scorpioncapital

My thinking is that given all the variables to consider, LUK is the cheapest of the group. I don't see $200 billion market cap companies outperforming $10 billion market cap companies so MSFT and BRK are out. As for Fairfax you have an average insurance operation with large amounts of fixed financial assets on the books selling for twice book in an inflationary future, not a dealmaker, not having much in the way of industrial operating businesses. Given all these variables LUK is the cheapest and most likely to outperform, just my opinion of course!

I find this a somewhat disingenious argument, the vast majority of public companies are liquid investments that own so-called "illiquid assets." Some exceptions, insurance, banking, and even there it takes years and years to run-off an insurance operation so even that is not entirely liquid.

"At 10% real rates, most Americans will be quite happy having money in the bank earning interest. " If inflation is 10% real rates will be 0%. Most Americans will be quite unhappy earning nothing in an inflationary world as they are now in a dis-inflationary world. No world promises a real return since even deflation is likely to produce a loss due to recession. To get a real return one must invest - under all possible scenarios. So given all the macrotalk, investing is still the right thing to do if you want more money.

"Levels of debt seem still pretty high to think that a bit more is in the card at least" There's nothing like inflation to melt away debt and make debt ratios look miniscule. Suppose I have $100 debt and $200 of hard assets, my debt to asset ratio is 50%. But now inflation kicks in and my hard assets are worth $400 but my debt is still $100 , my debt to asset ratio is 25%. There is no such thing as too much debt in an inflationary campaign, it all goes away like magic!

I'm not worried about millionaires - they won't suffer that much if bad things happen. It's the people who stretch - that should be the metric. The statistic that prices are 9x income is misleading. if the contest was between 1000 millionaire families against all the income earners in the province that would be unfair no? I bet many of those who have 1/10th the income to afford a house are probably renting and rental rates especially in the immediate suburbs are not as crazy.

The business meeting is the formal part (votes, ratification of directors, etc..) like the stuff they do at Berkshire after the Q&A. The actual Q&A comes after but you're right in total it's no more than 60 minutes for LUK +/- 10-15 minutes individual Q&A after so it's very light.

good catch, guess the rule of 72 is off by a bit, 10x is about 13 years at 20%

I believe in a recent annual letter they suggested they would either liquidate or merge. They also stated in this year's letter that they are working on a plan in more detail. However, 2 years ago, Ian Cumming said he'd like to do this job until he's "horizontal", so I suppose like Buffett he's in it for life. 10 years of 20% compounding = 10x your money! That is far too much money to leave on the table. It's quite possible for someone to live to 80 (he's 70) and his partner is 65 and will be 75 in 10 years.

Succession only affects future deals not current deals and valuation. If the current deals and valuation represent a fair price/share then even if they are gone tomorrow, an investor can either a) wait and see or b) sell and buy something else. In no case does one have to worry or decide before the event happens. Thinking that way one will miss out on making a considerable amount of money :)

Almost all central banks have a *stated* goal of 2%+ inflation over the medium-long term. Since inflation or deflation is entirely man-made and the goal is stated, the answer appears straightforward enough.

I found the reference to volatility being your friend interesting, how it enables one to make more money. I always was wondering about this concept in terms of games, it's like playing a sport with beginners, you may always win but is it satisfying? Or does the money factor mean that one should always play with beginners (referring to the many participants in the stock market) when it comes to taking their cash :)

"On CNBC, Sokol framed this chronology as beginning with his own investment interests and extending only as an afterthought to Berkshire's. "I'm trying to invest my family's capital," he said, "and if I see a company that I think is interesting and potentially undervalued, to not mention it to Warren, to me, seems inappropriate." As for his own conduct, Sokol said it was blameless. " Trying to invest his family's capital BUT Berkshire stock at $200billion cannot possibly result in a reasonable return, so the 'little' companies Berkshire acquires can offer higher returns. I take this incident as further evidence that Berkshire is a turtle, only slightly beating the S&P over time going forward.

There is no doubt that tax loss credits have a value so it should be assigned some number. I mean you can consider the risk they won't use it before it expires, but that's unlikely. I once saw in the newspaper an ad for a corporate shell with $'x' of tax losses and no income and they wanted to sell it for a certain sum. Clearly I wouldn't want to buy this vehicle for the price of the tax savings, so you can probably use a worst case scenario where the company has zero income from now on and what would you pay to get control and take those losses? 50%, 75%?

