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Krapdivad last won the day on May 1

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  1. Interesting that Stanley Druckenmiller also commented yesterday that crypto might provide a replacement to the dollar as the world's reserve currency, but suggesting an alternative that had yet to be created. Interesting because he owns bitcoin, but doesn't have a strong faith that it'll be THE crypto. He said in the CNBC interview that the ultimate solution could be “some kind of ledger system invented by some kids from MIT or Stanford” though he conceded that “I don’t know what it will be.”
  2. We often hear of Berkshire’s cash position terms of total dollars ($145 B), which highlights its sheer size. However, I was more interested in how the cash position looked as a percentage of Berkshire. This info would guide me in my own portfolio allocation to “guard against external calamities.” Buffett received a question about this during this weekend’s meeting. He said he views Berkshire’s cash position as a percentage of its assets. Looking at the latest balance sheet: Total Cash: $145B Total Assets: $884B Current Percentage of Cash = 16% In Buffett’s response, he said he’d like to put roughly $70 or $80 billion of cash to work, or about half his cash position. So I’m piecing together that he currently has 16% of his portfolio in cash, and he’d like to keep around 8% as a cash cushion. Am I getting this right? What do you think about keeping a cash cushion in your own portfolios? What percentage allows you to act with equanimity during a downturn?
  3. Thanks for posting your summary. Goes well with what Buffett said yesterday about the CEO being the biggest risk factor for a company.
  4. How do you "like" someone's post. Someone had "liked" my post and I'm not sure how they did it.
  5. There was a pre-Berkshire meeting by Yahoo Finance today with Laurence Cunningham, Robert Hagstrom, Carol Loomis, and Tom Gayner. Took a few notes if anyone was interested: Larry Cunningham: The annual meeting at Berkshire was created to attract a certain kind of shareholder base that was focused on owning a business for the long term. What makes Berkshire so distinctive and why don’t more companies copy it? Larry Cunningham Buffett sees himself being in a partnership with his shareholders. He makes the decisions for the company as a whole Berkshire is highly decentralized with good managers in place with their own strategies, in a trust based environment. Other companies have an overwhelming pressure to conform to short term results and quarterly guidance Some companies that have been able to adopt a long term/ Berkshire style: Markel Fairfax Constellation Post Johnson and Johnson Danaher Alphabet Robert Hagstrom Warren’s best success was building a culture of rational allocation of capital This created the most successful conglomerate in history that will last for decades Tom Gayner There’s a degree of personal responsibility that Buffett and Munger have assumed with a culture of stewardship and trust Tom Gayner quotes someone named Chad: “At any point in the investment arena, there are times where you look smarter or dummer than you really are.” Most people can’t endure the period when they look dummer I.e. Buffett whenever Berkshire is lagging the market Buffett is always accused of not doing enough during these periods and he’ll probably be asked “have you ever thought of … crypto, SPACs, etc” Carol Loomis: Has been editing Buffett’s letters for 50 years now. She gets a draft in October and they mail each other comments, because if they did it over the phone they’d get upset at one another. Since she’s the first person to ask a question, she feels some pressure to ask the question everyone wants to know. If not, the two other anchors next to her will. How will Berkshire evolve? Larry Cunningham: Buffett put in place great leaders for the future of Berkshire Insurance (Ajit Jain) Businesses (Greg Abel) 2 portfolio managers (Ted and Todd) Loyal shareholder base Robert Hagstrom mentions his new book Warren Buffett: Inside the Ultimate Money Mind Took him a very long time to realize that Buffett’s temperament was a large part of his success Tom Gayner on Berkshire’s evolution: Berkshire has changed in size, scale, skill, and as the world changed In the early days it was essentially Buffett’s investment partnership, and his investment skills in stocks that drove Berkshire Once he bought National Indemnity then it also became an insurance company With the purchase of the utility assets it morphed into a conglomerate and into an enterprise that was more multifaceted and larger than it used to be Buffett tells you what you own over time in a simple way On Berkshire’s future after Buffett, thinks about other businesses that have survived past their genius founder I.e. Dupont Why did Buffett take so long to buy stock? Robert Hagstrom: Believes Berkshire wasn’t at a huge discount to intrinsic value, and that Buffett allocated a modest amount to share repurchases With all the cash do you see more share buybacks or business purchases being made in the future? Tom Gayner: The beauty is that they’ve had both options open over the years. Buffett and Munger have the skill of business purchases and ability to repurchase shares.
  6. Put together a little list with some summaries I found online https://docs.google.com/spreadsheets/d/1eKDLCbkaV7-btd1Pklup14QxERO1ZDTOLIjimCJnKI8/edit?usp=sharing
  7. Li Lu's recent fireside chat with Bruce Greenwald had so much great stuff packed into it. https://www.youtube.com/watch?app=desktop&v=FiHrWy2jGbA&feature=youtu.be One thing that Li Lu recommended was that we devote as much time as possible reading up on the history of businesses, and the great businessmen in the past. The more you study companies, the better your judgement becomes about companies. Books that came to my mind were - Titan about John D Rockefeller - Good to Great - Shoe Dog (Nike) - My Father's Business (Dollar General) - In Sam We Trust (Walmart) - The Ride of a Lifetime (Disney) A bunch of these have been on my reading list. Do you guys have any recommendations on any books that enrich our understanding of businesses from the past?
