Cigarbutt

Things are far from perfect but I say that we're making progress. https://phys.org/news/2013-05-aliens-star-trekfact.html A graph is worth a thousand words. There will be temporary setbacks but we just need the overall trend to continue.

Thought this may be relevant. https://www.linkedin.com/pulse/just-because-youre-right-doesnt-mean-theyre-wrong-brian-walker "For me this is the true value of diversity, everybody examining and considering different perspectives and coming up with the best answers for the challenges they face. It’s not easy work. It’s often very uncomfortable. But the rewards are unmistakable, and we can end up finding solutions to problems we never imagined possible." Then again, who I am to say?

Looking forward moving to a normalized stock picking mode. Disclosure: -have held TLT (ETF 20yr+ long term US government bonds) since 2010, with opportunistic buying along the way. -net seller overall, especially in the last 2 years, with a residual +/- 10% of portfolio. Reasons to keep residual position: -USA potential as safe haven -Deleveraging environment with extreme over-indebtedness But now: -The Fed intends on tightening. -The US may lose its cleanest dirty shirt status. -This is a bubble and, at some point, the cycle will turn. For some horizon: https://seekingalpha.com/article/4121565-800-years-bond-markets-cycles According to the economist Eugen von Böhm-Bawerk: “the cultural level of a nation is mirrored by its interest rate: the higher a people’s intelligence and moral strength, the lower the rate of interest”. ??? Looking for contrarian opinions. In the meantime, will read more about the Venetians.

mjs111, Not the accounting pro here, but what you describe simply seems to correspond to the "convergence" that leads to the progressive incorporation of the IFRS policies into US GAAP.

"These big losses are telling you that they have run through their reinsurance cover; the unknowns are 1) is there another band of cover above them?, & 2) how far are they from it? Another 1-2 hurricanes/tropical storms showing up over the US mainland this quarter, could really screw up your day." Contrarian thought provoking. Speaking of covers, it looks like the sector is suffering to some extent as the earnings events are starting to look like capital events for some. Probably not enough for a material hard market in the days of ultra loose and centrally planned easy money. Maybe getting there slowly. In no way hoping for natural catastrophes but big hits in Q4 may reveal more as some may be more naked than others. The comment made me look at my 2005 notes about a previous holding which I still follow. For the long term minded, in 2005, Wilma was the 4th category 5 hurricane of the season and landed in Q4. When you look at the numbers, even if Wilma was relatively less costly than Katrina, losses reported by industry players including FFH revealed the potential problem related to relatively saturated layers. As always, the context then was not completely comparable. Retrospectively looking, Q4 events (and others) gave rise to an opportunity to participate in a secondary IPO with shares priced at 162,75 (USD). And that proved to be expensive for a short while. Still, hardship can give rise to opportunities. To address the underlying concern more fundamentally, from the operations standpoint, would humbly submit that risk management is not only related to the setup of layers and layout of covers. Have to look at the diversification of streams and overall capitalization. 2017 vs 2005 = different strokes.

Interesting question then. Should a benchmark be chosen based on previous returns or based on the philosophy of the fund manager?

"Berkshire cash position end of September 2017: Now at USD 109.290 B, as I calculate it [including T-Bills]." Here's a relatively recent link: http://www.silverlightinvest.com/blog/when-cash-king If the author wants to update the chart, there needs to be more room at the top. Go for gold or sky is the limit?

Great stuff. Interesting economics. It's good to hear from the real world. It seems to me that Amazon takes a large bite. Maybe when you reach a certain volume, you may obtain a better rate? At any rate, good luck. Your customers are probably part of the group who feel tight (disposable income, savings rate) so keep us informed. Thx.

To reconcile, the answer may be on page 65 (of the report) under the heading Holdco liquidity position and referring to the remainder of 2017. "Net proceeds of approximately $1.6 billion expected to be received on the closing of the sale of the company's 97.7% ownership interest in First Capital would further augment holding company cash."

