Cigarbutt

Interesting perspective about credit growth outpacing provisions and as to why Fiat and Subaru may have outperformed. https://insight.factset.com/car-companies-face-liquidity-risks-due-to-rising-auto-loan-delinquencies?utm_campaign=Insight&utm_source=hs_email&utm_medium=email&utm_content=65839202&_hsenc=p2ANqtz-8ft7T0EpIaJFIXS0bQ3026HG9zP9_nGYVOiDl3ffIkFAqf8_7MrVTc680WHDy4r4oa51AOfycuJeKHAIQsRfrnAE644A&_hsmi=65839202 At the same time, Credit Acceptance (which is the main idea behind this thread) keeps recording gradually higher provisions for credit losses but this negative trend is drowned by a very strong growth in the number of loans and a 35% growth in the dollar amount of loans over the past year. The size of the loans keeps getting bigger while the credit scores keep going lower. (?) What I'm trying to analyze now is the significance of the increase in the volume of borrowers rolling negative equity from an old loan to a new loan, as trees don't grow to the sky.

Thank you wondering. That was useful. Here's a recent AMBest report that offers complementary info on different topics including the impact of the ILS market. http://www3.ambest.com/bestweek/DisplayBinary.aspx?TY=P&record_code=277679&URatingId=2855493 -most relevant pages of the document (3-9 and 34-39). As you likely know, Markel has been expanding in a big way into the ILS space whereas Fairfax hasn't. The cat-bond space appears to be a huge success, seemingly may have made the underwriting cycle irrelevant and people involved with transactions are getting comfortable, as most participants no longer require an independent rating agency opinion. However, in 2017, from adequate sources, the average coupon on the bonds is about 5% and average expected loss stands at 2,7%. Seems like an awfully thin margin but, so far, so good.

I may understand better your perspective. To be clear, -Do you think that Mr. Einhorn was/is right but was/is unable to wait long enough for his thesis to work out given the unusual preeminence of a population of momemtum and price action investors and the larger proportion of passive indexing? -Have you considered that he may have been fundamentally wrong or that he may have overestimated his capacity to predict a shift in investor sentiment? -What makes you say that bulls have total control of the market?

We've entered the dark ages of balance sheet investing but, at times, book value can be useful. 1-In the past, I have valued Fairfax based on earning power multiples but also used adjusted book value measures because it was a relevant measure in the insurance/finance industry and because it helped define a lower bound in intrinsic value. 2-Listening to Mr. Bruce Flatt in the video submitted recently on the BAM thread, he mentions that he likes to buy "real" assets at a discount to replacement value because of the a)direct consequence of better returns on capital invested and also b)because of the relative competitive moat it creates versus future competitors. Neat concept.

@mwtorock and Liberty Many ways to skin a cat but if someone is selling equities, there must be some other buying. Reminds me of the Dalbar studies suggesting that the individual investor may be his or her worst enemy (in terms of fees, taxes and especially timing). Liberty, Do you know if the funds data showed by Bluegrass include ETFs? Equity funds often consist of retail and smaller individual investors. It seems that the small investor has not enjoyed the ride. Mathematically, some did as this is, outside of fees, a zero-sum game. I've seen data that the top 10%'s share of stock holdings has been increasing and foreign investors have also loaded up. From 2009 to 2017, I understand that US total market cap went from 15,1T to 32,1T, including buy-back activity. https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?locations=US&view=chart If the mutual fund and ETF crowd has increased ownership only by 0,2T, the difference has been made up by others: direct holders of equity, rest of the world (international investors, sovereign wealth funds and even central banks) as well as public and private pension funds, insurance company funds and hedge funds. It's very hard to distill insights from all this but the growth in market cap has been driven by a fundamental recovery but also by a significant increase in price multiples and the latter can be related to sentiment somehow. Who knows what the future holds? Philosophicaleconomics tried to answer this question around 2013 by looking at average household equity allocation and subsequent return. Interesting to note that the long historical inverse correlation trend has broken down recently. New plateau? For investors like Greenlight Capital, using certain value metrics has resulted in relatively poor results on the long and short side.

