shalab
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Posts posted by shalab
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Are you ahead (> 10000) after taxes?
I like Chou and have invested (regrettably) into his US fund.
For comparison, if someone invested $10,000 into the Chou Opportunity fund in 2010 it would be worth about $13,222. The S&P 500 meanwhile would be worth about $28,901. Ouch.
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Many have tried to invest like Buffett. Some tried to eat like him too.
http://www.businessinsider.com/warren-buffett-diet-conspiracy-theory-2017-10
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To be honest, most hedge funds add no value to an investor especially if investing in taxable accounts. Even if they beat the index by 3-4%, most of the gains will go to pay taxes. For institutions, it may make sense as many are tax exempt.
Hedge funds make sense if the manager has alternative strategies or invests in different markets/industries as a diversification mechanism. It is also difficult to find people who are ethical - especially with other people's money.
How long should an investor allow a fund manager to underperform the indexes before they redeem 5 - 10 - 15 years? If you were to underperform at a job for 5 years you surely would be fired.
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Not fair to anyone to have folks like Buffett, Malone etc. on the list. I am looking for the next set
Ummm.... Buffett? Really surprised he's not on the list.
Too old ;)
He is somehow out of date, one foot in the grave, the other in "old economy" [read "on the top of a banana shell"]. [j/k]
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Best jockey to invest with - if a person is missed, can you please add their name?
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Great work - if one looks carefully, Verizon, Microsoft and apple are the main culprits. In Microsoft's case, net income and stock price have moved in opposite directions
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Added Nevada and Austin.
Chatted with a friend from AMZN - apparently the employees also get to vote on the location. There isn't a whole lot of enthusiasm for Toronto (weather + taxes + not US) but Boston, Austin or Denver metro area are all in play. Apparently Denver is preferable to many as it has many outdoor activities like Seattle.
Cost per city:
https://www.recode.net/2017/9/9/16278136/amazon-jeff-bezos-top-cities-top-new-second-headquarters
I'm a little bit surprised that there are no Texas, Nevada, or Florida cities on the list as these states have no state tax. They are also located in sunny locations with abundance of land parcels. Being a real estate guy, I've heard the narrative in recent years that Texas and Nevada are attracting lots of companies as the regulations tend to favor businesses and land use are more flexible. Getting a building permit in NYC requires some serious undertaking. I think Dallas and Las Vegas should be considered as top candidates as well. Those certainly have international airports. Vegas is interesting as the weather is nice (though dry hot) year around. It also helps that there is a ton of entertainment, dinning, etc that is not available in large corporate campuses elsewhere. From a millennial perspective, it is likely attractive as well.
As a HHC shareholder, I'm hoping that they somehow decide to locate HQ2 in either the Woodlands, TX, or Summerlin Las Vegas. I would say that Summerlin, Las Vegas would have a higher chance of those two. One can hope.
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Let us do a poll to see what people think.
Details here:
https://www.amazon.com/gp/browse.html/?node=17044620011
In addition, the current employees can choose this place to relocate.
In 10 years time, this likely will translate in 5B/year in salaries alone. At 20% federal tax, it is 1B/year in revenue for the government.
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Cigarbutt, really appreciate your optimism and positive outlook:
Here is an article from mainstream media on the impact of free trade on US jobs.
http://www.newsweek.com/free-trade-costs-american-jobs-332962
HJ,
Fair enough. I respect your position. There are a lot of people in your camp.
I too think/hope that the US will regain its foothold.
The trajectory will lie between exceptionalism and cynicism.
There is a lot of talk about disconnect these days and I don't like it. Participation to this Board is only one of the ways to "fight" this.
And frankly, I don't know if the "elite" has disconnected from the common man or is it the other way around?
Whatever the cause, I submit that we have to re-connect.
Disclosure: Naturally born idealist.
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+1. The amount of lobbying even in small town city governments is astonishing - a person doing 9-6 job has no chance to alter government policy.
My view here is that the interests of the average american citizen and those of giant multinational corporations have diverged and been so ever since NAFTA. And in many instances they are diametrically opposed. One side has the lobbying power and ability to manouver a very archaic political system of rules and governance which is the US system, and the other has the votes. The people however do not have quite the same ability to navigate the political system and so their will is being drowned out. This break in the transmission mechanism is leaving the public very angry with the political and other classes of DC elites whom they see as serving the corporations and at their expense. And I have to say that perspective is with some justification.
