wisdom

Not buying anymore. Loaded up on USD over the last 10 years when the US was on sale. I am building CAD cash as I believe Canada is about to go on sale. PS. Should add, I am no expert.

I am sure the increase in amortization to 40 years with 0% down helped along with other steps taken to help Canadians buy houses. That was the governments contribution.

It will get nasty if this impacts the housing industry in Canada (which I expect it to). Housing and related industries are around 25% of GDP and investment in housing is over 7%. The commodity crash may lead to people losing houses when their debt levels are at their highest levels in history. At 70% home ownership it could get interesting as future demand is going to be limited when an average house costs 5.5 times the median household income. In some cities, it is at 10x. Canada does not need sub-prime lending - there are enough investors who have pooled funds and lend money privately at 12-14% on 2nd/3rd mortgages. These funds are usually borrowed at 3.35% from FI's using individuals equity in their own residence. The boom has gone on for so long a lot of home owners have made this is a source of income for themselves. Most of these guys have no past experince of downturns and have no idea what they are getting into. On $500,000 HELOC at 10% spread they could be earning $50,000, and, as far as they understand with no risk.

I concur with A_ Hamilton. The stimulus in China saved the day for Australia, Brazil and Canada. As China moves away from investment led growth it will be tough for these countries because all of them have real estate bubbles backed by higher personal debt levels than the US or UK back in 2007. The oil rigs had jobs that paid $120,000 to $300,000 for high school graduates. It is tough to earn those incomes in other industries and support the debt/lifestyle individuals may have taken on. For perspective - China was buying 50% of global production of several commodities at it's peak. It's tough for any other country to replace that kind of demand.

I do not have any specific knowledge but recall reading that this fund would be more focused on infrstructure type of projects. I would imagine this would be better for insurance companies or pension funds to invest in. TCIL is into buying businesses.

http://business.financialpost.com/2015/02/03/lower-oil-prices-strike-at-heart-of-oilsands-production/?__lsa=35ac-6d6c Perspective from the Canadian oilsands.

For businesses doing well during deflation you can look at companies such as Toyota in Japan over the last 25 years. There are several such examples. A good business will adapt to the new reality better than most other investments that one can think of. Bonds or income generating securities that can survive and maintain their payments during the deflationary period. I believe the reserve currency of the world is a good place to be, comes from the 1930s experience. UK and GBP did better than others. Back then GBP was the reserve currency as most commodities, global trade and debt ends up being in that currency. Avoiding debt will make a huge difference. I still recall from a link someone had poster here back in 2010 or so. It was a Fairfax employee newsletter. In that letter, Watsa had come out and said he recommended to employees that they have no debt - not even an auto loan for this very reason, if I recall correctly. I would want gold only if civilization was falling apart and I don't see that happening anytime soon. I am fascinated by India as an opportunity (opposite of the developed world - young and low levels of debt) - India should benefit due to commodity deflation - it is a net importer of energy/commodities. - I believe less than 10% of Indians have a mortgage and there is a huge shortfall in housing stock. - 50% of the population is under 28 (they will start earning and consuming over the next 20 odd years). - Large amount of infrastructure needs to be built. - it is an economy that is not that integrated into the global economy. - Investment cycle has just started in India (they just have to educate people, build infrastructure) and they will have enough growth just because of internal demand. - Lots of barriers to doing business (removal of these barriers will speed up growth)

This is what Watsa has been warning about for a few years now. FFH and BRK would be very well prepare to deal with this. My understanding is that you want to hold the reserve currency of the world. No debt.

http://www.bloomberg.com/news/2015-01-17/swiss-franc-trade-is-said-to-wipe-out-everest-s-main-fund.html $800 mil hedge fund blows up CHF trade

Cardboard that is awesome that you are able to share an experience such as this so openly. It will only make you better if the lessons learned are correct. Regarding being close to the bottom: Will there be secondary effects from the crash in oil/commodities, the Swiss decision on CHF, negative rates in Europe and China continuing to slow. It is too early for all this to have played out. How will European banks and insurance companies deal with negative rates especially when their banks are still so leveraged? The drop in Euro could force the Japanese to devalue the Yen more. What if the Yen moves to 200 against USD as some expect? How will this impact Germany and the rest of Europe and Asia? Meanwhile, debt levels aren't exactly low around the world leavinng no room for error by any major country. Where does demand come from unless the debts are reduced? The risks are pretty high until the de-leveraging cycle is completed. Obviously, this does not imply that the markets could not run up for the rest of the year from here. Who knows what happens in the short term? The movie is probably just beginning. Better to be prepared, just in case, things do not go the way we expect.

there is a youtube video - search mohnish pabrai and you will find it - he compares himself to forest gump. it is a 5 minute video. If you recall his old plate before GM warrants - cmplb26 that would be another clue.

