scorpioncapital

Any idea how value stocks, cheap stocks and inflation oriented stocks like financials, reits, hard assets did in the 1970's inflation?

Isn't there some rule now that banks must separate investment and core banking operations? I also looked at brokerage firms as bank substitutes these days. Sounds from all this that the key is who you get into bed with. The reputation. Even in insurance, there are so many run of the mill insurers, if there is nothing special or you can't trust or understand what management is doing it is like delegating your capital to endless layers of a black box process.

I see Buffett has always liked both insurance and banking. They are cousins but which is actually better if run well? Both use other people's money - depositors vs policy holders. And they have leverage ratios usually 4:1 for Insurance and 10:1 for banks/investment banks. Which business model has the lowest cost of capital all things being equal? Does the extra leverage of banks compensate for having to eventually pay depositors some interest? Combined ratio can be under 100% for well run insurer long term. Also is there a difference in the assets they can hold? Standard insurer holds mostly government bonds but it seems banks do many more loans like real estate, commercial loans , although less so equities. Any thoughts on if they should do roughy the same from the cost of financing benefit and type of investments they can make?

You say , most importantly #2 - tax. Never let tax dictate an investment decision. Besides the point that half the world has no capital gains taxes, even if it did, sell if this is the #1 reason. "Good bluechips with strong moat can have some premium " - my experience is the opposite happens. Good blue chips have eroding moats with low or negative growth and become value traps with even lower P/E ratio over time than smaller, faster growing stocks. Not all but many...There was a good book by a business professor in Utah, can't remember the title, but the point was that success breeds eventual stagnation and erosion of moats. Not much lasts forever. Competition is fierce. Some companies reinvent a portion of their business or break-up and become more nimble. I do worry large profitable blue chips may actually one day trade at a discount.

Good point, the next FAANG is very likely an unknown today. Not some incremental addition to an existing stock. "Ninety-four of the surviving firms are still in the S&P 500 index, 26 are publicly traded companies not in the index, and five are in bankruptcy proceedings." There is huge survivor bias. However I think an investor can do well even with moderate growth , mid-large cap winners. No need to swing for the fences to win. Unless CBs partner with crypto, I see crypto as having little to no future. Peter Thiel's Zero to One is a good book that deals with this issue. The next great company is not some copy, iteration, or copy-cat of another. It is a truly revolutionary and new idea at the time. Microsoft went nowhere for almost 15 years around 2001. There is actually a lot of mergers in corporate history. if that deal is all cash, you have to buy the buyer or you're out. Again, how many of the FAANGs came about via merger? I would say none originally. They all had a powerful unique organic business to start.

If they are mistakes of omission, it implies that you should have owned them, and perhaps in large size. Why didn't you? Random chance or you weren't very sure after all? Or the price got away? Philip Fisher says never nickel and dime a good potential investment. In today's world this could mean buying say 10-15% above your buying point. One has to figure out what leads to the thumb sucking. Not sure if Munger and Buffett ever explained why they didn't do what they knew very well. Presumably these are investments in the strike zone that you didn't take.

I believe it's now 12,000. But even so, there will be very little tax to pay because if you take 6 months of this, and have then a regular salary (whatever that means these days) for the other 6 months, there is no way you are pushing more than 40k and so tax will be very low.

Just make sure it's not a value trap..overly complex, management that doesn't know what it's doing. If you can't understand their presentations that's always a bad sign.

Didn't Buffett always say he would warn shareholders and the market if Berkshire stock was undervalued BEFORE buying back shares so the market had a chance to make up its mind about it and so that he wouldn't be taking advantage of exiting shareholders? Whatever happened to this sentiment? To the person who was worried about the pcp write off, I wouldn't be. This could easily be reversed when aerospace returns. It is just conservative accounting for this year given the magnitude of the drop - but it could still be very temporary.

It all depends [ : - ) ] [on the local tax system]. You mean those deadbeat countries that are tax havens?

Is it actually possible to have inflation - or at least the benefits alleged to it if everyone knows there is inflation and buys inflation protection? some say the benefit of inflation is its asymmetry. seems today people are more educated and on top of things in understanding these issues compared to the past?

