scorpioncapital

Lots of money have been given to people and businesses. I suspect some of this will not be asked back. Higher deficits and debt...higher inflation? I mean what happens the next crisis? Debt jubilee? How this doesn't turn out inflationary is beyond me. Governments think they will claw back the benefits, but unfortunately I suspect they will not be able to and have to go in the other direction even more.

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What's so unethical about the defense of nations? Even libertarians believe basic function of a nation is defense. However one might argue they shouldn't be public stocks. That is an argument i could go with. The military industrial complex is not going away, ever , and I don't think is so politically charged as tobacco companies since the state itself is never going to stop spending on this . Even peaceful countries have a military sector. It's just something you do.

Agree with lc. Everything is linked. When Berkshire is ripe for buybacks tend to coincide with the same time that the world is also ripe for new bargains. In the best case he nibbles a little bit of everything. Not entirely sure how he decides but if he's rational even if berkshire buyback is worth 40 percent return what If everything else is worth 80 percent return? It's all relative. But I think a measured balances approach is best.

If it will be higher due to inflation it's a nothing burger.

It's an example showing how flexibility to grow is impaired by buying back too much shares at the wrong price. Arguably nobody knows the right price. Not even Buffett can time the low.

I've looked at the balance sheet of some other industrial companies or conglomerates. Some have shrunk their equity to near Zero with buybacks. This implies a belief the business is a gift from above. It's a little presumptuous by some managements. Meanwhile others have just retained cash and over the years were able to add better businesses by merger or enter new lines. Cash is freedom. So I don't think berkshire likes to buy back unless it's massively undervalued. Not a little.

I think f1 is similar to booking or Expedia. Both are real world leisure stocks. The market is probably discounting (ie giving the benefit of the doubt) for some very poor numbers this year. But obviously the present value of a business is not 1 year of earnings. After all it will earn money 20 years from now+. The question is how long the real world activity shutdown will be. If you dilute a 10 year earnings stream by 1 year of zero earnings and it trades at 20x earnings, the difference is only about 11 percent (say 900m a year avg vs 1 billion a year avg over 10 years) Now I would say f1 dropped far more than 11 percent more like 66 percent. And that assumes 1 year of zero , which it may not be.

https://mobile.twitter.com/kylerhasson/status/124107845379477094 1.14 to 1.17x bv now.

It now appears to be at prices that have wiped out 10 years of gains.

To those who say inflation will make bonds underperform vs last 40 years , I also say Inflation makes stocks underperform. But maybe bonds get creamed less than stocks and make up the difference?

Anyone know a study or site that shows statistics on dividend suspension of preferred shares in the USA over time?

I have had more than 25 percent evaporation. And I was not holding junk. I tried this week to go defensive and even higher quality. It is in dark times that it becomes clear that serious defensive cash rich and quality protected stocks are worth more than gold. Perhaps they are good in all times. I see the stocks that have evaporated literally 10+ years of gains are leveraged , semi average stocks , entertainment or leisure companies. It seems with coronavirus people are thinking they are not going to be doing much besides eating and walking?

Does anyone feel this crash feels worse than 2008? It seems many stocks have erased 10 years+ of gains. In oil sometimes 20+ years.

I would also not throw out physical business in favour of the virtual. Some mix of the two seems best. Defensive quality real world stocks can be very good.

Agree. I'm a digital nomad and the government gives me nothing. Zip. Meanwhile cozy pencil pushers and bureaucrats get all kinds of social Benefits. Globalization is not really working unless it's a seamless web. Unfortunately too much nationalism and actually we see it now going backwards. With each tribe protecting only themselves and yet it's very limited resources if we don't work together globally.

Berkshire performed poorly before the coronavirus, and after even more poorly. Is something wrong ?

Let's hope Buffett is not in the wait pile when market tanks.

Yes after much (bad) experience I've come to the conclusion: avoid all options. With interest rate at almost zero percent, even more so.

The risk free rate is not 5 or 4 percent. It's under 1 percent. How does this affect the calculation?

Berkshire was as low as 193 I think.

It doesn't matter if dividends exceed or not interest expense. Carrying cost is often negative. It doesn't matter if you earn 1$ and pay 10000$ in interest. Actually it doesn't even matter if the stock does not pay a dividend at all. The rule I believe is IF the stock does not explicitly stated in the 10k or annual report 'we have no intention of paying a dividend ever'. If the legalaze is something like we may pay a dividend in the future or we will consider it it's also ok. It's a bit of a grey area for Berkshire. They said they never paid one in the past (which does not mean they never will technically). Buffet has recently said at a few annual meetings IF certain conditions are met or after his death management may consider a dividend I believe this also strictly qualifies. Unless Cra explicitly states NO dividend now, No deduction I believe their intent is to allow almost all deduction except those that explicitly stated in articles of incorporation we will never pay a dividend or plan to ever pay one. This would equalize real estate investor mortgage deduction benefit with stock investors. That's my understanding anyway.

I feel commerical real estate and oil both have very pronounced boom bust cycles but oil is more political and global , with sources only in some places and not others. Real estate on the other hand is more local and less dramatic I think. I guess oil is for those who love extreme volatility.

They are absolutely not the same. Ask yourself this. Suppose my stock goes down to zero. If I had to eat from this pool of money how much can I eat selling a stock at zero? Nothing. But the zero stock can still pay a dividend , say 20 percent a year paid quarterly. While I may struggle to reach the quarter end I will get cash in my hand. There is no way capital gains or capital is equivalent to income. Look at another example real estate for investment. You control the asset and the cash. You can pay a salary to yourself. You can pay yourself director board fees. You can do this regardless of the asset price or quoted value. That's why stock prices offer opportunities because there is a divergence between value and price. But cash in your hand is there regardless of asset value (some exceptions such as a failing company where dividend is suspended as equity goes to zero or bankruptcy)..you may argue it's a timing issue but when you need cash from the business you don't have the luxury of time. Cash dividend is pragmatic, now. It requires no wait for market to revalue an equity or perform.

A dividend and selling your shares are not anyway equivalent. Imagine you have 100 shares and the stock does not move for a few years. You sell all 100,you have nothing left, then it takes off. On the other hand if you had a dividend you would have the 100 shares and the income while waiting. Since the market price of the stock can't be controlled , selling stock is not the same as a dividend as presumably you must do it on a regular basis for income.