scorpioncapital

He's not a market timer. He's a value timer. He's not waiting for a crash. But he is waiting for the right prices, this can occur in a crash or outside of one (eg enough time passing and apathy toward a company's valuation). A crash is just icing on the cake.

If buffet really thought brk can't beat sp500 even a little why doesn't he liquidate, break it up, or close shop ? The only conclusion is not enough time has passed (although as has been pointed out it's been quite a while of matching performance) or he has some hope that it will do better. I am also hoping on his hope )

This is horrendous. If Berkshire performs the same as the sp500 it has zero reason to exist. I hope he was being modest in that quote and harbored a secret desire to actually do a little better.

I believe I read somewhere gates recounting a story that buffet came to him about thinking of buying msft or ibm and gates told him buy msft not IBM. He did in fact buy ibm. Probably it was a mistake. If Berkshire only matches sp500 going forward it would not be a good result. Why exist at all then ? It really should outperform, even by a little.

He has some very good points..there are certainly several mid to large cap stocks within Berkshire competence that were not bought. However.... Berkshire strikes me as conservative risk adjusted growth. As such I can't say the huge gains on what he didn't buy that was within the circle is not way ahead of itself and likely to drag while Berkshire can opportunistically catch up. Large cash pile is not an impediment to growth IT is the engine of future growth (though a temporary impediment) The underperformance to sp500 is more serious the longer it lasts. Either Berkshire stock zooms or sp Comes down alot. I suspect Berkshire is leveraged to financials while sp to technology. As such low rate environment is the cause. Should this even modestly reverse than sp500 may tread water or decline somewhat while brk would go up as it makes a fortune on banks making more interest margin profits. Just a theory. But it's possible.

Are they losing control of interest rates ? Either ib margin rate table is wrong or ? USD borrow rate 3.25 percent (fed rate 1.75 to 2) Cad borrow rate 1.99 percent (fed rate 1.75)

In some games, average is not enough to get you any points. In Investing, you can even win with average if you live long enough. But performance without a large population size of who is trying and what they are achieving in the aggregate is meaningless. And I don't think in investing this statistic is so easy to gather like census statistics.

"Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt. To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property." Another perspective...The guy is cutting hair leisurely while some very poor renters are paying off his mortgage. At the end he will have a very pricey asset free and clear and he'll probably be in the top 20% richest people in the world. And the renters are probably getting pretty cheap rent for renting a room in canada. win-win?

I don't see much evidence of rotation out of growth into value. But it's not so much a battle between growth and value as it is between earnings today and earnings tomorrow. The bridge is the interest rate and growth rate. Watch those variables both inside a company and in an economy.

" Therefore, the stock price being up or down from your cost basis is really not a factor regarding your income withdrawals from the stock." Not sure I can agree with this conclusion. If a stock is extremely overvalued, selling shares is going to yield far greater return than a dividend that won't adjust that much to this overvaluation of the share price. If it's undervalued, a dividend may be slower than an opportunistic buyback program. Problem is most companies are brainless zombies and don't understand opportunistic if it hit them in the side of the head. Or worse, they see opportunity all the time when there really is none.

Well he's just ignorant. "“We’re the only country that has an integer in front of our bond yields,” Bass says. “All the money is going to come here.”" https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

I am not sure so maybe others can confirm. Amortization of intangibles occurs only by acquisition. After all, accounting standards usually don't allow you to add an entry for your own start from scratch business about the value of intangibles. I don't know what US GAAP says vs International GAAP. Upon sale, it may be above tangible book but that would be on realizing the gain on sale, so it is the new owner that adds intangibles. Intangibles represent to me the volatility and durability of cash flows. They are inputs into what makes the output (free cash flows over time and their magnitude). Amortizing the purchase price of such assets is pure accounting fiction unless it is actually true that they degrade over time. Look to the moat of the business. The moat - if there is one and it isn't being eroded should determine whether you consider this deduction as fully true in any given year or you can ignore it to increase the annual cash flow. Amortization of intangibles seems conservative. It reduces current earnings - but not cash flow to protect against possible future reduction in earning power. If that does not come to pass, then you can ignore it...although you must make a judgement ahead of time what you think of the business itself!

Aren't many retirement and pension funds running big equity portfolios? I think Canadian Pension Board and some other pension funds have large equity stakes to make up for the bond portion. Not sure if it's enough though.

Indeed. I fail to see the difference between a 1% 100 year bond that gives you an 80% permanent capital loss (or rather 1% after 100 years and no doubt 100 years of much higher inflation than 1%) and a debt default.

