Cigarbutt

I have (see reply #18) and thought it was a relevant exercise as the story is fascinating and looking for discomforting evidence is a constructive analytical step. In a balance of probability way, I came away from the movie being more convinced that Mr. Browder's case is authentic. I was able to "catch" the movie on the internet but I hear that sites that make it available are rapidly shut down. :-X

"Does anyone know a blog/resource in English discussing stocks trading on Wiener Börse AG (Vienna Stock Exchange)?" Short answer: No. Long answer: See below. Just disregard if you have something better to do. My question to you meiroy: Are you trying to pull a Jim Rogers’ move here? ----- Side note #1: Sorry long post. This AM, I had to give rides to my two youngest daughters for swimming lessons etc and had some “free” time. The oldest of the two just turned 17 and she should be able get her driving license in the next few weeks. Eventually, as my kids will become more autonomous, will re-arrange my schedule and will likely have less time for ramblings such as this one and may have to resort to short and to-the-point posts on how to make money. Incidentally, the daughter who is about to obtain her license keeps complaining about the long process to get her driving permit and how much time is spent on theoretical notions concerning human nature. I disagree because I feel that a there is a lot of unrecognized risks beneath the surface. ----- Side note #2: Greetings (grüß Gott) to fellow Austrian members. Austria is a beautiful country and Vienna is a very special place. One time, I visited during Christmas Market season and recall walking along chestnut stands and stopping in coffee houses for a succulent piece of sachertorte and the best coffee I’ve tasted in my life. I still entertain the family, once in a while, with an exported recipe of Wiener Schnitzel. ----- Jim Rogers remains a controversial figure, has appeared at times more disturbed than the surrounding mass delusions, has had his share of reduction to humility but has been, on a few occasions, terribly right and certainly got the Austrian market right in the 1980’s. After splitting from Mr. Soros in the late 70’s, he continued to look for contrarian plays. In 1984, riding his motorcycle through Europe, he got interested in the German market and then the Austrian stock market. The Austrian market was cheap, obscure (less than 30 stocks trading!) and neglected. Mr. Rogers felt that the market was ripe for appreciation because of what was happening in Germany and because of consensual moves towards a more investor-friendly environment. His thesis was that the market would go from a gross and obvious undervaluation to a more “normal” valuation. He went to the Creditanstalt Bank and, after meeting a few key people, it looks like he bought most of the stocks from the exchange selecting those with stronger balance sheets (construction, financials, manufacturers and machinery) and sold in early 1987 after the Austrian stock market had gone up more than 400%, thereby completing one of his best coups. From the outside, Mr. Rogers was dubbed a magician and a Prince Charming and he obviously helped his cause by publicizing his interest (Barron’s and touring Austria as a state-sponsored market promoter and eventually being called the father of the Austrian stock market in a typical self-fulfilling prophecy scenario) but this appears to be a classic case of a tipping point situation waiting for the right trigger. From Jim Rogers reflecting on the Austrian outcome: “Now, I can’t move a stock market. All I can do is point out the reality of a situation. It was one of these things, a simple idea, but once you looked at it, it was dead clear and everybody piled in.” Looking at the following reference, it seems that Mr. Rogers’ contrarian insight was based on at least some kind of quantitative justification and perhaps explains why he has become more and more considered as an extra-terrestrian. https://fred.stlouisfed.org/series/DDDM01ATA156NWDB So meiroy (in the unlikely possibility that you made it this far), if you feel your Austrian time has come, all you need to do is to get Barron’s interested and to convince Austrian authorities to lend you a motorcycle for a tour. Being basically a know-nothing, what has piqued my interest in Austria’s financial markets is not the stocks but the bonds within the greater European picture. What we are seeing is something that, as far as I know, nobody even came close to predicting: the level of “risk-free” yields. Last quote on 10-yr bonds is 0.469%. Looking at Austrian historical yields and eliminating low-grade noise around the dot-com era and the 2007-9 episode, this is basically a downward straight line heading to zero and beyond whatever it takes. A low point was tested in mid-2016 when Austrian government 10-yr bonds basically reached zero and since then, in correlation to the excruciating tightening, rates are back to levitating levels at 0.469%. For the historically inclined, Austria used to be a major empire and has an incredibly rich history. WWI though helped uncover another tipping point and what followed could be considered instructive. With the Anschluss annexation in 1938, Austrian government bonds lost 46% in value and, when Poland received uninvited visit in 1939, those bonds lost another 46%. I would submit that there was a value opportunity after the Potsdam conference in 1945 because bonds only increased 12% after the conclusion of the meeting. It seems to me that there was a confluence of factors allowing to come to the conclusion that Austria would continue as a country and would sit on the right side of the curtain. I guess the cheery consensus was not so clear and the Marshall plan helped but bonds were back to par in 1953. Of course considering that the European Union is fragile is not consensus now and not everybody agrees that stocks trading in Europe are in for a rough ride. If you look, for example, at a document part of the package submitted by estimated fellow member John Hjorth this morning, where the authors submit that, under the guidance and support of the ECB, we may be in the early innings of an explosion of earnings and about to enter the investment opportunity of a generation. https://evermoreglobal.com/media/pdfs/Evermore_Europe_Lonely_and_Lumpy_White-Paper.pdf Austrians are rarely in the global limelight but there was another episode where, for a while, Vienna and its Creditanstalt Bank was a at the epicenter of the world. This is a fascinating episode for a different discussion but constitutes a classic example of an unrecognized tipping point that probably had its origin in the consequences of the new and incomplete world order that emerged after 1918. https://www.banque-france.fr/sites/default/files/9-macher-paper.pdf Edit: English is not my first language and do not always get the words right. When referring to John Hjorth above, I used the word estimated when I meant esteemed. :)

