SharperDingaan

Our bad. We meant a TRS agreement that expires as normal upon maturity. As well as an independent buyback of the notional shares, on the date the TRS agreement expires. The independent buyback most likely being the expiry date of a warehouse arrangement between FFH and some of the market brokers/banks. Net of the cumulative mark, the buyback is at the very low Q4 2020/Q1 2021 price, there is an extended period of warehouse buying support throughout the life of the TRS (assumed), and no sudden price spike because of the buyback. Very elegant, and very FFH. SD

At the operating level the swaps are producing a quarterly MTM settlement - with the market resetting every quater. Thereafter FFH receives $ if the share price goes up, pays $ if the share price goes down. At the stategic level, the swaps have locked in the purchase price on the notional quantity of FFH shares - for the life of the swap. All else equal when the swap matures, FFH buys in the underlying number of notional shares and cancels them. It implies that over the life of the swap, FFH both expects their share price to rise, and that the eventual buy-in will be funded from cummulative free cash flow. Very elegant, and smart approach. SD

For many people the contribution is just a tax deduction - how do I get the most benefit from the dollar I contribute. Most are OK with a tax deduction, creating a charity where you are the main beneficary ... not so much. However a great many charities are simply cash raising machines; net of costs/bribes. little benefit flows out at the end of the pipe. The default option. Just about any personal involvement, delivers more than the default option. From giving money away as a secret santa, donating time/services, or paying for infrastructure in some far off place. For the most part it is the medium/long-term view - and a lot more ruthless. The reality is that many are not going to make it - accept the loss, so as to give the remainder a better shot at life. Help them escape the circumstance, don't trap them in it. Lots of different approaches. We've generally found it better to invest in your kids experience (development projects. refugee camps, etc) first, then expanding circles around the family. Helps drive home just how priviliged your family is, and sets the family up for a lifetime of giving, vs just a once and done experience. SD

Agreed, temporary workers have been the traditional solution for farm work. But competition is now a lot harder, and costs are a lot higher. Farmers now must charter flights, pay for immediate vaccination, pay for ongoing testing, and pay the coordination costs of keeping the workers employed through their entire stay. Some nations also offer a path to citizenship, changing the game entirely. Ultimately, temporary workers are only viable if the cost of importing the food is more expensive than the cost of producing it locally. Grow in South America/Caribbean, import the food directly, and do not use temporary agricultural workers at all – a common practice in much of Europe. Of course, temporary workers are still used - but in higher value-add construction, not farm work. Hard for a McDonalds to staff with temporary workers, even if they could. Hiring temporary workers simply proves to critics that your business is too cheap to pay a living wage, and your management too incompetent to restructure the business to do so. Press loving protestors at your AGM, pushing indefensible optics, really screw up your day. Lots of ways to tilt the table, and many are - but not really an option for the fast food and restaurant industries. SD

Costco has essentially made 'hero-pay' permanent for the front-line staff. About 15-20% more for the cashiers, stockers, baggers, etc. https://www.thestar.com/business/2021/04/24/costco-gave-its-workers-a-permanent-pandemic-raise-and-didnt-tell-anyone-another-reason-why-its-developing-a-cult-like-following-in-canada.html Much of the franchise industry is not viable under these cost pressures, and will have to either shut down or 're-structure' their operational model. Long overdue as many are extremely abusive, but it will mean a lot of failed businesses, and less employment for longer. In most places, indentured slavery was banned a long time ago. SD

Just to add to the staffing discussion ... At our small craft brewery, to avoid layoffs everyone has worked for an extended period at reduced hours at reduced pay. Costs are up everywhere, but the real issue is supply chain availibilty - hard to reliably make beer when you cannot get hops, malt, cans, etc. - and you have to outbid a major in both price and quantity. Beer is a close knit community. Like most our size we track the cummulative wage loss monthly, and discuss with staff on an ongoing basis. Most brewers have agreed to restore pay rates as soon as practical, then pay 15-20% over that untill the cummulative loss has been eliminated. The extra cost temporary reducing owner returns, but retaining employees as to walk away is to leave $ on the table. Once the accumulated loss has been paid off, we will have to raise pay rates; most expect by 7-10% depending upon how long it takes the economy to 'recover'. Beer will cost more, and there will be more collaborative contract brews to reduce costs. Very good beer still available, but less variety. SD