I guess it depends what you're looking for. Time is precious, waste it wisely. I like also: https://deconstructingrisk.com/ A lot of generic topics but useful insights for some industries, like (re)insurance. Some posts are about specific names. For instance, some work on CenturyLink, a security that has been discussed here but for which I spend no time 'cause it's out of my league.

Thank you for the references. FWIW, the Flynn effect (rising IQ over time) may have reached a plateau or even started to regress in "developed" countries. Collective intelligence may be cyclical (genetic basis, envronmental or otherwise). https://www.gwern.net/docs/iq/2016-dutton.pdf

There is a file which contains a few items, which is labeled "look again in 5 to 10 years", which lists potential missed specific investment opportunities. But, there is a also a section on passive investment risk. When looking back, often the conclusions is that you were wrong to be right or right to be wrong. Sometimes, to be approximately right can be extremely rewarding. To modify conclusions along with evolving evidence/anaysis and to "publicly" do so is one of the things I value most in people. You may be interested in the following: https://www.bostonfed.org/publications/risk-and-policy-analysis/2018/the-shift-from-active-to-passive-investing.aspx Their institutional conclusion basically translates into adjustments and soft landings. I would say that the major (and difficult to envisage) difficulty is not the math, it's the behavioral side. Mr. Marks's conclusion: "What, then, will be the route to superior performance? Humans with superior insight. At least that's my hope."

Another "side effect" of high #MDs per capita is the possibility (for visitors and locals) of obtaining affordable house calls (or hotel, Airbnb etc). Indeed Italy scores well overall in healthcare costs/outcomes but fiscal constraints may change that. They also have regional disparities (North-South) to deal with. Other secondary considerations include the need to pay cash for certain out-of-pocket expenses and related party nominations at regional agencies.

https://www.reuters.com/article/us-berkshire-buffett-healthcare/amazon-berkshire-jpmorgans-healthcare-venture-names-coo-idUSKCN1LK2JX Mr. Stoddard was with Comcast but was also involved before in strategy with Accolade for many years. Accolade has shown it is possible to lower costs, improve results and patient satisfaction simultaneously (!). The idea is to introduce patient-centered technology tools with "concierge health assistants" using guidelines and data to help patients navigate through the "system". https://d10j0m6hqftivr.cloudfront.net/Whitepaper_PopulationHealth_July2018.pdf https://d10j0m6hqftivr.cloudfront.net/Paper_CFO_Accolade_Impact-of-Healthcare-Waste_July2018.pdf https://d10j0m6hqftivr.cloudfront.net/Accolade-Maya-One-Sheet-May2018-.pdf What's the point? At this point, an incredibly high proportion of people are not getting the right services, at the right time and by the right people. Still early in the game. Some will decide to compete, some to collaborate and some to ignore. Interesting parallel development with "Oscar": https://www.cnbc.com/2018/03/27/oscar-health-raises-165-million-at-3-point-2-billion-alphabet-founders.html

By that, I guess you mean the basic NPV question of legal costs and settlements. But did they have a choice? Once the 2006 lawsuit was launched, most "critics" were silenced and I'd say that was a good thing. I would also say that this wasn't about winning, it was about not losing. https://www.sec.gov/comments/s7-31-08/s73108-39.pdf "In July 2006 -- after nearly four years of having been the target of a relentless campaign of false rumors, dirty tricks, harassment, and market manipulation by certain short-selling hedge funds and those working with them --Fairfax had no choice but to institute a lawsuit to stop this illegal conduct." "Thus, when Fairfax's reputation was attacked through the spread of false rumors, not only its short-term success, but its entire existence, was threatened." That 2006 period with restatements and all, in retrospect, was an excellent contrarian period. And I didn't mind the large legal costs.

