Spooky

The podcast discussion was pretty interesting. Started reading the new version.

I own both BRK and BAM and think of them as somewhat similar but opposite sides of a coin - BRK should do well in an environment like today whereas BAM will do well in the low interest rate environment we experienced in the last decade (and BAM is my proxy for alternative investments such as PE, infrastructure, private credit, etc.). BAM really benefited from pension funds / LPs searching for yield in a low interest rate world. However, they have set themselves up in an anti-fragile way so that they can be counter-cyclical and take advantage of market dislocations. They seem to be pretty good at this and were selling / realizing a lot of their PE backed businesses during the frothy market at the tail end of 2021. If interest rates on government debt climb too high it also might be good for them since nations will need to sell infrastructure type assets to raise funds to cover higher interest expense. They have recently raised and closed some very sizable infrastructure funds.

This Odd Lots podcast was pretty interesting on the topic - if I'm remembering correctly, a lot of Japanese banks / companies needed to rebuild their balance sheets so the bailout funds / increase in the money supply didn't make it into general circulation: https://podcasts.apple.com/us/podcast/richard-koo-explains-why-the-recovery-will-be-so-difficult/id1056200096?i=1000474211676 The concept also helps to explain why the bailouts in 2008 didn't result in widespread inflation but the helicopter money delivered from central banks and fiscal authorities directly to individuals during the pandemic led to the current inflation. I also think that Milton Friedman's theory of monetary inflation has also been shown not to be completely accurate - there is not necessarily a direct relationship between an increase in the money supply and inflation. I read a paper on this once but would have to dig it up.

https://www.ubs.com/global/en/wealth-management/insights/2022/global-real-estate-bubble-index/_jcr_content/mainpar/toplevelgrid/col1/textimage.1255303826.file/dGV4dD0vY29udGVudC9kYW0vYXNzZXRzL3dtL2dsb2JhbC9pbnNpZ2h0cy9kb2MvdWJzLWdsb2JhbC1yZWFsLWVzdGF0ZS1idWJibGUtaW5kZXgtZW4ucGRm/ubs-global-real-estate-bubble-index-en.pdf This is an important part of the story I think - lots of international buyers parking their capital in Toronto housing looking to preserve it. There has also been a pretty big divergence between the prices of homes and rents since rents can generally only go up as much as local incomes can bear.

New condo / housing development in Toronto has not kept up with net migration into the city for years and years. Also, there is a huge zoning problem in Toronto where large parts of the city are only zoned for single family and the NIMBY's are fighting to keep it that way (https://globalnews.ca/news/3707723/margaret-atwood-condo-controversy-in-toronto/).

It's more like they are coming but we ain't building...

Hi Dinar, Thanks for your response. I'm not parroting anyone's talking points - I'm just looking at the data. I just showed the public spending on education of the US as a % of GDP as one data point which fits in with the broader picture (ranked 65th). At the end of the day I agree that it is not about the spending level but the effectiveness of the spending / outcomes being achieved which is why my previous post mentioned measuring the ROI of this investment. The fact remains that the US is lagging behind China (and many other developed countries) in reading, science and math https://www.oecd.org/pisa/PISA 2018 Insights and Interpretations FINAL PDF.pdf. With respect to private / public spending - the data I saw from a quick google search is that only 9%-12% of US students attend private schools. This means roughly 88-91% of students are going through the public system. Given the population disadvantage the US has relative to China, is it in the US' long term interest to stratify education so much? The US also lags behind other developed countries in terms of social mobility (https://en.wikipedia.org/wiki/Global_Social_Mobility_Index). I guess my overall point is that effectively competing on the global stage in the future will require more skilled labour since unskilled labour / tasks will be automated away. The countries that recognize this and are able to train their workforces most effectively will be long term winners.

