Cigarbutt

Hoping for a diversity of opinions and will keep the reply short. Your simplified answer is at the heart of the issue as I find that the rule for every lender, there must be a borrower has been blurred IMO by what, in the end, could be called black box economics, which is a layer of complexity above voodoo. Looking for perspective and I'm a slow learner as am still trying to fully understand the circumstances that led to the TARP program and maybe simply need to move on. All I know is that Mr. Powell and his team will try to move cautiously and without disruption and it is impossible to "predict" what will happen but it will certainly be interesting to watch. When everything is said and done, this may all come down to instinct. I suspect that George W. Bush, who often used instinct for decisions, did not go into the details of the the controversial bail out but, after the audience with the father, the son and the holy ghost, came out with the right solution: "If money doesn't loosen up, this sucker will go down". Under present circumstances, hard to figure out what he would say but it may have sounded like: "Like it or not, it's time to bite the bullet."

Don't want to derail this thread but what you mention is interesting (and debatable because your conclusions need a certain set of assumptions). So this post is about the net interest margin and will try to keep it in line with the spirit of the thread. The net interest margin at US banks has been relatively compressed since the sudden economic deterioration in 2007 but the trend seems to be changing. https://www.federalreserve.gov/econresdata/notes/feds-notes/2015/why-are-net-interest-margins-of-large-banks-so-compressed-20151005.html Overall, I understand that your comment means that rising rates will be a positive for lenders and if you look at the long term trend in rates, an interesting picture emerges. The curve does look like a smoothed version of the Treasury rate curves. https://fred.stlouisfed.org/series/USNIM Many factors involved and every cycle is different but, when you focus on certain aspects, the net interest margin, in general, seems to decrease when there is a tightening environment and typically increases after the curve has inverted and after the environment becomes accommodative again. This rise in margins typically happens during a period of a significant decrease in the volume of loans. https://www.richmondfed.org/publications/research/economic_brief/2016/eb_16-05 But the initial message of the thread is the possibility that Fed over-tightens and affects demand for the typical citizen. So far, in this cycle, uncharacteristically, Fed tightening has resulted in rising net interest margins but I wonder if more tightening, especially if sufficient to cause an inverted curve, will be beneficial to the net interest margin or the volume of loans. History seems to provide some potential answers. Here's a final link coming also from the Federal Reserve Bank of Richmond (this time from early 2007). The article talks about net interest margins, term spreads, chasing for yield and credit risk during inversion as well as the solidity of banks due to their robust levels of equity capital etc. The authors suggest vigilance which may always be a good idea afterall. https://www.richmondfed.org/-/media/richmondfedorg/publications/research/econ_focus/2007/spring/pdf/feature5.pdf

Fair enough. Individual securities need individual evaluations of merits. But this thread is about the FED and Mr. Buffett, in his usual apparent low level of interest, has said that the low level of interest has been fun to watch, adding: "QE is like watching a good movie, because I don’t know how it will end". Hmmm… Also, when evaluating an investment, a 1% increment from 2% to 3% does not have the same impact as from 8 to 9% (in terms of valuation, interest expense etc especially if higher leverage is in the picture). And when you're buying a security in the market or privately, you have been competing, for a few years during which there was a huge and incomplete experiment, with buyers using very low discount rates, having access to a large amount of cheap leverage and being driven by the hot potato effect that JimBowerman describes above. I wonder if the cash balance that has been rising at Berkshire has anything to do with the fact that is easier to buy than it is to sell (or wind down). I tend to think that Mr. Buffett is often on the right side of transactions. Don't you think? @JimBowerman The definition of the hot potato effect that you describe does not correspond to my understanding. You seem to imply that the 1,7 trillion injected by the FED through the QEs was transmitted to the economy because banks were induced to lend more. That does not seem to be the case and I understand that even the FED acknowledges that the real economy was not really affected, apart from the unverifiable comment that a worse depression was prevented, which is really something, if true. The hot potato effect that you describe seems to be related to the fact that, through an induced new equilibrium, the new money that found its way into the system eventually stayed at the banks but somehow encouraged chasing for yield behavior. Money did change hands but made it back to the banks as reserves but the result of the flow of new money was higher asset prices (wealth effect), especially in stocks, junk bonds, leveraged loans etc When the "excess" reserves are retired from the system, how do you call the hot potato effect? And what is the opposite of chasing for yield or wealth effect? I read some of your stuff and look forward to becoming more educated.