Explain what? That he's using a pseudonym on an anonymous message board? So, is this a meeting place or a community? Transactional or relational? Anonymity is a double-edged sword which comes with its own sense of responsibility. For me, an investment is a partnership and maybe that's too personal.

1-Recently looked at Mattel. The toy industry used to have great economics but now participants like Mattel will likely continue their secular declines even if they keep hiring outstanding CEOs. 2-In 2009, was involved with The Brick (Cdn furniture retailer). Basically a mid- to low-end retailer in a terribly competitive landscape. Operational weaknesses built up during good times and became apparent in a tougher environment (tide moving away revealing...). Management responded by applying remedies that worsened previous operational difficulties and shortcomings. Because of financial distress, management changes were made (Bill Gregson, who now leads the restaurant unit related to FFH was made CEO and the founder Bill Comrie was asked to come back and contribute (bridge financing and expertise as a "consultant") and operational changes were made. During that time, I built a significant stake and visited several stores and relevant competitors to confirm the reported financial numbers in relation to operational changes (increased advertising, hiring of sales personnel and especially improved operational management of inventory). The turnaround happened because, in part, of financial support by key providers but the operational changes (and the level of competence required) made the difference and were instrumental in the transformation to a sustainable model (in both good and bad times). ----- Side note #1: Fairfax and others then provided a sort of quantitative ease to the liquidity crunch that the firm faced (self-inflicted injury) but like Bagehot (illustrious British guiding light of another era it seems) described, if you want to prevent stupid money from zombification, the liquidity infusion has to be, sufficient, short-lived, expensive and associated with adequate collateral (or margin of safety). The cost of capital provided was high (but I did not mind then 'cause I was on the right side of the transaction) but was clearly linked to the needed operational changes necessary to reach a sustainable level of operations and solvency. Side note #2: petec, in a FFH related and interesting thread, your inputs were appreciated but the case above described IMO is an example showing that FFH will eventually get its investment mojo back but, for that to happen, we may need an environment which is different from the last few years because I think that it is better for them to wait for the right environment instead of awkwardly trying to adapt to this era. ----- https://www.theglobeandmail.com/report-on-business/the-brick-putting-its-house-in-order/article4282184/ 3-More recently, an example that may be relevant to you petec, is the involvement with Aimia's preferred shares. Loyalty businesses continue to show a promising future in some instances but loyalty programs with an airline anchor partner should be part of the airline itself IMO. So, my take was that, in itself, Aimia had become a "bad" business. The main part of the thesis was for an effective and fair transfer of the Aeroplan brand from Aimia to Air Canada. During the process, I did not hold until the full realization of the potential of the transaction because I could never build a sufficient level of confidence with Aimia's management team (even the new generation related to Mittleman). In that specific case where evaluation of management's level of competence was critical, there was an element of expectations that management would end up doing the "right" thing which is tricky because they may end up doing the right "thing" for themselves and that may not correlate well with minority stakeholders. In conclusion, management can make a difference, even in "bad" businesses, especially in selected cases but management evaluation (competence, energy and honesty) is qualitatively hard.

