scorpioncapital

It's funny. Fear of loss as an incentive. Now we have fear of loss from government due to risks you had no way to foresee and explicitly excluded. Essentially...a tax!

How exactly does it work that an insurer got a premium for NOT covering this risk and then the government says they must cover something they didn't get compensated for. I mean it's quite possible they go bankrupt. Does it make any sense. If they had actually had premiums to consider the risk and now the government comes in and says it doesn't matter if you charged $1 you are liable for xxxxxxxx$. I expect a great legal fight.

It is much worse in Europe with the restrictions. I actually look at the Americas and am envious how much freedom within the pandemic there is. In Eastern Europe you need a document signed every time you leave the house. Where you go, how long, what for. And imagine, a new one each day! And get this, they have like no cases of covid almost at all. So you can judge who is being totalitarian and overreacting. It's all relative.

Even worse than permanent loss of capital due to choosing a bad company is loss of capital due to unforced error of say using derivatives or leverage which is 100% under one's control.

I wonder if his fund is scalable , i.e if it was much bigger if he could do these things. Maybe there is counterparty risk on a larger scale? http://universa.net/UniversaResearch_SafeHavenPart3_Tenbaggers.pdf This article seems to suggest that you must buy catastrophe insurance in the amount of 4x-8x roughly return in a crash event. No discussion of pricing however. It seems they use out of the money put options. But another question is what are they buying puts on? Volatility? SP500? specific basket or individual stocks? Seems there is still a judgement call unless you just do the entire market. Guess this is where they make their admin fees, deciding. I suspect there is some theory about what they feel is highly likely to implode during a crash. SP500 can't possibly be the best choice but it is definitely a choice. In fact it may fall much less than say specific sectors. Maybe a good question to ask is: What has ALWAYS collapsed in a crash, any crash. So far real estate is prime candidate but that's only going back 20-30 years. Would be interesting to see sensitivity analysis to crashes somewhere. This article explains the mechanics of what they do. I found it very useful as you can do the same thing (not now though as premiums are sky high) - https://thefelderreport.com/2016/08/15/worried-about-a-stock-market-crash-heres-how-you-can-tail-hedge-your-portfolio/

It's insurance with a twist. Namely the payout is very high when it hits. So you pay very low premiums each year and every decade or two when a big disaster hits you make 1000x. It's not a bad strategy to add to any portfolio. But I'm not sure how to do it as a private investor. Universa probably isn't publicly traded or take all clients. You could buy deep out of the money puts but you need to do it regularly. Not sure if there is a vehicle to do this. Most people can just buy an inverse ETF or something? But that wouldn't hit big time as it's not buying tail risk insurance. Any thoughts on how to buy tail risk insurance would be appreciated!

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.