Cigarbutt

A part of it is also about learning about ourselves, right? [ : - ) ] So much to learn and so little time. I guess you could call this work in progress but this short term stuff is mostly noise. Ideally, it would be nice (and the right thing?) to be able to think like this gentleman, whom you may have heard of: http://csinvesting.org/wp-content/uploads/2016/02/Nick-Train-The-King-of-Buy-and-Hold.pdf For still an undefined period, will continue to have in mind St-Augustine's prayer who had his own way of formulating the paradigm between excellence and finish lines: "Lord make me pure, but not yet". I'm also looking forward to your comments (especially concerning what's written between the lines) about Mr. Marks' latest book.

Sold about half of BRK.b holdings today. Could be a relative mistake as the other Buyer may have a particular sense of intrinsic value. Bought recently after Mr. Buffett "signalled" a message which I thought was inefficently picked up by Mr. Market and made it about a 27% position. Would be happy to hold BRK.b forever and it has been used as an opportunity cost reference. However, I felt I needed to bring the position down to size within my portfolios. Interesting also because I have been selling another relatively illiquid security (small position) over a few days and was able to sell BRK.b in 11 separate accounts during the last 8 minutes of trading.

Maybe the quote needs context but speaking of cheerleading and potential errors in interpretation, interesting to note what Mr. Timothy Geithner, who plays on the same team, said under similar circumstances. In his memoirs, referring to the "mood" of the times around 2003 or 2004, he said: "There was growing confidence that {what "we" had done} had made devastating crises a thing of the past.”... His memoirs are an interesting read and, at times, he appears to be unusually candid about his own responsibilities. And I happen to think that he did quite a good job, once in the crisis, to navigate through the tough times. However, I find that, even retrospectively, he could not even consider that things could have turned out differently which is kind of scary. A comment made in a review of his memoirs summarizes this well: "There are two big worrying things here. The first is that Geithner didn’t see the crisis coming at all, and indeed was something of a cheerleader for all of the dangerous activities that the banks were getting up to. The second, which is just as bad, is that with hindsight, Geithner sees this speech as being prescient and heroic — that it’s something to be proud of, rather than sheepishly ashamed of." (my bold)

The trend has indeed moved towards larger players and more milk produced per animal with the US leading the way but the trend is international. In theory, this should translate into a more affordable product. The gains from increased productivity, whether or not in deregulated markets, seem to have been "milked" mostly, in descending order by the retailer, the processor, then the producer and finally the consumer. In an ideal world the US and Canada should integrate their dairy markets, but this would require a dialogue and it is difficult for one player to lower its guard if confidence in the other is limited. I guess Canada could unilaterally get rid of its supply management but, under present circumstances, it would need to compensate somehow those affected during the transition (especially smaller players and those in "remote" areas) and would need to set up a permanent subsidy system. Mostly, in countries that went through a similar process, consumers have not benefitted. Like on many other fronts, I think we can do better...together. https://www.wilsoncenter.org/sites/default/files/1i2v%20i17%20Supply%20Management%20-%20FINAL_0.pdf

Because Buffett and Soros have been bankrolling the Illuminati who are controlling the fed behind the scenes. BRK was "looked" at and had a pass. There are supposedly objective criteria but "character" evaluation may weigh in the balance. The fact that BH was providing funds at a time when AIG needed some during stress is kind of a strong argument although the process is certainly less than transparent. Diversification from diamonds to underwear may have been positive factor also. Bank bailouts remain, to this day, difficult to reconcile with free markets and wonder if some people who still remember were somehow forgotten. https://www.insurancejournal.com/news/national/2014/01/23/318114.htm https://www.americanbanker.com/opinion/fsoc-is-too-political-to-be-taken-seriously