I guess it's a matter of perspective and a matter of balance. If not useful, linking different concepts along different dimensions and disciplines is at least fun. "The real voyage of discovery consists not in seeking new landscapes, but in having new eyes." Marcel Proust

GDL is a stock I used to follow closely. Holding period was from 2001 to 2005, during the NA building boom. The decision to sell was based on a few key variables including direct comments from the Chairman, Stephen Jarislowsky, in the 2005 annual report: "It is hard to imagine a rise in construction and home improvement spending {given the evolving macro picture}". I deeply respect Mr. Jarislowsky who was Chairman for 19 years and is still (my understanding) an "honorary" director. GDL was on a watchlist in the following years but I found better alternatives after. I stopped following closely after but was aware of management hiccups. With your post, I decided to review the company, mostly for fun, because the liquidity is low and I tend to avoid public companies that are transferred from one generation to the next (also like Power Corporation). But here are a few potentially useful comments. The market price to book value has become incredibly low and expectations for a return-to-the-mean type of rebound are reasonable but: -even notwithstanding the "dark chapter" attributed to the short-lived outsider CEO (2014-5), sales are about the same level they were 10 years ago and the business profitability is based on very low net margins and GDL has not recovered the above 2% net margins they used to achieve before. In other words, the moat has declined. -IMO, a key variable here is what will happen to housing markets in Canada. In the run-up to the housing peak in 2006-7, under the leadership of the previous Goodfellow and Mr. Jarislowsky, GDL lowered debt and got ready to thrive during the following phase. In the 2009 report, Mr. Jarislowsky wrote: "It was obvious that the housing boom could not last". I understand that they then bought distressed inventory and gained market share but since 2010-1, net debt has increased ++ and their financial flexibility is low vs various potential scenarios going forward. -Their profile has evolved in the sense that they are relatively more exposed to new housing construction versus home improvement spending which is stickier in tougher economic environments. -In the 2007 annual report, Mr. Jarislowsky wrote: "The real test in life comes when times are tough." and IMO the 2019 GDL is not sufficiently ready for adversity. At first sight, the large discount to book value is appealing but I find that GDL is trading pretty much where it should. Sorry for the negativity. My 2019 resolution for involvement here is to spread less negative posts which means more absence unless the environment changes. :)

https://www.project-syndicate.org/commentary/federal-reserve-right-to-raise-interest-rates-by-stephen-s--roach-2018-12 https://fred.stlouisfed.org/series/EMRATIO Happy 2019 to all.

That was an interesting summary. Thank you. The reference to Francis Moore is quite revealing, a pioneer who, especially in early life, pushed for innovative reforms in a pro-active way, causing some painful transition issues along the way but he was a man of prodigious memory and energy, and never hesitated to overthrow dogma. The trigger for Dr. Moore, which eventually led to memoirs titled A Miracle and a Privilege was, in 1942, when he had to deal with the arrival of 114 burn victims from the catastrophic Cocoanut Grove nightclub fire. A reminder that "we" have gotten quite poor at handling tipping points. But, even if forced to, we'll get there somehow.

