SharperDingaan

We think claim adjusters will be hard balling in the affected areas, and Puerto Rico in particular. May/may not be appropriate - but we would expect that it quickly gets ugly, the concern will be the adequacy of reserves, & that the industry will have to 'wear it'. An ebbing tide that lowers everyone's boat; arc or rowboat. Ophelia hit Ireland as a heavy storm. Have to think there was damage, & that it's making its way up the reinsurance chain https://www.theguardian.com/world/video/2017/oct/16/storm-ophelia-makes-landfall-in-ireland-video-report SD

True but the odds of another major in the rest of the year are rather small. These super cat years come along every decade or so, and in that context a Q is a very tiny part. But yeah another one will certainly be more impactful. From the outside, there appears to be room for some dispersion of underwriting prowess from legacy units to acquired ones. Andy Barnard has some work to do! Agreed. Right now it's more a recognition that during the remaining stub of the coverage, their UW risk is more elevated than normal. Our own thoughts are that the risk is also more likely to be on the claims side (Puerto Rico &/or Ireland?) versus another weather event. SD

The risk here is three-fold 1) as Txvestor points out the bulk of this came from the acquisitions, 2) there are more floods, they are bigger, the 'season' is getting later, & there are so many black swans today - that they have almost become the norm, & 3) it's highly likely they have already burned through almost all the cover they thought they would need for the year. We would suggest the current cat/super-cat exposure is simply an unintended consequence of the acquisitions. If a late hurricane, or even a scandal around the industry's handling of existing hurricane/storm claims, drops the current price by 10%; it's a loss of roughly $C 65. If the intent was to buy & hold for the Jan ex-dividend date, you might benefit by roughly $C 13 (after FX). Hence, if you haven't bought yet - there is an incentive to wait as long as possible in anticipation of another natural disaster. Nothing to do with the company. Simply an opportunity. SD

Not to piss on the party - but you might want to reconsider the cat/super-cat insurance. These big losses are telling you that they have run through their reinsurance cover; the unknowns are 1) is there another band of cover above them?, & 2) how far are they from it? Another 1-2 hurricanes/tropical storms showing up over the US mainland this quarter, could really screw up your day. SD

Lots of immediate, new, & very different, markets open = significant diversification benefit. New markets also typically miss-price by quite a bit = an up-front reserve build similar to hard markets. P2P cost reductions reduce the load factors on existing reserves = ability to add significant new business without having to put up additional reserve. And none of this touches the golden data, cost, and automation advantages - which is where the real money is ;D All good. SD

Don't knock the block chain - the operational and financial benefits to the insurance industry are beyond ridiculous!! Case in point: 'Who do I sue if the Oracle running these applications doesn't deliver (IBM, Etherium, Bitcoin, etc.)? '... Well isn't this business 'problem' really just a crypto version of cat/super-cat insurance ? - and with no significant competitors in the market ;) SD

A few comments ... All countries have 3 main economies, 1) main street (do you have a job), 2) wall street (capital markets), & 3) underground (whatever for a price). Depending on the times, each will have greater or less prominence. There are more jobs today than there were in the GFC. The bitch is that they are lower quality than they were before the GFC, they are precarious, and they come with less benefits; all true. However the reality is that there is now a paycheque - where there wasn't before. Main street wasn't the first in line to benefit, but it has benefited. There is little doubt that Wall Street benefited from the equity boost of QE and low interest rates. It inflated asset values while leaving debt the same (equity boost), and added volume to offset the drop in the velocity of money. Without it many of the 'name' banks would have collapsed, and we would have seen the 1930's dust bowls all over again. Yes; Wall Street was first in line, but main street was close behind - had banking collapsed the main street of today would not exist. To many, errant banks should be harshly put down - as a lesson to the others. Letting Lehman go was the right thing to do, even if it almost killed us; today we are a lot stronger, and should be putting down the zombie banks. Per the UK - is the state really better off keeping RBS & others afloat, versus winding them up? An RBS employee would say 'yes', but to everyone else its 'maybe'. We aren't in 'normal' times, and haven't been for over a decade as we've worked through the GFC. History suggests that without the central bank interventions, we might well have needed a war to economically get as to where we are today. Some folks are still determined to make it happen. Different strokes. SD

