Cigarbutt

To be different does not automatically mean being inferior as it may just reflect underlying values and historical path-dependency. From data, it appears that clinical outcomes for the US population are diverging from rising health expenditures. Looking at what others are doing successfully may be a source of inspiration. Being great means different things to different people. I submit that a component is the ability to learn from others. There will be reform and this may impact, for better or for worse, private sector firms. Worth thinking about. If you think of the "system", it may be relevant to discuss the care that will be given to "these people" or what others refer to as ordinary folks. https://www.newyorker.com/magazine/2009/01/26/getting-there-from-here

http://www.businessinsider.com/new-yorker-writer-offered-20000-check-from-warren-buffetts-partner-2010-3 https://www.newyorker.com/magazine/2009/06/01/the-cost-conundrum

If you mean: -not polluted by an agenda or ideology -dealing with NAFTA Here is an interesting reference: https://bipartisanpolicy.org/wp-content/uploads/2017/06/BPC-North-American-Free-Trade-Agreement-Overview.pdf

In 1984, President Reagan used his clout to push for the Trade and Tariff Act which gave presidential authority to devise, negotiate and draft trade agreements and then to submit the deal to Congress in order to avoid the inevitable political bickering that would ensue. Using the same principles, given the long term nature of the arrangements and multitude of interest groups, sunset clauses are not included since there are embedded mechanisms to resolve conflicts. I think it is fair to say that the present mandate allows to reconsider this conclusion. Still, I want to be convinced how the deal was unfair and how it could be improved.

Perhaps the common thread between his most well known works and the currency books is the definition between investment and speculation (at the individual level and the connection of "money", in the aggregate, with its "intrinsic" value). Fascinating to remember that, in addition to the severity of the downturn, there continued to be a vexing absence of recovery in the 30's. Many, like Mr. Graham, tried to define ways to "reflate" without currency debasement. It seems that Mr. Graham was concerned with the decoupling between fiat money and "goods" in the sense that private actors may then produce asset inflation and public leaders may then lose fiscal discipline... "The idea of storage…is diametrically opposed to the topsy-turvy Alice-inWonderland reasoning that has marked so much of our depression thinking and policy. It rejects the argument that prosperity may be promoted by scarcity; that purchasing power may be showered in a gentle rain of greenbacks from heaven; that collapse due to excessive debt may be remedied by incurring new and larger debts; that our foreign trade may be strengthened by deliberately weakening our currency." Mr. Graham proposed a self-correcting system. The international currency system is bound to come back on the agenda and it will be interesting to see the proposals on how it should be "managed".

Would tend to agree with sleepydragon unless one has very specific goals. To use leverage and how to deal with it is a personal decision. I would say that a way to mitigate wrong decisions, shortened time horizons and discomfort due to margin pressures is to have a plan ahead of time with entry points and stress tests, such as what is discussed above about BRK.

The following has been my experience with a bank line of credit. Renewable each year (pretty much automatic) and prime rate, no maintenance fees. Have used it twice. Once in 1996, for a few months, in order to fund the purchase of a house and avoid mortgage insurance. The line of credit was for work and held in a separate institution and this allowed to avoid the spread associated with mandatory mortgage insurance. Then maximized it and made it a joint line of credit in 2003 when there was absolutely no need to do so. The second time in 2008-9, for a few weeks, drew 30% of the line to fund my wife's margin investment account which was highly leveraged. Note: the draw was not to invest more, it was due to falling values. I guess it helps to know that you have a parachute if you are walking on a cliff. Hope this helps.

Mergers and consolidations come in waves. The Money Game was a great book originally written during the conglomerate phase (edition 1968) when the PE bootstrap game was playing full swing. The name of the game was to use the (overvalued) stock of the acquirer as a currency hoping to catch synergy between technology, sports equipment and toilet paper. No waves are exactly the same and here’s a quote from the 1976 preface dealing with the passing phases of capitalism, taken from the otherwise exact version of the book: “Great rewards accrue to the successful, and even though, he said {Keynes} there will be (paraphrasing Chuck Prince) some without chairs when the music stops, all the players can still play with zest and enjoyment”. When you look at what Tom Murphy did at ABC/Capital Cities or Alain Bouchard at Couche-Tard, in terms of financing acquisitions, debt was used and over time debt levels rose but remained within restraints as the bump in debt levels after acquisitions was repaid within 2-3 years. Debt repayment is not an institutional priority in the relative opportunity EPS-accretion arena. Another book I like that deals with the historical aspects of M&A activity is from Bruce Wallerstein: Big Deal: Mergers and Acquisitions in the Digital Age.

