Munger_Disciple

I too only own FFH, no position in FIH. However I think there is a conflict between FIH and its manager FFH which also makes India investments on its own. If there is a new sexy idea, where would FFH invest? For its own account or FIH? Plus if I were an FIH investor I would hate to pay the excessive management fees based on NAV which is way higher than market price.

Personally, I don't think Fairfax should manage retail funds like Fairfax India or Africa. At a minimum, it is a conflict of interest between the mother ship & the fund. Fairfax could have just partnered with a pension fund or other institutional investor to make India investments directly without running a fund with high expenses. People like to compare Fairfax to Berkshire but I can't imagine Berkshire ever doing something like this.

They should base the fees on the lower of book value and market value of FIH shares, which also gives them an incentive to close the gap between the two if the shares are trading at a discount to book as they have been for awhile.

I pointed out earlier that governance is a major issue. Basically shareholders have zero say in how Google & Meta operate. The founders have super voting shares.

Apple is by far the best managed of the magnificent seven. I have heard from s/w engineer friends of mine that Apple doesn't grant stock options/ restricted stock grants to everyone, only to star performers. They tell me Google & Meta are very (excessively from a shareholder point of view) generous and there is a lot of fat at both these companies. I watched a video discussion with Apple CFO Luca Maestri & I can tell he went to Buffett school of frugality & management. Perhaps the best CFO in the world. And Tim Cook is a great CEO. I can see (belatedly to my detriment) why Buffett loves Apple and will most likely not sell ever even if forward returns may not be that good (kind of like Coke in late 90s) because Berkshire is sitting on a massive unrealized gain, loves the management & shareholder friendly capital allocation policies.

In addition to high valuations, the other issues with the mega tech companies are: excessive stock based comp (with evergreen option grants and repricing of grants to the entire work force), bloated work force with very high pay, poor allocation of capital (Google's Other Bets, Zuckerberg's Metaverse, etc.) and generally shareholder unfriendly governance & policies with one noteworthy exception being Apple. The other issue is that some point their growth has to slow; they are already massive companies trading at quite generous multiples. When the growth does slow, I think there will be a bloodbath as valuations will get reset. I mean Google & Meta already pretty much hoover up all the advertising dollars and at some point they can only grow GDP + may be a percent or two.

Yes! The higher return on bonds compared to just 2 years ago makes the index that much more expensive. You can get 4.5% on 10-year treasury bonds and probably 6% on high quality corporate bonds. So S&P 500 index earning 4% in comparison looks like a pretty bad bet. You would think that stocks should trade with an equity risk premium of at least 2-3% over 10-year treasury bonds.

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.