1-Collecting data is different from interpretation and application but the Federal Reserve does provide useful tools so that one can factually verify assumptions: https://www.minneapolisfed.org/publications/special-studies/recession-in-perspective IMO, it could be cause and effect or simple association but greater involvement by the central banks has been linked to worsening downturns and weaker recoveries. These days, a 0.25% announcement is considered a major event. We're OK as long as strong fundamentals are maintained but some cans that are kicked down the road by centrally-planned unconventional tools may simply keep getting larger and, at some point, this may be reflected in many portfolios. 2-Contrary to what you seem to write and others seem to imply, IMO the major factor behind the relay between Pax Britannica and Pax Americana was not because of pervasive involvement by central banks managing the economy but because there was an environment conducive to enduring real productivity growth. At least, that's what a guy, who seemed to know how nations become and stay prosperous, used to say in 1969. http://scienzepolitiche.unical.it/bacheca/archivio/materiale/2467/PDF-Books%20for%20Mr%20Pisula/David%20Landes-The%20unbound%20Prometheus-Cambridge%20University%20Press%20(1969).pdf If I understand correctly, Mr. Druckenmiller says that political and monetary forces are distorting the markets and that's always the case to some degree. It just seems that the some of the distortion has reached certain thresholds with potential spill-over effects in individual holdings. This is not a problem if the buy and hold definition has been properly framed.

Facts: Average annual growth of GDP during recoveries before 1990: 4%+ 1991-2001: 3.5% 2001-2007: 2.7% 2009-now: 2.1% Before sliding into political nonsense, please remember that this downward trend has transcended the political dimension and similar associated trends are in plain sight for progressively weaker recoveries in employment, business capital investment, real productivity etc What great recessions happened in the 90s? Or 00-07? What are these statistics referring to? Rrecoveries from the ‘98 EM stuff, nasdaq bubble, 9/11...stuff like that? That’s not what we are talking about here. Are you honestly saying recoveries were easier from 1929 and 1973? And that things are just getting harder because we keep carrying more debt into these massive every 40 year type crashes? Bah Actually 2001 was very, very concerning to a whole bunch of economists. Pretty much all recessions since the big one in the 30s has been as a result of the Fed hitting the breaks to cool things down. But the demand was always there. So as soon as the Fed too its foot off the break things started to pick up again. 2001 in itself was a relatively mild recession. But the Fed didn't touch the breaks, it was weak demand. Then it had a jobless recovery. This was very concerning because this was the 1930s type of recession. A large part of the economics profession didn't even think this could happen (the supply side/real business cycle guys). Another large part of the economics profession (the salt water guys) thought that it could happen in theory buy in practice it won't happen in advanced economies, only in EM countries with crappy banks. A few guys back then (off the top of my head Krugman/Stiglitz/Bernake) got really scared about what happened in 2001. They thought it was a really bad sign about what may come. So yea 2001 was different. In a bad way. The recoveries from 1973-4 and the early 80's were V-shaped and not comparable, in absolute numbers, to what we could achieve now, it seems. An intriguing narrative is that the downward trend in the strength of recoveries after downturns seen in the last 50 to 60 years has been attributed, by some, to an unavoidable cost related to a Great Moderation. When one looks at the progressively higher vigor of central bank interventions (post 1987 crash, Savings and Loan Associations in the early 1990's, the LTCM crisis, strong monetary response post dot-com and 9/11, and finally the unconventional policies post 2007-9), one is tempted to see a decreasing marginal return on the effort with an exponential rise in exposure to unintended consequences and moral hazard. FWIW, I think Mr. Powell et al are very smart people, well-meaning and likely animated by noble intentions. I would only hope that they would show an adequate level of humility in the face of quite obvious failures in economic theories of transmission. When facing uncomfortable darkness, the best response may be to confess that you don't know. “This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again.” John Maynard Keynes

Facts: Average annual growth of GDP during recoveries before 1990: 4%+ 1991-2001: 3.5% 2001-2007: 2.7% 2009-now: 2.1% Before sliding into political nonsense, please remember that this downward trend has transcended the political dimension and similar associated trends are in plain sight for progressively weaker recoveries in employment, business capital investment, real productivity etc @SHDL On a personal portfolio level, I'm also very satisfied with the post-GFC recovery but it seems that mainstreet recovery has been quite muted and this may be part of the disconnect that people talk about these days. Your post reminds me of when we close the door on our last guests who say that it had been a really great party and when we go back to the kitchen area.