On curve inversion and a job well done. I’ve been critical and will continue to be, concerning various distortions and unintended consequences introduced in the market by the Federal Reserve and think that the interest rate “conundrum” has not been resolved. However, if animal spirits do lift growth and interest rates going forward in sustainable manner, such as suggested by the Fairfax team for instance, I take the pledge to openly recognize that I’m wrong. If that’s the case, I will also dissociate from the morbid fascination about what happened in Japan. First, some would say that flattening or inverted curves don’t matter and there was some interesting work that came out in 2006 suggesting that curve inversion no longer really mattered and, using Fisherian and Wicksellian concepts, that the curve was not inverted even if it was!? At this point, if long term rates don’t increase, the inverting curve will become inverted with the next short term hikes. Maybe, in a way, not that relevant for most investments, but useful concept when looking at something like the Bank of the Ozarks. Even if the underwriting culture at that bank was very strong, IMO the distorted interest rate market may have very well insidiously introduced a bias to underestimate the risk premiums and decisions to enter certain markets to an extent that credit mistakes have been made. When purely looking at reported numbers, this bank would constitute a good opportunity but, given the historical perspective and the tightening of the term spread which, if it continues, will invariably manifest the stress between borrowing short and lending long, the recent negative developments represent a leading indicator of things to come. Possibly cherry picking to some degree here but, when you look back at actual comments made by Mr. Greenspan (before the 1990, 2001 and 2007 recessions) and Mr. Bernanke, concerns about an inverting or inverted yield curve were put aside. Example (forecast vs foresight?): https://www.marketwatch.com/story/greenspan-discounts-flatter-yield-curve-as-warning-sign FWIW, here’s a recent, interesting and balanced study by the none other than the San Francisco Fed: https://www.frbsf.org/economic-research/files/el2018-20.pdf So what? When I was a young kid, my parents, sometimes tired of never ending questions, would send me to my grandfather who had been born before the 1913 Federal Reserve Act and who had no formal education. But he was one of the wisest man I’ve come to know and never answered questions in a conventional way. One day, looking at the sky, watching the V-shaped flocks of birds convincingly moving in a southern direction, after a typical run of questions, my grandfather explained some “principles”. First he said, “One swallow does not a summer make, nor one fine day; similarly one day or brief time of happiness does not make a person entirely happy" from which I understood that he meant that complex systems are complex, exact timing is difficult and false signals could lead one astray. Then he explained that Canadian geese, some time during the fall, migrate south. But why? My grandfather said I was lucky because, in the new era of Great Moderation (he may have said era of great abundance), I could get educated and hear from the masters as to why birds migrate but he also said that for him, winter coming meant that he had to prepare for survival (food supply reserved and preparation for the next year’s sowing) and that he did not need to understand why the birds were migrating. He just needed to know that no seasons were exactly the same, that occasionally birds, especially the younger ones, did not fly exactly in the right direction and that there were natural and deep-ingrained forces “telling” the birds when and where to go. The future is indeed unknowable and to each our own as we have to decide how to balance profits and protection but I wonder what my grandfather would say today. He always seemed to focus on the real and the enduring. It’s hard to be a contrarian when one “sees” a certain amount of collective foolishness but today, I look at the sky and I see tightening in a late cycle. I assume John has finished his book on cycles and wonder if I’m off-base here. Speaking of tightening and of a job well done and linking to what Cardboard opened with, and basically asking the question: Why suffer if we don’t have to? I read some interesting stuff today and will finish with a question. It’s from Horizon Kinetics Q3 2018. “The U.S. has $71.3 trillion of total debt, including everything from a car loan and credit cards to a U.S. Treasury Bond. If rates were to increase, across all instruments, by 1%, the additional debt service would be $713 billion. The U.S. consumes about 20 million barrels of oil a day. At roughly $70 a barrel, it costs $1.4 billion a day to pay for the oil, or $511 billion a year. So imagine, using the 1% increase in debt service as a reference point, if the country had to pay another $713 billion for its oil. That would be a 140% increase over what it is right now. That works out to an oil price of $168 a barrel.” Yields have been increasing across the board and there’s more in store. If gas prices at the pump would have gone to 5 bucks a gallon and were moving to about 8 bucks a gallon and more in such a short time, the 70’s oil shock induced consumer suffering would pale in comparison. Yet, in the context of a job well done, deleveraging, in the main, has not occurred and fiscal deficits are heading up without any sign of suffering. Why is that? There is a rare disease where some people don’t ever feel pain (those familiar with the Millenium movies will understand). Despite what first level thinking would suggest, people who never feel pain don’t do well. Unnecessary suffering is unnecessary but pain has to be felt. It’s unfortunate but it’s evolutionary.

