scorpioncapital
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Posts posted by scorpioncapital
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16 hours ago, bizaro86 said:
I think Berkshire has mostly not issued stock because the shares have mostly been fairly valued to undervalued during their history. There have been a few times they got pretty high and iirc thats when he did stock acquisitions (ie BNSF).
A stock acquisition can be very good for shareholders if done with overvalued paper. For example, Steve Case doing the Warner deal may have generated more value for AOL shareholders than any other corporate action ever. The value was all transferred from Time Warner shareholders.
Good points. A company that sells itself for 'better paper' has to depend on a somewhat less competent buyer. I presume AOL shareholders did very well getting the Warner paper but did they do well over time going forward because the entire entity of Time Warner would have been decimated by the bad decision? I guess even if AOL was a zero, getting anything was great even if it lagged or stayed flat since flat is better than zero!
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i know Buffett don't use stock much in deals but why is that?
for example, if your stock is super overvalued and you buy something - anything - you will exchange something not worth it for something potentially much more valuable.
then, the new company, which was overvalued can become undervalued so the new incoming shareholders and the existing ones who should have been scared before of the overvaluation might now justify the high priced stock.
is the risk that finding such a new good deal, or shareholders to accept your overpriced stock is hard?
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biggest mistake was buying 'value trap' without diversification.
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every crash I end up doing the same darn thing..i sell the crap pile and buy the quality.
That's it. I've had it! from now on i buy the quality pile first - and just wait...and ignore the cheap pile even though I know 100% it will go back up on a recovery and usually much more.
However the quality also goes down less usually on the downside. Maximizing returns and risks just not needed.
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20 hours ago, Gregmal said:
Yea everyone has a different strategy but holding large amounts of cash is both bizarre and inefficient. I know plenty of people and even active managers who sold because they were scared of COVID in February, March and April 2020. No one that I am aware of became fully invested again until the market had already surpassed previous highs and even a year later most of them still weren't back to being invested. Over time Ive learned to hedge whenever some sort of short term uncertainty arises. Selling long term holdings to avoid 3-6 month paper losses is dumb.
I have a fondness for cash.
cash pays my bills.
cash lets me act fast.
cash lets me BUY things I need or want.
while cash may lose its purchasing power in the short to medium term, it will make up for that loss when asset prices deflate , yields increase and you actually have money left (even if worth less) to put to work at higher rate of return. That higher rate later versus now differential I feel does catch up the lost ground.
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are you not afraid of a significant stock move in the 31 day waiting period of the wash sale rule? It is this that keeps me from realizing some losses against gains this year - or any year for that matter...so I just wait and do nothing.
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at the moment, for me there are three themes that shape my Liberty holdings...
1. the economics of content vs delivery platform.
2. the regulatory framework (usually of platforms)
3. platform disruption.
I admit that unique assets like sports or content can be great inflation hedges - if done right, far superior to hard asset businesses.. but they are also more finnicky. They depend on consumer tastes and there is much competition.
Platforms are solid horses for utility+ like conservative gains with some catalyst upsides and if managed well probably the safer bet.
I own FWONA, LXSMK, LBRDK, and a little of the new spac for fun.
I also own LBTYA and want to get out of it but fear missing out on the venture portfolio ( they own Lacework for example at a high valuation). So I keep a small position for the ventures mostly.
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7 hours ago, TwoCitiesCapital said:
Stocks go up is primarily only true in hyper inflationary scenarios and is only true in nominal terms.
Equity returns were very negative during the last inflation of the 70s - particularly on a real basis.
If we get +5% inflation consistently going forward, there's no way that we're not near a decade long top.
Stocks went down in the 70s...after they went up a lot in the 60s...because the government was *fighting* the high inflation with eye-popping interest rate rises. It was the fighting inflation that made stocks go down.
Now I've seen 2 scenarios. Look at Turkey - they lowered rates from like 20% to 15%!! and currency continued to tank because not only was 15% too low but 20% was too low to 'break the back' of inflation.
The other scenario is financial repression which is what we have now. Where interest rates are suppressed below the rate of inflation for a long time.
So to me it seems to be the inflection points that cause damage to stocks - the commitment to fight inflation. Even a half-ass commitment is not enough. If fed raises rates to 5% and inflation rages at 10% we are in no different situation than today with inflation at 5% and rates at 0%...
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the top of what is coming? inflation is a disaster like deflation but it works differently. Inflation is like 2 horses. prices go up, stocks go up, there is no 'top', but the expense side of your life grows faster than your net worth/income. As a result you actually have personal deflation, camouflaged as inflation and infinite growth of assets, but just not enough.
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Does BHE give investors in BRK any significant exposure to rising oil or natural gas prices?
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not if it tanks later..stoneco investment is lower than their purchase price after several years of holding.
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I've always wondered when a company flips the switch from no earnings to earnings. I see today a lot of stocks that for several years , if not a decade, have made no money or very little. How do you tell they can just flip the switch OR there is no switch to flip and they will have a day of reckoning one day when the markets figure out they can't make good money? I hear Amazon was not fcf positive for a long time yet it was given the benefit of the doubt and it was fulfilled. but how many stocks today are actually 'lying' or ignorant about their future road to profitability and there is in fact never gonna be such a day?