For now, while the focus is on getting ICU numbers down and people vacinated against Covid, it is a back-burner thing. But once people start returning to work, it is going to quickly emerge that pay just isn't stretching as far anymore - and the sh!te hits the fan. The minimum is going to be the 2.74% increase in the 2021 budget federal minimum wage from $14.60/hour to $15/hour, and unions will collectively demand increments on top of that. If you hope to be re-elected - you are not going to cheap out on the wage demands of health care workers that have literally just saved your voters lives. You are going to pay over that, and you are going to extend it into the LTHC sector as well - so that grandma's covid death is not held against you. And you are also going to do what you can to push more money into pernsioners hands, as soon as you can, to compensate for those higher costs. Cost-push inflation, and sooner versus later. Not a bad thing, but it would seem pretty clear that we're not going back to the way things were. SD

Add to this that there are farm labor shortgages, forcing less crop planting, less havesting this summer/fall, and higher food prices. Supply chains are now bull-whipping, and almost everything in your grocery store has already risen 5-15% since the start of the year. Cost-push inflation is here, and there are at least a years worth of accross-the-board accumulated cost increases to work through. Energy price increases sitll to come, as economies progressively come out of lockdown. https://www.cbc.ca/news/business/bakx-mattress-fitness-office-furniture-inflation-1.5998221 Not a bad thing overall, but it means a coming end to much of the capital market excessess that have been seen of late. SD

Agreed there's a lot of waste, but it keeps coming back to we need Covid dead, we need it done now, and we need to win. Yes there is waste, but it is really just another cost of doing business - try to minimize it; but it doesn't wag the dog. WWII is just a scale comparisom, waste was a similar problem back then as well. Agreed political will is a big component, spending just to get back to where we were isn't going to cut it. It's 2021, most industrial/social infrastructure is 40+ yrs old, and just isn't up to the demands of a 21st century economy - it needs to be replaced. Change is uncertain, we can only guess the costs/benefits, and there are no guarantees - but without it there is no hope for a better life going forward. Tough sell, but you aren't selling to grandpa - you're selling to the kids/grandkids, and for them - the benefits outweigh the costs. Different strokes. SD

Not BS, we just don't like what it is telling us. https://www.philstar.com/world/2021/01/21/2071994/us-covid-19-deaths-exceed-wwii-military-toll-tracker The total number of combat and non-combat deaths in World War II was 405,399, according to the Department of Veterans Affairs. As of the evening (Jan 21, 2021), the (Johns Hopkins University) tracker showed that 405,400 people have died from the disease caused by the new coronavirus in the United States. Granted, in 1942 the US population was 135M, today it is 327M. Adjusted for population, combat/non-combat deaths would be 981K (327/135 x 405). US covid deaths as of yesterday were around 568K, up 163K in 3-months. All else equal, covid deaths equal the population adiusted number by around 2021 year-end (4 months gone + (981-568)/163 x 3). Point? WWII comparisom is valid, as is the war-time level spending to end it. SD

Very telling article in the G&M today ... https://www.theglobeandmail.com/business/article-major-banks-insurers-team-up-with-carney-vowing-to-mobilize-trillions/ "One problem on the path to net zero has been the difficulty in persuading companies in various industries to adhere to the standardized methods of both disclosure and getting emissions in check. Mr. Carney, who is also vice-chairman of Brookfield Asset Management, has been a leading force in the push to improve disclosure and shift financial structures to help decarbonize the global economy." “We can’t get to net zero if we continue to dump hundreds of billions of dollars into fossil fuel companies, particularly ones that are in the midst of expanding their operations – building more coal mines, digging for more oil or building more infrastructure that have lifespans of 20, 30, 40 years,” Canada is shifting to the standardized measures, and they include the mechanics of what makes up a carbon-credit. New money is only going to be available if operations produce carbon credits (C02 sequesture, etc), and the sale of those credits will repay the financing. An oil-sands plant either lives within its design rated output, or buys monthly credits to cover its incremental production. Obviously, if you want to expand operations, the preference is to reduce the existing carbon output to create 'space', vs buying them. And if you want to roll your notes as they come due, you need to get with the program. Great news for Alberta, despiite the political inability to recognize that climate change exists. SD

Really says 3 things: Decision has been made to raise the long end of the yield curve. Own thoughts are 200bp+ over time, and primarily through new issuance of infrastructure bonds that include equity kickers of some type (crowding out). Target total returns of 6%+ to meet DB PP requirements. Decision has been made to denominate in CAD. GIC's at higher yields, raising fixed income receipts, enabling the risk-adverse to weather inflation. Denominating in CAD effectively flows QE (diff in rate x ppl) through fixed income earners, where it will be spent on higher COL Either pay through higher rates, or top-ups to pension accounts. Decision has been made to materially reform Canada's PP system - CPP. OAS, GIS, DB, RRSP, etc. Long overdue, most would think that portability and RRSP changes cannot be far behind. Own thoughts are that the age 71 RRSP forced conversion either gets extended or eliminated. Hard to be dissapointed. SD

