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shalab

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    BRK-A book value and intrinsic value

    in Berkshire Hathaway

    Posted

    Thanks guys - then the only adjustment is for KHC. 283 + 13 = 296B. So the IV is anywhere from 430B - 475B on 31st Dec 2016. Current market cap 419B. Another 20-24 B will hit the books by end of this year. (if there is no major cat issue or stock market crash). So we are looking at a book value of 315 - 320 B by end of the year. Using the usual multiples - the IV will be anywhere from 470B - 505B without considering acquisition of other businesses, appreciation of stock price in 2017 etc. One can look at 10-20% gains for this year.

     

    If there is corporate tax reform or other changes - things should get even better.

     

    Thanks a lot, redskin & aws,

     

    That actually skipped my attention. The accounting treatment is actually material here.

    BRK-A book value and intrinsic value

    in Berkshire Hathaway

    Posted

    In the annual report - it mentions:

     

    shareholder equity:  283,001 Billions

    class A equivalent: 172,108 $/share

     

    If including KHC 13.1 Billion and BAC Warrant Gains 10 Billion, the shareholder equity will be 306 B. The current price including these two looks undervalued to me.

     

    Question: is the BAC gain reflected in book value/share or not?

     

     

     

    Question For Those That Voted For Trump

    in General Discussion

    Posted

    I don't know why the crowd comparison is headline news ( 2009 inauguration to 2017 inauguration ) unless you want to discredit the new President. One should also remember that papers sell to their audience and all major cities in the coasts are democrat oriented.

     

    Also some of the mainstream media painted his inauguration speech in negative terms. I didn't feel it was negative but was combative. It felt he called out Obama (all talk, no action) and there wasn't a need to do it.

     

    That said, the response of his team presenting "alternative truth" doesn't make sense.

     

    I think its great he is holding the media accountable. The majority of the media is liberal so this should be expected. Why shouldn't they be called out?

     

    Since everyone likes to put these discussions in an investing framework:  Imagine listening to a conference call where the CEO states that revenues increased by 25% YOY whereas a simple calculation shows there was actually a decline of 10%.  The CEO not only stands by his numbers when challenged, but is pissed that analysts are questioning him.  Then, in response further queries, the company's general counsel (or VP investor relations) states that the 25% increase is an "alternative fact".  I just don't get how any rational person/investor could not be alarmed by this behaviour.

     

    Yes, there's always spin.  But generally in the world's respected democracies the spin is not with regards to readily established facts.

     

    All this said, my biggest fear is that Trump's narcissism makes him very manipulable.  He is clearly preoccupied with his own grandeur to a degree incomprehensible to the average person.  Fortunately there are some smart people around him to help guide the ship. 

     

    Bump.

    Hamblin Watsa investment style over the decades

    in Fairfax Financial

    Posted

    I guess Ben Watsa and family will own controlling stock. They will also be on the board.

    Company will be run by professional managers

     

    I think the Hambin Watsa investment council will continue as they hire a lot of young people to manage their money.

     

    We know who would run Fairfax and that's the perfect choice in my opinion. 

     

    Could you educate me?  I missed this.  Thanks!

     

    Well Prem runs Fairfax and will until he no longer can...be it physically or spiritually.  But it looks pretty obvious who would run Fairfax if Prem could no longer do so.  If you don't really know, time to do some legwork and figure it out.  :)

     

    Incidentally, no one has ever said anything to me.  But after watching it for all these years, I kind of have a pretty good idea of changes at Fairfax that may not seem like much, but are monumental shifts in planning or thinking.  Cheers!

     

    Ha - OK!  I also have a fair idea, although I am nowhere near as well informed as you.  However I read your comment to mean that an announcement had been made, hence the question.

     

    Pete,

    It really is obvious!

    Sanjeev is going to merge FFH with PDH and he is the one who will be running the show!!😉

     

    Cheers,

     

    Gio

     

    You got it!  I'll do a reverse merger...$10M corp buys out $10B corp.  Cheers!

    Household debt

    in General Discussion

    Posted

    Average canadian debt in 2015: $93K

    Average US debt in 2016: 132.5K

     

    http://news.buzzbuzzhome.com/2015/08/bmo-canadian-debt-2015-good-debt.html

    http://news.buzzbuzzhome.com/2015/08/bmo-canadian-debt-2015-good-debt.html

     

    I have a home loan, car loan (at low interest rates) and put all my expenses on my credit card that I pay off monthly. I get 2% back for using my credit card.

     

    However, an average Canadian is wealthier than an average American and has less debt.

