Spooky

Indeed, his commentary made me think of a number of themes discussed on this board. Some of his points just make perfect logical sense - of course given the magnitude of the debt now the rise in interest rates is stimulative, interest expense is about 4% of GDP which is flowing into private parties' hands. I just hope that Mosler is wrong and the natural rate of interest is not 0%. This seems to cause too many financial distortions and asset inflation.

Thanks for sharing this. I wasn't familiar with Walter Schloss but he is my kind of guy. I found and enjoyed his 16 criteria for making money in the stock market: https://www.grahamvalue.com/blog/sixteen-factors-make-money-stocks-walter-schloss

Thought the latest Odd Lots was pretty interesting: MMT's Godfather Says the US Government Is Spending Like a Drunken Sailor https://podcasts.apple.com/us/podcast/mmts-godfather-says-the-us-government-is-spending/id1056200096?i=1000661504184

Great idea. I was thinking of doing the same with the S&P 600.

Are you Mark Leonard?

Pulled the trigger on a small starter position in JOE with the dip today.

Thanks for sharing! Really impressed by Bruce and his attitude. Especially the part where he talks about how he wants all Joe shareholders to do well, not just him, and he is taking no salary or shares. Contrasting this to the behaviour of Shari Redstone at Paramount is pretty eye opening. Also liked his goal of at some point distributing shares of JOE to the shareholders of his fund similar to what Buffett did with Berkshire. His ability to be so heavily concentrated in a single position is also impressive, he must have absolute conviction. Think I need to get on the Joe train. The part of the podcast where he was talking about regulatory confiscation / nationalization was pretty interesting. Wonder if that is the reason he has been selling down his position in Berkshire. Wish Greene had asked him to expand more on his comment about preparing for potential turbulence in the future and the change in behaviour if a single nuke were to go off. Seems like he is expecting some interesting times ahead.

Very wise. This is the realization I am coming to as well - I don't want to devote the limited time I have on this planet focused solely on the pursuit of generating more money / returns. I want to spend time on meaningful and fulfilling pursuits, focusing on my relationships with family and friends, my health, reading philosophy etc. Is my portfolio perfect? No, but as Munger would say it is good enough to hopefully compound at a respectable rate of return without any tinkering from me safely over the next decade. I see the behaviour of some of my friends that have more wealth than me and it is crazy - always trying to play short term games and follow the hot money, buying Tesla or Nvidia or the hot stock of the day or being super risky lending out money for second mortgages when all they would really need to do is park their money in some diversified ETFs and they would be set for life. Better to just try and tune out all the market noise, be invested in good companies / index funds for the long term and enjoy life. Sitting on your assets also has the inherent advantage of reducing taxes and transaction costs.

My mind went to GMThebeau right away as well. Haven't seen him posting here in a while, hope he was banned.

That AC Milan team with Maldini was so classy.

I don't have a mortgage and am currently debt free. The flexibility / psychological benefits are underrated in my opinion but that just could be me. Many people around me in Canada are over leveraged and the rise in interest rates is causing significant stress among a number of friends. Meanwhile I feel a sense of zen / calm just saving each month, watching my wealth compound. I have a healthy dose of cash which is earning interest. My rent is capped and if something goes wrong I just need to give my landlord 60 days notice and I'm out of here. I am also not tied to any specific location so if I wanted to pick up and become a nomad it is pretty easy. Thought this article on debt by Morgan Housel was interesting: https://collabfund.com/blog/how-i-think-about-debt/

Agree with this - it seems like a decent gauge of the "animal spirits" in the market.

Thanks for the response Viking. I agree that Fairfax buying back a significant amount of its shares below intrinsic value is excellent capital allocation. I also like that they are fishing where the fish are in Greece and India etc. There are many different ways to nirvana. Berkshire exploiting the opportunities available to it certainly contributed to their success but it was more a factor of their philosophy and changing their investment approach as they got larger - moving away from Ben Graham style value investing to buying wonderful companies at reasonable prices and recognizing the inherent advantages in just letting their investments compound over long periods of time. Also, some of Buffett's best investments were just sitting in plain sight available to anyone like when he bought Apple. Does Fairfax need to make this switch too? I'm not sure. I would like to see them shift more of their portfolio out of bonds to equities - focusing on cheap, safe, high-quality stocks combined with the consistent use of leverage through float. Hopefully the investment landscape co-operates.