"This made sense in a world where people usually died before they retired and struggled to satisfy basic needs. However, it can be argued that in affluent societies where people can expect to live ever longer and thus spend a significant amount of their lifetimes in retirement, more and more people demonstrate negative time preference, meaning they value future consumption during their retirement more than today’s consumption" Is it me or does this justification sound ridiculous? It's like what Buffett said about saving sex for your old age. Bodies get creaky, not better. Who in the world would prefer money in retirement to a life of slavery today? As for basic needs being met, these so called 'affluent' societies are nothing of the sort. I have seen they are quite miserly in the benefits they give, taxes are high, and service quality and wait times are poor. If anything it is the non-affluent societies that are actually doing better with low taxes and a virulently capitalist pay for whatever you want type markets. If anything, the argument of this article is to have much higher rates as people need more money now.

If the EU is united, then there is nothing wrong for germany to pay the pensions of other nations in part. just like in canada alberta sents 10 billion of transfer payments to slightly more bankrupt quebec...but europe is not na. each nation is extremely selfish although being part of the so called 'eu'. it is not really a union like the USA, or even canada...however i would say the eastern countries of the EU, the former communist countries are doing very well and actually are a very desirable place to live vs the western parts. it's not all one uniform bloc. these eastern additions to the EU that don't use the euro have reasonable inflation around 3 to 4% and are quite dynamic markets.

Negative bond yields are signifying covert helicopter money. Consider in Denmark they will pay you to take on a morgtage. This sounds very much like an indirect way of dropping money to regular citizens , albeit indirectly via the mortgage market. It seems to just be beginning as there is a strong resistance to actually 'reverse interest mortgages' but it's getting there. And what does helicopter money imply? Usually inflation.

Why should he buyback shares before the quarter report comes out when he knows / or suspects weakness in operating cos/industrials/trade war and speculates berkshire share price may drop after earnings? Wouldn't it make sense to just wait , buy a little and buy a lot after earnings comes out? Is there any SEC rule says he can't do this?

I think it's more... "Stock buybacks: Berkshire bought back 1,539 shares of Class A stock and 8.29M of Class B shares during the quarter, more than the 1,258 Class A shares and 6.53M of Class B shares it acquired in Q1." 8.29m x $200 share = 1.65 billion 1539 a shares x 300,000 = 461m.. eyeballing it would be around 2 billion. According to the previous poster that would be 12.5 years to spend 100 billion. Of course by then, we can reasonably expected another 250-300 billion.

Not good. What are managements thinking? To return 100%+ of all annual earning to shareholders leaves no margin of safety. Or just dumb management buying at any price. It seems a bit speculative. Notice Berkshire is doing almost the exact opposite. Piling up 100 billion in cash, nibbling some buybacks as Berkshire dips around $200 but nothing major. Maybe some CEOs should stop and ask if a great investor is doing the exact opposite of them all as a group, what does it mean?

Dalio produces a lot of good stuff but imo is dead wrong when he says we are "pushing on a string" or suggests that monetary policy is out of bullets. Monetary policy is never out of bullets. If we all think monetary policy is out of bullets we, then only need to go ask for advice from Argentine central bankers...they have no problem getting nominal rates to 25% or higher. Are they using some magic voodoo to get growth this high...or is it possible that monetary policy never runs out of ammo and the current batch of central bankers are just too timid to get the (nominal) growth they say they want absolutely agree. Japan too. It is comical to watch 30 years of Japan cb saying they want 2% inflation and not achieving it and saying they will do more. Obviously the will is not there and so it is a kind of 'read between the lines'. It's one thing to hand out to every person $1000 cash and another to 'buy bonds or even stocks and hold them by the CB'. The CBs do not want the inflation they claim they are trying to produce and get spooked. BUT, I don't think with dysfunctional politics and global tensions they will need to try much harder for much longer.

So he can pull up a comparative chart of SP500 vs BRK and if he's not happy with it not outperforming by a point or two he can do a big buyback one quarter, or threaten to and right back on track )

Interest rates are so low that a p/e of 15 is a joke. Try 30 or 40x if this interest rate-high inflation creating environment persists.

1. You may be wrong those stocks have the moats you think they do. 2. Even if you are right, Philip Fisher in Common Stocks and uncommon profits says very clearly that a wide moat stock that is re-rated at a lower p/e because of the 'financial communicty' means you can double earnings and still have the same stock price in 4-5 years if the community thinks earnings wont' grow as much further on. He states that the longer a growth can be expected the more you can pay. But, it is very hard to determine long term growth rates.

Ib does allow USA stocks in rrsp, tfsa which are foreign stocks. It may be possible to buy further ADRs on the US market thus providing even more international exposure if they are listed on a foreign exchange.