2) It was a CONFIDENCE problem, that triggered a liquidity collapse. Liquidity is just money flow PLUS confidence in the conduit (pipe) you're flowing that money through; with the vast majority of money flowing through a very limited number of pipes. If a pipe blocks, money flows back up in front of it - & you get a liquidity collapse at its exit. At that point, simply questioning the other pipes is enough to block them to - and bring on widespread collapse. The money was there, it just wasn't getting through. 3 & 4) Demographic bias. Boomers are no longer building assets - they are also not content to simply live on investment returns, & are liquidating to fund retirement. Borrow against the McMansion for X years, downsize to something smaller - repeat, downsize to a nursing home - & die. And with every downsize they give stuff away, & don't buy new (using commodities to make that new product). 3 & 4) Industry disruption. Financial services is built on 1) wealth never being spent, and 2) THE VAST MAJORITY of that wealth being passed on to future generations. Boomers spending their wealth means less domestic AUM & fees, and more foreign AUM & fees as they buy the assets being sold. A very new experience for NA industry. Raise the temperature slowly, and you will eat very well on cooked frogs; raise it too quickly and dinner just jumps out SD

Long term view. Inflation increases rents, offsetting the higher discount rate. It largely washes out. Short term view. Rents haven't increased yet, but the discount rate has. Lowers the PV, lowers price. As there is always a lag between 'rent adjustment' and higher rates - in rising rate rate environments inflation lowers prices. In falling rate environments it increases prices. SD

The very short history ... Stage 1: I started investing at roughly 14-15 in Africa, as a brewer. Trained by an Indunas (Zulu village chief) wife, brewing native beers and wine in 44 gallon oil drums, and selling by the calabash to fellow students at an all male boarding school of 2000+. As a straight 'A' science and business student, the techniques of monopoly control/price gouging/and removing competition were learnt on the job, both product and cash-flow were awesome, and I quickly emerged as one of the top 3 'cartels' in the school. I learn't that independent thinking/leadership is key to whatever we do, cash flow is king, and that straight-up chutzpa isn't a bad second. At the time I had no idea these were also valuable investment skills. Stage 2: Like many a 'draft dodger' before me I had to flee my home country at 18, find a new one in Europe/NA to 'adopt' me, learn a new way of doing things, decide what I wanted to do, and do all of it without any family being able to 'help' in any significant way. No money, living on your wits, few restraints, and the world at my feet. While NA students were doing thier undergrads I was getting a street smart education, meeting all kinds of interesting people, rising on my merits, and learning all kinds of tricks not taught in the textbooks. Excellent investment skills, but not recognized. Stage 3. Welcome to Canada, and 5 years of petroleum engineering/undergrad school at the University of Calgary. Thoroughly enjoyed myself, tried my hand at investing in oil/gas, mining, booze, smokes, and banking - and got my ass kicked, repeatedly. Not amused - I kept ramping up the technical skills for 10 years plus, and it just got worse & worse while losses mounted. I was the worst investor ever; because there was zero guidance, and zero EQ. I had no idea what that even was. Stage 4. CFA, financial services work/industry experience. The CFA forced discipline, but I faught the 'CFA Way' the entire way; a very long and painful education, that they eventually won. Then I fell into GE Capital during the Welsh years, and thrived; there's isn't much to match having a honking pot full of money, room to use it, and an old school boss enforcing control the old fashioned way. Suddenly investing fell into place overnight, everything turned to gold, and the problem became one of being overly aggressive. All it needed was guidance. Stage 5. Over time we naturally get 'tamer' as we recognize that our decisions now affect others, our EQ improves, and so does our risk management. And the more 'street smart' you are, the better you are it. Part of that is the people around you, and we're blessed with linkages to some very direct and down to earth people. We've done well, but we treat investing purely as an extension of managing the cheque-book. If we're running our business well we should be having fun, we should have annual surpluses, and we should be putting it into other opportunities where we think we have an advantage. We just have the additional advantage of being able to do it as either an operational, or purely a stock/bond investment. Our nephews get the advantage of guidance from a much younger age, while still retaining their freedoms. No books, I'm too busy changing the world through the use of block chain, smart contract applications ;) SD

