scorpioncapital
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Posts posted by scorpioncapital
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Even Roubini is now saying that he originally predicted a 24 month downturn and that we are now at the 19 month point, so he thinks he was correct in the first place as he sees it ending in the next few months.
Philip Fisher said it best in Paths to Wealth through Common Stocks over 60 years ago - if you listen to analysts and economists in the media you deserve what you get. Since most of them are playing on fear, most people are going to get not making money or losing it from fear.
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A Fed governor recently stated that if the fed short term rate is 0% in 2 years it will be a sign of failure and Japan style deflationary spiral. So keep your eye on the Fed rate. If it stays at zero, we are in trouble.
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Between 2005-2009 the rate of annual inflation was in the 3% per year range (official numbers). During this period some commodity businesses and oil went very high. Today many people are saying that if inflation picks up, commodity prices are the way to profit. But I think we are going to be in a low interest rate environment for a while but still commodities can do well. If currently the rate is in the 1% range, then just a move back to 2-3%, which doesn't seem that high could return commodity prices back to where they were 2 years ago. So I'm not at all convinced that very high inflation is necessary for energy and commodities to do well.
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Who does GE Capital lend to? Are most of their loans to finance corporate and governmental clients buying their industrial products like turbines, etc.. or consumers? That could make a big difference to the nature of those loans.
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"then that is fine. But if a partner withdraws capital because of fear of the markets or our investment strategy, then we won't allow that partner to return once they've withdrawn their capital"
How are you able to determine the reason for the withdrawal- Truth serum?
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You can either always hold a large amount of cash and invest say 60% of all funds only or you can tell your investors that the money they put into the fund should be money they don't need for the next year and have an annual cash-out date (I think Buffett did something like this). How can you run a fund when investors are going to be so unpredictable they are going to demand cash at any time. Best thing is to tell them if you need the money or you are afraid you may need it it is emergency funds and I won't take the money because it isn't long-term capital.
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In today's interview, Buffet said we will never see deflation in our lifetimes. Pretty strong words. If this is true, than the mis-understanding of the market on this issue creates amazing investment opportunities whenever there is another "scare" and prices drop.
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Nice article. The one assumption I'd like to question is if the budget must be balanced in any given year to exactly zero. Does the government need $1.6 trillion this year or can it raise less and carry-over the deficit to the next year?
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Well he did mention at the Annual Meeting that Berkshire stock is not undervalued enough for that at current prices so I'm not sure it is quite a steal yet. Maybe in the low $2000's per B share....
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visit the websites of the various brokerage houses in NY, Jefferies, FoxPitt Kelton, Credit Suisse, etc.. as they are the ones that usually host various company presentations in various sectors. Entry is not a problem. In today's economy, just say you are representing a private investor and they'll most likely let you in.
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investments at the 100% level only when Mr. Market says so. And that might never happen
The test has failed for the 5 year rolling period, which means that investors cannot realize the value created by Buffett. The question is how long is this travesty allowed to continue :)
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Here is the real test...can you invest the dividend (allocate capital) better than Warren Buffett?
I think that is the purpose of the test in the owner manual, that good capital allocation should convert into an equivalent increase in market price, if it doesn't, you can't benefit from the good capital allocation. Essentially, the market must be inefficient on Berkshire stock. If Berkshire retained $40 billion and the market price went up zero, then the market price should go up $40 billion. What I think is happening is multiple to book value compression, which is not good at all. Essentially, not only you are not getting $1 of increased market value for $1 of retained earnings you are getting a decrease of 1/2 of market value for $1 of retained earnings.
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I've noticed since this listing, my Berkshire B margin requirement dropped from 50% to 30%. Nice!
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It may not be a good test, but Buffet himself believes in using this test, it is one of the principles of the company from the Owner's Manual.
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Someone posted this on Yahoo and thought it made a lot of sense:
Retained earnings Dec 2003: 31.9 bil
Retained earnings Dec 2008: 78.2 bil
Five-year change in retained earnings: 46.3 bil
Stock market value Dec 31, 2003: 84,250*1.54 = $129.7 bil
Stock market value Dec 31, 2008: 96,600*1.55 = $149.7 bil
Five-year change in market value = 20.0 billion
In the owner's manual, Buffet says that every 5 years this test should be met or a dividend should be considered. It hasn't been met for 2008 and also hasn't been met so far in 2009. Berkshire stock would have to rise 45% in the next 6 months for the test to be met. Is Buffet wrong in not paying a dividend?
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Does anybody know why if I enter 10% discount rate vs. 50% discount rate, the IV of the B shares changes by about $1000/share?
http://www.creativeacademics.com/finance/IV.html
I can't believe that a 50% discount rate vs 5-10% makes a difference of only $1000 per B share.
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But what does this "war scare" have to do with the stock market? If anything, it will make it rise even further.
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DCF is as easy as the rule of 72. Your money doubles appx every 7.2 years at 10% (3.4 years at 20% return, etc..). Likewise it gets cut in half (discounted) by half every 7.2 years if you want to calculate value of future income streams or inflation. That's all you need to do DCF, forget fancy spreadsheets and models.
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From what I read of Buffet's philosphy, he much rather prefers a say 7% initial yield with some reasonable growth than a 15% yield (P/E=7) with little future growth. The reason is that value is hidden in the "back-end". You will still get a 15% return with the 7% initial yield given some growth assumptions you are relatively certain about.
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Wow, in reading that article I'm more convinced we'll hit the all time bull market high of 14,000, maybe not this year or next year but sooner than people expect.
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I am at a loss to understand how this guy won the Noble Prize - or even got a degree from a University.
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My impression of Snowball was to get a deeper understanding of Berkshire and also the mysteries of how junk can turn into gold. In reading the book, I was asking myself, could you have foreseen the outcome ($140 billion market cap company in 2009) from the early years? And the answer for me was no, it looked like a hodge-podge of crappy unrelated businesses that wouldn't go anywhere. It looked like every deal was a tiny one and yet all those tiny deals added up. Like why all the fuss over a newspaper in some small town, it seemed an inordinate amount of time spent on stuff like this, yet this was the kind of events the capital went through to get really big via compound interest. To be honest, the book gave me less faith that I could spot the next big growth company just by looking at transactions and/or the nature of the business. Instead it seems you have to look more at the mind of the person making the decisions.
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I'm not entirely sure you read the article carefully. She said Buffet recommends average investors not go out of the US market, she didn't say anything about super-smart professionals like Buffet.
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You've just defined a bull market. People can't stand to not get a piece of the action, so the markets keep on going up. Conversely, people can't stand to lose, even temporarily, so they can't wait to get out of stocks exactly when it is the best time to get in. There are riches in the market, just because people can't control their emotions.
Forum member's asset allocation
in General Discussion
Posted
Leucadia National - 57%
Berkshire Hathaway - 42%
Enstar Group - 1%
Cash - (negative 25%) i.e. 25% margin loan. as follows: 1/3 CDN$, 2/3 USD$ margin