You seem to want to add another mandate to the FED: to avoid an inverted yield curve? Isn't an inverting or inverted yield, if at all useful, only a symptom of an underlying problem and not a problem in itself? I understand that the FED has laid out a plan to gradually decrease its balance sheet over a few years by letting bonds mature and by not reinvesting the proceeds. Are you suggesting, as they are entering the second and most delicate part of the greatest (unorthodox and aggressive) monetary experiment of all times, that they suddenly unwind the humongous position that they have built since the financial Pearl Harbour? Interesting to consider the unwinding options and timeline, as tightening is being mentioned (and felt, see opening post), but the "normalization" process has only begun and lags are expected. Looking at what the Bank of the Ozarks reported today and compared to previous trend, its net interest margin has steadily decreased but not by much (even report an improving core spread) mostly because the asset side is mostly tied to variable rates but the the "tightening" is being felt as it is passed on to the borrower and aggregate loan growth has started to moderate already. Perhaps just a blip for the bank but we may already see the early manifestation of the tide going out (risk premium set too low, credit mistake) even if the "normalization" is just starting. Just to add, versus another part of the thread above, monetary and fiscal policy are two different animals but, for a while, the FED was, in a way, buying debt issued by the government (indirectly in the secondary market) and this paradigm will change as the FED will no longer be a net buyer of government debt at a time when the Treasury Department will need to offer an increasing amount of debt to the market. I wonder if they will go to the short or long end of the curve.

I agree that this is a short term long term question. The FED has started to reverse course but, in the overall scheme of things, would say that they are still accommodative. Wouldn't want to be in their shoes at this point. Guess also that they would easily revert to lowering interest rates at the first sign of distress which will provide other opportunities for interesting debates. Thinking back of previous chairmans, what Mr. Volcker did in the early 80's was certainly not popular and an argument could be made that a recession was "triggered" but, lo and behold, in a way, it set the stage for one of the most amazing bull market. There is another chairman that I admire: William McChesney Martin. Interesting to remember that when calls to have him go finally hit home, Mr. Buffett was planning on disbanding his partnership. https://fraser.stlouisfed.org/files/docs/historical/martin/20_09_19650610.pdf When somebody goes to the emergency room with a diabetic coma secondary to a sugar overdose, no questions asked, insulin is given and the life is saved. It's what happens after which is interesting as a largely preventable disease can be endured and in fact worsened by simply continuing on applying the same medicine. It's a question of perspective, different opinions are respected and maybe the point of view I describe can't stand prosperity but I think the punch bowl occasinally needs to be taken away. And IMO, this is such a time.