I seem to recall that my first investment was in a modest few pounds of sugar, and some misc. equipment to produce some gallons of fine libation - that were sold for a healthy profit. At the fine young age of about 15! SD

Couple of thoughts after talking to some property brokers. House buying is not rational. All the metrics in the world are meaningless as soon as your significant other informs you that 'this is the one'; you will pay whatever it takes, and twist the financial logic until it supports your decision. In the short-term the supply of product is fixed - and vertical on the Supply/Demand graph. If demand is static (most places), price change is entirely driven by self fulfilling sentiment. If you think prices will be higher later - you don't put your house on the market, reducing the number of listings (supply), and raising the price. The same process is readily observable in Bitcoin/Ether cryptocurrency valuation. If you believe that fiat currency debases over time (there will be inflation over the next X years), the price you pay today really doesn't matter much. The property will sell for more later, and the mortgage will be less in today's $, leaving you with an inflation 'equity'. And the higher the price paid, & the longer you hold the property - the higher this 'equity' will be. Case in point. In Toronto there are numerous 'box' houses in neighborhoods along the Bloor subway line, that were erected shortly after WWII as the supply solution to housing shortages driven by returned servicemen - who were starting families. At the time, these houses were at the 'end of the line', land was both cheap and plentiful, and a house might cost $70K (a lot of money at the time, to the people who bought them to live in). 70-80 years on, Toronto has grown well beyond these neighborhoods - and these same houses now go for 1M+ on a bad day. The 1M gain is almost entirely attributable to inflation over the years, and 'affordability' today is no different to what it was 'back then' - the numbers are just bigger (they have inflated). Apparently the major distinction between the different markets in the same urban centers is really mindset. The $3M condo owner views the market entirely differently than the $1M condo owner, who just wants a place to live. Hence it's entirely rationale. We typically just don't like what it says to us. SD

We just took a holistic view. 1) Wind turbines are here. Accept it or move on. 2) Wind beats nukes. Disputed/not popular in NA - but the proven reality in many other parts of the world. 3) Price includes pollution. Wind on top, coal on the bottom - how much is a clean environment worth to your society. 4) NA view is really resistance to change. Not #1 anymore, fighting to maintain status quo, and not adapting to change. The 'change' thing is not unique to the US or Canada; we see it in Europe and the UK 'Brexit' as well. We also see it showing up repeatedly in political discussion spilling over into other spheres. There is nothing wrong in that - but recognize that it both creates and destroys opportunities. Don't try to fight Shiva (Hindu god) - just position yourself so as to benefit when she gets more energetic. As Taleb would say - be 'anti-fragile' SD