Recent anecdote from a seller in our neighborhood. The house was too big for them. Could have hired cleaners, live-in's, etc. but they really needed to downsize - when and where to go. They bought a 1/4 floor of a new-build apartment block in a desirable location, and have rented a basic flat for one-year near a daughter with very young kids. Meanwhile the developer finishes the apartment to their specs. Per the specs it will be a vety nice place, everything on one floor, and with space for kids to stay and visit. Very smart, and a great many others in the neighborhood have similar versions of the above in mind, comes their turm. It is old housing stock being swapped for new, via a new way of doing things. Hard to knock it. SD

It's war-time spending, and hard to argue against - Covid has killed more people than died in WW II (US). This is a time when you ruthlessly fight to win, and the costs are secondary. Dead is not an option, surviving to thrive is. Media will focus on the spend. The real benefit is the planned change to the debt maturity profile - rolling out to 10yr and 50yr terms. Very likely as $CAD bonds, with inflation driven rate escalaors and reduced taxation depending on the type of bond (green) and term (infrastructue). Very elegant, very smart, very BoC alumni. Nice to see a much more feminist, and practical approach. Like it or not, 50% of the work force is female, and Canada does not have enough workers. There are a great many very smart/industrious women about, and $10/day day-care removes a lot of chains. Again, very elegant, and very smart. SD.

Blockchain/smart-contracts are the invention, everything else is just an application of the invention. Hurdles are par for the course, and ultimately 'bend' over time - to go with the flow. SD

It's not just 'cheap' house relative to what you are used to - it's the monthly cost of living as well. Pre WFH the aspiration was always 'live in the big city'. Lower COL in the burbs just wasn't on the radar, the conversation was all about the relative cost of housing vs the 'city', and the 'cost/length of commute'. Today, the mover saves on BOTH the transportation AND the COL - and sees just how much of a cash savings that actually is. Often the result is more space, a better environment for kids, and mom being able to reduce hours/stay at home - 'cause the savings are on-par/or-more than mom brought home net of all the costs of child-care and working. Mom can still work if she wishes to, and it is a much better quality of life for the family as a whole. Yeah, but post Covid everybody will go back to the office? Bosses might prefer it, but recent workforce surveys indicate that modified WFH is here to stay. The small towns simply gentrify and become more attactivre places to live - pulling in more buyers, new development, and better infrastucture. Everybody wins. SD

Couple of observations ... For decades the 'mantra' has been 'one house, one family'. Champagne expectations have progressively risen, on a beer budget that buys less and less - even when it is augmented with rental income and parental down-payment help. Obviously, there needs to be change. Around the world, multi-generation households are commonpace, and they have been resilient for very practical reasons. It is a great deal cheaper to re-model an existing house for multi-generational living (or sell and buy a purpose built), than it is to buy a new one. Mom/dad want grandkids, son/daughter/spouse cover the cost of renovation (mortgage), and improve ability to work (while grand-parents help look after the kids). Housing has a great deal further to run. RE is built on deal flow. Stay-in-place renovation, versus sell/move-on - seriously reduces total volume, total commission and associated sales revenues. There are also a growing number of blockchain apps, facilitating purchase/sale of partial ownerships in a house - further reducing house sales. As well as apps that facilitate seperation of land value, via a lease of the dwelling for X years. Again, housing has a great deal further to run, despite RE industry bitching every inch of the way. Not just RE industry bitching either. For many people, RE is a time-honored better investment than buying individual stocks/index funds; as partial ownership interests and long-term leases become more readily available - young money flows out of capital markets and into RE. Progess. Point? Housing has a long way to run, but if you insist upon last century approaches - welcome to your ulcer. The Times They Are A Changing - Bob Dylan SD

Existing payment rails are truly sh1te, and work only because we have laarnt how to make them work - patches upon patches, upon patches. CBDC is essentially everyone/everything in the country with an account at the same place, a payment is simply debit account X, credit account Y. Same output; just done very, very differently. Cheaper, faster, more reliable, more secure, yada, yada ... Fixed at 1 diigital fiat ($CAD) = 1 paper fiat ($CAD), there is zero value change. No different to your bank account today, where 'digital/cash conversion' takes place at either the ATM or tellers desk. CBDC has been live tested (eKrone) for some time now, and acceptance has been demonstrated to not be an issue. FX is problematic because there are different flows; tourism, trade payments, capital, etc. It becomes a lot simpler if capital flows can be shifted to a RBDC (Reserve Currency). The days FX rate then becomes the ratio that settles the days trade and tourism flows at zero. RBDC mechanics a work-in-progress There will still be payment intermediaries, but now they have to prove their value add. No getting paid anymore for simply making a payment happen, or being an order taker. Paying for alpha, is not a bad thing. SD

