longer. But you can choose to avoid factual or rational discussions but it may become hard to care and ignore at the same time.

It appears that the 'story' has evolved (murkier?) with a new buyer and a slightly different price tag. https://www.insurancejournal.com/news/national/2019/10/16/545668.htm The official line continues to be the "channel conflict" issue but, even if the picture is incomplete, there are red flags that suggest that the issue may have been more 'cultural'. https://www.consumerwatchdog.org/news-story/flash-report-ricardo-lara-was-it-money-laundering-bribery https://yubanet.com/california/release-of-calendar-and-public-records-suggest-lara-made-first-contact-in-pay-to-play-insurance-scandal/

^This is an exercise of (trying to) translating backward-looking returns into forward-looking returns. The following article supplies a graph that decomposes the returns over time periods. A backward-looking trend about diminishing alpha returns is clear and the relative outperformance during the last downturn (what Paul is describing) hasn't made much of a difference overall. https://www.marketwatch.com/story/buffetts-formula-is-still-working-if-you-know-where-to-look-2019-05-22 FWIW, I think what Mr. Buffett has achieved in the last period (to match the S&P 500 with such a size and in such an environment) is truly amazing given his historical investment mindset (he constantly adapts). And IMO this was achieved in a context where he has built ammunitions to maintain (or even to increase) his (or his legacy's) edge. But it's understandable that some people are losing their patience.

On the tax-efficient transfer topic, Let's make this work in progress and there will be more to come from my part, in due course and in a separate thread. It seems that the best time to do such transfers is during marked to market dislocations. :) Back to topic.

I wonder what the conditions were in those promissory notes. [ :- ) ] Transfer of non-cash generating assets to the kids at low prices. - - - o 0 o - - - When I was young, I had a boss, that when he was young was serving a client - a lawyer of high age, who was wealthy. Because of high earnings combined with frugality he had become wealthy by buying real estate. He had started deliberately & gradually transferring properties to his kids, starting with the properties with the most louzy cash flow first, some even with negative cash flow, because of the mortgages. My boss asked him why he did so [The lawyer was old and alone. He had lost his wife, who had passed away.] His answer was : "That way I'm sure that my kids still visit me!" [ ; - D] Side note: Interesting that you describe a trust but verify situation while transferring value from one generation to the next. I've been looking into an estate freeze 'strategy' for my business, which implies, in my neck of the woods, to alter the structure of the company and to issue new preferred shares (fixed income) that freezes the value for the owner (tax deferred until the last breath) and new regular shares to the offsprings whose value will grow over time (more tax deferral). The key issue is control, whose loss of can only be deferred to some degree. It is possible though to set up voting rights or involve a family trust (where the owner remains a trustee) in a way to (economically) maintain contact with the next generation. -----)back to the thread dealing with Wedgewood throwing the towel and sale move as a potential contrarian indicator to buy BRK.

Nice update on your line of thinking, which has been consistent. Accepting the possibility that you may be right to "outsource", to some degree, the timing of investments (which really is not timing but sticking to internal yardsticks by Mr. Buffett {and IMO not thumb-sucking as implied by the Wedgewood move}), a potential weakness of the model may be that the IV floor that you describe may move down, as perceived by the markets, when fat pitches come along, given how progressively correlated BRK has become in downturns (typical time to use the elephant gun) and given BRK's relatively high exposure to financials. As John Hjorth alludes to above, BRK is built to last but a question remains: is the relative advantage for BRK in downturns and the ensuing recoveries sufficient, on a relative basis?

From reported numbers and other inputs, it is interesting to try to come up with a 'breakeven' occupancy number and to define the path to profitability. Changing course (lowering growth) even without extrinsic economic shocks needs to incorporate the facts that: 1-We has paid a dear price for some leases, 2-We has included lower or free rent concessions for a while in some contracts and 3-We has committed significant capital to improve the value of the space for renters. If you are SoftBank, what do you do? You double down! This has the ingredients to become a story where the equity seemed cheap at 50B and will seem expensive at 5B. Then they say markets are efficient. http://aswathdamodaran.blogspot.com/2019/09/runaway-story-or-meltdown-in-motion.html https://www.hbs.edu/faculty/Publication%20Files/Final%20Version%20WeWork%20Article%20HBS%20Header_91efe3b9-fc0b-408b-b29e-d7d365a245b2_f7f6a0fa-cf26-4caa-99cc-3653fc8e6dc6.pdf#page25