If you look at every single law passed in this country in the past couple of decades, it intentionally or not(I believe in the former) favors corporations over small businesses and multinationals over american based manufscturers. Even the tax system enormously favors the under 75k cohort of earners and the giant corporations but the small business owner pays 44.6% plus State/local/property taxes etc. ending up with a marginal tax rate over 50%. Whatever your view on progressivity, surely one can agree that it is a mess and not a fair system when the burden falls so heavily on one subsection of the population. Currently the higher wage earners and working couples and small business owners are facing the brunt of this system. The public sees that and percieves that the ladders of success available to them are being pulled away.
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Cigarbutt, your arguments are well reasoned.
I don't think the savings rate by itself is a huge issue in trade deficits - the US banks hold > 13 trillion in deposits. (http://www.bankregdata.com/allDP.asp)
As DTEJD has said, the US doesn't have reciprocal agreements with most countries. So government policy/regulation does play a big role on how trade works.
In addition, there is no need to have a trade war, I like the Wilbur Ross approach, tweak and enforce the current agreements. (you should listen to his confirmation hearing as commerce secretary). It was his position that multilateral agreements don't work well as a lot of compromise is needed to make the agreement palatable to everyone.
Your point of cost and consumption is right on - if the cost is high, people would think twice before spending.
In the reports you shared (including the one by the congressional group), it doesn't look at the US jobs lost due to these agreements. In the last election the majority from both sides thought that the US government is not acting for the benefit of its citizens. Part of it might be the Triffin dilemma.
Free trade is one aspect of it but there are others such as the cost of education, health care which is increasingly beyond the scope of an average citizen. So people in general have the feeling that they are not progressing forward. You can compare this to countries in Eastern Europe or Asia which were impoverished but have made good progress in the past two-three decades.
shalab,
The fact that I hold different or even opposing views does not mean that we are enemies.
Thank you for the inputs as it incites to dig deeper.
To get closer towards the light, maybe helpful to look at the other person's facts or line of reasoning.
I read your posts and links and suggest that you do the same.
In terms of trade balance, here are two links, chosen on basis of quality and objectivity.
https://sites.hks.harvard.edu/fs/rlawrence/ShatteringMyths.pdf
https://www.usitc.gov/publications/332/pub4614.pdf
You focus a lot on the trade balance issue, attribute the trade deficits to trade agreements and allocate a lot of unilateral harm to this aspect. That opinion likely played a decisive role in the last election. The second link has a lot of pages and the authors used "models" that can be reasonably questioned. However, I submit that the report shows convincingly that the trade agreements have not contributed significantly and independently to trade deficits.
The persisting trade deficits, especially with China, are significant. You can look at this from an "economist" point of view using the Kalecki equation (à la Montier/Hussman) or simply using common sense. Sharper Dingaan talks about the addictive buying behavior of America and high relative costs of production but it could very well be the savings glut behavior of export driven nations (you seem to favor the latter, with currency manipulation). But the deficits could also be due to Americans not saving enough themselves or the unusually low interest rates prevailing. There are many variables and the situation is dynamic.
What do you think of the Triffin dilemma?
Are you not worried that somehow unilaterally changing course on trade balance may precipitate a sharp fall of US firms profitability.
http://www.oftwominds.com/blogaug13/trade8-13.html
The Great Recession worked great in improving the USA trade deficit. Does it mean that we have to induce another Great Depression to normalize trade?
Like said before, in business, you need trading partners. Accords are better negotiated, not imposed. No?
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FWIW, every country has its positives and negatives. I have enjoyed my several trips to Canada and have a very positive view of the country. Once a border guard was grumpy (we were crossing the border past midnight) but otherwise no major issues. I checked out how to become Canadian permanent resident but the paperwork was quite involved.
Our favorite insurer (FRFHF) has a lot of operations in the US and reports book value in USD. So we are very close ;D.
SharperDingaan,
In some cases bilateral is better than no agreement or even disagreement. Don't you agree? ;)
http://globalnews.ca/news/3711536/canada-mexico-will-stay-in-nafta/
Unilateral decisions can be good, if right. Partners can be useful.