Hi SHDL, (Trying to learn here) Last October 19th, you mentioned: "Given what I know about this, I am squarely in the camp that thinks the Fed has done an excellent job post crisis." Please help me reconcile. What happened in the last 2 months? I thought superheroes becoming villains overnight only happened in American movies. :D This evolving narrative (not yours but the global one) :) is feeling really bizarre. I feel like watching a football game and we've reached the half-time of the greatest monetary experiment of all times and I see a completely different scoreboard. So, I will just follow with a few questions. "It was terribly hard to get the economy going again after 2008..." This is not a new problem. If you look at the last cycles, the economy has become more and more amorphous and "recoveries" have become less and less satisfying. ---Inversion exercise--- -Why is that? -Is it possible that growing global debt is at the heart of the issue? -Is it reasonable to expect to recover from this issue by long bouts of suppressed interest rates?

Thank you for the clarifications. Value investing, in a way, consists in completing asset swaps. For every buyer, there is a seller and both are convinced of a good deal. In the last few months, I spent perhaps a disproportionate time on the liability side of corporate balance sheets but here are the objective numbers for the private to public swap that you seem to refer to (from 2008 to Q3 2018, over GDP, US numbers). Household debt: 0.86 -----) 0.74 Total federal debt: 0.68 -----) 1.09

I wouldn't be surprised. Powell is a complete hack though. I rarely agree with Jim Cramer but he nailed this whole thing. It's one thing to hike as expected. It's another to come in completely tone deaf, after talking about being data dependent, and then push some aggressive rate hike agenda that is totally data independent. What an idiot. Kevin O'Leary gave a good sound bite on this too. There was an interesting interaction in 1965. LBJ had decided to have his gallbladder resection on a Friday to avoid a negative effect on the stock market and spent time after on his ranch during his recovery (showing his surgical scar among others to whomever came around, including journalists and photographs) when he summoned Fed Chairman William McChesney Martin Jr. History does not repeat itself but there are interesting parallels in addition to divergent views. The government was running high deficits during an expansion, the period was reaching a more than monetary juncture and it was felt (by some) that the Fed was behind the curve. I would say there was a fundamental difference because then, there were signs of rising demand for credit and now, IMO there are underlying secular currents pushing for further declines in credit demand, which may prove to be a defining feature. I don't know if Mr. Powell will finish his term but wonder what he will say at his farewell party. As far as putting Jim Cramer in the Chairman of the Fed position, I would say he would need to be groomed first as a White House official. https://www.richmondfed.org/-/media/richmondfedorg/publications/research/econ_focus/2016/q3-4/federal_reserve.pdf Ideally, I would like a world where the Fed does less and less and eventually very little but one can envisage scenarios where they will do more and more in terms of quantity and quality, if not unconventional.

Thank you for this link and the post in the BRK-general news section concerning Home Capital. Another confirmation that Mr. Buffett is in a league of its own. The BRK news release is a classic piece. BTW, I liked several aspects of TBW's interview and I know he has commented above in this thread concerning Mr. Buffett's involvement in HCG. If one thinks of the real estate picture in Canada as potential dominoes to fall, one would think that a company like Home Capital is in first line and before government involvement is triggered.

The stock market needs a fix in order to finish the year with a Santa Claus rally.

^From AR 2017: ----- Based on the surplus and net earnings (loss) of the primary insurance and reinsurance subsidiaries as at and for the year ended December 31, 2017, the maximum dividend capacity available in 2018 at each of those subsidiaries, payable to all shareholders (including non-controlling interests) is as follows: December 31, 2017 Allied World 688.0 OdysseyRe 324.9 Northbridge(1) 149.1 Crum & Forster 130.2 Zenith National 86.0 Brit 195.1 Total: 1,573.3 (1) Subject to prior regulatory approval. ----- In Q123, ORH sent upstream 100.0 and NB 65.6. Capital is pretty much the same and “core” NPW is up 8.5% so HUGE residual dividend capacity. Downside to using the dividend capacity is reduced ability to benefit from a hypothetical and unexpected hard market. ----- For the opening theme, the value CPI-linked derivative contracts has steadily decreased over the last few years along the declining price for deflation protection in Europe. That protection price is now back to where it was around 2008 and something like 10 x less than in 2009. Ironic.

