Xerxes
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Posts posted by Xerxes
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Michael Saylor must not very happy. He is the one who pushed Musk into Bitcoin late 2020 and ignited this 2021 rally, and now the whole rally is coming down with Musk’ about face.
Saylor is very smart and good marketer. But pushing for Tesla/Musk to go long Bitcoin was a bold move that is now going to end up biting him. Musk is at the end an engineer, always iterating and looking for a solution. Saylor is a marketer and a Bitcoin maximalist. His incentives are clear.
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1 hour ago, StubbleJumper said:
The Resolute shares were likely acquired several years ago (pre-merger) and have been held ever since.
Now that you have posted the table of his major holdings, I wanted to observe that it's interesting that he added to his BB holdings. It takes a fair level of conviction to add to BB after years of poor execution by the company.
SJ
Indeed,
I just hope that he didn't buy it from me back in Q1, when I sold my BBs at $24.99 CAD
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5 hours ago, Charlie said:
Interesting to see that Francis Chou has nearly 41% in Berkshire Hathaway:
How did Chou got his cost so low for Resolute at $1.26 per share.
BRK.A - Berkshire Hathaway CL A 40.83 150 Add 50.00% $272000.00 $40,800,000 ≡ BHC - Bausch Health 24.18 1,558,992 Add 1.30% $15.50 $24,164,000 ≡ WFC - Wells Fargo 6.02 209,542 $28.70 $6,014,000 ≡ RFP - Resolute Forest Products 5.77 4,571,960 $1.26 $5,761,000 ≡ MBI - MBIA Inc. 4.66 652,531 Add 5.33% $7.14 $4,659,000 ≡ JPM - JPMorgan Chase & Co. 3.09 34,275 $90.04 $3,086,000 ≡ GS - Goldman Sachs Group 3.09 20,000 Add 11.11% $154.60 $3,092,000 ≡ C - Citigroup Inc. 2.85 67,695 $42.12 $2,851,000 ≡ DVA - DaVita HealthCare Partners 2.49 32,743 Add 204.78% $76.05 $2,490,000 ≡ BB - BlackBerry Ltd. 2.17 529,040 Add 23.31% $4.10 $2,169,000 ≡ SNY - Sanofi Aventis 0.87 20,000 Buy $43.70 $874,000 -
Farmer's Edge down a lofty 17% in 1 day.
Thank god it is not marked-to-market
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13F Q1
An increase on Atlas ? maybe exercising some warrants
FAIRFAX FINANCIAL HOLDINGS LTD/ CAN Top 13F Holdings (whalewisdom.com)
Fairfax Financial Holdings Ltd Can Top Holdings 13F Filings (holdingschannel.com)
I find it interesting that you can neither see Exxon nor Bank of America in the list, yet those two name make it to the conference call and letter to the shareholder. Is that some sort of Marketing on some insignificant position.
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17 hours ago, StubbleJumper said:
Yes, we are paying them to maximize shareholder wealth. But part of that is running the actual business, not just investing. The insurance business requires that the reserves be available for policy holder indemnities. You can invest in any old risky assets if your premiums:surplus ratio is very low. But, once you get your underwriting gets into gear the premiums:surplus ratio rises, you need to manage the risk of the securities that make up your insurance reserves. Otherwise, wouldn't the optimal strategy always be to invest 100% in equities because over the medium and long-term, the return will blow the snot out of debt instruments?
So, if you review Note 5 from the 2020 Q1 report, FFH had $28B of cash, short term investments and bonds. Of that, $12B was corporates. With the lessons learned during the ABCP freeze-up and the other joys of the financial crisis, how high would you want to see that go? As an insurer, you still need to write cheques to the policy holders, irrespective of what is happening in the world.
SJ
I admit that I am not familiar with the 08-09 event with FFH getting a hold of Berkshire-backed municipal bonds and even less familiar with what is a "optimal" surplus ratio. But given some of the missteps they have done in the past few years, I think going in March 2020 on the risk curve with a 7% allocation wasn't totally a bad move.
