Dinar

If you mark to market their investments particularly the investment in Fairfax India, and private investments held through Fairfax india, including the airport, the tangible book value is closer to $1100 per share. Also, AJG Gallagher was very bullish on the call yesterday regarding insurance pricing for the next several years.

In my opinion, the purchase of Gen Re by Buffett was brilliant.

There is another way to look at this. Let's look at the price to book multiples of other reinsurers - Everest, RNR, et all. I think that they are trading at a price / book = 1.45 for Everest, 1.57 for RNR, so clearly markets expect good times to last. I have not by the way checked if it is accurate book, in other words were bonds marked to market? If we mark Fairfax's investments to market - airport, etc..., then price to book is 0.9, may be 0.8? So clearly cheap vs the rest of the reinsurance space?

@Viking, why do you think underwriting and reinsurance profits will be done in 2024 from 2023? Thank you.

I do not think that is correct. Bloomberg shows 923.08 low but no trades below 940. Lowest trade it shows is 945.4043

All I am saying is that the importance of the country is not measured by its GDP. I am NOT saying that we should what a KGB operative or a terrorist or a dictator wants us to do.

You hear but you do not listen. Nowhere did I say that we should do what Putin or Kim want us to do. You said it does not matter what Russia wants because it is a tiny % of the world's GDP, I stated why % of the world's GDP is the wrong metric to use. Muslims have killed 3,000 Americans on 9/11, what % of world's GDP was Afghanistan at that point? Yet it mattered because Muslims based in Afghanistan hatched a plot that killed 3,000 Americans.

@ValueArb, you need to care about what North Korea thinks because it has nukes and can wipe out South Korea, Taiwan, Japan, and parts of the US. Looking at Russia through a GDP prism is a mistake. If Russia stops trading with the rest of the world, what will happen to oil, gas, uranium, titanium and other commodities? When Russia is 30% of the titanium supply for aircraft, that surely matters.

There is a write-up on VIC from December 13th pitching Fairfax India. The India based writer states that in his opinion, the value of the airport is more than $4.2bn not counting the land (probably worth several billion more in my uneducated opinion) vs $2.7bn valuation by Fairfax India. If the writer is correct and land is say worth $3bn, then value to Fairfax India is higher by $2.7bn or so and to Fairfax by billion to billion and a half. At an extreme, could be another $100 per share, if land is worth $6bn+ and airport is worth north of $5-6bn. (The writer uses a 12% discount rate.)

You are 100% correct, it's a philosophical discussion. I think clearly one has to adjust for health for instance, skills/intangibles - a college professor may have no measurable wealth, but if he can enjoy and stay at his job till say 80, that is clearly wealth that a mover or a ditch digger does not have. I think Seneca may have said it best - be content with what you have. I am content with what I have. I will never fly on a private jet, but I will also not be upset over it.

Of course I don't understand scarcity, you are the only one who understands anything. Yes, I do not understand why someone would want to live in Manhattan and go to the opera & Carnegie Hall, jazz clubs and ballet. Why expose kids to Metropolitan Museum of Art and incredible educational opportunities when one can live in Mobile Alabama for a fraction of the cost. Who the hell needs to show kids Europe when you can play a video game. When I see my friend's immigrant parents from China work here for 40 years (retiring at 70) as a janitor and a seamstress barely speaking English, and thanks to a lifetime of hard work and thrift buy a million dollar condo in Flushing for cash and have another million in the bank, I do not understand why people who are healthy and born in this country complain of having no money. If people you continually cite in your clearly wrong government statistics worked like my friend's parents, and saved, they would all be millionaires several times over, again barring health issues. You feel wealthy? I am happy for you. There is a difference between being happy and content with life and being wealthy.

As I said before, you and I have a different definition of what it means to be wealthy. How can one one be wealthy if one cannot live where one wants? As for why the average person in the US is not wealthy (per your definition) it is quite simple. Excluding people who got very unlucky health-wise themselves or in their family, it is really a function of not willing to work hard, acquire useful skills, and live below their means and invest the savings. Most people who have no savings have chosen to work less than 35 hours a week, spend their money on $300 sneakers and $800+ apple watches and $1500 iPhones. I consistently meet people who complain that they have no savings, yet have never met an expense they did not like, and always turn down the opportunity to work beyond 30-35 hours per week, even at $25+ per hour wage. You have clearly not had a family in Manhattan. When I was single, I thought just like you. Again, wealth means freedom, and first and foremost ability to live where one wants. Using your definition of freedom, anyone who can retire to rural Alabama is wealthy. I beg to differ.