Apologies, but I am having trouble understanding this point. If you are putting a significant share of your mortgage payments into the equity of the home, doesn't it reduce the risk to the system? At e.g. 100% LTV, and with all payments going to interest, any drop in the value of the assets could cause insolvency. But at 80% LTV, and 50% of payments going into to the principal, the scenario of going underwater requires a >20% drop in asset values. I understand (psychologically) why trading loonies for quarters would cause hardship for homeowners/homesellers, but certainly reducing leverage in the housing market (which capital repayment does) reduces systemic risk, right? Hi wisowis Don't apologize. :) It is a question of perspective, price/value and ability to hold to maturity. The underlying assumption is that there has been a growing disconnect between intrinsic value and price. -Perspective Elevated down-payments and accelerated principal reimbursement are sound principles and a sign of conservatism. -Price/value and ability to hold to maturity The potential problem is paying a premium to intrinsic value and financing a part of that purchase with debt. Then part of the "principal" repayments includes the premium and if you have to sell (for any reason) before maturity when the premium is gone or even has reversed you may end up with an underwater loan and eventually no house left. Think of dollar-cost averaging for investments. You assume that, over time, the price to value discrepancies will cancel each other. With housing in Canada, it seems to me that a lot of home buyers have increasingly used dollar-cost-averaging to buy and reimburse an over-valued home and some may not have the chance to take advantage of the full cycle. Also, the higher principal component in the debt servicing implies that people were encouraged and rendered comfortable buying a more expensive home, not considering the over-valuation issue discussed above. Have you spoken to real people about disappearing home equity going through this in the US 10 years ago? In the US, leading up to the peak, there was a lot of home refinancing and some of the dynamics was different but the people I spoke too have a feeling the "equity money" that disappeared reappeared (through a creative process) in somebody else's pockets.

For expected extent, direction and quality of “good governance”, you may be interested in reading a 2011 report from the Bank of Canada: https://www.bankofcanada.ca/wp-content/uploads/2011/06/sp150611.pdf#chart1 Message of yesteryear: we need to apply “vigilance” and “moderation”. Somehow what happened (just continue the graph lines and data points up to Q3 2018) does not fit, at least to me, to the definition of vigilance and moderation. The author of the note is now leading a venerated institution in London, may have to issue guidance through a different kind of transition and he’s likely to do whatever it takes. We have learned (in a Pavlovian way) to expect nothing less. About 7 to 8 years ago, it was suggested that there was a risk: “our institutions should not be lulled into a false sense of security by current low rates. Similarly, households will need to be prudent in their borrowing… ” Definitions: Lull: A temporary interval of quiet or lack of activity. LOL: Laughing out loud, to denote great amusement. With use, LOL has been overused to the point where nobody laughs out loud when they say it. In fact, the acronym may be a prelude that leads to a less than cheery consensus. More accurately, the acronym "LOL" could sometimes be redefined as "lack of laughter." With profiteering, the problem was unreasonable profits from unreasonable delegation of government powers and now it seems that the problem is excessive presence of authorities giving the illusion of control. At least, a constant remains: opportunity to profit in times of stress. LOL