The book is about resource conflicts, security and "global justice". The defining issue is the coming energy transition. Will we have to? versus Do we need to? versus Do we want to? Disclosure: my take is that the transition may not be as smooth as "planned". Decided to look at opinions that appear to be far from my own at this point. Typical ivory tower type of book with a relatively high anti free market sentiment. Useful because the book contains a lot of relevant data and the way the analysis is done allows checking on the underlying assumptions. The book was published in 2007, which is a relative advantage as there is an adequate period for a retrospective assessment of the positions. One of the takeaways is that the concerns about sustainability have been around for some time in a Malthusian type of way. Like in the case of Mr. Hussman for the markets, the concerns may materialize...eventually. Another takeaway is that the transition will be a challenge. Optimist, but the "adjustments" will raise fairness issues that may trigger instincts. We'll need to talk. Good book if you can tolerate being left with more questions than answers.

Page 18, he means, using the page numbers in the document - Allied World's income statement history. Sorry, couldn't resist.

Interesting. No wonder the retail space is being clobbered. If you can answer, how do you choose a supplier and how do you decide if a supplier is reliable? Do you specialize in only a few items? Your turnover seems quite high but do you store the inventory in your home? Maybe you are on your way to become a leading indicator. :)

As per pp 51-52 in interim report. http://s1.q4cdn.com/579586326/files/doc_financials/2017/q3/2017-Q3-Interim-Report-Final.pdf -accident year loss ratio from date of acquisition (July 6th to end of quarter). -both numerator and denominator It's a risk business. From the report, acquired insurance and reinsurance portfolios "responded as expected". Large numbers, but in line. So, should be a blip in the long term scheme of things.

Few more comments. Maybe this all benign. Maybe not. For those interested: http://www.libertylawsite.org/2017/10/31/giant-qe-gamble-how-will-it-end/ https://www.stlouisfed.org/publications/regional-economist/third-quarter-2017/quantitative-easing-how-well-does-this-tool-work The questions: -Is this just about splitting hairs? -Was QE effective? -Will this be an uneventful symmetric unwind? I submit that nobody really knows and we have history in the making. My opinion: this is a colossal gamble. Bias: always worried when some play with other People's money. Certainly a topic worth re-visiting at some point.

From Seth Klarman: "You might think that the increasing percentage of investor funds managed by professional ("professional"?) money managers would serve as a check on market excess. If you did, you would be seriously wrong. Very few professional investors are willing to give up the joy ride of a roaring U.S. bull market to stand virtually alone against the crowd, selling overvalued securities without reinvesting the proceeds in something also overvalued. The pressures are to remain fully invested in whatever is working, the comfort of consensus serving as the ultimate life preserver for anyone inclined to worry about the downside. As small comfort as it may be, the fact that almost everyone will get clobbered in a market reversal makes remaining fully invested an easy relative performance decision. Isn't this what always happens at the top of historic bull markets? The answer, of course, is of course. Investors and the financial media, always eager to grasp at straws, however slim and brittle, jumped on the year-end shareholder letter of legendary investor Warren Buffett as fodder for the bull case. The Dow immediately rallied 200 points. What Buffett, Chairman of Berkshire Hathaway, said is that at today's level of interest rates, and assuming prevailing levels of corporate profitability, in his view U.S. equities as a whole are not overvalued (and, just as assuredly, not undervalued.) Virtually no one explored his real message, equally prominent, suggesting that today's unprecedented level of corporate profitability may well be unsustainable; future profits may fall far short of today's lofty expectations. The U.S. stock market is extremely vulnerable to disappointments; nothing short of perfection is built into today's prices. And Buffett confesses that it has become increasingly difficult for him to find bargains in the current market environment." That was in 1998. From the Oracle: "Today's price levels, though, have materially eroded the "margin of safety" that Ben Graham identified as the cornerstone of intelligent investing." Also from 1998. I'm not saying that markets are overvalued. I'm just asking: Is this time different?

investmd, "Does anyone with more experience than me, have thoughts on above or specific insight into Braddock, Giverny, Arlington Value? " I have never invested in Giverny Capital but have followed them. Really a fine operation with a consistent and candid approach. It's fairly easy to access the annual reports (some info is hidden for outside investors) if you want to understand their philosophy. My understanding is that they follow a GARP approach and do not look at macro stuff at all. racemize, Enjoyed reading your report and thank you for sharing. From Benjamin Graham, who does not appear explicitly on your list but who, somehow, is the "father" of all of them. "Common stock selection is a difficult art, naturally, since it offers large rewards for success. It requires a skillful mental balance between the facts of the past and the possibilities of the future." Congratulations on your results and good luck going forward.