     

    uccmal - you are right that U.S has more assets and also U.S can't export its way out.

     

     

    That which cannot continue into perpetuity won't.

     

    But we also tend to only change when we're forced to. 2008 was the beginning of that "force"; but instead of dealing with it, we socialized it at a lower carrying cost to delay the day of reckoning. In response, gov't budgets went to hell and national debt figures have exploded - and are still growing.

     

    At some point, there will be a reckoning.I don't know when or what will spark that, but it seems totally unreasonable to have this exploding debt (mostly corporate and national, but some at the individual level again too) while growth has remained muted and wages have remained stagnant. At the very least, it means that all the money borrowed in the past few years was wasted on unprofitable and uneconomic endeavors given that national income growth has remained a fraction of debt stock growth.

     

    I just read what Howard Marks said about cycles of loose credit & that very waste of capital.

     

    Are their any significant parrallels in history (US or foreign) which eventually came to an unavoidable end?

     

    I'd love to read more about this...

     

    Canada: 1990-1996: Government debt had exploded exactly like the US is now, perhaps with less assets.  Interest rates were high.  So, the consumer was squeezed at the same time as the government.  To get it in order the government had to downsize at all levels aggravating the recession in the private sector.  And oil was very low. 

     

    It took a few years and alot of export assisted growth to get things back on track.  It was during this period when I entered the workforce after school.  I worked from 89 to late 1992, got laid off, went back to school in 1994 for a year and a half, graduated and didn't work full time until 1998.  I read Lowensteins book and decided I never wanted to depend on having a job again.  In 1992/93 I knew almost no young person who had a job. 

     

    The difference for Canada versus the US is that we could export our way out.  The US has no such option.  This period also set the stage for 2008, when Canada, and Canadian banks were still in the careful stage, and as a result didn't suffer much. I am afraid it has degenerated since then.  How quickly we forget.

    Identity Crisis

    in Fairfax Financial

    Posted

    I have never understood the deflation bet. As far as I can see:

     

    1. Canadian economy has not shrunk despite the drop in commodity prices and people don't expect Canadian economy to tank in the next five years

    2. Inflation in China/India etc. is high despite the drop in commodity prices

    3. Wages/salaries are going up in the U.S

    4. If the Euro/pound drops against the USD, there will be inflation pressure in the E.U

    5. The U.S is a major economic power still ( > 18 trillion USD in GDP in 2016 and ~20% of world GDP ) - China has 350B trade surplus with the US, Germany has 75B surplus with the US. These economies will be impacted heavily if the US trade is disrupted.

    Identity Crisis

    in Fairfax Financial

    Posted

    What about deflation hedges? - looks like there is going to be inflation not deflation.  I like PW as well but I think the 15% return goal in the AR is a bit disingenuous.

     

    Fairfax has always been enigmatic.

     

    I agree it is pretty hard to argue that that the Russell 2000 is cheaper today than 5 years ago. I'd like to see a good honest discussion of the hedging mistakes, and ultimately  get out of the equity "hedging" business altogether.

    Canada Economy

    in General Discussion

    Posted

    The pension tax is pretty reasonable - it is higher in the U.S (with higher salary cap of close to 120K) and our social security system is about to break down. Hopefully there will be some reforms will be made so it remains solvent for the needy.

     

    I have heard Canada has very generous pension/health care scheme - how much does one pay into it? What is even more surprising is that the median net worth in Europe is much higher - is this because of inheritance of wealth?

     

    Specifically to this. Health care is paid out of income tax. Pension is paid for through payroll taxes. The rate is 4.95% of salary up to 54k income and 0 above 54k. This deduction is matched 1:1 by the employer. After reforms in the late 90s the pension system is very well run. I'm not sure how generous it is. Everyone gets a fixed amount based on years or residence then the rest is determined by how much you paid into the system. I think it maxes out around $1,600 per month if you've paid the max into it. Most people get less.

     

    Regarding the disparity between Europe and Canada there are several factors ate work. Yes there's more inherited wealth it Europe. There are some countries in Europe with really high savings rate (Germany, France, Italy), more organized labor in Europe, more income inequality in Canada. Also Canada is a country with high immigration (about 0.8% per year), more than 20% of the population was not born here and were quite poor when they came. So they didn't really have the time to build that wealth.

    Canada Economy

    in General Discussion

    Posted

    I have found that everything is more expensive in Canada compared to U.S - especially after 2007 or so. Everything costs more starting from orange juice, hotel rates, pizza  etc. Also, I was surprised they started charging for parking at Whistler/Backcomb - this wasn't the case before the Olympics.