Complementary information. Hard to get a clear picture on prices but the following is a reasonable source of information and methodology is interesting but conclusions are incomplete (more on that at the end of the post): http://fieldagentcanada.com/wp-content/uploads/2018/06/Canadian-Fluid-Milk-Report-2018.pdf Take-home messages: 1-milk prices vary ++ between regions in Canada 2-milk prices vary ++ even within regions in Canada 3-Canadian milk prices appear to be higher than US prices but the methodology on the US side is different and based on a smaller sample On 1-, I would say that the net return to the producer is quite stable across the country given the principles behind supply management which is basically a national policy. In Atlantic Canada, higher prices at the consumer level can be explained by higher input costs and lower economies of scale at the farm level and higher transportation costs compared to farms in Ontario and Quebec. I know less about dairy farms in Alberta and BC. On 1-, the difference in price between Quebec and Ontario does not lie at the producer level but has to do, as rb explains, with a different philosophy. Milk prices are set similarly to gas prices with a minimum and a maximum. In Quebec, the range is relatively small. In Ontario, the range is larger, especially down, because retailers have historically and typically used milk as a "loss leader", so consumers who save on milk will tend to pay more for other products because, in the main, the net margin for groceries is similar between Quebec and Ontario. On 3-, If you look at historical evolution of prices, often US prices for milk have been lower and, for some periods, by a lot. However, one needs to compare apples to apples. The difference in subsidies directly to the producer can explain some of the differences. Also, if you look for the price of milk that is free of growth hormone, which is banned in Canada, the price differential tends to disappear. And, if you look at some work that's been done, in the US, it's been shown that a significant portion of workers on dairy farms are immigrants, frequently undocumented (up to 50% of workers in some reports) which seems to also explain a significant part of the price differential. So, overall, there doesn't seem to be much left for true productivity enhancing economies of scale in terms of a price advantage for the consumer. One of the problems is that both the US and the CDN dairy systems are relatively broken (seems to be a pattern, doesn't it?) and the tendency, on both sides, has not been to fundamentally reconsider the policies put in place a long time ago but has been to try adding adjustments on top of it all resulting in a relatively inefficient patchwork. I just realized that I wrote this post eating ice cream with milk products (diafiltered milk) probably imported from the US. Am I a traitor?

Their profiles have converged to some degree and the return correlation should increase. Assuming BRK and FRFHF are core holdings, how would go about scaling up or down relative positions? Also, assuming your "bet" is not a pure and whole company statistical bet, of the 10-12% CAGR, what do you think will come from 1-underwriting, 2-investments and 3-capital structure decisions (opportunistic share buyback or issue) or do you just assume that component future returns will just revert back to historical means?

Opinions voiced about the relative "appropriateness" of regulators' actions may be correct. Relative contrarian opinion here is that the potential for infrequent but significant shocks is underestimated (through insufficient reserves against surprises and through recency bias) but I may be wrong. But, if a significant shock were to occur, the "real estate eco-system" happens to be in a very vulnerable posture. So, a variance of opinions is possible and depends on the weighting one attributes to various scenarios and their potential severities. Interestingly for context, in a typical fashion for the years preceding the GFC in the US, here's a link which shows how the "regulator" may have suffered from looking too heavily in the rear-view mirror. Speech from Federal Reserve 2006: https://www.federalreserve.gov/newsevents/speech/kohn20060518a.htm So, this was an environment of tolerable gyrations within a Great Moderation frame of mind, despite real, growing and significant risks within household real estate (at least relatively apparent to modest contrarian observers). This was also an era where reliance on market discipline was to become challenged shortly after by issues where bank nationalizations were considered as potential remedial measures. When dealing specifically with the prevention of crises: "A third principle is that the actions taken to prevent a crisis should not raise the odds of creating more problems in the future. In particular, the problem of moral hazard is a significant concern. If market participants begin to rely too much on regulators and central bankers to manage possible future crises, they may act in a way that has the effect of raising the risk of a financial crisis. For example, they may fail to engage in adequate due diligence when extending credit to other market participants or to maintain adequate capital for the risks they undertake. And they might come to believe that the government possesses more tools and resources than are actually available to shield them from the consequences of poor risk management." I would humbly submit that their assessment of moral hazard was VERY wrong. Collectively, their assessment was precise but quite inaccurate. Also, when you look at USA-based and European surveys and ivory-tower assessments done around 2005, 2006 and even 2007 versus the potential trouble brewing in US real estate and potential spillovers, the wording is almost exactly copy and paste compared to what is presently reported by the Bank of Canada (2018): "More broadly, participants in the Bank of Canada’s Financial System Survey were asked about their confidence in the Canadian financial system if a large shock were to materialize. Most survey participants remain confident in the current resilience of the financial system." Enough doom and gloom for this topic. BTW, whack-a-mole is one of my family's favorite game when we see one. In a terribly competitive environment, I usually get the second score and my son typically gets first prize. What's your recipe? You have to get your rhythm and anticipate the moves, he says. Easier said than done.