Reminiscence http://securities.stanford.edu/filings-documents/1037/FFH_01/2007116_f01k_064197.pdf http://www.deepcapture.com/tag/john-gwynn/ From today: https://ca.investing.com/news/stock-market-news/brieffairfax-settles-lawsuit-with-morgan-keegan-1258851

Hmmm.. That will be the end of the discussion from my perspective but I guess it would be interesting to hear from Dynamic. Not too long ago, Mr. Munger's list of recommended books, along Guns, Germs and Steel, included The Selfish Gene by Mr. Richard Dawkins who has voiced opinions on the concept of designer babies. In the book, the author marvels at how historical bottlenecks have been solved by the random jostling of small particles. https://www.inc.com/jessica-stillman/10-book-recommendations-from-warren-buffett-s-right-hand-man.html https://www.express.co.uk/news/science/673390/Richard-Dawkins-Designer-babies-HITLER-selfish-gene Handle with care?

You raise controversial questions similar to what is discussed in "The Bell Curve". It really seems that Mr. Munger believes in "their innate quality". There's also the additional dimension of jumping from individual IQs to the "intelligence" of a nation as a whole. Hard to say what the future holds and Mr. Munger has mentioned that it does not hurt to try to learn from history. In the last years, during free time, I've spend time reading on the introduction of the Industrial Revolution and how it caught on (and did not) in various regions of the globe. Another controversial question. Any relevance to today's challenges?

I live in the Montreal area and you are correct in underlining significant local and regional variations. Interesting because if you look at the Calgary (and Edmonton) area real estate index from the National Bank link listed above (p.3), you may find a very close correlation between oil prices and the index with a probable strong causal effect from oil to housing as the most important variable among many. In the reference provided below there are some useful comments that are relevant for commercial real estate. I looked at the CDN oil and gas sector in 2015 and 2016 and felt a rebound was reasonable within a lower for longer environment. Interesting to remember how difficult it is to "forecast" oil prices. https://www.avisonyoung.com/documents/20342/571064/AYWhitePaperEnergySectorImpactCREMktApr1_15Final.pdf/33928470-d9b0-454e-862e-dd7e801eeb48 Despite or perhaps because of "national" trends and risks in housing and real estate in Canada, you may have to include an outlook for oil prices in your intrinsic value and margin of safety assessment in Calgary. One might even say that you may need to include an outlook for political resolution of the pipeline resistance which may stubbornly prevent the differential from closing to historical levels. Good luck.

Anecdotal experience on my part also suggests that adopted Chinese and Asian children tend to "outperform" but, from a humble perspective, the adoptive parents also happen to be VERY different from the general population. This is hard to study but seems to be corroborated: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2398719/ FWIW, I think the conclusion of genetic superiority should be be considered carefully and after other explanations have been ruled out. Parents who are financially secure and who have certain attitudes towards effort and education can definitely move the needle. No?

Anecdotal Neighbours on my street put their house for sale (not eager to sell and tagged with a full price) on the market and sold it (papers signed) within 3 (three) hours. Context Reading shalab's recurrent threads that suggest Canadians are wealthy (and implicitly implying that the wealth is owed...) and wondering if the house is built on sand. From 1990 to today, both household assets and household debt (and so household net worth) have grown at an annual compound rate of 6,9% and I continue to be haunted by the divergence (US-CDN) that occurred in 2008-9. Understanding the evolution is difficult and short term forecasts are impossible but the real estate sector in Canada is one of those non-linear equilibriums marred by perhaps an illusory sense of stability and fraught with linear extrapolation risks. Conclusion There is a significant amount of discomfort that is at least based on some rationality. Maybe we will muddle through somehow but painful adjustments are possible and, thinking of creep mechanics, there is the possibility of sudden collapse with a sea of red ink. To "explain" the evolving real estate conundrum, some suggest that households simply react rationally to the underlying incentives supported by financial innovation while others suggest that there are deep deficiencies in financial literacy. I still believe in cycles. Preparing for all scenarios. https://www.weforum.org/agenda/2017/12/canada-s-household-debt-levels-are-the-highest-in-the-world/ https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf https://eppdscrmssa01.blob.core.windows.net/cmhcprodcontainer/sf/project/cmhc/pubsandreports/housing-market-assessment/2018/q3/canada/housing-market-assessment-canada-68456-2018-q03-en.pdf?sv=2017-07-29&ss=b&srt=sco&sp=r&se=2019-05-09T06:10:51Z&st=2018-03-11T22:10:51Z&spr=https,http&sig=0Ketq0sPGtnokWOe66BpqguDljVgBRH9wLOCg8HfE3w%3D

