Munger_Disciple

Even at 24X multiple? That's the question.

I find tech investing incredibly hard. For me the hardest part is predicting what can happen in 5-10 year time frame. Businesses like AAPL, GOOG or MSFT which people think they can predict the business reasonably well are all trading at pretty high valuations. With the high valuation comes the risk that business won't pan out as predicted. And it is almost impossible to predict which new comer will be the next META or GOOG. A side question: Is it even possible to out-perform or even match overall market long term without direct exposure to tech?

That's a bizarre interpretation of my post. I talked about the mental model I use for FFH not its valuation.

+1 In a commodity business like insurance, mining or retail, there is a moat to being the lowest cost provider in the industry. Examples include Costco, Walmart, Geico, etc. I don't think FFH's insurance business has much of a moat. At a 10,000 ft level, I view Fairfax as a levered bond fund (leverage coming from float and debt) managed by a group of smart bond guys who have consistently delivered. The rest of the investments are hit and miss; sometimes they do ok, sometimes not. As long as they can underwrite below 100 CR and the bond guys keep executing, this will be a decent investment.

Perceived moat of FFH by COBF members as a whole is directly proportional to FFH stock price.

Fantastic letter from Buffett on the eve of Thanksgiving! We are lucky to have the running Berkshire. Wonderful human being too. https://www.berkshirehathaway.com/news/nov2123.pdf

Generally agree. Many of the old moats these days are getting filled with rocks & sand due to increasing change brought by technology among other things. I think Disney is toast FWIW. I also think Berkshire has a much bigger moat than Fairfax today because they have been transformed into a diversified energy, industrial, consumer and insurance company as opposed to Fairfax which is mostly just an insurer. It is hard for me to see how BHE & BNSF can get disrupted; I think they will good businesses 100 years form now (barring some exogenous horrible event like nuclear war or something).

I think we mostly agree. IMO the culture component at Berkshire or Fairfax will get progressively harder to maintain in the future. That's what I was saying in my earlier post. I think Disney's moat is very weak (and getting weaker by the day) and it doesn't belong with the other consumer staples in the discussion. I think Hershey & See's have pretty good moats . Their volumes won't grow much but the pricing power is still there. Their moats far better than "culture" type moats.

I think you missed the whole point of the moat discussion.

+1 Even Buffett misjudged the deterioration of culture at Gen Re. It is not easy to maintain the culture especially after the founder departs. So I would call this much a lower quality fragile moat than say Hershey bars or See's Candies.

No worries, just having some fun. Cheers!

What are you talking about? Bezos is an engineer. He has dual degrees in Electrical Engineering & Computer Science from Princeton. People have no clue how hard that is! Just getting a BS in one of the two disciplines is damn hard; getting dual degrees in both is almost unheard of. And he graduated with a 4.3 GPA! He is off the charts smart.

It appears that MP's fund already drifted from "Circle the Wagons" style and permanent holding philosophy of Berkshire & Nick Sleep who he quotes a lot with 30% allocation to coal stocks.

More than anything else, I worry about the lack of focus and discipline on the part of management to keep doubling down on shitcos. It is almost like they keep falling for sunk cost fallacy without learning.

Yeah, he apparently shared some amazing insights such as this: "Economically strong means financially strong" https://www.cnbc.com/2023/11/17/ray-dalio-says-us-reaching-a-point-where-our-debt-problem-gets-even-worse.html

That would be torture . It is amazing what people would do for money. Apparently BW pays even secretaries $200K per year (according to Copeland) to put up with this stuff.

+1 Every time I listen to Dalio on TV, I get a headache. So I stopped watching his interviews.

It is almost a given that ROE will go down as the asset base increases in size. It happened to Berkshire and will happen to Fairfax.

Thanks @glider3834!

Thanks @Cigarbutt!

A couple of questions for Fairfax experts: I was going through the cashflow statement in Q3 report. At first glance, it seemed odd that the cashflow from operations for the first nine months was negative $1B. Then I realized it was due to the line item called "Net purchases of investments classified at FVTPL". I would think purchases of investments would belong in investing activities, not operating activities? Is it related to adoption of IFRS? Why do they classify share buybacks into two separate line items, i.e., purchases for treasury and purchases for cancellation? Thanks in advance.

https://www.cnbc.com/video/2023/11/07/the-surge-in-stock-prices-goes-hand-in-hand-with-dropping-yields-says-interactive-brokers-peterffy.html According to Peterffy, the treasury basis traders use 100 to 1 leverage.