I've been using specialized voice recognition software for three years and have come to the conclusion that there has been displacement of human work and increased productivity. Three levels: 1-basic transcription work: level reached. 2-first-level analysis: level not reached, at least not quite. A while ago, an experienced and knowledgeable assistant doing the transcriptions would suggest additions and omissions when, for intance, comparing for coherence and completeness as expressed in other previous reports (data base). It looks like this could be "artificially" achieved relatively soon. 3-second-level analysis and other higher cognition: IMO sustainable moat will be enduring for a while.

... Hence what happened in the US is not really comparable. When "reflecting" on the housing bubble, US "wise" men suggested that they could have done better, maybe… (government and regulations). But who wants to take the punch bowl away these days? Read this morning, article title: "Why are so many Canadians obese? There’s not an epidemic loss of willpower" and from the article: "Blaming people doesn’t do us any good...it just makes it worse". In fact, discussing this financial obesity issue is really only possible on an anonymous board such as this one. What happened in the US was different mainly because of securitizations and some mass scale deleterious aspects of many mortgages but key ingredients are shared: ultra-low interest rates, very significant credit expansion and IMO irrational expectations about home prices. Whichever way one looks at this, home prices have decoupled from sustainable earning power of significant segments of buyers. IMO, the real estate outcome is baked in the cake. In another life, I was asked to prepare reports/testimonies on the validity of cause and effect relationships. In some cases (baked in the cake), an outcome happens and one tries to allocate for a trigger factor. In these cases, one can use the practical example of an apple that is ripe enough to fall. When sitting under a tree (thinking of a gravity theory or whatever) and seeing an apple falling, you may think that it's the wind, people walking around or even you looking at the apple...But, one may need simply to realize that the apple was ripe for detachment. I would say that the best time to harvest apples is during the fall, which I plan to do today. :) Opinion: Public oversight should be more pro-active and counter-cyclical but who wants to be a party pooper? Canada real estate was not ripe in 2007 but IMO it is now. Contagion goes both ways.

As mentioned above in the thread, Ashley Vance's biography of Elon Musk is a good read and gives a glimpse of what it must be to be him. The biography is easily available for download but here's an "official" link: https://www.amazon.com/Elon-Musk-Billionaire-SpaceX-Shaping-ebook/dp/B00SIDCSWY Interesting that "burnout" syndrome is mentioned. "It's better to burn out than to fade away" is a key line in a classic song written by Neil Young in the late 70's. Neil Young was not referring to the "burnout" syndrome then and later explained what he meant: "it's better to burn out really bright than to sort of decay off into infinity", which may reflect how Mr. Musk feels in general. Also interesting to note that the social definition of the "burnout" syndrome has evolved. Before it became associated with stress and heavy extrinsic demands, in the 70's and 80's, classical burnout cases were manifested by people, typically idealists, who failed to reach unrealistically self-imposed intrinsic high altruistic goals, possibly a better potential depiction of Mr. Musk. “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” George Bernard Shaw Whatever disease or syndrome considered, Mr Musk's "problem" is that he has been unusually unreasonable. Mr Thiel has said of him: "To the extent that the world still doubts Elon, I think it’s a reflection on the insanity of the world and not on the supposed insanity of Elon.” He indeed may need help but this may not be an option for him. Hope he does well.

The perspective is historical. If you have an interest in cycles or if you feel that interest in cycles is counter-cyclical. Freely available now in a pdf version: https://www.bridgewater.com/big-debt-crises/ Thought it was a nice complement to Mr. Marks' latest memo.

To prune or not to prune? That is often the question. Thank you.