You pay $10MM for a property that generates $400K per year in cash flow on an unleveraged basis. You can depreciate most of the $10MM, excluding the value assigned to the land, which cannot be depreciated, unless it is an agricultural property, in which case part of the value of the land can be assigned to minerals in the soil and can be depreciated. The part that you can depreciate is in theory can be written off against taxes over 39.5 years. However, iif you run cost segregation study, you can depreciate over shorter periods (windows I think 15 years, roof - 25 years, boiler - 10, etc). So say $8MM of the 10MM can be depreciated, and on average over 20 years. Then for the first 20 years of ownership, you have a $400K per annum depreciation tax shield. In addition, most people borrow when buying real estate. Say you use 50% leverage. Then, assuming $5MM of debt at say 4% interest rate, you get a $200K annual interest bill. So in year one, your taxable income = -200k (400K - 200K depreciation - 200K interest.) In year 2, assuming 3% inflation, your unlevered cash flow = $412K, your taxable income = -$212K. In addition, there are other interesting tricks. I am sure @Gregmalcan explain better, but if I am not mistaken, when you refinance a property with a larger debt balance, you can increase your taxable basis in the property and get another depreciation tax shield. Lastly, most people who do this tend to use appreciation in one property to borrow additional funds to invest in other properties and effectively keep getting bigger and getting more and more tax shields. I think President Trump was a good example with less than $500K in taxable income.

100%. I am not good at fixing things and finding high quality tradesmen and judging people - prospective tenants, so I am long NEN and AIV at 10-11% cap rates, but I do not get the tax shield.

You clearly take nothing into account, since you accept government statistics that have nothing to do with reality at face value. You lived in Manhattan (in the past 5 years) with four kids and you spent less than $350K per year in a nice apartment, kids in good schools, nice travel, etc? Care to share the budget? I know a lot of people in my kids' public school who would like to know your secret. I know people who live in Manhattan with four kids on $100K post-tax, but they sure as hell don't describe their lifestyle as luxurious (6 people in a 700 sq foot 2 bdr apartment.) Again, you are telling me that making 10% year in year out in investment returns is not working? What % of the population actually achieves that? One other thing, since there are drawdowns, and sequence of returns matters, clearly your investment returns need to be higher than 10%. Again, how do you achieve that by literally doing nothing? Again, I'd like to know how I can make a guaranteed 10% per year not working, thank you.

You are not offending anyone. It is a very good question, and yes, 100% my fault, and nobody else's.

Luca, I guarantee you that there a lot of people with plenty of cash flow which is not considered taxable income. Real estate is a perfect example.

When I was 24, single and living in Manhattan, I spent $20K per annum, and could not comprehend how senior colleagues would complain about not being able to make ends meet on $200K a year. The difference, aside from the fact that I was and am very frugal, was family. They had it, and I did not. Kids and wife tend to be very, very expensive in Manhattan.