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On 5/10/2021 at 11:07 AM, John Hjorth said:
Added further to BAM today.
[I'm now "maxed out" [in the sense of being basically fully invested, without any use of any kind af leverage, except deferred taxes on taxable accounts]].
John, i must say, i was a bit surprised to see you start a position on BAM. I always saw you as sticking with the devil-that-you know-like story (yr long term holding on BRK). That said, glad to see you joining BAM.
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It was not risk-free (and could have gone the other way (i.e. prolonged downturn)), but still lower on the risk ladder than adding to equity, but either way as shareholder aren't you paying the management team their annual salary to take risk to take advantage of market dislocation ?
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I did find it interesting that they did not react more forcefully in 2018. If the framework that they have is that in 2016, the economy flipped and therefore higher rates were coming, one would have expected that in 2018 they would have bought the dip in the bond market (i.e. locking in some parts). That they didn't, could mean that they expected the rate to go even higher than it did. In late Dec 2018, when the stock market took a plunge, it took some dovishness from the Fed in mid-Dec 2018, to calm the beast. So maybe that dovishness ended that rate increase cycle then.
Fast forward into this new economic cycle, if there are far reaching consequence from pedal to the metal Fed policy (i.e. inflation being more perm than transitory), than that would be another opportunity. It just seem to me they are "waiting" for substantially higher rates before locking. If there is an opportunity in the next 8 months, i hope they wont miss it.
March 2020 was interesting. They deployed about 7% of their $40 billion portfolio as spreads opened (corporate bonds i believe) up, and rode the collapsing spread from 4-5% to 1-2% approx. Amazing but one would ask, why not more than 7% allocation. Was it because it was too fast ? if the downturn was more prolonged, than that new reality would have different than the one we went through, therefore, it is likely that a larger 15% allocation as spreads opened up would not have snapped back that fast.
Therefore,
current reality: 7% allocation in March-April 2020 as spreads opened up => made your money in 6 months
Alternate reality: +15% allocation in March-April 2020 as spreads opened up => still licking your wounds
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I think the tailwind from substantial deployment of that dry powder in the bond portfolio will totally crush and net out any headwinds on its equity portfolio. Until then the stock doesnt deserve a premium to book.
I complained in the other thread, about him being perma-bear for so long (2010-16), the positive effect of that is him having that substantial dry powder available and un-deployed.
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Matt,
If I may suggest:
Own FFH for what it is & not what you want it to be. What FFH is today is a company with large bond portfolio with short term duration, well suited to deploy it into this transient/permanent rising inflation/rate environment. J. Powell is helping to create that mother of opportunity for FFH. Druckenmiller talked about just now on CNBC and had a piece on WSJ.
If the fall in growth/ARK and rise of value are the two sides of the same coin, than FFH can play that trade through its bond portfolio and stay away from something that historically may have been just awful in executing. Said differently, you are getting what you want but through a different lever.
Lastly, at no point Prem did mention Tesla as as short. The Tesla short speculation started here.... that said it is also true that a number of 2008-09 bears who did well during the GFC seem to have a correlated point of view that Tesla was doomed and shorted it. So by that logic one can correlates that Prem also shorted Tesla but that is purely speculation.
We did however get an additional piece of info during the AGM about it. He said it was one short position from 2019. After AGM, i said to myself let me go through the realized/unrealized shorts in the 4 quarters of 2020 and find out the likely 2019 short candidate, but then wisely decided not being worth my time.
Prem mistake was to think that he was the Valuation Policeman giving speeding tickets to inflated tech names. For a macroinvestor, I think he entirely missed the impact of a lasting low-interest regime on valuations. Chanos and other successful short sellers, on the other hand, makes their dough by shorting mostly names where there is trigger or reason (fraud etc.) in the same period.