"After I'm gone, after we break up
After I'm gone, you're gonna wake up
You will find you were blind
To let somebody come and change your mind"
Ella Fitzgerald
I don't spend much time on the horizon of the USD dollar relative strength, but I take in consideration that the US may have the cleanest dirty shirt. I also think that the US continues to have amazing attributes but may be masked now, and maybe for some time, by unusual expediency.
I agree though that "adjustments" will come along the way (opportunities?). Downsizing can be difficult.
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The usa is not just another trading partner - 50% of Canadian FDI comes from USA. 2/3 of outward Canadian investment is in the USA. A lot of Canadian jobs depend on USA bilateral trade.
If the govt of China was running USA, Canada would have become northern USA a long time back : -). The situation is similar with Australia and to a certain extent the U.K.
http://selectusa.commerce.gov/country-fact-sheets/United_Kingdom_Fact_Sheet.pdf
The USA is unlikely to be hurt significantly in the event of currency devaluation - production will simply move to the US as the US economy is very flexible. Around 50% of the earnings of SP500 are from overseas.
The US still attracts the best and the brightest from around the planet. The US population is expected to cross 400 million in the next few decades whereas that in Canada will also increase but not significantly - the US population will be more than ten times Canadian population. The economy will also be much larger. The population in Europe (Germany, Russia) will decline significantly. Chinese population will also age.
Furthermore, the US has the most arable land, plenty of water supply and abundance of natural resources. Even with the current GDP levels of ~60K/person, the US GDP will cross 24 trillion. (it already is at 19.3 trillion now)
The US has started exporting pulses to places like India. India has second largest arable land (after US) but huge population growth, conversion of agricultural land for housing is causing it to import food.
No worries, the US is just another trading partner - same as everybody else!
Point is that if you're going to trade you cant be isolationist, and you cant dictate - the US isn't #1 anymore. A lot of what the US offers, Asia does as well - and often at better value. Currency manipulation, subsidies, protectionism, etc. is part of the value equation - and expected.
Like it or not, the imbalances exist because the US is addicted to buying more than it sells; simply either buy less, make the product yourself, or sell more. But recognize that you cant make someone buy from you when your value proposition sucks.
Many would argue that a very good solution would be making more product at home, and making US consumers pay more. Even Henry Ford recognized that the whole reason for paying a workforce more is so that they can afford to buy the products that you make; paying a foreign workforce little, then trying to sell them goods they cant afford - just ensures a growing trade deficit.
Deficits have to be financed, it is primarily Asia doing the financing, and they don't have to fully roll over maturing debt.
It is hard to see how the US would not be forced into a slow devaluation.
Ultimately it means adverse changes in the US standard of living, and the ability to accept them.
Not something the US does well.
SD
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EU may survive if Germany subsidizes all other countries through trade or other incentives. It runs a surplus. It is the same the us has done to sustain NATO.
In terms of the number of parties to an agreement, I would submit that the European Union was designed to fail eventually by design but its demise will likely be precipitated by the relatively high number of heterogeneous members. So your suggestion to simplify negotiations through bilateral agreements is reasonable. After all, Canada is only a negligible factor in this global game. ???
Concerning the link provided, I understand that most essential comments and references support the arguments detailed in previous posts.
In 1918, Woodrow Wilson described 14 points that formed the backbone of the League of Nations. The League failed eventually in large part because President Wilson could not obtain support by the Senate, in the context of the primacy of domestic focus. The inability to deal with the global world order transition then did not help peace and trade, to say the least. The third point of his presentation: abolish economic barriers.
Definition of a barrier: a circumstance or obstacle that keeps people or things apart or prevents communication or progress.
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Agreed, I think this applies to all the trading partners of USA. A lot of the lobbying was done by corporates to open up USA markets to do labor arbitrage but the reverse isn't true.
Free trade was promoted by a bunch of academics using outdated models. USA trade deficit against China is 350 billion dollars and 75 billion against Germany. The first one is more than 1000 dollars for every person in the USA. The second one is 250 dollars for every person.
I think most people would agree that free trade is good.
HOWEVER, I can think of three MAJOR example right off the top of my head of ANYTHING but free trade...