Given that I came to this country penniless at the age of 13, and worked as a garbage man in college to pay bills, and know quite a few people who live on less than $40K a year today, I have a feeling that I am in touch with reality. I do not know where you take your family income statistics from, but I would be shocked if they were accurate. I highly doubt that the statistics account for cash income, which for many people double or more their reported income, as well as government transfers. You cannot imagine how many nannies in NYC, Boston, DC & LA/San Fran who make $50-$80K per year in cash and report zero income. Barbers that take cash only. A guy runs a neighborhood barbershop in Staten Island, makes $5K a week cash, how much do you think he reports? A neighborhood fruit stand clears $600K in cash revenue, and roughly $300K per year in cash income, what do you think this guy reports? Dog walkers, waiters, bartenders, tradesmen - electricians, carpenters, plumbers, and the list goes on. Similarly, how do you account for welfare, Medicaid - worth 10-50K per year, Section 8 housing, food stamps, free cell phone, broadband, gas/electricity, and the list goes on. You clearly do not take into account regional differences. In NYC, where there are plenty of unskilled jobs paying $25 per hour, a two adult household is hard pressed not to receive $100K per annum income if both adults work 40 hours per week, 50 weeks a year. A non-union doorman gets paid $55K a year in NYC, plus another $10k per year in cash. I am sure that the situation is different in rural Pennsylvania, and it is hard to find an unskilled job for $20 per hour. Similarly, there is a difference in cost of living by region. When a rent for a 3 bedroom apartment in Manhattan in a safe neighborhood starts at $9K per month, utilities are another $600 a month (that includes gas, electric, internet, cell phones) and medical insurance for a family is call it $50K per year, and shopping bill at Costco is $2000 a month for a family of six (the wife cooks), kids clothes and shoes that have to be replaced monthly, pray tell me how $350K per year to spend in Manhattan with a family of six is rich. It is in Kansas. It is in Boca Raton. It is not in Boston, Manhattan/Brooklyn Heights, San Fran. Passively sitting around is very hard. I did not know that making 10% per year on your investments was so easy. I wonder why the entire country just doesn't do it? Actually, it is quite difficult to do, at least for me. I have been investing since 1994, and I can tell you that I have compounded at around 18% per annum. To say that this was easy would be a complete lie. It was hard to sit in the market in 1994 invested in Mexican stocks and see a 90% drop in the Bolsa and not to sell. It was hard not to be scared in fall of 2008 and spring of 2009. Really hard not to panic in 2020. It was hard to be long Tel Aviv stock exchange on October 7th and not panic. But damn, I admire your balls of steel. Perhaps we have a different definition of rich. For me, it is not just being able to put food on the table, provide a roof, and medical insurance. It includes being able to live in a nice apartment where every kid has his/her own bedroom, pay for enrichment classes for kids, being able to take kids on vacation twice year and fly business class, being able to keep a car in Manhattan, being able to go to nice restaurants once a week, being able to go to opera/ballet/Carnegie hall/jazz club once a week, to send kids to private school in Manhattan, being able to gift a nephew a trip to African Safari for his 18th birthday, being able to help friends/relatives in their hour of need. You can NOT do this on $350K per annum in Manhattan. This lifestyle is $700K+ after-tax per annum in Manhattan.

@bargainman, actually the math is worse than you say. Say you have a $10MM portfolio, say you make a million a year. You can NOT spend a million a year. First, assuming that you live in CA/NY/NJ where most of these people live, you only have $500K post tax. Even if all income is long term capital gains, tax burden is 35% (assuming no job) and hence $650K post tax. $300K needs to be redeployed into the portfolio to keep up with inflation. So you can spend $350K per annum. Not bad, but hardly rich, and if you have a family in say NYC, you cannot afford luxuries once you spend $50K on health insurance (since neither of the parents work) and housing is another $150-$200K per annum. So yes, a retired couple in Pennsylvania is rich with a $10MM portfolio, but a young family cannot retire in NYC or even suburbs on a $10MM portfolio assuming a 10% return. (A house in a nice suburb of NYC can easily run you 1.5MM with a $35-50K annual property tax.)

I agree with 2,4, and 5. I would add the following: JOE, L'Oreal, Safran & Airbus, Ashtead, MSGE(ticker) , NEN (ticker), Tel-Aviv stock exchange. Also, Hermes which I do NOT own.

You don't get it do you? China is thriving, US in going down the flames according to Luca! He looks at everything through that prism! Inconvenient facts like millions trying to immigrate to the US from China do not distract him from his vision!

@Luca, when you make statements that the US has only shitty service jobs, the only thing you show is your ignorance. Do you know that there is a massive shortage of plumbers, electricians, carpenters & other construction workers in the US? Massive shortage of doctors, nurses, et all? (In NYC today, there is a four month wait to see a dermatologist for instance.) Do you know how much these people, including skilled tradesmen make? Why is working a service job shitty? Just because you do not like it does not mean it is shitty. I do not know what you do for a living, but I am sure I can find plenty of people who will not like what you do. Does this mean that your job is shitty? You remind me of good old Karl...

I do not know what will happen to inflation, macro, etc... I do know that a) there are millions of people in corporate America, and even more in the public sector who sit around all day and either do nothing, or actively hinder output. So if either the government or large companies or universities start firing deadwood, productivity will soar. At Harvard for instance number of administrators & other bureaucrats has doubled on a per student/professor basis in the past several decades I believe. b) The welfare state is becoming bigger and bigger and destroying any incentive to work for unskilled and low skilled labor. If it ever gets cut back, watch millions re-enter the labor force, with huge upside to GDP, and downside to inflation. In NYC today, it is more profitable to develop homeless shelters in Manhattan on UWS (home of $4000 per sq foot condos) than to turn an existing building into luxury housing.

https://www.schwab.com/learn/story/beware-taxes-on-discounted-munis