scorpioncapital

He said Munger was the architect that taught him to buy great businesses at fair price rather than cheap (or cyclical) at a good price. The bnsf and bhe issues (and even the oil investments) suggest that due to size he chose to go into businesses that have *some* advantages but not nearly as good as truly great businesses. Large capex utilities with high regulatory risk are obviously one or two levels lower on the quality ladder. In other words, it was the next best thing to do with large amount of capital in the absence of finding the super great businesses. On the other hand, should he have specialized in technology, given tech firms are the largest market cap assets in the world today, he might have been able to do better. But do we really know if the FANGS themselves won't have big problems in the next generation too? He also talked about if Americans want to go the public utility model. I believe in countries like Canada it is such a model with a sole, highly subsidized Crown corporation providing all the power. Should this happen, he will have made a wrong bet on changing situation. It isn't even clear he could divest them or the gov would pay a fair price. Most likely they'd be profit restrained going forward.

Read Viktor Shvets of Macquire and Russell Napier. Interest rates zero or negative, technological deflation, demographic challenges , all lead to governments in desperate mode to control and regulate more and more, financial repression, etc.. Basically 'you will own nothing and be happy'. Viktor especially talks about the death of capitalism under this new model, but almost out of necessity, even if it was bungled up over many decades. The global economy is no match for a self-contained system. China flooding global markets, rules at home that give them advantages at the expense of citizenry, etc..all this requires massive government regulation, even expropriation to prevent civil war imho.

Seems very likely they go over 5% right? I mean, they are so big it has to get to 5% soon enough. So that means immediate disclosure between 13f and quarterlies I imagine.

Do we know the date it HAS to be disclosed? I was guessing maybe AIG but we just don't know until its disclosed.

well if pe is 3 after the 7m payout it seems they still make good money right? It isn't so much different than SBC, although in that case they do get ownership, but the cost basis is 0.00$, or something below fair market value. In all these cases it is a headwind but look at abnb - even after netting out a very high level of sbc, the cash-flow adding back what they ditched out is still quite respectable. Where the danger comes is if the business turns (you said its a commodity). In that case, the numbers will quickly change and the money given out is definitely not coming back. How many managers returned money when the business went south?

avoid bad businesses at all costs and avoid industries that you don't feel comfortable with. how do you get comfortable? you have to figure it out. see what kinds of industries (that don't suck) you feel compound gains as you like. For example i just can't really get comfortable with watch paint dry insurance, financial, and oil stocks. just not for me. i'm sure they're great for someone. however i do love garp, tech-industrials, consumer franchises, up and coming end markets, saas. be very skeptical all the time. have a high threshold for new action. position size is feel and trying to avoid overlaps. always moving higher position size to increase quality. How do you get comfortable? i'm afraid for me its a bit reflexive. while stock price is not only indicator if a company does badly for a while or the stock doesn't have some gains over time you have to ask what you are missing about the company - usually worse business than you thought or poor management decisions or bad end markets. Sometimes its temporary but usually the market is more right than not. don't fall for the value investing stuff about price is not right. price is very useful information over time. it isn't the only criteria and you should have internal views about company and industry dynamics but use the price action after purchase, or while watching, as some input to "learning" about what markets like and dislike about various companies. Reverse engineer that to understand business better. That wisdom is key to comfort with positions and adding to them or discarding them. Finally I would be diversified. I own about 20-25 positions. Try to spread it so there is not too much overlap. Doesn't mean you shouldn't specialize in some fields but if you have tech, have some brk or something perhaps. All tech or all healthcare , even if the trend now, is too risky. But you can't miss it out either. find a vehicle if you aren't comfortable picking in that area.

"Olson said he is confident Abel is a match for the CEO job. “He’s no Warren Buffett,” Olson said. “But neither is anyone else.”" Have you noticed how Nadella at Microsoft looks like a much balder version of Gates? No idea where he found the guy but his mannerisms, grin, and talk its almost like he's some futuristic clone of Gates! )

ah ok, i was not talking about the US. in other countries you aren't allowed to kick someone out except if you sell the property or do some extensive renovation or for family members to move in. Since that is quite rare rents are capped below or at inflation rate, although there are many landlord scams now where they try to evict for false reasons , re-rent at 100-200% price increase, and the tenant is too scared or unknowledgeable to ever go back and investigate who actually moved in.