Thank you for the link handycap5. It was an interesting conversation and I hope that the BRK-led venture amounts to something. Mr. Gawande is a humble leader with conviction and I guess he is not the type to underestimate the challenge. Benjamin Friedman must himself turn in his grave if he sees the growing portion of GDP spent on healthcare and he did make a distinction between the oath and the man behind the oath. Going forward, we will need to continuously rebalance the tensions between the freedom for alternatives and the reliance on third party payments. The foreseeable future is fuzzy, as always, but I think health outcomes, for at least a while for the tapeworm to grow, will come down to a race between growing "system" productivity and diminishing returns on "scientific" inputs. All the hype around the big data and predictive analytics is really about gradual and evolutionary application of method where science meets humanity. Interesting to note that Mr. Gawande does not talk about increasing intricacies and opacity, he explains that we will try to "unknot the complexity". In my own humble on-the-ground experience, the most effective improvement projects were simple, automatic and "natural", irrespective of the degree of underlying complexity, insight or sophistication. The underlying design will continue to require human intelligence but the application of the design will increasingly require the assistance of artificial intelligence. Concerning incentives and changing people, I remember an episode where I was part of a group responsible, in a self-regulating type of environment, for adjustments in payment amounts (code) for listed procedures. There was a typing mistake and a rarely performed procedure became more rewarding financially. Guess what happened after the new list was disseminated. People, medical or otherwise, respond to incentives, good and bad. Concerning changing people and systems, nobody likes it to be told about the huge gap that exists between the assumed "performance" and actual results but Mr. Gawande sees himself as a bridge builder and Fortune favored the prepared mind. A relevant example is the integration of the thermometer into the "system". Historical example but highly enlightening. Just like the BRK-led projects to come, the iniatives may first be seen as threats but, before you know it, it's not the the people that will change the system but the system that will change the people. https://blogs.scientificamerican.com/observations/why-doctors-reject-tools-that-make-their-jobs-easier/ I'm long human intelligence since ignorance has reached the level of ineptitude.

The venture is shaping up. I understand that the recently posted "data scientist" position may have something to do with the adventure. https://www.amazon.jobs/en/jobs/715945/data-scientist-healthcare-benefits FWIW, I think there is a huge talent basin for this position. The profile requires to be data driven, transformative and multi-disciplinary. The #1 candidate on my list is Mr. Andrew Bartley. https://itpeernetwork.intel.com/lean-startup-approach-predictive-clinical-analytics-healthcare-part-ii/ https://www.intel.com/content/www/us/en/healthcare-it/solutions/documents/predictive-analytics-in-healthcare.html Was looking recently at work being done on workers injuring themselves at work and ending in the downard spiral of an opioid addiction problem. Big issue, huge costs (human and financial) and...mostly preventable. All you need is a relatively intelligent tool that would spot the risk factors early on, provide alternatives and remedial actions before it's too late. And it would cost less too. An unrecognized concept is that the approach that the data scientist will apply is very similar to what clinicians do on the field. They will: -observe and collect data (listen, ask, examine and read test results) -try to answer a question (diagnosis) -finds way to predict what will happen based on the above two (risk factors and natural history) -try to prescribe a solution in order to obtain a positive change in outcome Hippocrates would be proud and advanced analytics is closer than you think.

^Interesting. Would add the following for constructive purposes. The two most relevant and interesting studies I've come across about this specific topic (causality in Alzheimer's) are: https://smjournals.com/ebooks/Neurobiology/chapters/NB-16-01.pdf https://pdfs.semanticscholar.org/4aad/4949528f570dad23d0d2c7cbb3398e5fb914.pdf The field of nanotoxicology remains relatively controversial. At this point, genetic factors are felt to be major contributors and prevalence increases exponentially with age. It seems that, essentially, the rising prevalence of dementia is related to population cohorts living longer. A word on the article. I possibly spent not enough time on it and on the premises supporting the conclusions but the Toronto article mentioned is a retrospective study of exposures. These are labeled as observational and are very weak indicators of causality. But they form the basis of further studies. This is because the conclusions are based on statistical calculations using odds ratios and relative risks associated with attempts to retrospectively "control" for other potential exposures or causes. These studies are notorious for suggesting spurious correlations or correlations with no material meaning with reality ie breast cancer risk related to the number of bathrooms in the house. Historical tidbit: In the old days, people suffering from tuberculosis were sent to sanatoriums for the fresh air. At some point, many of these places were transformed into fancy touristic resorts. https://en.wikipedia.org/wiki/Sanatorium Alzheimer's disease is a nasty disease and hopefully explanations and treatments will be forth coming.