Coming back from the gym, I was listening to Michigan NPR...Something I try to do less & less, but the announcer was wailing that if President Trump rescinds the Korea free trade deal, a lot of Michigan won't be able to sell their cheese into Korea....and what a catastrophe that would be for Michigan jobs.
That very well may be...I do not know a SINGLE dairy farmer, OR anybody connected to it. Conversely, I know several people who work in auto plants/management for the big 3. I know many others that work at auto parts suppliers...It is cost prohibitive to bring a car manufactured/assembled in the USA to Korea...not impossible, just so expensive as to not make it worth while. We get plenty of Korean autos, and I buy LOTS of SSD drives and computer memory manufactured in Korea (Samsung). Why won't Korea let us sell them cars on a reasonable playing field? How much cheese does it take to equal the value of 1 auto/truck?
Same thing for Thailand. I had a friend who wanted to bring Corvettes/Cadillac CTS-V's to Thailand. It was relatively simple arranging the freight...slightly more burdensome filling out all the paperwork...almost impossible to overcome the 200% tariff on auto imports. Thailand sends the USA plenty of Seagate hard drives....why can't America sell autos to Thailand with little or no tariffs?
How are EITHER of these two examples of free trade?
Why does the "cheese farmer" get preferential treatment/representation from the USA government and the auto industry does not?
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The global liquidity and wealth has grown tremendously since 2000 - primarily on the back of real estate. It is impossible to say what the future holds - but it is strange that little known places in Canada cost more than cities with robust economic growth in the U.S
Well i can say what happens if we go full correction. We get another 10-15% drop over the fall and winter. Then it levels off for a while - 9 to 12 months - then you get another 10-15% leg down and then it says there for a few years.
However it's really hard to say what will come to pass. Vancouver prices have been insane for a long time. Also, there are places in the world, like Australia, which have been at bubble levels for more than a decade. So it's very hard to tell where it goes from here. But I think after this episode, the bloom is off the rose so to say. I don't think there's much of a chance of a strong recovery from where we are.
My personal view is negative. If the government follows through on their plans there will be massive tightening of credit for residential real estate come September (when this this is supposed to take off - per realtors). It's really hard to have a bubble without credit.
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For comparison, in the meantime - FRFHF book value decreased from 406 to 378 (or 388 including dividends) - a decrease of -4.4% and MKL increased from 555 to 643 an increase of 15.86%. The former trades at P/B of 1.28 whereas the latter trades at a P/B of 1.65.
BRK trades at a P/B of 1.44 (including KHC stake).
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Someone posted this in the fool's board - thought it is an interesting way to look at BRK. BTW, the book value is not adjusted for KHC market value still. A gap of 12 B pre-tax or about 9B after tax.
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Here's a fun way to look at how well they've done lately, and a way of thinking about the cash drag:
A year ago, Berkshire as a whole had shareholders' equity of $263,025m.
Of that, $72,679m was cash which has earned nothing and is still there: the start-of-period dead weight.
So, the "shareholders' assets that produced any earnings" were at $190,346. That still includes tons of goodwill and intangibles.
Shareholders' assets are now at $300,659, up $37,634 in a year.
So, the increase in shareholders' equity represents net earnings of 19.8% on the starting equity at work.
Thought of as a type of after-tax return on capital employed, that's a wonderful number.
It's only 14.3% increase on the entire starting equity balance.
So, the cash drag can be estimated as 5.5% in this quite good year.
That's a pretty high estimate, as Berkshire would have no financial credibility without some big chunk of it.
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Sd is right on the ball on this one. UCCAML is also correct. One has to remember that Watsa is from India and he puts family above everything. Watsa is getting on in age at around 70 years or so. Time for him to hand over reigns to his family.
You might want to look out a little more long term - and apply some context.
Prem's getting old, and planning for the next generation; it's why there have been all the spin-offs into Africa, India, etc. - paid for by issuing stock. Referring to Singleton strongly suggests that the stock was issued at a high price, and that over time - the intent is to opportunistically buy much of it back at a lower price. They hold their treasuries in part because it's an OSFI requirement of most FI's; but it also allows them to buy back what they've issued at any time.
http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/LAR_index.aspx
http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/tlac.aspx
They haven't had any big UW losses in a while; but we all know it's a numbers game, and that both the frequency and severity of weather related loss is getting higher. While it's highly likely they've re-insured much of the risk, it's pretty much a given that at some point they're going to take a hit. Lowering price, and triggering Singleton strategy buy-backs.