I hope you're right. We just need to be careful about believing it because we want to believe it.

Didn't you just write an article alluding FFH is following in the footsteps of BRK which "shot up 27 times after it reached the size Fairfax is now"?

What I'm driving at is it is one thing for Fairfax to talk about buying wonderful / good companies and just letting them compound versus actually executing on that plan. I like the idea but right now when I look at Fairfax it looks more like a leveraged bond fund with a side of value investments rather than a Berkshire Hathaway in 1995. Which investments in Fairfax's portfolio today are wonderful companies (i.e. high return on assets and growing) that can just keep compounding at high rates of return for the next 20-30 years? When Berkshire buys back stock, you as a shareholder are getting a higher ownership percentage of the wonderful businesses they own. Certainly Fairfax has set themselves up well going forward, hopefully the investing environment co-operates and throws them some fat pitches. Let's see, I'll be watching with interest.

Excellent post John - is there anywhere that I can look that has more information on Berkshire's corporate structure and where NICO sits?

Buffett bought $1B in Coca-Cola in 1988 so before they were the size Fairfax is currently. They also bought Amex a few years later in the early 90s. They had See's Candy much sooner.

I like Fairfax's setup here and have added some more to my position recently. But aren't we all jumping the gun comparing it to Berkshire and their position in 1995? To match Berkshire's track record going forward, Fairfax is going to need to significantly shift its asset allocation from 75% bonds to predominantly equities. As a Canadian company, will Fairfax be allowed to do this by insurance regulators (I'm ignorant on the rules here but there must be differences between the US and Canada)? Also, this shift presumes that there will be good opportunities to buy wonderful companies at fair prices that Fairfax can easily shift capital into. Is the investing environment going forward going to be conducive to doing this? Buffett himself has written that the investment arena is much more competitive now and there aren't as many easy opportunities as there were in the past. There are also many people out there now trying to implement the Munger playbook. Lastly, have we seen that Fairfax is able to identify and buy these compounders / wonderful companies? Where are the Coca-Cola's, Amex's, See's Candies, Apples in their portfolio today? Which companies in their portfolio have high returns on assets, are growing and have durable moats?

What happens from here is really the huge question. The company is so big now, Buffett even wrote in the last letter that their era of eye popping returns is over. Breaking up the company after Buffett is gone would impair some of the advantages it has using insurance float to buy safe businesses. Paying a dividend would be counter to the desires of most of the shareholder base that Buffett has built up. No easy answers. However, there is still a possibility that in a period of financial turmoil Berkshire will be in a position to deploy a significant amount of capital. Given what is happening in the world today I wouldn't count out that possibility. This WSJ article was pretty good: https://www.wsj.com/finance/stocks/warren-buffett-berkshire-hathaway-returns-investors-2e0acca9?st=y8ssqh77y6a8wpt&reflink=desktopwebshare_permalink

Market movements seem to be based a lot more on vibes these days. People have become so short term focused, trading zero day options. There is a lot more volatility day to day. However, this gives those of us with a longer term perspective an opportunity to exploit the volatility they create.

If Berkshire's legal structure is set up properly it can insulate the parent from risks at the subsidiary / operating level. Generally the maximum you can lose in a corporation is the capital that you have put into it, there is no default right to go after the assets of a parent corporation or shareholders. There are a few exceptions: 1) parent company guarantees of debts / contracts at the subsidiary level; 2) piercing the corporate veil - a judge can look through the corporate form if a corporation is not run as a distinct entity of the shareholder (I doubt this is a risk for BRK, more common with small corporations with one or two shareholders); 3) certain regulatory regimes like GDPR can give you a penalty equal to a percentage of the global revenue of a company which is terrifying but I think this penalty would be levelled at the subsidiary which violated the rules.

Same. Like to see the evolution in their investing style happening.

Sure but your original post was that the interest payments will be a drag on economic activity in the future. Counter-intuitively there is an argument to be made that raising interest rates is actually stimulative. Still 75% of this income going to American citizens and institutions will be spent or re-invested. It may be a drag if the interest payments force the government to spend less thus reducing GDP. The key question is whether the borrowing is to make productive investments which will increase productivity / GDP in the future. Also, if the US were to switch from running deficits to a surplus that would be deflationary / potentially lead to another crisis like 2008 which has been talked about by Wabuffo and others on this board.