My answer is yes and I submit that many acquisitions, when reassessed years after the fact, reveal that value creation was over-estimated and this phenomenon may be in large part related to the EPS accretion mindset. With interest rates where they are (risk free rates and spreads), relative opportunity mindset with debt-financed acquisition can justify pretty much any acquisition since "stocks are cheap" because of gravity. This applies also to buy-backs these days. Not saying that we should go back in time but there was a period, not long ago, when goodwill resulting from acquisition was amortized, raising the hurdle at least to some degree for EPS accretion. The companies I look at and what is shown in the aggregate point to the possibility that firms have loaded up on debt in the last 10 years and this marked rise has not really resulted in adverse coverage ratios so far. I would say that using a normalized cost of capital analysis would result in a better assessment for the potential economic profit arising from an acquisition. However, many compensation packages are tied to the EPS number. I recently heard Mr. Buffett in an interview saying that, when evaluating "deals", he would do so as if he would finance the deal entirely with equity which is either conservative and/or a way to say that the rule gravity should not be applied using a simple rule of three. I understand that the hurdle rate that Mr. Buffett uses results in his bids being not competitive to others who use cheap leverage to finance acquisitions. And then there is always optimism about synergies.

Trying to understand the intent and the objective. -Is this part of a strategy to set the tone before dealing with the bigger imbalances in trade? -Is this just to format the message and please parts of the electoral base? I guess it is expected that the larger partner gets a better deal but if pushed too far, isn't there a risk of a backlash? Anyways Nafta negotiations will continue in the next few months. Relevant info trying to answer some questions: https://www.cfr.org/article/o-canada

Interesting read as I was analyzing the potential market share of the Da Vinci system (Intuitive Surgical) for robot-assisted procedures and realizing how there is an evolving recognition of "moral injuries". Mind under matter.

Interesting name. Yield 7,875% over 7 years. Poster child of an era? Indeed, there is a clear potential duration mismatch between long term commitments to property owners of office space and subleases to various clients (typically small business owners) by the day, week or month… interesting features: -typically set up off-balance sheet SPVs for leases with minimal retained interest by parent with little recourse to the office space owner -use new era "community-adjusted" EBITDA measures -describe an asset-light model sold as a technology-like firm associated with goodwill related to the "enjoyable" workplace they create -thesis rely on a rapid growth "story" and renowned investors (SoftBank) Numbers: -cash flows are hugely negative with revenues comparable to development costs, growth will depend on more funding -estimating valuation if WeWork would equity own the real estate that is sub-leased, the valuation would be a fraction of what is implied now in presentations and capital-raising initiatives https://ftalphaville.ft.com/2018/04/24/1524606395000/More-on-WeWork-and-its-bond-offering/ Huge opportunity or a mirage of prosperity? Maybe I lack vision but it smells like dogma over thought.

https://farm.ewg.org/progdetail.php?fips=00000&progcode=totalfarm&page=states&regionname=theUnitedStates A picture that shows: -significance of subsidies -unequal distribution of subsidies (states) -how the issue of agricultural free trade will be contentious as it has a significant political component (election results map) Most of the subsidies go to large farm corporations who are heavily involved in exports and who are also involved in lobbying. One of the reasons why this is the case is that the general population do not "see" the unnecessary price tag associated with the support that parts of the agricultural sector gets. The conveyed message is in fact quite different. What would you do if you were an elected official? Potentially biased opinion: NAFTA has been a win-win overall. The 1988 Canadian federal election was mostly based on NAFTA. The conservatives who supported NAFTA obtained 43% of the votes and formed the government. The two opposition parties who opposed the agreement gathered 52% of the votes. Democracies can function but sometimes it's complicated.