Whether digital, or paper, the country fiat will be backed by the CB and freely exchangeable on a 1:1 basis. You will just have 2 accounts - the account at your bank, and the wallet at the CB. Most will pay using their wallet, simply because it is faster, cheaper, and the amounts are guaranteed. Existing payment plumbing rapidly displaced over time. When a vendor can accept CBDC as legal tender, vs sh1te coin, the sh1te coin becomes worthless. Of course, if the market believes the coin has value (BTC, ETH, etc.), the outcome might be different - but what the participants think is irrelevant. Comes back to the great winnowing, and ability to short. We'll all learn something new SD

Digital currency. The other name for it is CBDC, for a lot of crypto token it is a game-changer. In many apps, a fiat currency is exchanged for a token that pays for activities within the app - but outside of the app, that token has little/no value. The developer in turn, supposedly used the fiat to develop the app promised in the whitepaper As CBDC is a token, users no longer need buy the app's token to pay for activities, they just pay with CBDC instead. The developer can no longer use seigniorage to pay for development, and the activities move to value-add commodity pricing. The party ends, and most app developers collapse. Winnowing the wheat from the chaff is not a bad thing. CBDC is country level digital currency, that most all counties will eventually go to. Reserve Bank Digital Currency (RBDC) is trade level digital currency, and most likely a decade long work-in-process. Eventually it will become the globes reserve currency, but after a number of iterations along the way. SD .

5% average inflation thing: Agreed, all else equal, there is little reason to expect significant inflation. The problem is that economic conditions are NOT equal, this is a 10-yr interval, and inertia dictates 'stay in place for as long as possible'. Someone wants the house? and cannot wait? just outbid everyone else (it's just money you cannot take with you). When they do - that sets the CAGR. Compare your cost of living today, to what it was a year ago - it is a lot higher than the BoC target inflation. There is also a limit as to how long asset and consumer inflation rates can be kept separate; eventually you get cost-push inflation at some trailing consumer inflation rate. Independent, rational decisions, by everyday people, in quantity. We just don't like what it implies. SD

Keep in mind that the 2M+ forecast is a projection, and as at 2031 (10 yrs out). I think it a little conservative. It is also not an isolated outlier, and price expectations like this are becoming increasingly common. 8.25% is nominal CAGR. If you expect that the average post-Covid inflation over the period turns out to be 5.00%, the real return is 3.25% - and actually not far off the historic trend. The pricing is rational. The houses themselves are 2,500ft+,open-concept, 9ft+ ceilings (20ft+ in the great-room), designer kitchen and washrooms, wide passageways to accommodate wheelchairs, etc. Condo clears the snow, mows the grass, shared use of the clubhouse, the complex is surrounded by quality medical, and has an adjacent 4500+ room high-end seniors retirement home. High-end market, between Hamilton and Oakville, and not on the lake. SD

We have a neighbor who bought their new build townhouse bungalow in 2011 for around 45OK net of upgrades. It is an airy, spacious and desirable house, in a desirable location, the complex has been complete for some time, the target market is retirees 55+, and there is a longstanding waiting list of buyers. Pre Covid, the median house sold for around 900-925K, and took no more than 10-15 days to sell. The neighbor is aging, and wanted to assess whether it was worth staying/renovating, or selling/moving elsewhere. They had an agent approach the buyers and ask for expressions of interest. They had their first expression in < 72 hours, at 1.4 million; by end-of-day there were 2 more averaging 1.5 million. Terrified, the neighbor withdrew the house, and chose to stay/renovate. The neighbor is well liked, it is a close-knit community, and a great many of the residents are retired/semi-retired senior executives. If the renovation meant they could stay another 10 years; most expected a future sale at around 2M+. The renovation pays for itself, implied nominal CAGR of around 8.25%. SD

Ma held 76% of Ant Financial until recently, and with the recent IPO - is now a multi-billionaire in China. Just exactly HOW does one pull off this trick in a communist country? SD

This thread underlines that culture matters, and that in a large company - it is very much a product of the continuing long tenure of the men/women at the top. When they leave (Buffer, Munger, etc.) the culture leaves with them - momentum may continue for a while, but the new men/women will want to make their mark. Change. Culture and process substitute to a limited degree. A GS is as good as it is, largely because of its market driven internal processes. Up or out, is widely copied by many others, and very successfully. Obviously, it is worth something; but valuation is very subjective, and wide open to error. Analytically, the value of a Jack Ma, or an Elon Musk, should be worth MORE (than that of a Web/Munger) - simply because they have more 'runway' left to them. But would most actually conclude that? Nothing wrong with betting on the jockey, but there are limitations. Different strokes. SD