Hi Shane, My long term goal is to switch to passive investing and am actively working on achieving that goal. Some ideas: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=x745112&serialid=knrGGNw%2Bo620toTTx96qBQ%3D%3D https://www.bostonfed.org/publications/risk-and-policy-analysis/2018/the-shift-from-active-to-passive-investing.aspx FWIW, apart from some pockets of potential illiquidity-induced departures from NAV in the levered/synthetic categories of ETFs, I think a lot of people are overreading the phenomenon especially as a timing tool. In theory, passivity consequences may show up in times of duress. Interesting study showing that stress can help to show your true colors. https://www.eurekalert.org/pub_releases/2018-09/osu-sfy090418.php I think Mr. Soros calls this reflexivity. https://www.opensocietyfoundations.org/sites/default/files/george-soros-general-theory-of-reflexivity-transcript.pdf

Still early especially for H. Micheal but I come up with lower estimates. H. Micheal may proportionally cost more to FFH due to the wind over rain factor and increased related burden on reinsurers. Last year, each of Harvey, Irma and Maria came to about 30B of insured losses and FFH picked up a bill (net of reinstatements) of about 300M for each on average with Allied World's share at about 45% of total FFH exposure. I assume AW's catastrophe exposure has been decreased (going to higher layers?) but we'll see.

Is the insurance expensive? Does it include emergency evacuation etc.? I know that when expats, from any country, living abroad (e.g. a French expat in Vietnam) wanting to buy an international health insurance they are often introduced to two types: 1. global including the U.S.A 2. global excluding the U.S.A. That by itself shows just how bad the situation is with the health system. Travel insurance for medical emergencies, from my perspective, has not been expensive (+ or - about 2 to 3$ per person per day of travel, sometimes much less with "promotions") whether the US is part of the itinerary or not. The process is fast and convenient and, if underwriting is of any interest to you, they tend to focus on a few key questions (inclusion and exclusion criteria) with some criteria of doubtful value and with other important criteria not even being considered if you succeed going through the basic screening. Worth trying a few competitors because criteria and resulting premiums can vary wildly (not an efficient market, it seems). This is the commodity product. No personal experience with utilization of the product but know of people who had to use it with no problems concerning access, payments (no need for upfront fees, deductibles or co-pays) and evacuation if necessary once the medical condition stabilizes. I have a feeling that the companies make decent underwriting profits on this even if premiums are low (low expense ratio, relatively rare claims). However, I hear that the insurance premiums shoot up very fast when certain criteria are met which define your risk of being sick "suddenly" (age, certain pre-existing conditions, recent medical visit, medication change etc). In these cases, you have to go through a customized process and, if the US is part of your travel plans, premiums shoot up exponentially. BTW, we take this type of insurance on international trips only for catastrophic medical events but when we go to the US, even a simple visit or a simple ailment can result in a catastrophic bill as care is more expensive and visitors are typically charged the highest margin multiple of the basic Medicare fee but the care received is usually excellent.

For those interested: Was just looking at my old "Brascan" file and was able to recuperate this: https://www.theglobeandmail.com/news/national/how-flatt-is-reforging-brascan/article18273692/ Not terribly informative if you are in an investigative mood but the 2004 article gives perspective on the "transition" and the "partners". Interesting also, thinking of the recent "discount" discussion about BAM, because then, as the article describes, Brascan was trading at a discount, using a sum-of-the-parts calculation. One could say that the discount has closed, at least when referring to what the author meant in 2004.

Micheal Lewis is a uniquely gifted writer, which does not rule out insufficient objectivity. When he writes: "It’s what you fail to imagine which kills you", he may suffer from excessive imagination and he may even suffer from what he described in 1996 about Bob Woodward: https://www.nytimes.com/1996/07/28/books/politics-1996-bill-and-bob-s-excellent-adventure.html when referring to the commercial bind and the confirmation bias trap, but Mr. Lewis has shown, over time, a very unusual knack to spot and explain human misbehavior. His outsider take adds to the always elusive reality. After reading his works, I've always come out with the impression that the view may have been seen through a particular prism but never felt being trapped into an ideological quagmire. Conclusions may vary. That's the idea.

