Dynamic

Thank you. I was hoping to find the full interview but only found various short excerpts earlier on!

I hope it goes well too, John, as that puts my look-through exposure to this 2-bagger in GBP (or 1.9-bagger in USD) up to at least 33.5% at the close, about 6¼% points coming via our 69.1% BRK.B position. I think it got a little higher at the end of 2016 when our direct AAPL exposure was around 31-32% at market prices, but it's closer to fully-valued now. I imagine Berkshire bought substantially in the early February dip into the $150s (when a lot of us were busily buying BRK.B in the low $190s on volume around 8 million per day - which for me was cheaper than it is now, thanks to currency swings). Traded volume was well over 50 million shares a day for all of the 4 or 5 sessions with the lowest prices (and a bit higher than surrounding weeks), so buying about 75 million shares could quite possibly have included a good proportion purchased at some of the lowest prices that quarter, assuming they keep to a modest proportion to avoid causing the price to rise. I'm pleased to see that large caps with decent volume still provide plenty of opportunities for Berkshire to take meaningful stakes at reasonable valuations.

+1 to vinod1 from me too. I concur about the promise of many members of the younger generation and the overeagerness to call bubbles. I think the latter can lead to a lot of people to miss out on time-in-the-market by trying too hard in timing the market often at a cost to their long-term returns.

It's far from clear that it's true and it's certainly easier for me to recall more recent events when I've been an active investor than events in the 80s and early 90s when I was not and was also less aware of events in the US than the UK, but I suspect the speed with which many participants can now act, the reduced frictional cost of trading and the variety and speed of transmission of information, news, misinformation and ideas could contribute to increased bubble frequency if it is increasing. The difficulty in gauging whether frequency is increasing is the availability bias - things more recent are easier to recall. You need a systematic way of searching for these things. Perhaps a fairly good way of counting bubbles or recessions over many decades would be to look at the writings of someone with a consistent regular habit of commenting on the economy and its bubbles and recessions. I'd suggest the Berkshire Hathaway Chairman's Letter would probably be fairly consistent barometer of bubbles, panics and crises over time, by which you could gauge what one fairly consistent and rational person considers to be worthy of comment. I've learned a lot about problems from before my investing life, such as the Savings and Loan scandals from reading Buffett's annual reports.

I haven't answered. Should "No, never" mean - "No, never have", or "No, never would"?

Debt leverage is powerful in both directions. Clearly with extremely stable companies like regulated utility monopolies, there is scope for the company to use a lot of debt to finance the capital base and boost ROE. Their income stability makes them low risk to bondholders and affords them modest interest rates. Investment is a lot less certain than those income streams, suffers correlated declines during broad bear markets and usually operates on far lower degrees of certainty of outcome, especially in the short term. However, I think there are rare times when the upside/downside balance is greatly skewed and the downside is limited. The only problem then might be the timing and the short term price action. The problem with debt is remaining solvent until the intrinsic value of your investments is reflected in market price, and intermediate prices falling even lower could lead to a margin call or similar problem with how the counterparty to your debt views your financial position that can wipe you out completely and multiply that string of great returns by zero. Sometimes, I think the problems come with duration mismatch. If you have a 10-15+ year mortgage and can be completely sure of meeting the very modest payments to avoid default, an investment that might need 5 years to have its value recognised could be fine to invest some borrowed money against. But if the counterparty is able to call your debt in at the worst moment you might have to assume that they probably will! So I think you need to consider the effects of possible short-term market price action very carefully to give yourself plenty of leeway to ensure you can ride out the turbulence without crashing. It's far to easy to be overconfident and get addicted to the juiced up returns when things worked out well for you in the past.

Another 13D/A filing from Berkshire about Knauf's bid for USG. (Thanks Rocket Financial for the email alert) Again, no change in Berkshire's holding, but it's the Notes that are amended as follows (emphasis mine): Interesting!

I read it as: If it's negative and the price is -- (blank) I would assume it's cancellation of treasury shares. The other dates you showed with positive numbers of shares were presumably repurchased by Fairfax at the price shown but hadn't yet been cancelled.