The California legislature has provided and is likely to provide more implicit but conditional support. Despite popular backlash, oldco is likely to continue to play the regulatory capture game, an area where they still possess a relative edge. I find the debtors have done a decent job, with nature cooperating. Adversaries have come and include the Elliott Group and the aim of the vulture group is to get their part of the flesh but their true intents may become all too apparent at times (see docket 4119, exhibit A). https://restructuring.primeclerk.com/pge/Home-DocketInfo It seems like the Judge may appreciate the superior value of the way to deal with subrogation claims, as described by the debtors. Interestingly, from what I can gather from public disclosures, Baupost has been able to buy various subrogation claims over time (total value about 2.6B, bought at around 30 to 35% of 'face' value) and they would recover 11/20B under the proposed plan. One has to deduct an uncertainty premium and the value of time but Baupost (which remains a large holder of common equity), at least on that level, would do very well with their 'distressed' subrogation claims.

Humble opinion here, after having discovered and reviewed previous comments made on this Board years ago. Disclosure: I was a Fairfax shareholder then and intensively looked at how money could be made somehow with ABH and FBK. The definitive opinion may change after reading the whole judgement but this seems to be the price to pay for playing the game between legal rules and ethics. There was a conceptual flaw from the start (especially versus the fair and friendly and not hostile culture mindset) by actively pursuing an acquisition where Fairfax was a significant shareholder in the bidder and the target. The relevant National Policy 62-202: Take-Over Bids Defensive Tactics, indicates that “[t]he primary objective of the take-over bid provisions of Canadian securities legislation is the protection of the bona fi de interests of the shareholders of the target company.” Regulatory bodies then focused on a majority concept of the take-over which did not take into account that this majority was possible by the inclusion of a party which had diverging interests and that this basic fact likely contributed to a financial oppression of Fibrek's minority shareholders. Higher Courts eventually deferred to the regulatory body's decisions so that Fairfax got the legal nod to proceed. But one has to consider that this would not have been OK under other legal jurisdictional auspices. It seems that the September 2019 judgement is, somehow, an attempt to correct an unfair outcome for minority shareholders but the Court seems to omit that this process had been anointed with a legal seal of approval in a contemporaneous way and perhaps the judgement is an attempt to bridge the definition of fairness, from legal to ethical. It's not the job of the legal system to do this but it's an interesting side effect and a reminder to legislators.

75B here, 75B there and soon we'll be talking real money. When I transfer funds from one account to another, I always double check (like some of you, I assume) the number of zeros in the number before pushing the enter button. Just once, it would be nice to work in the Big Office and to get the OK from Mr. Jerome and click an extra "0" just for fun. Oops! But seriously, these guys are impressive. In just three (3) days, by pushing on the enter button once daily, they have 'injected' the equivalent of 16% of QE1, 34% of QE2 or 12% of QE3. I know it's not fair to compare the financial pressure easing facilities which are different but 1-the new liquidity pressures may not abate so easily given the unusually high supply of treasuries coming and given that somehow a higher coupon doesn't seem to be in the Fed offing and 2-QE1, which was initiated more than 10 years ago was supposed to be an emergency, temporary and easily reversible experiment. In related news, the easing champion always ready and eager to buy any government bonds that needs to be bought just released inflation numbers and some are disappointed and are hinting at more easing. https://www.reuters.com/article/japan-economy-inflation/update-1-japan-august-consumer-inflation-eases-to-2-yr-low-in-blow-to-boj-idUSL3N26A0G9 In the spirit of being open-minded and to leave aside the primitive thought that higher debt should warrant higher interest rates, I'm relieved to have found out recently a potential explanation for the disappointment displayed by central money managers: they are not doing enough! According to the theory (the Wray curve) espoused by MMT apostles and the like, there is some kind of a reverse Laffer curve. The curve is "U" shaped with growth coming down with higher deficits and debt and then, somehow (in theory it all makes sense) growth picks up with even higher deficits. ???