This post is for American "friends" who are reflecting on ways to improve their system based on factual analysis. This post is not about which system is better. https://www.msn.com/en-ca/news/canada/trump-calls-out-canadians-travelling-to-us-for-health-care-at-kentucky-rally/ar-BBOlip9?ocid=spartanntp From data, Canadians do spend on US-based healthcare but most of the money spent results from unpredictably becoming sick in the US while being in the US for other reasons (tourism, business etc). There is a small segment of the population who chooses to go to the US for medical care and some of these cases can involve celebrities and political figures. The main reasons to go abroad: certain heart surgeries, substance abuse centers and experimental cancer treatments. Estimates vary but, overall, between 1 and 3% of expenditures incurred by Canadians are spent in the US. There are huge line-ups at the USA-Canada border (both directions) but it's not because Canadians are fleeing en masse to access US healthcare. Personally, the main reason I go to the US (frequent) is because I like to meet people there. :) But when we go, we always buy complementary health insurance. Just in case.

^Mammography is controversial and poor incentives may result in poor results. OK. Interesting to note though that in Singapore, there are guidelines for mammographies that are comparable to Canada or the US and, on a recurrent basis, like in most places in the world, they aim to periodically improve their guidelines with best evidence. So the way that services are paid for seems to have little to do with prevention guidelines. Here's what seems to be their latest version for mammographies: http://www.smj.org.sg/sites/default/files/5102/5102cpg1.pdf I would tend to agree with most of what you describe but don't tend to agree on the black and white thinking and on the implicit assumptions that healthcare actors are intrinsically bad. There are poor performers but, in the main, people simply respond to incentives. To err is human and what one may realize with relevant experience and practical involvement is that, mostly, medical errors are not made by bad people, but rather by good people working in bad systems. I may be biased though because healthcare saved my life and significantly extended the life of several significant persons around me.

From the 1961 partnership letter: "I have consistently told partners that it is my expectation and hope (it's always hard to tell which is which) that we will do relatively well compared to the general market in down or static markets, but that we may not look so good in advancing markets. In strongly advancing markets I expect to have real difficulty keeping up with the general market." Given the historical record, would say that hope and expectations have tended to converge with reality, with a premium. Reasonable to expect more of the same.

Hi DocSnowball, I have followed this thread intermittently and some aspects are fascinating. Here and now, just want to make a few comments about the bolded part above. Context: I've always found US public involvement in housing finance and private home ownership to be highly unusual. Opinion: This is work in progress through Congress but most of the involvement is a relic of reforms from the Great Depression and should be curtailed. The marvelling and potentially noble aspects have been mired in a growing web of moral hazard. I thought the following to be useful for historical perspective: https://files.stlouisfed.org/files/htdocs/publications/review/94/07/Structure_Jul_Aug1994.pdf https://www.huduser.gov/publications/pdf/us_evolution.pdf https://www.mercatus.org/system/files/House_of_Cards_March_2012.pdf -Comments about the bolded part of your post The idea is to maintain cheap financing. Most of the financial backing is domestic but, since the early 2000's, a significant part of the financial backing comes from countries that show a positive current account balance and with whom trade skirmishes are forming. So, in substance, the US buys cheap goods and then recycle USD through the capital account in order to maintain cheap affordable housing. :o Here are some numbers (not audited!) which show the percentage of the current account balance that has been "financed" through net changes in foreign holdings of agency MBS. 2004 4,3% 2009 (5,5%) 2014 3,0% 2005 11,8% 2010 (9,0%) 2015 18,2% 2006 15,1% 2011 0,1% 2016 20,7% 2007 25,9% 2012 0,8% 2017 12,8% 2008 29,8% 2013 (17,4%) Reference: https://www.ginniemae.gov/newsroom/publications/Documents/foreign_ownership_mbs.pdf All I'm saying is that the unsustainable trade imbalance will/should be dealt with and that adjustments will need to be made of both side of the equations and that the outcome with agencies may have to take into account less efficient entry of foreign capital.