So, our current economy is said to be business as usual as we are going through an unprecedented monetary experiment that has nothing to do with 2017 Japan which is trapped in a vicious circle and from which it can no longer disentangle. True enough, because of the absolutely unusual parameters, you need to look far and between for historical comparables. Didn’t a recent Chairman, full of good intentions, have answers for Japan in 1999-2000 (17-18 years ago)? http://www.sistematikrisk.com/wp-content/uploads/Japanese-Monetary-Policy.pdf Perhaps, since then, in a case of self-induced paralysis or lack of resolve, Japan has not done whatever it takes. ??? In simple terms, it is said that 1- the goals were currency depreciation and inflation 2- those goals should be relatively easy to attain if you understand the monetary logic that precluded a result that would be a manifest impossibility in equilibrium. Forward to 2017. The JPY/USD exchange rate and Japan inflation are essentially the same. So money printing is effective? From the great powers that be, who can explain that? Any side effects? In the same time frame, gross public debt went from 140% of GDP to 250%. :o And there is now no end in sight as a vicious liquidity trap circle has been initiated. What’s the relevance as one may be reading note 22 in the financial statements of a US manufacturing firm? Because, the same recipe is being applied in the US (and elsewhere). There have been recent talks of an attempt at quantitative tightening but, in a very recent talk given by Janet Yellen, it is clearly explained that the full unconventional armamentarium will be rapidly re-deployed in the event of even a run of the mill recession. https://www.federalreserve.gov/newsevents/speech/yellen20171020a.htm Vicarious learning, anyone?

"I'd be interested to know how your counter-cyclical macro focus has worked for you over time and how you use it to make decisions." Common themes: -no forecasting or timing ability -essentially bottom up, looking for long term compounders -anchor holdings -concentrated investments Differences: -very conservative intrinsic value appraisal -very large requirement for margin of safety -will tend to sell securities when IV reached (deep value and event driven stuff) -have adjusted positions in core holdings, with a net advantage even with tax effect included -Have not held BRK as I continue to assume that I will do better… -often high cash balance -so far absence in the markets more than compensated by opportunistic dipping -when cash reach high balance, still look at an expanding opportunity set but time spent looking at macro side, otherwise the macro stuff is just for fun -comfortable contrarian with what seem to be very awkward positions at times In terms of cycles, -went through the dot-com bubble with a conventional portfolio and no hype stocks -coincidentally in 2007-9, went all in with leverage -now back to similar profile as in 2006-7 Now, Trying to expand opportunity set Debating if high cash level is because I’m wrong or because the Market is wrong Mostly long term optimist Hoping to opportunistically invest in 5 to 7 holdings for the long run and keep cash balance at less than 5%

You are right, the timing is impossible to predict or forecast. Think Kyle Bass. The description was only to convey that this complex financial structure is based on trust. The Imperial Palace will not disappear overnight but confidence can vanish. Some people thought the Berlin Wall would never fall. The model did not consider that as a viable option. I may be wrong but we clearly are in uncharted territory. Yeah and it's only an opinion. Story: I visited the Chicago Federal Reserve 4-5 years ago. There was a gentleman who was retired from a senior position. He was the guide. Nice man. One of the attractions of the exhibits was some kind of game where economic data would appear on a screen and the participant had to adjust dials (ie interest rates) in order to control the economy. The gentleman thought that the game was really funny. Funny thing, I left terrified. You're right: only an opinion.

"Now the Japanese private sector get's pissed of at the government and doesn't want to buy bonds anymore. It exchanges its yen for RWD and buys RW bonds instead. But now the thing is that RW has a bunch of Yen. It can't use them in RW because things are denominated in RWD over there. RW can do only two things with its Yen. It can buy Japanese assets - essentially Japanese bonds - so no funding crisis for the JP gov't. Or it can buy Japanese goods with it - the it increases JP exports and AD pushing the economy towards capacity so growth, revenue, etc." In order for this to work, you need relatively fixed terms of trade and exchange rates. Remember that Japan has a massive net liability in yens on its balance sheet. In substance, they're essentially at the helicopter money stage. Japan has very special attributes and that has, unfortunately, allowed going down this path. One day, everything is fine as "they" will do whatever it takes and will provide unlimited support. Then you wake up and buy your bread in the morning because it will be more expensive than in the afternoon and you start carrying your cash with a wheelbarrow. My opinion: not a recipe for success for the current economy.