There has been and there will be trade disputes but most agricultural trade between Canada and the United States is unimpeded and clearly benefits people on both sides of the border. Trade has increased ++ since the introduction of NAFTA. Agriculture is different and perhaps deserves a special status but, in 2016, Canada was the world’s fifth-largest exporter of agriculture and agri-food products with the US being by far Canada’s main trading partner. Canadian food exports have grown 77% over the last 10 years to $56 billion annually, with the US accounting for slightly more than 50% of this amount. Both sides recognize that trade barriers can continue to go down but, to obtain/maintain a win-win, we need constructive discussions. Supply management can be phased out but one would expect that this would involve a reconsideration of how the US subsidizes its own agricultural sector. Fortunately, I submit that some are ready to have these kinds of discussions. https://www.heritage.org/trade/report/promoting-free-trade-agriculture

"Banking is basically theft at full daylight. It has always been. It's set into a system - now for several centuries - with oversight, regulation and such - now, to the extent, that seems absurd. I just happen to hate banks. I suppose that's also why I have invested in some of them." Very reasonable. Hate them or love them, debt is addictive and the House always wins. -What's the problem with banker jokes? Bankers don't think they're funny and mainstreet people don't think they're jokes.

"Food is not cheap." OK. "Now you could make some argument around how much of that money goes to the food producers vs. transportation and retail. But food cost is far from a negligible expense." You may want to include the processor in the list. And to link with the thread, it seems there has been growing producer to retail gap also referred to the "marketing" gap. I know Saputo (SAP.TO) very well and it is fair to assume that the processor and the retailer explain a large part of this gap. I understand that, these days, out of every dollar of milk sold, about 12% goes to the producer. Relevant for a tariff discussion?

You're correct in the sense that, even if historically lower, it is still a significant expense. https://www.theatlantic.com/business/archive/2012/04/how-america-spends-money-100-years-in-the-life-of-the-family-budget/255475/ For poor countries and the poorest quintile in "rich" countries, the % is between 40 to 50% of expenditures. http://wsm.wsu.edu/researcher/WSMaug11_billions.pdf

"We have subsidized prices, around the world, for a reason - it mitigates against civil unrest. When food becomes out of reach, populations riot." I partially disagree with this. Some people have described the development paradox. What you describe obviously applies to developing countries. The equation is much harder to apply to developed countries (the portion of expenses on food is relatively low, in comparison for instance to monthly cell phone bills or used car payments) and other explanations need to be sought. Some people suggest that politicians (right and left and center) simply want to get elected. http://people.duke.edu/~nwc8/Bellemare_Carnes.pdf http://business.financialpost.com/news/economy/the-real-nafta-problem-is-canada-not-mexico-paul-ryan-says https://farm.ewg.org/top_recips.php?fips=WI01&progcode=totalfarm&regionname=1stDistrictofWisconsin(Rep.PaulRyan)

Ending supply management could be done. Australia did it (mixed results). The last time I checked the value of dairy quotas was: book value: 4-5 billion market value: +/- 23 billion. It is a tough political question and farmers can be efficient interest groups (think last Federal Conservative race for leadership). I would say that, to make it an efficient win-win, you would need constructive discussions with our neighbors because it would be necessary to harmonize the subsidy aspect because this aspect is more "generous" south of the border. There seems to be also the question of (illegal?) immigrants working in the field earning unusually low wages. Finally some other rules would need to be harmonized. For instance, some US milk contains growth hormone whereas this is not allowed in Canada now.