  8. 3/19/21 interview with Bloomberg Getting some clarity from Ray Dalio on what’s going on with the stimulus checks and interest rates. The central government has the ability to collect taxes, sell bonds, and spend money on goods and services (like unemployment and stimulus) The central bank (aka the fed) has the ability to print new money and buy financial assets (like bonds and stocks) When the central bank uses printed money to buy government bonds for the central government to spend, it’s called monetization. According to Dalio, this activity of creating a lot more debt and then monetizing it is indicative of a late stage in the long term debt cycle. During the pandemic, people were desperate for money and spending decreased. In order to make up for the decrease in the economy, the central government provided stimulus by selling a lot of bonds. Currently you can’t get a great return if you buy these bonds (if you factor inflation your returns would be negative). This unattractive deal results in less buying demand (by Americans and foreigners), so the price of bonds goes down, and raises their interest rates. The dilemma: The fed can either 1) allow interest rates to rise (which hurts stock valuations and eventually the economy) or 2) try to hold down the interest rates by buying bonds with printed money. But when they print money, they accelerate the devaluation the dollar and raise monetary inflation pressures. Meanwhile people seeing the value of their bonds fall (as bond prices fall), feel the pressure to sell bonds at the same time the government is selling. This creates the danger we’re in as interest rates keep rising because of the increasing pressure to sell bonds. Allegedly this is an inevitable situation that happens at the end of the long term debt cycle and the life cycle of a world power. It may signal the transition of the old to the new world order (aka China). Dalio is predicting higher interest rates towards the end of the year as growth and inflation become stronger. He says the important signal that things are going downhill will be when the fed proceeds to buy bonds when the economy and inflation are strong. He describes the effects of monetary inflation, which reduces your cash spending power by about 2% s year. TL:DR 
Cash is trash and interest rates will continue to rise, and America is in decline.
  9. What kind of companies would you say would benefit from an interest rate increase? Howard Marks writes in his latest memo: “Because the primary risk lies in the possibility of rising inflation and the higher interest rates that would bring, I think portfolios have to make allowances: even though we can’t predict, we should prepare. This possibility means (a) bonds with maturities much above ten years are obvious candidates for underweighting and (b) inflation beneficiaries should be considered for overweighting, including floating-rate debt, real estate capable of seeing rent increases, and the stocks of companies with the power to pass on price increases and/or the potential for rapid earnings growth.”
  10. Has anyone read the series "The Changing World Order" by Ray Dalio on his linkedin page? https://www.linkedin.com/in/raydalio/ An extremely thorough analysis on previous cycles of empires/countries and how they've risen and fallen, and where we are now. Dalio says the US is basically in its decline phase in the big cycle (approximately 75% +/-10% of the entire cycle). America has had the longest cycle so far at 245 years. The likely new order will be China, who owns the most foreign reserves. He paints a somewhat frightening picture of past transitions of the old to the new order. Increasing debt, and inability to stimulate the economy, and losing the status of the world reserve currency leading to civil wars between the rich and poor and eventual demise of the old order. However, he suggests it can be done more thoughtfully and peacefully. Reading some of Dalio's ideas makes me wonder what affect this will have and how I can position myself to prepare for a potential downturn. Perhaps bitcoin will be a big part of a defensive portfolio. I haven't read these fully... it's a somewhat intimidating amount of dense material.
  11. This is interesting to me just because my experience with it is so different. Obviously crypto is seeing more headlines now after it's 5x run, but my experience is that the interest in it still isn't close to what it was in 2017. In my own anecdotal experience, my little brother's college friends were trading shit-coins and getting "rich" in 2017. My NYC finance friends were talking about buying lamborghinis with their crypto profits. I couldn't go to a holiday party at Thanksgiving or Christmas or Ned Years in 2017 without cyrpto being a topic of conversation for people there. Now? Not a peep out my bro's college friends last time I checked in with him (a month or so ago around 35-40k), I have one friend in NYC who still owns Ethereum, and nobody really ralks about it in my social circle except for me. So to me it looks like retail interest is still relatively minimal while it seems it truly is institutional demand pushing the price. While I don't think BTC's boom bust cycle is over, I do think we have further to boom before the eventual bust. The pullback from 40k to 30k was a healthy consolidation that lasted 2-3 weeks. My guess is that we'll pull back to 35-40k for another consolidation in the near future. I don't think this run exhausts itself before 100k though (which would still be shallow compared to prior rallies). Consider 2017. Prices start ~$900/coin and rallies to ~7k by early December. And then goes from 7k to 20k in 4-5 weeks. A massive blow off top that accelerated at the end. We've just seen the rally from 10-12k to 57k over the course of 5 months (akin to the 2017 run) , but haven't yet seen the blow off top IMO. I imagine this will be a 30-50% correction/consolidation like January proved to be and that we'll continue to move higher in the near term. My best guess is this exhausts itself somewhere around 120k a coin, but we'll probably have two or three more 30-50% pull backs along the way. Michael Saylor had a recent podcast on The Bitcoin Standard Podcast where he was explaining how this wave of buying was different from the past ones because of the incoming institutional investors' size and typical holding period. They are able to move the market cap of Bitcoin at $1 trillion more meaningfully due to their size, and able to create less downside volatility because they're allocating a relatively small portion of their overall portfolios to bitcoin as an alternate store of value. This could mean we are in the early stages of mass adoption and likely see the price move much higher rather than lower with the replacement of bitcoin's base of retail adopters with institutional investors.
  12. Ray Dalio taking a deep dive into Bitcoin. His conclusion: Bitcoin looks like a long-duration option on a highly unknown future that I could put an amount of money in that I wouldn’t mind losing about 80% of. Aka he’s willing to place a bet on it https://www.bridgewater.com/research-and-insights/ray-dalio-what-i-think-of-bitcoin
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