PS: but then both Buffet and Druckenmiller also did not see the magnitude of Fed intervention to prevent a complete market collapse. BUT they pivoted when facts changed through 2020, while Prem remained perm-bear from 2010 till 2016. Or at least that is my understanding.
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Interesting clip with the Redfin CEO on low housing inventory. My personal view has been that once the economy re-opens and rate start to climb up the great dash to move to suburb will slow down. As folks settle down and start enjoying life.
I of course have no global view on the housing market but listening to this clip, they see this (bias view for sure) as a multi-year event that igniting a housing construction boom given the low inventory. So, does that mean lumber prices will stick for some times if this rally has some legs.
Redfin: U.S. Housing Inventory at Record Low, Getting Worse - Bloomberg
On a different note, all these houses that have been bought by the newer generation using apps like Zillow, Redfins or Opendoor, will probably come with an owner that is more likely than not make use of services like ANGI as oppose to call up contractors like I do to get a quote. The opportunity is there for ANGI, the hard part I guess is execution and having that pipeline of "pros" that haven interest.
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thepupil,
i probably have the same thinking as you do in terms of having a continuous flow from the paycheck, but cap that contribution when i hit the ceiling of the tax-free account.
i rather use the surplus $$ to do renovation work in the house, first, then adding to non-taxable account.
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TRS are a levered-play, if they sense the bounce back is losing steam at some point in 2021, they ought to unwind the position, capture the gain and live to trade another day.
Good news is that with some of their holdings doing well, their margin of safety keeps increasing.
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4 hours ago, Libs said:
https://finance.yahoo.com/news/robinhood-response-to-buffett-and-munger-comments-132124035.html
Cramer is eviscerating Buffett and Munger just now for their Robinhoood and ESG comments. Note the pandering from Robinhood - as if Buffett / Munger are trying to thwart young investors. They're trying to SAVE them.
While Munger + Buffett are not above criticism, it is also true that CNBC is a TV show, and the more critical they are the better they'll do. No one is going to click on YouTube to hear Cramer saying how right Buffett was about Robinhood.
Few quarters ago, Adam Jonas gave a really weird price target for Tesla (something like low two digit for a bear case), and Cramer toasted him for that, saying that the only reason that price target was made by Morgan Stanley was to generate discussion & a buzz about themselves .... i guess Cramer did the samething. In the next few days, we will probably have Chamath weigh in as well.
To stay/look relevant, irrelevant people need to anchor themselves against the words of the relevant few.
full disclaimer: i am irrelevant as well.
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49 minutes ago, SharperDingaan said:
At the operating level the swaps are producing a quarterly MTM settlement - with the market resetting every quater. Thereafter FFH receives $ if the share price goes up, pays $ if the share price goes down. At the stategic level, the swaps have locked in the purchase price on the notional quanity of FFH shares - for the life of the swap. All else equal when the swap matures, FFH buys in the underlying number of notional shares and cancels them.
It implies that over the life of the swap, FFH both expects their share price to rise, and that the eventual buy-in will be funded from cummulative free cash flow. Very elegant, and smart approach.
SD,
i dont think that last statement is correct, just based on my understanding of a TRS.
FFH can of course buy whatever quantity it wants of its own shares at the end, but i dont think it will be as part of TRS agreement or within that sandbox. Of course if FFH does a buyback at the end funded by TRS gains, than it would akin to doing a buyback in Q4 2020/Q1 2021 when share price was much lower.
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40 minutes ago, aws said:
“The directors are in agreement that if something were to happen to me tonight, it would be Greg who’d take over tomorrow morning,” Buffett said. He praised Abel and Vice Chairman Ajit Jain, who runs all of Berkshire’s insurance operations.
And there is the Munger statement as well when they were discussing culture where he said: "Greg will keep it that way"
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i believe you are right vis a vis TRS vs. commons.
The whole statement confused me.