I heard a good description on ep 661 of the Skeptics Guide to the Universe podcast recently about opioids, and from the show notes, I think this story was brought about by a recent study summarized in an LA Times article. The gist seem to be that over a year-long clinical trial it appeared that over a year, i.e. for condition where pain is chronic (long-term) rather than acute (short-term spike) opioids offered no advantage over everyday non-opioid painkillers (I believe they referred to Tylenol, which I have understood is a US name or brand-name for paracetamol). I think in the short term, opioids may be superior for pain relief and not caring, but over time their effectiveness at pain suppression lessens, requiring increase doses, and greatly increasing the likelihood of dependence and withdrawal symptoms, and long term non-opioids are at least as good. For end-of-life palliative care, opioids are very helpful, and dependence isn't really a problem. As the evidence base changes I suspect that the best practice needs to be redefined and new guidelines for the default interventions issued across the medical community for long term (chronic) pain management in light of the best available evidence of benefits and side-effects. It may be that opioids still provide the best combination of effectiveness and reasonable safety for short-term use in certain categories of acute pain, but should be avoided for chronic pain management. The SGU team made clear certain limitations of the trial, but it adds to a body of evidence that change may be required.

I think you first need to add the Ublock Origin extension to your Chrome browser (or Firefox). The Chrome Extension is here After that I'm not sure, so over to @jimjam

Maybe if I open an account that supports options, I could get to like writing out of the money puts myself at prices where I'd be a willing buyer anyway. Getting paid $0.75 for $49.50 strike either means buying at effectively $48.75 or getting $0.75 per share return - close to 2% of the potential position in 9 days. It seems more attractive than a limit order at $48.75 except it can't be cancelled in the event of truly adverse news. For a high confidence stock trading fairly near my buy price it seems like a good way to profit from my willingness to buy even if the desired price doesn't materialize.

I hadn't noticed the ticker change from BNY, but 13 April puts at $49.50 last sold for $0.75 according to NASDAQ

Bought a few more BRK.B with additional savings at about $194.78 USD / £138.37 GBP. Discretionary Portfolio Weightings: 70.7% BRK.B at $196.30 26.0% AAPL at $169.27 3.3% others with <0.1% cash

The "CURRENCY:USDUSD" and "CURRENCY:GBXGBP" is also working again. Thanks Google!

You mean ("UPRO", "price")? What I usually do is click a link for a known share such as BRK.B then type UPRO in the Search Box at the top. It suggests two different things and includes in capital letters the correct ticker for each (including exchange where necessary). For UPRO these are: NYSEARCA: UPRO MCX: UPRO

I had tried some Japanese prices before on my watchlist, but they never seemed to be supported on the old GOOGLEFINANCE function. Perhaps they're aiming to include more markets in future.

I think some parts of the way Google Finance works may be undergoing recoding behind the scenes at present. Some of the GOOGLEFINANCE function in Google Sheets isn't behaving as it used to (and I've reported the regression). For example, GOOGLEFINANCE("CURRENCY:USDUSD") should return 1 always, and "CURRENCY:GBXGBP" should return 0.01 always but both return N/A error code. This can be worked around but makes for simpler more consistent Google Sheets formulae to convert whatever currency a stock trades in into a target currency of choice which could be the same currency like USDUSD = 1 or like converting GBX penny to GBP pound = 0.01. I use it in my own portfolio tracker and my Look Through Berkshire tracker, so if they don't fix it, I'll have to use a workaround using IF() or hard-coding rates.