"Not OK. Japan's external + balance is not in the billions of yen. It's in the trillions of yen. 349 trillion yen at last count to be exact and growing. That's about 3.1 trillion USD." I was wrong and you are right. OK. Even if the magnitude of my mistake is large (not very precise), I would venture to say that the conclusions are still accurate. The increase of public debt in the last 7 to 8 years matches the actual external debt. If this central management is OK, how come the central bank has essentially become the public debt market and how come this is slowly morphing into crowding out of even their stock market? Please show me how this is sustainable. Are they trying to get the train running or aiming to take off without wings?

A word about Japan. Each case is different but isn't it, in a way, a leading indicator? In terms of proportion and perspective, the external balance is net+, in the billions of yens. OK. In terms of public debt only, we are now in the quadrillion. ??? Trillion is between billion and quadrillion. Orders of magnitude in difference. The numbers are SO large. What is fascinating is that, even if the two piles are not really comparable (absolute and relative), Japan makes more money on the US government bonds it holds than it pays for its own public debt. :o I submit that holding a doctorate degree in economics may be detrimental when trying to explain that one. Believing in MMT may help. How is Japan going to get the train going? The public debt is essentially shifting from private hands to the central bank. In my book, this is called explicit monetization. Even if this is not openly recognized as such at THIS point. In terms of the I hold your debt and you hold mine concept, there is a game (and a song) called in my language: "jeu de la barbichette" I looked it up and it does not really exist, as far as I know, in the English speaking world. The best equivalent explanation I could find: I hold you You hold me By our little goatee. The first one Of us two Who will laugh Will get a wee slap! I agree that a possibility is that somehow, these seemingly huge imbalances may correct over time in a muddle through scenario. Fair enough. Leading to the real estate bubble, a major problem was that there was an actual disconnect between the debtor (ie buyer with a poor record and poor prospects) who was buying an inflated asset and the creditor who bought the debt after various financial steps. The discount rates had come to have no rational meaning in relation to the underlying real asset. The underwriting process was broken. This required a painful price discovery. Now, massive parts of the global and inter-connected financial system are characterized by the same conceptual flaw. There needs to be price discovery. Maybe this whole thing started way back (1971 and before) with the uncoupling to fiat money. In no way hoping for a return of the gold standard and I don't have the answers. This experiment may take a very long time to bear its fruits. Hoping that it won't be grapes of wrath. But I decided to fasten my seat belt. Just in case.

Debt services appear to be healthy. https://fred.stlouisfed.org/series/TDSP But deleveraging, what deleveraging? https://fred.stlouisfed.org/series/HCCSDODNS Then again, who wants to delever when they don't want/need to?

SD, Highly value your inputs and, going forward, still looking at insurance and reinsurance as potential opportunities and still looking at Fairfax as a potential field of dreams (if/when). Tried to do my homeworks to maximize the value of inputs. I understand the potential for faster services and decentralization of trust to decapture transaction costs but I don't see how long tail reserve management could be reasonably imparted. Isn't blockchain potential only limited to a leaner intermediate for the basic transaction? Aren't fragmented data sources and diffuse second-level liability management obstacles to long term commitments required by insurance contracts? In other words, even if the process becomes smoother and more efficient from risk assessment, to quote, to claim assessment, how does that threaten the moat associated with underwriting discipline and long term reserve management?

"History suggests that without the central bank interventions, we might well have needed a war to economically get as to where we are today." Was able to swallow the liquidity maneuvers to save bankers et al from the economic Pearl Harbor even if the average Joe felt the pinch. Have difficulty with life support though and so the populist movement, it appears. Would politely submit that we have not "worked through" the "problem" that perhaps rb alludes to. Currency wars, in theory, are played on paper. In reality, as maybe Keynes would have posited and as a guy named Kyle Bass presently conveys, synchronized easing now rests on the assumptions that a "stationary" state will persist and that no backlash will occur from those who stagnate. I would submit that these are very shaky assumptions. Next time questions will be asked, I somehow ask myself if two quotes from a previous President who, perhaps was not fully appreciated for his intellect, are relevant. Versus 2008 liquidity crisis, in a Bagehotian style: "If money isn't loosened up, this sucker could go down,” Versus the next time solvency questions are asked: "Fool me once...shame on...shame on you...Fool me...you can't get fooled again."