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55 minutes ago, LearningMachine said:
On Alibaba, when Buffett put up the top 20 list of companies, which contained Alibaba, and helped attendees realize that the list won't be the same 30 years from now, to me it felt like an internal conversation that Buffett might have had with Munger as well to not get too excited about Alibaba as it likely won't be on the list anymore in sometime.
I had a similar feeling when he made the audience realize that even if "you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States, everything about it and had realized 'Well, this is pretty easy. It's going to be cars. It can be autos.", investors would have still failed by trying to pick one of the auto-manufacturers or even all of the auto manufacturers in all the excitement.
Felt like he must have had a conversation with Munger that even we can see the vision that Chinese economy is going to be much bigger than the U.S. economy, you can still fail by trying to pick one of the Chinese companies at a high multiple based on the assumption that it will stay on the list for a while.
It was also interesting to see Buffett talk about Google, Microsoft and Facebook: "So those are the kind of businesses -- they're the best businesses, but they command the best prices too. And there aren't that many of them, and they don't always stay that way." I think Buffett is still opposed to paying best prices for businesses because the high multiple assumes the businesses will stay that way for a while, but "they don't always stay that way."
I think the "you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States, everything about it and had realized 'Well, this is pretty easy. It's going to be cars. It can be autos.", was squarely aimed at the new herd of retail investors buying anything EV related.
On the comment about 1989 vs 2020 vs 2050, who knows what will be there but i dont think it is unthinkable to think Alibaba wont be there. Propelled by the sheer macro-tailwind of Chinese economy, it will be there somewhere.
An interesting contrast is with that of Yukos and Michael Khodorkovsky, that Moscow took over in 2004 and subsequently merged its asset with Rosneft. That Russia could do given how tangible were the resources and the assets. If you were to give $700 billion (Alibaba' approx market cap) to the Chinese Communist Party to rebuild Alibaba from scratch, they probably couldn't do it. Same for Tencent.
It is interesting though, we went from Deng Xiapong era, to Ziang Zemin era, to Chairman Hu era and now Xi era. The latter is has been pushing the "state" to reclaim its commending heights, yet it was in 2006-07-ish (Hu era) that I recall seeing on the cover page of The Economist the world largest companies, among them Gazprom, Bank of China, Agriculture Bank of China, etc. etc. all/mostly stated-owned entities. So will we see in 2050 Chinese state owned companies, i doubt it. Chinese will be there in 2050 on the top 30, but it will be their private enterprises (Alibaba, Tencent of the world). Could these two be de-throned by another Chinese disruptor, possibly, but they will not be de-throned by the CCP.
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4 hours ago, Daphne said:
Yes. So, Tom, in terms of Fairfax shares as you see in the press release, right, we have about 730 million, 2 million shares at approximately US$372. This is all of U.S dollars, 730 million is the total return swaps in Fairfax. And, of course, it's already doing well. [Indiscernible] on an opportunistic basis, we've looked at buying some common shares, Tom, but they're not long-term and they're the ones that we bought quite a bit, we've already sold. And so we continue to look at opportunities, but it's short-term stuff, meaning [multiple speakers] for a long -- longer period of time.
Would anyone on the board hazard a guess to what Prem is saying here and what it means?
He was asked about the TRS, but he diverted his answer and start talking about buying the market dip in 2020. He is referring to the trade that Wade and the team put in. That is why he said we already sold. See letter from March, where he says that they sold about $200 million of shares. It confused me as well, because i thought he was saying he un-winded the TRS trade, but he also said he added to it, which made no sense. Looking back i think he was talking about the Wade trade where he says they already sold some.
"After the March/April crash in the stock market, we could not resist buying Exxon shares at a dividend yield of 10.5%, Canadian banks at an average yield of 6.1% and some other companies like Royal Dutch Shell, Alphabet, FedEx and Helmerich & Payne at very attractive prices. We sold approximately half of them in 2020 for a profit of $212 million or an average gain of 40% on our investment."