Bought just a few more BRK.B at about $195.97 (£137.77 GBP) with added cash, which thanks to exchange rates were a slightly cheaper in GBP than my 10x larger February 9th purchase at $192.69 (£139.55 GBP). Nonetheless I'm very happy with the Feb 9th trade as I funded 72% of that BRK.B buy by selling my entire stake in WFC at $55.70 (£40.26 GBP) and still got its dividend, and WFC is down about 6% since, while BRK is up 2% in USD, so I wouldn't have done as well by waiting until today to switch horses on that portion. Aside from modest pension schemes in Index Funds that make up about 20% of our holdings, the discretionary portfolio is still very concentrated: Discretionary Portfolio Weightings: 0.1% GBP cash, 70.5% BRK.B, 26.1% AAPL, 2.1% wife's employer ShareSave Option scheme, 1.2% made up of HPQ and HPE remnants. I feel very safe with the BRK.B concentration and would happily increase it to 100% as it's very diversified internally. Feel that AAPL isn't overvalued and is high quality compounder but poses larger single-company risk. May dispose of the HPQ and HPE remnants that aren't held in our main trading accounts to have easier control.

The Bloomberg article I quoted earlier now includes news of USG's rejection of the takeover under the new title: "Berkshire-Backed USG Rejects $5.9 Billion Takeover by Knauf" It also shows a surge in the USG stock price, partly from the easing of trade war fears since Friday, no doubt, and partly from the takeover talk I imagine.

I never liked this part of the quote. Can't we both be right? Maybe you sell your BRK to buy BAM and I buy your BRK and we both make great returns. The whole zero-sum thing bothers me because I think of investing as a value-adding activity which grows the pie over time I think it's sensible to divide things up into two games that occur at once: The positive-sum game is investing as a whole - owning the market of pieces of publicly traded companies and collecting their dividends generally produces positive returns over long time frames. The zero-sum game is where investors can get an edge and outperform the market as a whole, and this can be by being selective in the companies chosen as well as the prices paid and received. I think that Value Investors to some extent provide a service in limiting irrational underpricing during distressed markets and may be rewarded with outperformance. Likewise, some buyers may rationally accept low risks in a certain sense that matters to them (solvency risk, dividend reduction risk, volatility etc.) in exchange for lower returns, while some value buyers get to reduce risk of losing funds and increase returns simultaneously by buying with a large margin of safety. Likewise I think that fearful instinctive investors who buy high after a run-up and sell low in fear tend to be on the losing side of the zero-sum game over time and hamper their long-run returns. And of course there's an element of luck involved.

Berkshire Hathaway Says Knauf Made Offer for USG at $42 a Share That represents a 25.3% premium to Friday's closing price in a down market. Berkshire's stake at $42 per share would be valued at $1,822,295,160 (versus $1,453,931,209.80 at Friday's closing price). Berkshire just filed a 13D/A (hat tip to rocketfinancial.com) which seemingly reiterates that it controls 43,387,980 shares of USG common stock (30.8% of class). This number of shares exactly matches what I got from combining the BRK and New England Asset Management 13-Fs dated 31 Dec 2017 in my BRK Look Through Google Sheet, so does not represent a change. NICO seems to control the BRK 13-F portion of 39,002,016 shares (and parts of it are held via their subsidiaries), while GenRe controls the remaining NEAM portion of 4,385,964 shares. Warren Buffett is deemed to control the whole holding as he has control over NICO and GenRe. This made me look up USG on Google Finance/News, and I found the above Bloomberg article, which presumably explains the 13D/A filing. The juicy part was in the SEC 13D/A filing Notes which include:

Did that feature track changes in your portfolio over time? I read a bit about the portfolio import and export recently on the Google Finance help pages and it sounded as though they recorded buys and sells, both long and short properly and they described the calculations made for each position, and allowed import and export of the portfolio ledger from various brokers via .CSV data files. I seem to recall it also allowed you to set your own native currency, so it seemed as thought it was quite capable. It's possible that the reworked system will also be able to work from these ledgers, but we'll just have to wait and see whether it's an improvement capable of even more or something less useful but cheaper to maintain. I do a lot of this sort of tracking in Google Sheets, but I tend to hard-code snapshots in time (e.g. annually in a table) for my portfolio and individual holdings and the total return index values, rather than importing historical data and charting it. I do use my own 365-day portfolio ledger from my broker's site, from which I can just paste new transactions into Google Sheets (Paste Values = Ctrl+Shift+V) and add a ticker column to identify the dividends with the stock. Historical prices are also supported by the GOOGLEFINANCE() function in Google Sheets and I've used it recently for some data that is only a few months old, but I also noticed it doesn't work for all stocks (JNJ failed for a while in my tests, but is now working again, while NASDAQ:LILA never seems to work). I'm not aware of it being able to report dividends paid historically either, except for the most recent dividend (and likewise the most recent capital distribution), so that's where having portfolio ledgers can help. I guess there's some scope to chart this data in Google Sheets as you can use it to return daily data over a long period. What doesn't seem to work historically on GOOGLEFINANCE() is currencies, which is relevant to me, investing mostly in USD but with all buys and sells via GBP. I tend to use Yahoo Finance Charts (which can be scrolled and hovered over to reveal historical prices of stocks, currencies and indexes) to take snapshots on a few relevant dates in the past when I had not recorded the information. This lets me track my outperformance (or underperformance) relative to the index of choice, by adding and subtracting the same cash flows to the index. I also have a few online resources - some updated annually or even less frequently which help me track other total return index values (FTSE100TRI, FTAS-TRI) historically, some of which aren't on GoogleFinance or YahooFinance. I believe Yahoo Finance's ASP does allow some spreadsheet integration, so perhaps I can automate more historical lookup in future. For now, this suffices to track performance in appropriate currency versus my chosen 3 Total Return Index competitors (S&P500TR, FTSE100TRI and FTAS-TRI) and to calculate my IRR for various positions against the equivalent index investments.

I agree that these are valuable observations and discussions. We sometimes need to be precise about in what way a person, group of people or a fund is acting passively or actively. For example, assume there exists a substantial portion of retail investors as a collective, the presumably large group who tend to put money into funds at the end of the boom cycle and withdraw it upon signs of trouble, not returning until the market has again showed multi-year gains in the recent past. That group is making an active decision about the timing and amount of their added or withdrawn funds, regardless of whether the underlying funds make active or passive decisions about buying and selling stocks on their behalf in accord with the net inflow and outflow of investor funds. On the subset of that group of investors that invest in broad-market index funds (market cap weighted), each fund unit represents the same fractional ownership of each company (or of each company's free float) aside from tracking error and tracker decisions to omit smaller caps or to rebalance them less often to save costs. At the whole-market level the net inflows and outflows can be considered a contribution to price-setting (based on some kind of active momentum-like behaviour). It does not differentiate between one stock and another within the same index, however, as allocation is passive. Only flow is active and flow (assuming it is momentum-based) tends to accentuate general market rises and declines, but it shouldn't (for this subset) change the relative price-pressures on specific stocks within the index except by how it adds to or subtracts from buying or selling trends created by other market participants, unless it just so happens that, relatively to market-cap, those specific stocks happen to be among the most thinly-traded in general (daily volume as a proportion of their free float), in which case their buying pressure is outsized compared to more typically traded stocks.

$2.76 bn was paid for 38.6% of Pilot Travel Centers LLC according to this article on Yahoo Finance via Bloomberg

From the first article, it seems that about 13% of the US market cap was in index funds, but that represented about 25% of all funds, since they make up about half of the market cap. This has certainly risen substantially in the last few years and accounts for most of the outflows from managed mutual funds, it would seem from their graphs. The second article seems to provide a sampling of evidence (I've heard of a couple of the studies like Malkiel's before) that indexes don't cause significant market distortion at current levels. I found it more interesting that some new indexes are created based on backtesting, and that while over 70% outperform in the backtest, only 51% outperform after the creation of the index. Nonetheless, the backtest result seems to draw in AUM, hence the creation of the new index and tracking funds aiming to attract AUM. It seems Wall Street marketing departments are motivated to create new index products to attract AUM, especially if backtesting provides a favorable 'story' to sell the product. Nonetheless, a broad market index (rather than sector index etc) seems to be a sensible thing to track. I dare say there must come a point where excessive indexing as a proportion of all trading volume would remove most of the 'price-setting function' of markets. This could provide opportunities for intrinsic value investors and arbitrageurs to profit from long and short-term discrepancies between price and value, hence providing a degree of limitation to the distortions that it might create. But we're probably still a long way from that point.