This thread is about wind turbines - lets keep it that way. Like it or not wind turbines are here to stay, and they will be subsidized until economies of scale get the per unit cost down to where a subsidy is no longer required. Local governments make the decision, citizens who object are free to move elsewhere. The biggest producer of wind turbines in the world is China, & they replace coal generation. That China chose wind over nukes, and is reaping most of the benefit of the global economies of scale - is conveniently ignored. To get the lowest cost/ton from fossil fuel, requires large scale mining; what gets mined depends on the realizable energy output to pollution mix. Most coal sucks for burning purposes, & comes in far down the list; tar sands also suck - but at least perform a lot better because we can get other valuable products out of the bitumen stream. We measure energy output/pollution mix with price. Coal is a dying business, around the world. It's a handful of very large producers selling commodity product, and a lot of others struggling to get by. And many of those struggling being kept alive with subsidies, to preserve a way of life. As it is human nature to try and preserve what you have - protesters will not be going away. However, their kids will be encouraged to go to other industries. Our own view is that while US industry has been a powerhouse, the key words are HAS BEEN. The innovation, quality, and creativeness of the capital stock has been allowed to run down to the point where much of it is no longer competitive in today's reality. We no longer live in a world where everything is the same (therefore mass produce), and both good enough (value/application) and sometime (waiting lists) were acceptable criteria. CHANGE. SD

If they just build a portfolio of cryptocoin (Bitcoin, Ether, etc.) they (and their investors) deserve everything that is coming to them. But if they go into existing businesses; and JV with them to fund block chain/smart contract applications that fundamentally change the 'plumbing' of their business - the sky is literally the limit. I teach a due diligence course in the implementation of block chain/smart applications that advocates doing something very similar to this :) All it really needs is an existing (profitable) business, a group of developers, and a long-term funder. The JV gets bought out, the funder takes stock over cash, & resells later at inflated CF multiples when the applications deliver the greatly increased CF/share from automation. Everybody involved ends up doing very, very well. SD

Our position is only about 2 weeks old, and we took pretty much the same approach as we did with both DB and HCG. With luck and timing it just happened to work out almost right away. About the 1st time in 30 years for us! Agreed Boeing did this to themselves. We also suspect their problems are only just beginning, and that a few more shoes will drop before its over. Most would have expected Delta's purchase to have gone to Boeing - yet it didn't? Stealing someone's lunch is common practice in their business - yet they chose to start a pissing match? then bullied a smaller player & lost? If their defense business wasn't supporting their commercial side, would it still be in business? We have been very lucky here, and hopefully are wise enough to know when not to push it. SD

We took a punt on the pissing match between Boeing and Bombardier - and would seem to have just won big. Essentially a bet on Quebec standing behind Bombardier, and that there would be some kind of deal given all the recent high-level traffic with the UK. Prefs over common because of Bombardiers negative equity, & an expectation that we would have to wait at least 6-9 months. Instead we got yesterdays announcements. Pure luck! Is anyone else in this? SD

Green King makes a very good point. Spend a few bucks to simply re-certify in Canada - in what they know, don't expose the rest of the capital, & just work for a health care facility as many hours as they wish. Their return will be in what's meaningful to them, they will always be in demand (population is aging with them), and there will be minimal waste of their human capital. Hard to see any negatives. SD

Just to throw out a few observations; and move on. A good many of these are partnerships; to achieve the scale to afford a property manager, spread the cost of maintenance, and prosecute the deadbeats. Everything is as efficient as possible (AC/Heat, Boiler, Electric, Gas, Clad, etc), & debt financed with a standard P&I payment every month. We understand that in most cases the target for all this is around 1/3 of total rent. A good many are small hotels/pensions located in major cities/tourist areas & filled via AirBnB. Business people/tourists staying for a few days, & long-term stays of a few months/years until they buy a place of their own. And as they will not be full every night, owners get a free place to stay when they come into the city (perks). Cost to purchase of 2-5 million euro, renovation is debt financed. Partnership interests are typically 5% chunks, with valuation at a constant multiple of the last 5 years of average net income. It's possible to game, but partners typically know each other & partnerships are passed down through families. Everybody has been around the block, it's hard to BS, & partnerships are typically by invitation only. Very European, and community matters. Even those who could do it alone (American approach), typically don't. Most would spread their risk over 2-3 partnerships across the land; french partners would typically spread their interest across Paris, Provence, & something in the Loire Valley - with different percentages in each. Arabic partners might go with something in Cairo, Morocco, and southern Spain. You will not be rolling the partners either. A great many are women who have outlived their husbands, they have lots of friends in both high and low places, & more than a few have had a colourful history at some point. There isn't much that they don't know, and extremely well. Perhaps not what most NA people would could consider? But very effective! SD