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Some thoughts on the AGM:
- Airlines: the point that he made that maybe BRK would have been the one doing the bailout of the Big Four if he did not divest the shares, is an important point and not considered in the past. I could imagine the discussion within the Treasury when BRK dropped the shares that "damn, the BRK option is now out of reach", so as steward of Berkshire capital, I think Buffet was more concerned about those things and the right calls were made. The reality is that in 2008-09 he chose the type of institutions where he wanted to be the one doing the bailouts. Whereas in 2020, he would have been forced to be involved in the Big Four.
I never appreciated the level of care he takes with company's capital, as the steward of capital, until now. The Big Four airlines simply did not have the permanence that he looks for in a business and he would never want to be pass the 10% ownership. The pandemic drove that point home for him. I also see the shedding of hodge-podge collection of banks as a good thing as well.
With that, and the importance in today's working from home world, it is no surprise that he sees that permanency in the like of Verizon, and its dumb digital pipelines. Also, in an interview few years ago in Texas, he made the comment how Apple has that permanency and that it along with BRK and perhaps one or two other companies, have that permanency (paraphrasing).
- Alibaba : would have loved to hear more. But i think given that (1) Munger bought in and (2) sees no clamp down and no major reversal from Deng Xiapong era, it must be enough for me i think.
- Apple: so he trimmed some. Find it cute that he would make sure that at per share level, we still have the same exposure to Apple even as he trimmed due to buyback. BNSF was said to have an implied value of well over $120 billion or so (given the bidding war between CP and CN). Imagine if BNSF was not wholly owned, would he trim at this peak valuation slightly ? in his mind BNSF and Apple are about the same size, i think there is a tug of war in his mind:
- Buffet the value investor: I need to trim some at these crazy multiples
- Buffet the portfolio manager: suppose you do, and then what ?
- Buffer the conglomerate CEO: this is a critical piece of digital infrastructure that we own, that is no different that BNSF, just happens to trade publicly. Diamond hands.
- Japanese Trading Companies: would have been interesting if someone had asked/pushed for more on that to see what nugget he drops. I dont think he was referring to these companies when he said buying something he wasn't to clear on the business model.
** Bloomstran must have been getting pissed, during the pre-show when the Yahoo Finance folks kept talking about the $150 billion cash pile.
** no tweet yet from Elon Musk commenting on the AGM
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4 hours ago, Viking said:
- mentioned BAC as equity holding?
I just finished listening to the re-run.
He mentioned BAC twice in fact - second time as a contributor to FFH gains in Q1 (if i heard correctly). I am guessing we will see it in the 13F for Q1 as a new addition. Most probably a Wade-like allocation. Glad to see to tilt to quality continue even though this might be a small size position vs. the larger ones.
Depending when they bought in Q1, this could be as high as 35% gain on Bank of America.
Fairfax 2021
in Fairfax Financial
Posted
Boasting about catching Exxon when it dividend yield expanded to 10% on the 2020 shareholder meeting, strongly implies buying Exxon direct.
"After the March/April crash in the stock market, we could not resist buying Exxon shares at a dividend yield of 10.5%, Canadian banks at an average yield of 6.1% and some other companies like Royal Dutch Shell, Alphabet, FedEx and Helmerich & Payne at very attractive prices. We sold approximately half of them in 2020 for a profit of $212 million or an average gain of 40% on our investment."
I looked all the past 5 quarters' 13F; On Q1 2020 it shows FFH buying 155,800 shares of Chevron; but no Exxon. They still hold all of the 155,800 of Chevron. But no sign of Exxon anywhere unless it is being held elsewhere where 13F disclosures doesn't cover. But then again, it is not like it is an international equity.
Would it be too farfetched to think that Prem thinks his team bought Exxon, whereas his team actually bought Chevron, and two sides within FFH haven't reconcile yet. Just weird.
FAIRFAX FINANCIAL HOLDINGS LTD/ CAN Top 13F Holdings (whalewisdom.com)