So are Danes contrarians or simply too conservative? https://finance.yahoo.com/news/richer-ever-danes-sitting-wealth-100000906.html Racemize, your report was thoughtful and balanced. Back in 2010, I thought deleveraging was an issue and was relevant for financial institutions. Then people described beautiful deleveraging and then deleveraging, what deleveraging? Is the topic of deleveraging still relevant for big US banks? https://www.mckinsey.com/featured-insights/employment-and-growth/the-looming-deleveraging-challenge

Additional thoughts: -The tiered structure with tranches found in CAT bonds results in some variation of the risk/return profile and even if a collateralized quota-share hybrid transaction is not a tiered structure, the capital can be funded with debt (quota share notes) or equity. Holding the notes versus the equity would result in a less equity-type risk/return profile and more in a fixed income risk/return profile, maybe relatively comparable to some tranches of the CAT bonds but without the tail catastrophe risk. -A variable potentially mitigating lower results in CAT bonds in certain years is the fact that collateralized quota-share contracts or sidecars are relatively flexible, in terms of composition, and can rest on premiums being derived from a more diversified book of business (property catastrophe, marine risks or even "bundled") versus a narrowly defined peril. -In terms of return, CAT bonds are typically multi-year arrangements with the spread determined at the inception of the contract. In the event of a hard market not caused by CAT events or not associated with triggers tied to CAT bonds held, the relative value of CAT bonds in the portfolio would decrease in comparison to newer contracts reflecting higher rates for the remaining of the term. With collateralized quota-share contracts, which are typically potentially renewed every year, the return going forward would adjust to higher rates. -I played with some numbers and tried to compare (retrospectively) the return that would have been obtained from a combination of CAT and quota-share contracts versus a basket of reinsurers. Interestingly, for different time periods, the former seemed to be doing better for many time periods. Going forward, it seems that the CAT bond yields are quite compressed (coupon or excess spread to expected loss is historically very low) and the "novelty" premium appears to be gone. Also, even accounting for the high 2017 catastrophe year, it has been relatively quiet on the catastrophe front for quite some time. Add to that the unusually long soft environment. Some suggest that ILS spreads are low because the risk is better understood but many are reaching for yield and loss model uncertainty always appears after large events. I understand that many institutions like the field now because of the uncorrelated aspect of the academic risk but it can also be an opportunistic pure-play. For these opportunities, I've always thought that it's better to invest when there is blood in the streets, not when it's raining dollar bills.

The key variables are cost and coverage. Invariably, this debate will put to the fore the clash between personal responsibility and social solidarity. The above comments just show how hard it would be to achieve a satisfactory consensus on coverage and "shared" costs. At a certain point, limited or unaffordable access to healthcare in our increasingly unequal world may eventually prove to be detrimental. Otto von Bismark is often recognized as the father of state socialism. However, he did not promote reforms out of idealism. He simply wanted to maintain the balance of power. Call it what you want but make it affordable. https://www.smithsonianmag.com/history/bismarck-tried-end-socialisms-grip-offering-government-healthcare-180964064/

Jurgis, I see your point but find that your judgement is quite severe. The FANG part of their "analysis" is poor on the quantitative side but I thought they nicely underlined two interesting concepts: -the future is hard to predict, especially longer term -there is a tendency to forecast using simple extrapolation of recent trends If you look at the top ten capitalizations over time, the list has been quite dynamic and I submit that it may be reasonable to expect that trend to continue. :) I thought their line of reasoning helps to add perspective and was similar to what Semper Augustus discussed in their last annual report (34-37) "Many shall be restored that now are fallen and many shall fall that now are in honor". Not all of them though. https://seekingalpha.com/article/4151002-semper-augustus-investments-group-2017-letter-clients For the original Research Affiliates article: https://www.researchaffiliates.com/en_us/publications/articles/668-yes-its-a-bubble-so-what.html

Complementary info: https://www.ncbi.nlm.nih.gov/books/NBK62584/ The first two paragraphs summarize well. Basically, at the individual or "mutual level", it boils down to an NPV decision to see if potential useful life lost is worth the investment. The Constitution mentioned that all are created equal and can have a free and happy life (duration not mentioned). Life expectancy, when the document was written, was estimated in the mid 30's but recently, after incredible progress, in the aggregate, has been dropping for two years in a row. Multi-dimensional problem but America's best days lie ahead (ref: Warren Buffett).

1+ from my perspective also. From the what is provided point of view, perhaps we're in a diminishing return temporary plateau but, apart from some breakthroughs, progress at that level has been slow for quite some time. The quality/cost curve has been unfavorable and whatever the reason (too little or too much government, distorted private incentives or a combination of both), innovation should not be limited to what is provided but also to how it is provided.