CREA has national statistics on residential market balance with inventory in months and it is possible to look at regional inventory numbers. http://creastats.crea.ca/natl/ http://creastats.crea.ca/treb/ Looking for disconfirming evidence but would tend to say that the Canadian mortgage regulatory framework is more "sound" although Timothy Geithner and Ben Bernanke used to give reassurance that was growing alongside implicit and explicit government involvement. And things turned out more complicated than forecasted. -underwriting standards appear to rely on stronger documentation and clearer rules for down-payments and affordability -mortgage interest is not deductible and lenders have legal authority to go after borrowers -the mortgage product is less "exotic", no teasers and the principal is scheduled to go down -the mortgages are less intermediated In contrast to the US where the government encouraged home ownership and the subprime wave, I find that, in Canada, the government has "only" allowed an environment where households became "comfortable" with debt and became used to rising house prices much faster than fundamentals. However assumptions relied, at least in part, on mortgage interest rates remaining low and the regulators now appear to be behind the ball. So, the mortgage markets are different animals when one compares the US and Canada. In 2006-7, an argument can be made that the subprime sector imploded, spread to the rest of the mortgage sector and then the economy went south. For the above reasons, IMO the Canadian real estate market is unlikely to turn badly on its own but different measures show a relatively high degree of vulnerability if the economy experiences a cyclical downturn (for whatever reason). Asset busts are much more painful and longer than the typical cyclical economic busts. https://www.bankofcanada.ca/wp-content/uploads/2015/12/fsr-december2015-cateau.pdf see pages 55 and 56 of the document, including Box 1. But nobody really knows until we find out. Sometimes objects in mirrors are closer than they appear. It is possible to envisage the possibility of "deep trouble" but the banks should make it through considering that public entities would rapidly rescue and back-stop with the undesirable potential side effect of preventing the deleveraging from bearing its fruit.

No need to answer 'cause politics is heavy today and I mostly agree here but food for thought: What is meant by "useful"? Who would define "usefulness"?

Along the same lines, FYI: https://www.bis.org/publ/qtrpdf/r_qt1809u.htm

Welcome Tadimety. Where do you see both stocks in 10 years?

The reason for this post: -With enough conviction, I would short a basket of Canadian banks. -In the meantime, I am scouting real estate (apartment buildings) in my area in order to be ready to buy, given the right circumstances. It is even reasonable to consider the possibility, contrary to the historical trend, that condos could eventually be converted to apartments. The context is the Australian real estate market and the narrative is the parallel development with Canada, New Zealand and some Scandinavian countries. https://lt3000.blogspot.com/2018/09/the-australian-housing-bust-why-this.html According to the author, the market is priced for perfection and a perfect storm (that's what it would be called in hindsight) combining the economic and credit cycles could deflate what could eventually be called a bubble. https://www.whitehelmcapital.com/wp-content/uploads/2018/05/201805-Feature-Article-Tightening-Lending-Standards-Brief.pdf The report that confirmed what many suspected. Since then, the mortgage market has tightened and prices have started to decrease but the damage will be "contained" (heard that before?). https://www.rba.gov.au/publications/bulletin/2009/may/pdf/bu-0509-4.pdf https://www.rba.gov.au/speeches/2018/pdf/sp-ag-2018-02-20.pdf What I find absolutely fascinating is that "authorities" could explain, in 2009, the Australian exceptional experience during the GFC but apparently fail to appreciate now that the very factors that allowed the relative smooth transition (absence of excessive price and over-extension, "better" regulation and tax policies) then are no longer true. When facts change... https://www.businessinsider.com.au/chart-australian-wages-house-prices-2018-3 (compare graph 14 in 2009 document to above; note that the latter graph does not measure the exact same thing but the proportional change holds. Specifically, the rising "dwelling" price to income measure has certainly thinned the margin of safety to the point of oblivion. A similar conclusion can be reached for LTV ratios which have "improved" lately but with a high starting point (coming back to earth?). Like in Canada for many cities, Australia home affordability is challenging. Coming back to the LT3000 blog thesis, timing is the issue and there is always the possibility that mortgage debt to GDP will just continue on its upward historical trend. ::) http://www.abc.net.au/news/2017-04-09/mortgage-to-australian-gdp-ration/8429174

Sorry, it's difficult to convey some stuff on the internet. Another way to say what I mean is that there are only a few people who can show both show a high level of confidence AND a high level of critical self-doubt. It's hard because one tries to achieve the balance between two contradictory forces. When we take decisions, we have incomplete information and may have to act decisively (like the subject of this thread or when we make an investment) while at the same time remain comfortable that we may be wrong. I think Seth Klarman has said something like: "You have to balance arrogance and humility". To understand this though perhaps makes it easier to recognize mistakes and to learn from them. An alternative is to remain angry.