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The way I see it is if you like the stock at a loss and don't think its going much lower, just sell it and buy it back after 31 days. There is some risk that it goes up but it would have to go up beyond the loss you took. If the loss is a small one, I would forget it. If it's a big one, you might lose a bit in those 30 days. Overall I think its worth taking the risk.
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On 9/23/2021 at 11:59 PM, SharperDingaan said:
Keep in mind that if the withdrawal is to fund a charity, there will be a reduced tax bite
Put an animal shelter on the side of your barn, have the charity pay for it, and hire your kids to do some of the work (nothing says you cannot be a main beneficiary). Even have the charity pay to send one to veterinary school, conditional of concurrent care of the animals in your shelter ....
Lots of possibilities - but if you want a luxury vessel to document coral destruction in the carribean, expect some 'resistance'. You'll need to have at least 1-2 researchers on your boat, at least every 6 months or so - but the rest of the time, she's yours!
SD
why should the government make me jump through hoops about how i should structure my life to avoid tax.
GET GOVERNMENT out of human life is my motto. It is destroying the world almost everywhere but the Westersn socialist 'democracies' are the worst.
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wow, well one has to be critical of a system that you have to do all these complex things so the state don't trick you out of 2/3 of your wealth. Maybe he was sloppy but the system needs to be much simpler too.
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try an arbitrage etf
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canada has a 52% marginal tax rate, currency is relatively strong for now. Of course most are too poor to be in that bracket, even though its much lower than in USA. So maybe the effects of high tax is a poorer society.
I also don't know about others but i find it kinda sickening that covid is being used to generate inflation. how do you know the politicians aren't going too far than is scientifically necessary?
as for the article regarding energy lookout, things are changing. so maybe look at alternative energy too because it is possible oil is gonna be suppressed relative to what it would normally do in high inflation.
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i don't know trusts very well, but can anyone invest or put their wealth into a trust and the tax man won't be able to get it at death? Does it mean that if you don't do this you are pretty much just volunteering to give your money back to the state when you pass on?
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it's possible she goes out with a whimper (flat tech market going nowhere for a generation) as opposed to a bang (dot com sudden drop)
the end result is the same: wasting time and underperforming. let's see ..maybe I'm wrong
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don't forget the back end of the magic trick. Let's say rates stay low and markets boom. They will raise cap gains tax to say 50%. That will slow it down without impacting Main street, but definitely will impact the rich. smaller investors have tax sheltered accounts. the rich will be paying if they want to sell anything. but then there will also be higher cost of living for everyone, less services from the debt. so in a way we will pay and that 1 or 10 million nest egg might be as little as a 100k nest egg today.
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if he buys back at just shy of 280 in june, does it mean he thinks this is good value?
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9 hours ago, omagh said:
@scorpioncapital Sure, but inflation had been going on at a high clip from 1965 (1%) through to 1979 (15%) when Volcker took his measures shortly after assuming the position of Fed chair. It's a little early to be calling for drastic measures as the length of the run was the inducement to act. With better information in today's environment, we'll probably see action sooner, but still it seems early.
I think compensation for loss of buying power affects those who have savings or investments. Those who do not are going to get killed by high inflation. Since I read that a large number of citizens cannot even pay a debt of a few hundred dollars and live paycheck to paycheck high inflation is indeed far worse regardless of how high interest rates go or how small or big the delta is. On the other hand, highly indebted citizens are a big social problem. It is possible that the populist tendency to keep interest rates suppressed to pay off the debt will be made at the expense of the daily living problems of high inflation. Perhaps the key is to look at the situation of the largest segments such as the middle class. Their financial situation will dictate policy I think.
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You know if inflation was 10% and interest rates say 7% it would not be much different than today at say 3% inflation and 0% rate. Perhaps it is the difference between the repression of rates and inflation, the real rate of interest that matters. How wide was this gap in the 70s before Volker jacked up rates? Was it like 3% and 15%? It might matter as a comparison. It is this delta to watch perhaps. If it gets way out of hand you know there will be a jack up of rates at some point and a big crash since otherwise you get hyperinflation. Another possibility is just inability to launch, small recessions after recession as rates slowly go up.
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¨This was a time when P/Es were not high to begin with, and interest rates were not that low to begin with. This time, it will be devastating if inflation/interest rates shot up that high by any chance¨
I think profits would be much higher, even if companies could not keep up with pricing power if inflation was unexpectedly 10%. Therefore even if pe now is say 30x, if profits double will be 15x. The stocks may still go down to say 10x pe but it is not more devastating than in the 1970s.
Also it is not clear that stock market crashes are only influenced by inflation. inflation can be high or low when stock markets crash. Inflation does tend to produce sideways markets (and there is a good book called the little book of sideways markets that is worth reading I feel for the period ahead). These are markets that may not go down or up too much for many years. In this scenario, i feel you want income, you can do arbitrage, you can accumulate great companies on dips, but you should not expect 10 baggers except perhaps in some venture capital fields. Even there, there will be more headwinds than has been so far.
17. Cash Flow Statement Analysis
in General Discussion
Posted
would love to see a more in depth exploration of 'change in non-working capital' section. This is a poorly understood area of cash flow statements and can give clues to the quality of earnings . It often can cause substantial differences between the reality or fiction of some measures of free cash flow.