"Firstly, companies/landlords took the piss with price increases during the COVID period taking advantage of the extra spending power consumers had with all the COVID handouts and their excess savings and the strong economy and using the supply chain issues and material cost inflation as an excuse. Those price increases are unlikely to stick." What landlords? it was and is actually illegal in most developed countries to increase rates even at the rate of inflation nowadays. mandated below inflation rate rises. sure, you can have deflation but only because of totalitarian boot to the head of any economy.

we need to confiscate 20% of all billionaire wealth off the top.

anything with a p/fcf over 40 for sure.

I think Berkshire/Buffett is more comfortable in consumer franchises, industrials, financials/insurance. Apple is sort of cross of tech/software & consumer franchise. I think he said once that everything is tech. That's not really a business, that's just an input to everything. Tech has never been a business. What exactly is tech? Everything is tech! Perhaps better to think in terms of end-markets? and applications?

I'm a bit confused what is defined as the invested capital. Is it the annual capex over many years, summed together, or is it the actual historical capital on the equity side (+ debt) of the balance sheet? I can see a case where both are important to invested capital relative to revenues or earnings. One is somewhat static, except for retained earnings, the other is a regular annual expense.

Because anarcho-capitalism worked everywhere it was tried? What are the super wealthy anarcho-capitalist nations, by this we mean something with zero welfare state? How does that work in Argentina where 40% are well below poverty line? Is it kinda like they die out and the averages go up? what i mean is i doubt this guy's ideas will turn things around.

Lol, this smooth talking hypocrite is saying to deleverage now. You got to do these things before the sh*t hits the fan. Otherwise you are not a great investor!! Better yet, like Munger says, don't get into situations of reckless debt at all.

You can be a scumbag and a genius at the same time. I'm not sure it is a great use of the talent though and society should probably penalize such uses of 'genius'. After all using genius for bad things does not make the world a better place. Or maybe he can provide restitution, but how?

I think what they were saying is that lack of competition - or strong mono or duopolies protect his ability to earn an economic rent without much headache or risks of high capital investment or expenses. For example, Amazon has over 1 million employees. I'm actually surprised they do so well given that any minor increase in wages would skyrocket their expenses. If they cannot pass it on to customers they would lose volume. Plus you got to pay health insurance, various babysitting tasks etc.. Recently the NDP of BC Canada made very strict bans on Airbnb type housing and the justification was something like, go find another way to get rich or make money. Governments don't like people making tons of money but do not solve the problems by regulation. Usually they need more supply. That's one case. Competition for sure helps. Higher prices leads to more construction for example. That's free market. But then they said they protect the hotel industry. Either way it seems an eternal struggle between protecting party A vs B, or completely monopolizing some area that if was open to competition would result in lower profits for the previous monopolist but spread out among more players and lower prices to consumers. That's the theory. Then there is the argument of inefficiency. I am totally puzzled by it. In theory, competition could be inefficient and even state-run or almost monopolized scale players more efficient. Is the concept of competition somehow defective?? To give credit to BRK they are also in high capex businesses like energy, utilities, railroads. Here they have some monopolies with restricted profits, but steady and high investment needs. With float at 0% they can still earn good leveraged money even at a capped 10% return that's guaranteed. I think the article talks about only those industries that *could* have competition but for some reason the government allowed excessive consolidation and pricing power.

Ok, I didn't think about that delay if it has huge consequences. Perhaps you can link it with the funds that outperform to see who has the least turnover and assume there is more than average of 90 days continuity between reports? One fund was just a collection of indexes. I guess for 5 years they just shifted around the index distribution and name, currency used and perhaps used leverage (unknown). But if you assume leverage has a maximum you could back engineer the non-margined return. Not sure if funds can get more than 2-3:1 leverage or not.