Same here. What I find interesting is the tension that exists between the necessity to do a large buyback at a significant discount to make a meaningful impact on intrinsic value per share and to manage the uncomfortable cash pile while, at the same time, keeping the magic opportunistic formula loaded in order to maintain the capacity to outperform. Despite the soft-spoken aphorisms, I still picture Mr. Buffett as a warrior with a knife between his teeth. His thinking has always been long term and I would say that this may be even more important at a time when he is defining his legacy. The Oracle has to balance the weighted opportunity cost of holding excess cash now and for the next few years. Simple but not easy.

Thank you for the article. -First reflex: This must be fake news. It's not: surprise medical bills (out-of-network MDs working in the network and out-of-network hospitals) are frequent and often (because of size and unexpected nature of the bill) a tipping point to financial hardship. -Second reflex: Let's put surprise bill laws into effect. This seems to be in the air but IMO unlikely to prevent self-sustaining unintended consequences coming from the foundations. -Many problems described here but I submit that the basic essential problem is the following: In a study published in 2014 by Wilson and Cutler (referenced below), it was found that hospitals had profit margins of 39.6% for privately insured patients treated in emergency departments, whereas the profit margin for patients covered by Medicare and Medicaid, and those uninsured were: -15.6%, -35.9% and -54.4% respectively. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4285369/ If you're an MD, what is your incentive to sign a contract with the network if you can avoid it and charge 150 to 300% of Medicare rates in order to provide the exact same services? If you're a for-profit hospital, what is your incentive to become part of a network if you can avoid it and charge sky is the limit rates? This thing will be a huge challenge and I would say that this file is either one for bipartisan wise men or for the deranged with a "your margin is my opportunity" attitude.

flesh, I'd like to have your opinion on the following. Relevant to investing because I suspect, for instance, that I may unconsciously lower my appraisal for companies led by a woman CEO which IMO is wrong: should base my evaluation on credentials, decisions, results etc (can add dimensions of race, attractiveness etc) My understanding of your post is that 1-the tests are poor and that 2-the biases are learned, justified, beneficial and even may be genetically programmed. While some "differences" may be justified in some areas (ability, taste etc), unconscious and conscious biases can be detrimental and conscious work is required to re-balance the assumptions. This is obviously controversial and hard to study and prove but I submit the following study: https://cos.gatech.edu/facultyres/Diversity_Studies/Goldin_Orchestrating%20Impartiality.pdf IMO, despite some limitations, the study shows that major orchestras discriminated against women performers and the "screen" has helped with a more balanced "hiring" process. Anecdotally, for the symphony orchestra in my area, in the 90's, a woman performer doing an audition (principle oboe) without a screen was dismissed on the spot by the medical director but was then hired when a second method with a "screen" was used. Interesting to note that this conductor eventually had to deal with various legal issues that suggested that the bias may not have been unconscious. Or do you think that male musical performers are better?

-Intrinsic reasons: size, style drift -Extrinsic reasons: in the "environment" of the last 8 years, features such as concentration, contrarian value, avoidance of technology stocks have performed relatively poorly If the style drift itself is poor and if the "environment" works against you, it's a double whammy. If you're consistently the opposite, you're Warren Buffett. I guess we all try to find our space in between but this topic is just another example showing how hard it may be to outperform over the long term because it seemed, at some point, that Mr. Berkowitz could do no wrong. Interesting that the contributors of the first page of this thread (at least in retrospect) described the seeds of disappointment.