     

    Not sure why there isn't adequate competition in Canada - is this the tax structure or something else? (difficulty of doing business)

     

    I have heard Canada has very generous pension/health care scheme - how much does one pay into it? What is even more surprising is that the median net worth in Europe is much higher - is this because of inheritance of wealth?

     

    Average wages and net worth should always be looked at as a share of the developed world wages and net worth. Hence the need to adjust for currencies.

     

    This is especially true for Canada since a lot of consumed goods are imported. The USD has a big impact on our costs. Moreover, competition seems lower: restaurants, banking, etc. and we get gouged by companies (cartels) not pricing goods at the same price that they sell them for in the U.S. even after adjusting for currencies. Cars, electronic goods.

     

    Regarding net worth, that value is so influenced by the value of housing that it is hard to see if it is real or not.

     

    Cardboard

    Canada Economy

    in General Discussion

    Posted

    We had a heated debate on US presidential race, now time for a discussion on Canada as we have so many board members who are very familiar with Canada.

     

    Here are some factors to consider:

     

    Housing prices in Canada are more expensive than the U.S. where the average is around 189K per Zillow.

     

    http://www.livingin-canada.com/house-prices-canada.html

    http://www.zillow.com/home-values/

     

    Consumer taxes in Canada are higher than the U.S.

     

    Average wages are higher in Canada than the U.S

     

    http://www.livingin-canada.com/work-salaries-wages-canada.html

    http://www.tradingeconomics.com/united-states/wages

     

    Finally, the US trade deficit with Canada is dropping - it is expected to be the lowest this year since 1992 (pre NAFTA). While this can be partially attributed to drop in commodity prices, likely this is due to the strength in Canadian economy and the wealth of citizens.

     

    http://www.freedomthirtyfiveblog.com/resources/median-and-average-net-worth

     

    The median net worth of a Canadian household is much higher than that of a median American house hold.

     

    Canadian GDP is at 1.8 trillion, the U.S Trade (export+import) is about a third of the economy.

     

    Inspite of the commodity crash, the GDP has continued to grow - building on the wealth from last decade.

     

    The questions are as follows:

     

    Canadian GDP and wealth will grow in the next five years

    Candian GDP and wealth will stagnate/decline in the next five years

    Canadian currency will decline further in the next five years

    Canadian currency will appreciate against the U.S dollar in the next five years

    Canadian govt offers better(and more) services to its citizens compared to US

     

     

     

    American or not, how would you hedge a Trump win on Nov. 8

    in General Discussion

    Posted

    The odds of a Trump win is very small to be non-existent. I am yet to see a poll that shows Trump winning the electoral college. I think he is going to carry Ohio and Iowa which is better than what Romney did last time around. Trump has no path without winning one or all three of these states - Florida, North Carolina and New Hampshire.

     

    The real fight though is going to be for the senate control.

     

    A democratic president and democratic control of senate and the republican control of the house, should be a good path forward under the circumstances.

     

    https://www.bing.com/search?q=Election+2016+Predictions+By+State

     

    Anyway, it should be obvious tomorrow evening  ;D

     

     

    A loss in confidence in government and political gridlock will be good for Bitcoin. Prem selling his long US treasuries for cash was also good positioning.

     

    They are preparing for a market crash regardless of the outcome.  They are freeing up cash to deploy elsewhere.  I am using a very simple metric:

    Trump wins: instant market crash.

    Clinton wins: market rally followed by market crash.  Simply because we are due for one.

     

    I cant even begin to quantify how much this election has juiced the economy in the US.  Also, When this distraction is past other non US issues will start to weigh on markets.  EU, China, et al. 

     

    This reminds me of the long build up to the 2008 Olympics in China, and what followed after.

    BRK 2016Q3 reporting

    in Berkshire Hathaway

    Posted

    Comparison with some other (more popular) stocks:

     

     

    MSFT Quarterly earnings:

    Income before income taxes: 5,325 million

    Market cap: 457 billion

     

    Google Quarterly earnings

    Income before income taxes: 6,045 million

    Market cap: 531 billion

     

    Facebook quarterly earnings

     

    Income before income taxes: 3,169 million

    Market cap: 347 billion

     

    Amazon quarterly earnings

     

    Income before income taxes: 491 million

    Market cap: 357 billion

     

    Netflix quarterly earnings

     

    Income before income taxes: 51 million

    Market cap: 52 billion

     

    Berkshire Hathaway quarterly earnings

     

    Income before income taxes: 10,525 million

    Market cap: 353 billion

     

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