Reason for this post: I’ve held a basket of Canadian banks in the late 90’s, did quite well (eg a quite rapid double with CIBC) but eventually put that result in the failure file (file #2 of 4: good result and bad process) because it was basically luck. I want to invest in Canadian Banks again but need to understand better what will happen to Canadian real estate. Viking has elegantly suggested the possibility that we may somehow muddle through and that’s a reasonable alternative. This post was triggered by a phone call and a one-page note. I understand that a significant fraction of Canadians are hurt by rising rates and profiles obviously vary. A member of the extended family circle recently called me to ask advice about a topic unrelated to money or investment. Going to general talk (during which she offered unsolicited financial advice), it became quite clear that she had become financially stretched in the context of a recent purchase of a new (and quite expensive) car and as a recent owner of a nice condo. At the conclusion of the conversation, I made a mental note to prepare an answer that would not appear condescending in order to politely deflect an eventual invitation to participate in an Occupy-Wall-Street type of event in the future. The one-page note (see below) shows how 1-the % of mortgage debt servicing to disposable income has remained quite stable although there are small peaks that help to define the concept of margin of safety and how 2-the composition of the mortgage payment has changed over time (principal and interest strip). However what the author considers to be a source of “strength” and financial flexibility may correspond, at least to me, to a terrible misconception if the value of the underlying asset bought and financed is overvalued. In some scenarios, the price obtained upon selling may be a relevant input and a source of significant hardship as the value of liabilities is much stickier than the value of assets. At least, that’s one of the lessons learned from the American Experience in 2007-9. Putting the anecdotal and the statistical together An amazing phenomenon that has occurred (in North America at least) is that consumers have responded to improved energy efficiency in cars and relatively cheap gasoline prices (despite environmental and high gas prices headlines) by buying heavier and more expensive cars. Can somebody explain that conundrum other than saying that “rational” people respond to prices? The same way, people have responded to ultra-low interest rates by buying larger and more expensive (and progressively overvalued IMHO) homes and this new era even prompted some (?5% of households) to buy a home when it would have been financially safer to rent one. https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/hot-charts-181214.pdf What’s the point and why it may be relevant now? People refer to the “hawkish tone” displayed by the Bank of Canada and describe the recent rise in rates as a “shock”. A link is provided below for historical perspective. If what has happened to the recent mortgage rate trajectory is found to be traumatic, the historical perspective helps to define the extent of the household leverage situation and the precarity of the residual margin of safety for many. The expression that comes to mind for the residual margin of safety is “peau de chagrin” which cannot be translated directly but which means that, at times, all you may be left with is sorrow. https://www.ratehub.ca/5-year-fixed-mortgage-rate-history This post is getting way too long but I looked also at the exposure to fixed and variable rates and the nature of Canadian debt, especially the mortgage debt that has a significant fixed component, which is felt to offer protection in a muddling through scenario but which may also happen to be a curse in disguise. Disclosure: no long position in Canadian banks, yet.

Going tabula rasa on this topic for the next few weeks. If your leverage question has to do with corporate leverage, here's a relevant and balanced link (focus on figure 1,2 and 3): https://www.moodysanalytics.com/-/media/article/2018/weekly-market-outlook-middling-ratio-of-net-corporate-debt-to-gdp.pdf Keep in mind that the average numbers for net debt may be skewed because an unusually low number of firms have an unusually high level of cash. Why is that? Another consideration is that the leverage ratio tends to rise in recessionary conditions because of effects on both the numerator and the denominator and those who suffer most are the ones that, perhaps, did not prepare sufficiently for adverse scenarios. Off-topic remark: Good Times Roll is one of my favorite songs by the Cars. When they released it in 1979, the stock market was about to enter one of its greatest runs and today when I considered putting a YouTube link to the song, I have to watch a publicity showing a trader in his private jet ready to share his success recipe in options trading.

Statistical ramblings: Since 1998, if one had invested in the S&P 500 only during the 2 days preceding every FOMC announcement, ie 16 days per year, one would have captured about 85% of the index return (not accounting for dividends and transactions cost) even if the announcement was appreciated to be negative, neutral or positive afterwards. (!) Just in case this has some real-life meaning, there are two possibilities: -Don't fight the Fed 'cause these guys know what they're doin'. -Consider the possibility that the correlation eventually breaks down, down the road.

Another alternative: https://www.yardeni.com/pub/peacockperf.pdf

^If I may add, CalculatedRISK (which was very relevant pre-GFC in the US), put a relevant piece this AM where he questions Mr. Schiller's assumptions concerning the level of the real estate index in the US now. I would say that statistical analysis or theoretical models are optional when looking at the diverging paths depicted above. https://www.calculatedriskblog.com/2018/12/a-comment-on-professor-shillers-housing.html How far can this go? It looks like Australia is starting to provide an answer.

^Somehow I suspect your post may elicit similar visceral reactions as if you'd walk into an NRA convention with a T-shirt saying "I hate guns". :) Not suggesting to short BRK but, in terms of a yardstick, anchor holding, or a contrarian or even relative hedge, going forward, it is possible that BRK relatively disappoints. Another consideration is that BRK has pretty much made it to the "too-big-to-fail" category, which should provide a floor if the sky falls. See following link with a focus on: -graph showing declining Berkshire's alpha -graph showing a higher level of correlation between BRK and the S&P since the last shake-up https://realinvestmentadvice.com/the-myths-of-stocks-for-the-long-run-part-vi/