The problem with that is, it's not possible if the market isn't doing the same. There's a trade-off between driving the CR down to compensate for low returns on investments, and shrinking your book to the point where you effectively liquidate your franchise. Up to a point, underwriting discipline drives better ROEs; beyond that point, if the market is happy to accept lower ROEs then FFH has to as well. Agreed. We haven't seen a shake-out in the secondary capital being provided for insurance-linked contracts. The demand for these likely has little correlation with interest rates because these investors are simply looking for an uncorrelated return. If interested rates are zero, alternatives investors don't need CRs to go 80. They simply need a reasonably positive, uncorrelated return (i.e. loss ratios less than premiums received - this could be a CR of 95). It's hard for me to envision a prolonged hardening of the market until we see a shake-out event in the alternative capital. The leverage comment is what everyone who is getting on FFH is currently depending on. Can they consistently produce 3-5% returns that are leveraged to a decent overall ROE - but with interest rates at 1.8%...even this will be difficult. In a way, managing the underwriting cycle has parallels to managing the extent of % invested when managing money (yours or OPM). I agree that the CR needs to be 90% or below these days in order to achieve an adequate return on equity but that objective would effectively mean closing down shop in today's environment. So, what to do? All lines of businesses have different dynamics and the insurer may play the cashflow underwriting game or 'catch-up' when the market hardens but it's an extremely difficult exercise in a commoditized world and this has become harder with the cheap and abundant capital era. Of all the subs, I admire how Zenith has been able to shrink and grow their business opportunistically. Even if most FFH subs need to continue to write a certain amount of business with an inadequate margin vs reasonable ROE, the holding company should make sure that they can grow the business when the time is right and need to make sure that the asset and liability sides of their books allow them to do so. Right now, the investment leverage is a potential advantage but IMO, given some scenarios, this leverage may actually become a hindrance for growth if, for instance, capital becomes more scarce or more expensive. The following is interesting (data ends around 2016 but the trends have continued, mostly unabated and even worse for the combined ratios across the industry) as it gives an idea about the CR necessary to obtain adequate returns given what overall yields have become. https://www.treasury.gov/initiatives/fio/Documents/2_SELECTIVE_FACI_8-15-16.pdf

A word about potential silicosis insurance exposure. It's a real problem and the incidence of claims may eventually rise related to the recent popularity of kitchen countertops and others derived from artificial stone etc. Anything is possible because of potential legal inflation but silicosis exposure has not resulted in separate disclosure in the latent claims related to environmental exposure category across the industry (as far as I can tell). Compared to the asbestosis issue, silicosis is much less prevalent, is not associated with a specific tumor such as mesothelioma and potential claim exposure is occurring in a context of significant decreasing mortality rates (contrary to asbestos-related mortality which has been increasing) which points to the possibility that the exposure risks have been better defined and safety standards (that need to be improved) have at least been partly effective. Also, contrary to asbestos, where it is felt that simply breathing air for a sufficient amount of time may be enough to trigger health effects, it is now felt that dangerous silica exposure requires some kind of active involvement (cutting the stone etc). In the early 2000's, there was a significant rise in silica-related claims, suggesting the possibility of a similar wave of liability damage related to asbestos. The rise in claims was very abrupt but was followed by a comparable abrupt decline because of the realisation that the vast majority of claims had no material basis. A Texas judge was particularly impressive during that episode. A good side effect was that this led to a better and more reliable set of medical criteria in order to define acceptability of claims. A bad side effect was that those really affected by the disease were possibly overlooked by the nonspecific nature of those in charge of claimants. The unintended consequence of inappropriate legal inflation was circumscribed then and it may come back although this remains unlikely under present circumstances. Conclusion: this issue needs to be followed and may become a significant issue for specific manufacturers, distributors, insurers and others but IMO it's unlikely to be an earth-shattering event for the insurance industry. It may be the risks that you don't know about that are most likely to kill you. :) -----)Back to BRK insurance

Liquidity strain has been brewing (FF rate vs IOER) for a few months in that corner of the market. If one has had to personally deal with working capital management with boots on the ground when the local banker calls more and more often, one may argue about 'technical' factors but the underlying problem may be an inadequate amount of 'excess' cash in the operating account. For various reasons (growth of money base with growth in economy, regulatory requirements and getting used to 'ample' {Federal Reserve terminology}reserves), it looks like the big banks have found their sweet spot in terms of 'excess' reserves and this new-normal attitude is accompanied now by a smaller appetite for low yielding government bonds. The evolution of excess reserves and asset composition at big banks is interesting: https://www.kansascityfed.org/en/publications/research/eb/articles/2019/how-have-banks-responded-declining-reserve-balances There is also the issue of the divergence between the increasing funding needs of the US government versus the, at least temporary, decreased international appetite for US government bonds, if hedging costs are taken into account. https://home.treasury.gov/news/press-releases/sm743 https://www.newyorkfed.org/markets/gsds/search# For the last link, go visual chart, US Treasury, coupon-bearing. The primary dealers have built a significant amount of 'inventory' of various government debt securities and this inventory has been funded by the repo market. Isn't fascinating that the Fed people have realized that their theoretical transmission mechanism (ivory tower to real economy) has not worked and now are finding out that their setup is preventing price discovery for US government debt? Of course, the easy thing is to restart open market operations on a grand scale (somebody will be happy) but is this where we want to go? I am planning to eventually visit Japan but not this way.