Thank you for the reminder. So what's the message? Probably best to invest in the Market like a private business owner would. Interesting because I'm re-reading Money of the Mind by James Grant, written in 1994, at a time when he described the long term trends that gave rise to the democratization of credit in conjunction with the socialization of risk... Mr. Grant has a tendency to stick his neck out. He can be dead wrong, can be right too early or when it does not matter but I find that what he writes is always interesting and thought-provoking. A quote that resonates (given my training background) is: " In science, progress is cumulative, and in finance, progress is cyclical." Indeed, Mr. Buffett stands out. He has always been able to combine exposure and protection from tail risks, and to ride the cycles as the Market has a life of its own.

I did the same one as you. The test is so flawed. Half the time I forgot which hand was for which category. So what they're assigning a bias towards ("Office" = "Paul"), was nothing more than forgetting which hand was for which category. Maybe the test is flawed but perhaps worthwhile taking this further. What the site uses is the implicit association test which carries some weight in terms of method and results. Also, maybe there is nothing wrong with "association" as there may be underlying biological justifications that tilt the numbers. The research on unconscious bias is often based on tests that require multi-tasking, involve distraction or include a time component for the explicit reason that "conscious" pathways need to be bypassed. For those interested in the topic, Google has produced a program for employees which is relevant. https://rework.withgoogle.com/guides/unbiasing-raise-awareness/steps/introduction/ The video: Watch Unconscious Bias @ Work is long but IMO worth it. @augustabound I respect the fact that you may think that this is hogwash (maybe it is...) but, based on former postings, I suggest the following scenario: In 3 years, you receive 2 resumes from computer science graduates and you have to decide whom to hire. The only material differences are that 1- my daughter's first language is French (although perfectly fluent in English) and 2- she was born and raised in Québec (vs Ontario, for instance). Do you think these differentiating factors constitute potential unconscious (or conscious?) effects? After watching the Google video, it seems that unconcious bias is permeating the process in many cases. The easy way is to forget about it.

This idea was triggered by: -recent direct and indirect anecdotal experience suggesting a significant growth opportunity going forward with a not so discretionary component -reviewing prospects of different books of underwriting businesses at Fairfax and relevant competitors The following remarks apply to the US market but I think similar conclusions can be reached for Canada, Europe etc. Pet ownership is on the rise and correlates with rising pet expenditures, well above inflation. A large part of expenditures is related to veterinary care and services. I understand that pet insurance market history and penetration are variable. For instance, I understand that, in Sweden, policies were written way back and some report that 50% (!) of pets are insured. In the US, the "story" is more recent with, apparently, the first policy written in 1982 to cover the dog (dogs?) playing Lassie on television. In the US, market penetration has slowly risen from 1% to now about 3 to 5%. IMO, Fairfax is very well positioned with their Crum & Forster Pet Insurance Group (including Hartville) and their PetHealth Inc. subsidiary. I assume that there is resistance or at least passive assistance from veterinarians related to inertia to change and I wonder if growth now is mostly impeded due to a lack of awareness or lack of available options. Given the strong bond that pet owners develop, I wonder how much a pet owner would be ready to pay to obtain satisfactory coverage. I suspect a lot. Anyboby holding a pet insurance policy? It seems many people who hold such policies are not satisfied with coverage issues that are "discovered" along the way. Entitlements bring mixed feelings but sometimes, it just may be better to not fight the trend. https://www.city-journal.org/html/pet-insurance-16130.html

Just finished a test. Haven't done the required work on this but the methodology "looks" weak, especially since it concludes that I suffer from a bias I don't have. :) Reminds me of the 90% of people who consider themselves better than the average driver. The scary part is that the remaining 10% may be part of the prudent category. Reminds me also of the bias blind spot (recognizing the impact of biases on the judgment of others, while failing to see the impact of biases on one's own judgment) which is the norm rather than the exception as a very large majority of people think they are less biased than others with almost nobody thinking that they are more biased than others. Sadly, higher level thinking does not seem to improve the self-deception as it only brings "stronger" attempts at rationalization. Perhaps realization that this may be a potential problem (going through online tests, for instance) could represent a step in the right direction. An exercise that can be done privately if public recognition brings unbearable dissonance.