I'm not American so I don't want to get political about it but the facts are that the US : 1) is lagging behind its developed peers in terms of investments in public education as a percentage of GDP and public spending (and this spending has not kept up with inflation over time); 2) educational outcomes have been sliding relative to its developed peers over the last three decades as shown by rankings in math and science scores; 3) in terms of early childhood education, the United States is one of six countries that does not report any educational spending in the OECD. Given the rise of AI and automation in the future, work forces are going to need to be more skilled and educated. There is a lot of human capital in the US that could be better utilized. https://en.wikipedia.org/wiki/List_of_countries_by_spending_on_education_(%_of_GDP) https://educationdata.org/public-education-spending-statistics Government's should definitely view this through the lens of public investment (as with all government spending ideally) - measuring the ROI of the amount spent against and objective metric / outcomes. My personal view is that we should de-emphasize the content of what is being taught but rather teach people how to learn / think critically / overcome mental biases.

Personally I think the US' biggest challenge is their under investment in public education over the last 40 years.

It is one thing for China to catch up to the West by copying previous advancements and stealing intellectual property but it is another for them to innovate from here to surpass the West. Have we seen that their central / top down planning economy can successfully innovate / compete with the US in terms of innovating new productivity enhancing technologies? Does an open society with free speech result in more innovation? Also, it seems to me like under Xi they are starting to deviate from the reforms and policies first initiated under Deng Xiaopeng that resulted in their spectacular growth and returning more heavily to marxist / isolationist ideology which will not bode well for their economic growth from here, especially given their demographic headwinds. For all their faults, Western democracies and the US seem to be making better decisions than autocracies / closed societies like China and Russia.

Bought some more BAM

VRE seems very cheap ... I've been slowly adding some in my TFSA. P/E of 6.8x and P/B of 1x according to Vanguard.

My BAM dividend was automatically reinvested for 1 more share... awww yaaaa

Seems like every pundit and podcast is talking about holding cash / a further crash from here. Don't see any optimism out there. Probably means its a good time to buy...

LOL

Does anyone have good resources to study moats?

The problem is that 8% figure is backwards looking, what happens when we get to the start of 2023 and the comparable figure changes? People will be talking about deflation soon lol.

Highly recommend Thinking in Bets by Annie Duke.

“People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.” - Charlie Munger “I’ve never been able to predict accurately. I don’t make money predicting accurately. We just tend to get into good businesses and stay there.” -Charlie Munger

Curious about where the people who have retired early are living. I'm in Toronto and don't see any possibility of being able to own a property here with no mortgage and retire early.

Beautiful! I just got back from another trip to Lake Superior Provincial Park camping at Agawa bay for a week and it was once again stunning. One of the most beautiful places I've been to in the world and the sunsets over the bay are legendary. Doesn't feel like you are in Ontario at all, driving up the coast of the lake feels like being out on the West Coast. I've hiked the full coastal trail at Pukaskwa (roughly 60 km), it was intense but extremely beautiful and the campsites and beaches are amazing. Some of the best beaches in the world and no one is there. The trail is very isolated since you can only enter from the North end or via a boat. The water is very cold but you get used to it over time, nice and refreshing!

Looks like Bridgewater is predicting a period of stagflation ahead: https://www.bridgewater.com/research-and-insights/an-update-from-our-cios-transitioning-to-stagflation

I agree and hope Xi doesn't get a third term - his sharp pivot towards Marxism and nationalism and away from Deng Xiaoping's reforms is bad for China's economic growth long term and the world. Real estate is a huge part of China's GDP (~30%) and it involves significant amounts of leverage. Average people boycotting their mortgage payments leading to government censorship. Seems like a huge meltdown in the works to me. The narrative that China can handle it no problem seems odd to me and I haven't seen any good evidence to this effect - similar to the GFC we don't know the extent of the contagion to the different banks from this fallout and real estate is a much higher percentage of GDP than it was in the US at the time. Combined with most average citizens' wealth being tied up predominantly in real estate and there is a big problem there. Add on top of that zero covid and like 20% youth unemployment and things could get ugly quick. Also, they have crushed what was a vibrant VC ecosystem and replaced it with central / state directed investments in certain industries.

Started reading this book and have been really enjoying it so far. Very informative and clearly written, having a hard time putting it down.