It seems like the Market is presently asking for further easing... What is fascinating is that we are still in the middle of the experiment and have only started the exit strategy. https://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm Interesting to hear from someone who thought this could become problematic before it reached the surface: https://doubleline.com/dl/wp-content/uploads/MoneyMarketsFed_Campbell_July-2019.pdf I think we are nowhere near an exit. :) "Only those who will risk going too far can possibly find out how far one can go." The quote is from T.S. Eliot and apparently was meant to underline the positive attributes of risk taking. However, the quote was tweeted in 2015 by a higher office hopeful who happens to have a lot of influence now and I submit that risk taking is like Janus, the Roman god with two faces. I will leave the conclusion to Mr. Bernanke himself (2010): "The sequencing of steps and the combination of tools that the Federal Reserve uses as it exits from its currently very accommodative policy stance will depend on economic and financial developments." Indeed. I just find that they are now ill-prepared under certain scenarios but who cares?

Thesis: housing prices is Canada are influenced by many factors but the level of interest rates remains the most important factor. This post: Supply factors are important and regional dynamics apply but the above thesis is maintained. Potential outcome: The recent trend (last 20 years) is assumed to continue if interest rates stay low or go lower. IMO, the potential for non-linear changes are inadequately discounted. If you have time to waste: https://bankunderground.co.uk/2019/09/05/houses-are-assets-not-goods:-what-the-difference-between-bulbs-and-flowers-tells-us-about-the-housing-market/ https://bankunderground.co.uk/2019/09/06/houses-are-assets-not-goods-taking-the-theory-to-the-uk-data/ https://housingevidence.ac.uk/wp-content/uploads/2019/08/20190820b-CaCHE-Housing-Supply-FINAL.pdf https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/hot-charts-190913.pdf Since the year 2000, when Nortel peaked, Canada's household debt to GDP and disposable income has been multiplied by 1.7, interest rates (10-yr government bonds) went from 5.9% to 1.5% now (1.1% a few weeks ago), 'investments' have been diverted to housing and household debt services burden is worsening and reaching a new high. Nobody knows the future but I guess it may be worthwhile to look into potential side effects from non-linear developments.

Humble contribution: I disagree with Mr. Burry, at least on the extent of securities lending risk versus systemic risk as compared to CDOs in the years 2000's. The CDO issue was based on a significant growth of securities, backed by real estate collateral and resting on the assumption that the real estate price rise would continue to shift from fundamentals and that, if there would be price declines, it would be mild, would happen in pockets and not in a correlated way. Evaluating this using a solvency to liquidity spectrum, along the value chain, there was a clear problem with liquidity and solvency of home owners and that resulted in questioning the solvency of financial institutions which were highly leveraged and dependent on wholesale short term funding which was mismatched with price discovery of the underlying collateralized asset. A side effect of this was the relative questioning of the solvency of money market funds, which broke the buck, but this was mainly a liquidity issue, was recognized as such and dealt with rapidly with liquidity measures. I think the securities lending issue with ETFs, if it comes to materialize in a declining environment, would correspond to, essentially, a liquidity issue that may require central money assistance. Securities lending has grown relatively little in the last few years and, even if the collateralized assets vary and may raise questions in certain environments, this, in itself, would not result in a systemic and long lasting issue. Also a lot of the passive inflows have occurred at the expense of 'actively' managed mutual funds, a large part of which tend to follow the crowd and their respective benchmarks. So, the active to passive mindset has happened only to a degree and not as a paradigm shift. Market declines tend to be more concentrated and steeper than market rises and the new relatively passive era has not been tested and the securities lending issue may accentuate underlying trends but I think it is not a systemic issue in itself. Interesting times: with increased securities lending activity, it is possible that ETFs carrying negative fees will become the norm. Caveat: Perhaps Mr. Burry has noticed an increasing and inadequate level of securities lending in some areas and perhaps he has detected gradually deteriorating behavior with the management of the 102-105% collateralized assets. A 2018 regulatory report has some data on this (pages 45-46 of the underlying document) https://home.treasury.gov/system/files/261/FSOC2018AnnualReport.pdf?46