Hoping autos and retailers do well as the consumer benefits.

Could it be the Fairfax thesis starting to play out?

http://www.bloomberg.com/news/2014-12-04/gross-says-debt-creation-by-policy-makers-akin-to-public-smoking.html

I read up on what Gary Shiller has to say as he speaks or writes frequently enough to keep up with his toughts as they are evolving. I watch good investors - most of them have higher cash levels or have raised capital and set up new permanent vehiclessince the beginning of 2014. Countering this - there will be winners - I think of Toyota in Japan for example. Even though Japan hasn't done well, several Japanese companies have. Could there be 2 phases: 1) where the consumers have more money to spend and users of commodities have higher margins. 2) where jobs and incomes are impacted and thus, the consumer too slows Difficult to know how it plays out though. Who knows how long China can keep things going. Several China watchers think - another year or 2 at the most without serious changes. I don't think anyone undestood exactly how 2008 would play out either. Best to position yourself to have options no matter what situation plays out, would be my guess. Have hedges or higher levels of cash maybe. Demand a higher margin of safety. EDIT: Or maybe just sit on our butts as Munger seems to be doing right now.

Not such a good thing for Canada as we produce commodities unfortunately. I think the consumers, retailers, leisure activities, importers and users of commodities stand to gain.

That is a tough one. No easy choices. Perhaps your wife and you need to sit down and see what is more valuable to the 2 of you. Maybe looking out 5-10 years from now. Giving a higher weighting to things that are more important to the 2 of you in the long run. Hope you make the best deicision for you guys.

The Chinese are trying to move their economic model to a consumption model from the current investment model. So even though there may be a temporary blip in auto sales (maybe bigger in real estate and related industries), I would expect autos to do better than those industries.

In Canada,we have had 2 industries that have come to dominate - mining/drilling and housing/finance over the last few years. We have had over 9,000 manufacturing businesses close since GFC. As commodities drop - our incomes will be impacted at a time when most consider our real estate overvalued (70% home ownership) and highest recorded personal debts (same or higher than US back in 2007). Deflation especially in commodities and real estate would not be good for Canada. Could make for an interesting scenario. EDIT:I guess it has already started in Canada.

this is why you have cash, FFH and no debt. countering that is QE in Japan, Euro zone and stimulus in China. Not sure when it could start. Relatively in that scenario US should still fair better than most of the world because it has the reserve currency.

How about Autos - GM. SUVs and trucks have higher margins. Retail - consumer will have more money to spend. Both areas are cheaper than the market.

Gio, India has 600 mil people below 28 years of age while the rest of the world is aging. The other 50% have been providing for the 600 mil - educating and raising the 600 mil. If the 600 mil can be educated and trained over the next 20 years - it will unleash a lot of potential. Which inturn will lead to large increases in spending and growth. India today is the mirror image of the developed world - the consumer does not have much debt, insurance and it is a young country (demographics) with a lot of red tape. If these barriers are removed, India would grow rapidly over the next 20 years. edit: at 7% growth over 20 years - the per capita income in India will be around USD 8,000 which is where consumption reaches the levels we are used to in NA or Europe. Cheers.

http://www.bloomberg.com/news/2014-11-27/watsa-s-fairfax-to-sell-shares-in-fund-for-investments-in-india.html?cmpid=yhoo FFH is setting up a new company for the first time to invest in India. FFH and other investors are putting up $500 mil. I recall reading somewhere that FFH had planned to put in $300 mil. Not sure about the fee mcliu.

Anecdotal: Everyone I talk to is more interested in stocks today then they were 2 or 5 years ago. At the sametime, everyone seems to be scared of the upcoming crash. I am not sure what to make of it. But, the excitement isn't there yet. In the past everyone would be talking or investing in stocks without being too worried of losses in the near future.

From memory munger was virtually all cash or treasuries going into 2008. He is relatively bullish holding as many stocks as he does. Things may not be cheap but not everything is expensive.