So you take a database of all funds or insiders (includes pensions, individuals as insiders, etc..) from a public database (reporting requirements differ by country but there is some minimum to report). You find the funds with the top returns above sp500 over 5 years (you can exclude outliers if you want), with some criteria. E.g. 3 out of 5 outperformance years, over 10 securities held) Say this returns 300 funds. You then dig into their holdings and find which securities had the top mentions across all of them and categorize by market cap size. Pick top 5 from each size class and buy them (say 50 stocks if you split it into 5 size categories). Rebalance monthly or quarterly. For me the backward looking aspect is the big issue. But I can't say why or why not it wouldn't work. Since you are always coat-tailing on the ones that come to the top. After all, all index funds operate this way. Sp500 removes those who fall out, and adds those which have risen to the top. That's why Buffett says it is so hard to beat sp500 because it is never too late to add winners and ditch losers.

Say you do a database study of global funds/insiders and what they hold each month, then choose 5-5-5-5 from each size category. Totally algorithmic. What are the pitfalls or pros of this method? So far this year such a strategy has outperformed sp500 by a huge margin. Furthermore, the study seems to show large cap and very tiny companies have had the best performance (the middle of the road the worst). Any thoughts? My initial reaction is that it is somewhat backward looking, or disguised beta as alpha. But I can't really criticize the results if they work. Thoughts?

I am not sure to disagree or agree. They seem to bring some valid points? https://www.thenation.com/article/archive/special-investigation-the-dirty-secret-behind-warren-buffetts-billions/

I am not sure I understand currency debasement. Wouldn't stocks go up and bonds go down? Is it possible for stocks to rise as rates rise?

Why do the government bureaucrats have to do all these supply and demand laws and actions? I mean, it sounds to me that by not allowing the free market to operate, there is not an incentive to bring supply and demand in balance. A lack of desire to invest and capital flight. If the government wants to raise taxes to 80% and build all the housing stock itself, why not? Well, that doesn't work so well either. There are lots of slum-type apartment complexes in former Soviet countries - they are falling apart, was constructed poorly, and while it houses lots of people it isn't exactly a good quality of life. "3.) Rents in Vancouver are controlled by the government. Same for older housing stock in Toronto. So in the same building two of the exact same units can rent for $1,500/month and $3,000/month. So no renters can afford to move today - your rent is going to double if you do. The rental market is effectively frozen. " Isn't this an arbitrage situation? Switch all the 1500/month rents to 3000/month and the investor/landlord doubles their money?

I'm confused. Are the former Communist Eastern European countries more capitalist than the Western European ones? For example, from what I understand the EU controls international elements of the bloc as well as cross-country policies. But does the EU have the right to control taxes on companies within a country? Or is that an OECD thing? In other words is it possible that some EU countries are very economically liberal compared to others? Well, the Eastern ones have other problems like a regressive tax system. (E.g. very low flat tax which benefits the rich or those with capital and very high wage taxes, say 30-40% plus the 10% flat tax which impedes capital formation if you don't already have it) PS. These bank windfall taxes make 100% sense to me and I'm all for it even as a capitalist. Think about it. The banks pay 0% interest. They don't want to pay 3 or 5%. The government is saying, unless you pay 3-5%, we will take that money as a tax and distribute it to people in lieu of getting that 3-5% on interest. How is it different than the outflow of capital from banks causing bank failures in USA because people took their money out to brokers or etfs that did pay 5%? Essentially it is the bank's own fault for not following with higher rates on cash. Now one can argue its not the best method. For example, not everyone has savings so it could just be a socialist redistribution grab but the banks could certainly up interest to avoid some of these taxes?

I was thinking southern hemisphere, those countries said they're not aligned. I guess it would have to be a real chain reaction for neutral countries to be hit. But then I wonder if, like Covid, flights will be cancelled and you had to be out well before. The most eerie show I saw about how this could play out from 1984 - was https://www.imdb.com/title/tt0090163/ Everyone talks about world destroying nuclear war but it is possible to have a limited , tactical type nuclear engagement that would still be as severe as covid but not world destroying. The tactical nukes of today are actually as or more powerful than the Hiroshima nuke.