SHDL

I for one don’t share your hatred towards China but there is probably something to this. If Trump’s only goal is to win in 2020 and he anticipates running against a Democrat who also supports the China tariffs then he basically has nothing to fear. We should be prepared for a big disaster in that case.

I’m not as informed about the mechanics but I’ve heard similar stories. And I do find it quite bizarre that the President is allowed act like a dictator when it comes to tariffs... Anyway, if what you say is true I agree that Congress ought to do something before it’s too late.

The WSJ had an article today with some useful info and stats on this topic: https://www.wsj.com/articles/free-podcasts-are-good-for-me-but-bad-for-business-11566572581?mod=hp_lead_pos9

Doubling down! https://twitter.com/realDonaldTrump/status/1165005927864512512

That is probably true. Very important not to overdo it though!

I can assure you that a lot of people will get hurt in the real world if he were to do this. Job losses, financial losses, inflation, the inability to buy essential goods, ... it will be amazing. If I were President and I wanted to see the country burn I would seriously consider doing this. Maybe launch a few nuclear missiles too while I'm at it, because why not?

That is a higher probability event than a lot of my capitalist friends seem to think IMO. God help us if we end up with a mad socialist in the White House. Texas has an open primary, so I will be voting in the Democratic primary for the first time in my life to try and help that not happen. Your service is greatly appreciated!

That is a higher probability event than a lot of my capitalist friends seem to think IMO. God help us if we end up with a mad socialist in the White House.

To be fair, the signaling can be just as important as the actions. I think that's what most people are expecting from JH - signaling of a commitment in one direction or the other That’s true. Personally I’m quite skeptical that he’ll say what Mr Market wants to hear given the circumstances (the US economy is holding up okay so far; the issues we’re seeing are almost surely due to tariffs and other geopolitical issues which I don’t think the Fed can fix; and the Fed itself is divided on whether it’s a good idea to cut rates preemptively or not).

I find it amusing that some people are expecting him to commit to a huge rate cut or something. This isn’t even an FOMC meeting.

I have the feeling that these employers will sooner or later discover that they are better off offering their workers a compensation plan where they can “earn an extra few dollars” if they opt to wait a week or two before receiving their paychecks. Framing matters.

I don’t know, it seems to me that we could just as easily settle into a regime where the US has higher interest rates but also higher inflation vs the rest of the world and the USD gradually depreciates vs other currencies. In such a world there is no incentive for foreigners to keep buying US bonds and drive their yields lower.

I forget when I first saw that article but it was a good one for sure. Quite accurate too, from what I know. I think it also nicely highlights a lot of structural issues that are holding their economy back. My contacts tell me that things have started changing a lot over the last ~5 years though (e.g., some of their best engineering talent is now avoiding the salaryman-at-a-megacorp career route and going straight down the startup/entrepreneurship path after graduation, which was previously almost unheard of).

Hi John, I think it’s a good move. I think we have an interesting setup here in that BRK (by which I mean the stock) has done pretty much nothing for a few years now and remains cheap-ish, while a lot of other assets with similar characteristics — high quality, low risk — have really gone up in price. So if you think that general trend is here to stay then it is probably not unreasonable to expect BRK to join the party sooner or later. That said, there is one perfectly “rational” explanation for why BRK isn’t hot now, which is that everyone really seems to think that interest rates are going to go much lower and stay there forever — in which case industries like banking and insurance will probably not do so well. Personally, though, I feel perfectly fine betting against this consensus view by buying/holding BRK.

Ackman apparently bought a bunch of BRK B shares recently according to their 13-F.

I’m personally a fan of the income sharing arrangements that some institutions are starting/testing. IMO a young person’s professional career is the type of thing that ought to be financed mostly by equity, not debt. A lot of the horror stories I read are about households that are like startups that got themselves started with 7x EBITDA worth of debt and no equity. That is financially reckless, even if the expected returns are good. That said, I do agree that higher ed is ripe for massive disruption.

My baseline expectation is that the next recession, if we get one soon, will be caused by a supply side shock — tariffs and such — and that therefore monetary accommodations will be of limited help. In fact I think stagflation is more likely than most people think, and that the trend may well be toward monetary tightening rather than easing because of this. A real bear case to watch out for would be something like a replay of the 1970s.

This is the key (and big) "if." We'll see how it goes, but given how hard central bankers are trying to avoid deflation, I don't think it is very likely to materialize.

One really strange piece of advice that my father gave me when I was young was that if I was going to do anything criminal, I might as well commit a huge crime — because being a small time criminal makes absolutely no sense in terms of risk/reward. I didn’t get it at the time but nowadays I do. (Not that I’m a huge criminal mastermind, just to be clear.)

What would be a good instrument for placing such a bet as a retail investor? I remember around 2010 Soros or his proteges made a similar bet on interest rate increases using some derivative instruments, but I forgot what it was and I wouldn't be able to access such instruments anyways. TIPS are probably the most obvious candidate. I would focus on individual bonds that mature within a year or two. If you have the inclination you can probably even isolate the inflation protection component by simultaneously shorting a (non-inflation protected) Treasury note that matures on the same day.

I think this is right. He significantly reduced his equity exposure both in 1969 (by closing his partnerships) and in 1998 (via the GenRe transaction), both at/near major inflation adjusted cyclical peaks, and then loaded up later when things got cheaper. Will this be his third time? We shall see...

Yes, that’s something to keep in mind. In my case though I'm using a pile of cash that was not going to be invested in anything (other than T-bills and such) anyway so it makes no real difference, at least for the time being.

I’m personally not too bummed by the ever increasing cash pile at Berkshire because I can neutralize it by holding more BRK shares and less cash myself. However I understand the frustration of fund managers who have a meaningful chunk of their portfolio in BRK. I’ve read several reports recently about such managers finally giving up and selling. Speaking of which, I have yet another silly theory about Buffett’s Master Plan: he’s intentionally repurchasing shares as slowly as he can in order to reconfigure the shareholder base to his liking before he retires. Well, ok, I said “silly” but I’m only half joking.

I mostly agree with the above posts re: hedging via index puts. For generic hedging I typically just buy deeply OTM index puts when they’re cheap. Here, by “deeply” I mean like 25% or more and by “cheap” I mean (annualized) premiums that are ~1% or less of the contract’s notional value. It’s basically disaster insurance. I’ve never had these puts become in the money but there have been several occasions when I was able to sell them at good prices during big sell offs and use the proceeds to buy something else that was on sale. It is always nice to have some extra cash when quality assets are cheap. A suspiciously low VIX is, for obvious reasons, a very good indicator of when to buy these hedges, but if you strongly believe that it is volatility (and not the underlying index) that is mispriced then you may be better off trading VIX futures or options. I’m not selling my index puts yet BTW.

My guess is that if we do get stuck with super low interest rates and inflation for a long time, the Fed and other CBs will eventually come to the realization that they really need to do some variation of helicopter money. That should create some inflation and give them room to raise rates without creating too many problems. The other option that you hear some people talk about is to abolish physical cash so that people have no way of getting around negative interest rates. That should work in theory too but I think will not go as well politically vs helicopter money. In terms of investing, I think owning high quality real assets is the way to go if all this monetary stuff keeps you up at night.