I'm not so dogmatic about doubt. Doubt can be on a scale. And if I feel my doubt is say 40%, conversely my certainty is 60%, I might keep some.

So something like get paid in shares, sell them to recreate the dividend and maybe on the tail-end of the option expiry if the price has risen, get the dividend back and keep the remainder as an equity holding. If things look just as bad in 8 or 9 years, just sell it all out via the shares and consider it a dividend-equivalent? If they got paid entirely in stock instead of dividends what break-even price would recreate their current dividend of 8%?

Frankly I don't really think any bond investment is that great. short or long. I remember Buffett said in an interview he would love to be long Sp500 and short 30 year bond but he didn't know how. I see the problem. You can't really lock in an efficient bet on the bond part long-term. And he actually could do it with derivatives. Maybe he didn't find a counterparty. One could in theory buy an investment that provides income during disinflation and has a tail hedge against inflation - like hard asset component. Well this is of course the standard commodity, agriculture, real estate, energy playbook. Is there a reason to think bond ideas are going to outperform?

How about hedging a little by shorting 30 year bonds? Like that black swan guy who made 4000% every time people think they got it all under control ) Of course you have to have a hedging insurance mentality and find a suitable product. That's the catch.

The problem is that less than 5x earnings is often a sign of the many problems that made it so cheap. Rarely will a company be solid and cheap. It's like one or the other.

Some would argue low rates are a sign of a very sick economy, not a healthy one. Enticing people with cheap money because things are so bad does not strike me as particularly healthy.

If float is like the cost of money, then something like Berkshire is turbocharged, although with more volatility...But most insurers don't write so well as to have zero cost. Sometimes if they are not very good their cost of capital is even higher than prevailing interest rates to borrow the cash. It's a fine line between borrowing with interest and using float. I think an exceptional insurance operation will always do well, but you can't deny they are financial companies and definitely are vulnerable to seismic shifts in financial conditions.

- Insurance companies depend on net investment income to make up underwriting losses and also for paying claims. - Low rates will show unrealized (and possibly realized) gains on the leveraged bond assets and large rises in book value , but this is temporary. - When they go to renew expiring bonds that have appreciated (meaning yields are even lower), they will have less investment income. - If unexpected rise in inflation and rates, they will suffer losses by locking in the lower yields. In higher inflation, claim costs increase too. It could suffer large losses. Basically you have heard over the last 10 years how pension funds and insurance companies are suffering. That's because they can't make good investment income for their business operations without incurring more risk. Then if that risk is realized they will have a double failure and possibly go bankrupt. So it's a double edged sword too low interest rates.

In other words efficiency. I just wonder if one day military spending will be outsourced to third parties, large oligopolies with great competitive advantages. Wait a sec...that describes the current situation! )

If he buys 1.2% per quarter or 4.8% a year, then Berkshire will be entirely bought and private in just 20 years although I suspect the batch of 5% in year 19 is going to be a lot higher than today's 180 a share )

What's amazing is that such a large buyback is still only 1 quarter of earnings. And there is still over 127 billion of cash after the 10 billion for Dominion assets. It just seems they can't stop making $$$ )

Are you not worried that 80% government funded defense companies will suffer when government itself is weakened by overspending, debt, and possible inflation? It doesn't even have to stop spending, but could it be forced to reduce spending and thus reduce the profits to these companies? The key question to me is if world governments are now at the strongest - or weakest they've been in history. In some ways if you look at the numbers alone it looks as if they are the weakest. Anybody know how did defense spending evolve after WW2? I guess it may not be a good example today as there you had winners and losers. But who is winning today? The over indebted Western military industrial complex or perhaps something like China and emerging markets? Or nobody is winning?

Man is the new woman ? )

Spain has amazing food vegetable quality and supply and quite good price. When I recall the desert of plastic, non-existent, few stores, or hyper-priced foods in Northern countries I cry myself to sleep. But this is a gift of geography. When in Finland I also felt like i was gonna starve Very expensive and few choices. Switzerland was very expensive. But spain was like infinite quality and brands. Also the balkan countries. I don't know latam but might be similar. It's all geography. Unfortunately the Northern countries will NEVER match the costs and food quality/health of the south.