Fair enough. Helpful to remember however that, if people were rational at all times, value investing would be much less fun. :) Still painful to watch an upcoming train wreck, even with apparent slow motion. Good for you. Anecdotally (but maybe typical of what is happening in the education systems of developed countries?), earlier this week, I went for the meeting with the teacher to start the school year (6th grade). The teacher seemed to be dedicated and competent but spent about half of her presentation on the importance of student self-esteem and how the inner voice is an enemy. I agree with you that one should make his or her inner voice an ally but, in my humble experience, the strength and purpose of the inner voice tends to be inversely proportional to the inner score card strength. The combination that both John and you show appears to be rare.

Trust in media is reaching cyclical lows as the media used by media is undergoing transformation. But "there are so many good stories that haven't been written yet". If one of my children would decide to become a journalist, I would say that the long term value has not changed.

Not sure if formal teaching with an elaborate curriculum is the way to go or if only some kind of online simplified program could do the trick. Perhaps an even more targeted approach (cost effective) may help. Just for awareness of potential evidence, there seem to be green shoots. https://www.inceptia.org/PDF/Inceptia_LoanSummary_Whitepaper.pdf https://www.in.gov/che/files/150722_PressRelease_TruthInBorrowing.pdf https://www.in.gov/che/files/Loan_Disclosure_Template_for_Mail_Merge.pdf A simple annual "reminder" seems to "nudge" people in the right direction. A bit sad that we may need "programs" to help people helping themselves but the principle of secondary prevention is to minimize the impact of a disease once you have it. Obviously primary prevention is better but democracies are not perfect.

This is an old thread but relevant as patience is a potential requirement. In retrospect, 2009 was a great time to be in stocks but since then, along with some minor bumps, junk bonds have fared very well and continue to reach new heights. When climbing a high mountain, gradual ascension can decrease the risk of cerebral malfunction due to lower levels of oxygen but confusion can happen. The last elevation segment is always the most tricky. And now, some feel that the sector has become a "safe haven" above a sea of potential volatility. https://www.marketwatch.com/story/heres-how-junk-bonds-became-a-quiet-haven-for-investors-says-baml-2018-09-10 https://www.hvst.com/organization/thornburg-investment-management/posts/beware-high-yields-siren-song-X7QTZzx5?position=1 http://www.leveragedloan.com/covenant-lite-share-us-leveraged-loan-market-hits-record-79/ Maybe, this is a story with no end but I would tend to bet in the other direction. Good ole Ben Graham used to say that, in some instances, the only effective resistance is to look away. In Homer's Odyssey, in order to escape the funest appeal of sirens, Ulysses "resisted" by having his ship's crew tie him up, and members of the crew were ordered to block their own ears with wax to prevent themselves from hearing the song.

There's a broader underlying point here about the financial illiteracy of even apparently intelligent people in this country, whether teenagers or adults. As you note, this person made the initial decision to go to NYU and major in journalism when he was 17 or 18 years old. He appears to be an intelligent person. So, why did he (and many others like him) not make wiser decisions? I understand the point about personal responsibility, but most people absorb the lessons they see around them. Interesting question. Looked for answers. https://www.brookings.edu/wp-content/uploads/2016/06/Are-College-Students-Borrowing-Blindly_Dec-2014.pdf https://static.newamerica.org/attachments/2358-why-student-loans-are-different/StudentLoansAreDifferent_March11_Updated.e7bf17f703ad4da299fad650f47ac343.pdf So, this is an issue tied to individual responsibility. But what if everybody around you (parents, friends, social circle, school, government and other institutions) say: "Don't worry, just sign here." Is it reasonable to expect that the average college applicant will behave responsibly? Somehow, I would say that the "system" can be improved and not only through emphasis (and consequences) on personal responsibility. This has a lot of parallels to the unfortunate mortgage episode that happened recently. Doesn't history repeat itself sometimes? Can we learn from mistakes?

Interesting discussion about responsibility. When faced with it, an easy way is to point fingers and share the blame. Sometimes though, responsibility does need to be shared. IMO, it's hard to say that the government (our image?) has a fiscally responsible behavior: https://fred.stlouisfed.org/series/FYFSD Some days, I have a feeling that we are living on borrowed time. Wonder if the Financial Crisis was not wasted? That's life and humans are humans.