So you are really buying a quality shop + an implied put (Singleton strategy buy-back). All good.
But as an investor - could you not do the same thing for less? Simply sell when Prem issues, sit in treasuries, & buy when he repurchases.
They haven't had any big realized wins on their bow-wow investments in a while either.
However, if they were going to fail - most would expect that they would have done so by now, and that these things are going to be worth quite a bit as the economy starts to improve.
SD
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IV: if we take 50% of float as being equal to equity at 50B, the book value is equal to the current market cap!
Regarding FAMG - Microsoft's pre-tax earnings have dropped in the last five years (even adjusting for restructuring costs) from ~27B to ~23B this year but the stock has doubled. In the same time, the long term debt has gone up from ~20B to ~76B. If we put the pre-tax multiple of 10 to the earnings as some folks are saying, this is worth only 250B give or take. However, the market cap now is 575B.
Something has to give
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That includes folks like Watsa also - he still says in his annual letters that the goal is to get 15 percent annualized return. This hasn't been the case since 2010. No one seems to question that - if Buffett did it, there would have been many critical articles about him in this board and the general press.
It is not just Zinc, it is CRYP, HNR, Delta financial ... the list goes on and on. If I spend 10 minutes, I can come up with dozen stocks that he touched and went to literally 0.
What irks me is that, he is like the mouse that has learnt to roar like a lion (Buffett) and has no killing to show for it. He constantly cites Buffett, quotes compounding. He has a Madoff like Chutzpah given his track record.
He is exploiting the flaw in which compounding is measured. You setup few funds with small amounts, and take infinite risks in first two years. Some will collapse. Some will return triple digits. You close the collapsed funds. Then highlight the early triple digit returning funds to investors and start gathering funds. You underperform major indices when you add new $. But with the way compounding is shown (the growth of $1 since inception), you still show admirable returns. You then go out and keep marketing showing the incredible returns of the first $1 that walked in.
No one remembers the closed funds. You can underperform major indices for 30 years, but still the first $1 compounding will show outperformance. Foolish investors are too dumb to realize that. Then you go out and give talks about compounding of that first $1.
Nice summary!
+1. No particular bone to pick with Pabrai but he's the archetype of the helpers Buffett talks about. More marketing versus investing skills. Also this idea of "what's wrong with having very high goals?". Yeah right, try telling your potential investors that you aim to beat the index by modest amounts. Even they are eating crow. I remember distinctly Longleaf stating their goal of index+10%.
So, my money saving tip I've developed is not put any money with those who state a large outperformance goal.
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This is a good post, p/b is a metric like any other metric. If you look at the debt (debt/equity), another picture will emerge. Now, many techs have surged because of p/e expansion, not necessarily because they increased earnings or book value etc. In some cases, the debt has also increased tremendously.
I asked in another thread when people think the tech stocks will rise another 50% from current valuations. In Berkshires case, everything else being equal and without a major recession, it will be five years or less. It is difficult to estimate this for the techs.
Valuing BRK on book makes less and less sense as time goes on. It used to be mostly insurance cos with a portfolio of publicly traded stocks and a few operating businesses on top, but now it's also bunch of very large operating businesses of various kinds. The two-column valuation method makes most sense, IMO.
I certainly wouldn't compare the book value of BRK to GOOG or whatever...
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Book value at end of Q1 - $124 (including KHC stake of 10B not counted in book value - actual value is close to 15 B, -5B for tax allowance)
Book value at end of Q2 - $129 SP500 perf + ~1.5% => 4.5% gain from Q1. If book value is $128, P/B is 1.32, if book value is 129, P/B is 1.31.
For comparison - average P/B for SP500 company is 3.1.
The famous FAAMG stocks look like this:
AMZN => 27
FB => 7.2
GOOG => 5
AAPL => 5.9
MSFT => 7.7
Buying Korean stocks as a US investor
in General Discussion
Posted
Hi guys - I checked with Fido and Etrade, looks like both stopped offering the ability to buy south korean stocks in 2016. Are there other options (besides buying ADRs or ETFs) to buy stocks directly in KOPSI?
cheers!
shalab