Most folks in their 70's should not be in the stock market, period - even if you're a wizard. Simply because both time and health are working against you, and one stroke is all it takes. So what have other 'old' people around the world traditionally done? They aren't in the stock market; they own rental property, they live on the rents, and they hire in labour/management as they need. There is no clawback of state retirement income, there is something to do every day, and the property is available to mortgage against any time he/she wishes. And it is very, very effective. Next time you visit the Mediterranean, look at who owns the rental properties - how old they are, and how mobile. Compare that to the same age group in your town/city, and assess who seems happier. That's the true return on investment, and it's not measured in %. Good luck! SD

The switching costs are quite low for mining pools. If there was rampant abuse by a certain pool, I believe most miners would quickly switch mining pools. When the miners are mining in coordinated 'pools', and those pools are responsible for well over 50% of all the mining activity; the miners themselves are the abusers. While individual miners may switch between coordinated pools, there is no difference in the collective outcome. SD

#2 is the closest, but its missing much of the point. Yes, you're trying not to lose money; but the reality is that your handicapping will be off by quite a bit (model error) - simply because you're trying to compensate for irregular events that have inherent high standard deviation. The MOS you think you have, could well be a lot less than you thought - as for a time , the market is pricing at something other than the conventional metrics. Once bought you're looking for both return to the mean, AND growth. The company that can grow its FCF 5x over the next 3 years, is currently losing $, & just fell out of favor with the street. You bought because the negative sentiment distorted pricing, & are hoping you got the timing reasonably right (it does not crash another 20% the day after it was bought). Return to mean, means change in sentiment, & has nothing to do with conventional metrics. Focusing only on low cost means that you will almost never buy a great business doing well, and will almost always be in clean up mode. There are a lot easier ways of making a dime. SD

This is Asian lending - the 'real' collateral is the family name, and maintaining 'face' within the community. The public loans will not be allowed to default as it carries too much shame; different story for the private loans. SD

? is this not simply trading in a broker/dealer capacity? It likely is. But can they buy things for their customers what they consider a fraud? Exactly. It's a fraud and a scam and I'll fire anyone who buys it because they are stupid, but if you're our customer and you want some we'll be happy to facilitate the trade. So Jamie Dimon personally has to agree with the investment merits of every trade his clients want to make? I think this whole JPM/bitcoin thing is ridiculous No but his company shouldn't be providing know fraudulent investments to its clients. That's like knowing in advance that Bernie Madoff is running a Ponzi scheme yet helping people invest with him. If he truly believes that it is a fraud as he states, then there is no way his company should be dealing with it in any way. A brokerage or investment advisor should only offer legitimate investment options for its clients. It seems unethical to me to do otherwise. He's simply recognizing that crypto-currency is already a mania, and that folks are going to trade in these tulips - no matter what he might personally think. His forceful statement on the subject is the 'get out of jail free' card - removing a punters ability to successfully sue when this ultimately blows up at some time. In the meantime selling drugs to junkies is a profitable business, they have a comparative advantage, and they aren't afraid to use it. It also helps to remind ourselves that Tulip mania was simply an early example of momentum investing, which is a widely accepted practice today. SD

I will have a short on-line university course out in the next 4-6 weeks, that is designed with very much this in mind. Amongst other things the expectation is that it will take the learner through the block chain due diligence process from vision through to implementation, demonstrate via a case study - implementation of clear token in a charity application; demonstrate via a case study - implementation of colored token in a bond issuance application, and conclude with a project where the learner tries it out him/herself under guidance. If you then wish to do it 'for real' afterwards ... I know a great consultant who can help you - at a very reasonable rate net of a COBF 'friends and family' discount ;) SD