The following is: -anecdotal -regional in nature and worries about vulnerability have been voiced for many years. Still. https://www.msn.com/en-ca/video/news/is-toronto-the-new-manhattan/vi-BBOc41p?ocid=spartanntp checked for reference: https://www.kijiji.ca/v-1-bedroom-apartments-condos/city-of-toronto/1-bedroom-we-pay-your-utilities-lawrence-ave-e/1376748826?enableSearchNavigationFlag=true Anecdotally, just renewed the lease on an apartment used by two of my children in Montreal (typical student sector). The rent was increased by 1,5% and when compared to what I was paying for a similar arrangement in the 80's, rent rise has slightly decoupled from inflation but not that much. I inquired to the owner if the building was for sale. I end up with the conclusion that the price asked is quite high but can be rationalized to some degree with long term optimism and if you believe that interest rates will stay low for a very long time. I find the situation in Toronto puzzling and the short video underlines some concerns about fundamentals. It's always hard to gauge "sentiment" but I wonder if the tone used and complacency shown by the two entertainers may not represent an underlying current (with timmies in our coffees and with sunshine on our faces). It seems to me that market participants assume that prices can move away from fundamentals forever. Who are the buyers? With stocks at least, one could always hope to sell rapidly to the next buyer if things get tight. I'm afraid some Toronto real estate owners may not have this luxury when prices eventually come back to earth (net worth=market value of assets-debt). Like Ben Rabidoux says, there are "strange risk dynamics".

Delicate topic, but agree. In an era where opportunity costs are estimated and where potentially positive NPVs are discounted in the longevity escape velocity projects, perhaps some consideration should be given to the potential fact that the hospital should be a last resort solution, if quality of life is high on your list. https://accessh.org/wp-content/uploads/2017/01/Bruce-Leff-April-4.pdf https://www.commonwealthfund.org/sites/default/files/2018-09/1895_Klein_hospital_at_home_case_study_v2b.pdf I would say huge opportunities for those putting customers first, single payer or not.

^Interesting. Few thoughts. -International comparisons can be helpful but domestic concepts cannot be simply imported, there are no perfect systems and some systems are more broken than others. -IMO healthcare delivery brings value but the recent trend (last 20-40 years) is based on gradually smaller incremental value gains and gradually larger costs. -Agree that the challenge is significant but remain optimistic. -Compounding can be slow but can be wonderful when incentives are better aligned (in the right direction). -Value-based care is basically a capital allocation decision and we can do better (a lot better). Recently read the following and thought it was useful: https://www.amazon.ca/Better-Now-Improve-Health-Canadians/dp/0735232598/ref=sr_1_1?ie=UTF8&qid=1539345551&sr=8-1&keywords=danielle+martin+healthcare Thought provoking, a lot to disagree with, but constructive grounds for progress.

Looking at this now. Could you please, in a few words, explain why you bought these two, in the context of buying them at the same time?

Would add another minor point. Mr. Buffett has described that, for some time, his bids are not competitive in this environment. Looking at Bloomberg this AM, the spectrum of treasuries yields from 3 months to 2 years have increased by 115 to 138 basis points over the last 12 months. Nothing earth shattering but, using the gravity argument, higher interest rates would tend to put downward pressure on deal valuation from Mr. Buffett's perspective and the cash optionality value has increased a little as he is getting paid slightly more in order to wait for the fat pitches. I see this aspect as another factor contributing to higher cash balance and, by consequence, to increased pressure into the buyback default option.

Interesting speculation. Need the following assumptions: -limited outside re-investment opportunities -cooperating market -capital deployment discipline Unusual scenario but not unheard of: https://brianlangis.files.wordpress.com/2017/07/grants-article-1148.pdf

"The discounts, however, are meaningless if the underlying charges aren’t capped. When Bartlett looked at a common knee replacement, with no complications and a one-night hospital stay, she saw that one hospital had charged the plan $25,000, then applied a 7 percent discount. So, the plan paid $23,250. A different hospital gave a better discount, 10 percent, but on a sticker price of $115,000. So, the plan got billed $103,500 — more than four times the amount it paid the other hospital for the same operation. Bartlett recalled wondering why anyone would think this was okay." Hospitals’ negotiated transaction prices for the privately insured typically vary by a factor of +/- 8 or more across the nation and by a factor of about 3 within a region (for equivalent services). Hospital market structure (degree of competition) appears to be a major factor but the relative absence of determined negotiators also plays a role. Marilyn Bartlett "was a potent combination of irreverent and nerdy, a certified public accountant whose Smart car’s license plate reads DR CR, the Latin abbreviations for debit and credit." Never underestimate an irreverent nerd.