I think there was another thread about this try a search. Generally I would use a multiple scenario analysis and come up with 2 or 3 potential figures for the present cash value. You have to estimate future tax rates and interest rates. You also have to estimate future losses that could increase existing losses. I wouldn't use earnings in any of these calculations, you don't need to - the only assumption you have to make is either all will be used, some will be used, or only those equal to past earning rate will be used (if trying to be more conservative).

The line about savers getting short-changed by Fed inflation policy amuses me. It's the most misunderstood cliche, makes one sound smart at cocktail parties but since when are cash holders the only savers? Since when is putting your money in the bank the only form of saving? What about the countless people lending their savings to the US government or investing it in their own business as an entrepreneur or buying stocks? This is 100% saving as well!

The only thing this poll shows is that how you ask a question determines what response you get, check out the other poll, asks a similar question phrased differently and has an almost 50/50 result vs. 80/20.

If I was a conspiracy type thinker, I'd say it's in the interest of the US to help the whole emerging world get wealthier with the debt we've got it would not be pretty for the world to stumble. But think about it - the reason the US has this ballooning debt is in part becasue of this huge consumption - that had to come from the wealth of the world growing over the last few decades. To live outside your means as a nation, the pie was getting bigger and the American nation wealthier (albeit more indebted). Those nations must hold the surpluses that the Americans have given up which is why the central bankers are always talking about global imbalances, etc.. The only things that really worry me are natural disasters and war with weapons of mass destruction. That we are able to "gum up" our economies from time to time I'll take anyday compared to the other disasters that are possible.

I'm worried about high inflation far more than a moderate disinflation or deflation. In fact, if you look at their letter and what others have written about how the US must rein in the debt and Congress stop fighting, that would be moderately disinflationary. That's not bad for business, in fact it's probably pretty good. If a government is going to kill the engine of prosperity for the Nation, why would it choose hyperdeflation instead of hyperinflation? The choice is a 100% man-made decision. But these are extremes that aren't going to happen anyway so why worry about it?

In the last 96 years, 14% of the years have had a negative CPI and 86% had a positive CPI. Of the 14%, about 90% was in 5 years of the Great Depression. The story of the past - and of the future is inflation. A deflation hedge, in my opinion, is a waste of time and money.

I'm a pragmatist on these questions. I wouldn't ever sell a stock because of age risk, if and when it happens I'll deal with it as it unfolds. Age, like investing is a longer-term proposition. Look at what's happening to Berkshire, it is undergoing "some" turbulence in P/BV and valuation, maybe in part due to age and succession but turbulence is not a loss nor the end of the world. Loews, when the sons took over, has gone through a decade of turbulence. Again, there is time to think about these issues and make an informed decision. Generally, if I had a really great partner who was much better than me, I'd want to have him/her working for me until the end, a lot of value can be created between now and then - assuming they are of sound mind. As for growth in BV, I expect it to keep pace with the S&P500. Low expectations = few disappointments. In reality, I think it will do better, no point to invest in something without the possibility of upside.

LUK is 100% of my portfolio and I'm not selling any shares. I'm adding in small amounts. Check out the book Path to Wealth through Common Stocks by Philip Fisher. He had one line that stuck in my brain. Paraphrasing, it said something along the lines of the best businesses run by the best managements can drop like a rock in a business depression, but in the next cycle, they tend to not only meet the previous all time high, but exceed it handly. The all time high for LUK was $52 and change. It's really hard to say when a stock is dramatically overvalued, sometimes people look at the entire market as a clue. In my mind, long term interest rates would have to double before I consider lightening up.

Neither.

My rule for weightloss: Always eat food that is thirty minutes walking distance or more from your mouth. Unlike value investing, this is a case were buying in bulk and saving could lead to overconsumption.

It's very simple. The US is a prosperous nation with large stores of wealth. As a result, like any citizen with a good reputation and financial resources, can build up a large amount of goodwill and credit. That goodwill represents creditor financing and promises to pay for programs - but there is sufficient wealth underpinning these liabilities. Even a decrease in the standard of living in the US is miles ahead of the standard of living elsewhere. Not worried about this country one bit. I'd worry about things like terrorism or natural disasters or war.

Actually we've raised rates from 0.25 to 1% already, the US is still at zero.