Thrifty3000

Until everyone on earth has everything they want Instantly there’s still opportunity to deploy capital, do work and provide value. (Unless some non-human species thinks energy used by humans is energy wasted. That would suck.)

Gov will have to print trillions at first to stop the panic and trillions later to service debt

Apparently a family only needs about an acre of land (and decent weather) to sustain itself. Some seeds, livestock, tools, a couple Tesla bot farmers, and you’re farm to table, baby! But… when you realize that it will cost less than $10 billion a year for about 200,000 bots/machines to replace the current 3 million or so farmers in the US, you’ll realize that farm labor cost per American will only be about 6 CENTS per day! (Cost of seeds and meat also plummets over time.) Don’t buy farm land. Dig through your couch cushions. There are several angles to the AI/robotics story. One that people have trouble wrapping their minds around is just how incredibly cheap basic things ARE about to get. I think your best use of that bonus is to get out of debt! If the value of your labor declines it’s gonna be hard to pay off that loan.

If a bunch of white collar yups - up to their eyeballs in debt - are about to be all but unemployable, then what assets will they (or their lenders) be selling to stay afloat? I suspect I’ll own a nice chunk of land 10 years from now. But, I’m not in a rush to buy just yet. (I remember when I could have bought a multistory beachfront on 30A for around $300k during the GFC. Unbelievable. I ended up buying my primary home for $500k instead. No regerts.)

If nobody has a job then who’s paying for all these AI services?

I’d love to have a decent estimate of normalized look through earnings on the portfolio. I recall we were able to round up the look throughs for about half the portfolio a few years ago.

Nah, we’d all feel very differently about the BlackBerry bet if that pesky Steve Jobs hadn’t come along and: 1) pushed for an incredibly innovative touchscreen-only device. 2) recognized the power of the App Store. Prem’s bet on BlackBerry was done for pretty much exactly the same reasons Buffett later bet on Apple. (Prem was addicted to his Blackberry and saw he wasn’t alone. That’s indicative of a very strong franchise. Buffett recognized that his grandkids - and practically everyone else around him - if forced to choose between having a car or an iPhone - but not both - would choose the iPhone without hesitation.)

For those of you who have been attending Berkshire’s annual meetings for decades there’s a decent chance you’ve met Richard Cook. He’s a long time Berkshire groupie from Alabama and hosts a party in Omaha every year. More importantly he’s an especially nice, generous, man. Sadly, his daughter was one of the two students killed at Brown this week. Please keep fellow Berker Richard Cook and his family in your thoughts and prayers.

Haha. @gfp I suspect your investing “dumb face” gets a whole lot less wear than mine. (Mine could use a face lift.)

Whoever it was that sold on Friday sure is wearing their “dumb face” today

Amen

Steak house. Never as good as the ones I make on my Green Egg, and 5x more expensive. But I was ridin’ high on that wealth effect wave, baby!

According to AI a 4% to 8% sustainable price jump this week would be consistent with the price action of other recent additions to the TSX 60. I had a celebratory steak dinner last night because I like to count chickens before they hatch.

@Viking Buffett used to add intangible amortization back to cash flows to estimate owner earnings. Do you factor intangible amortization into your estimates? I assume it’s another $5 or $10 per share.

Well, this is going to be easier to solve than I expected, thanks to AI. LOL According to Grok’s dozens of sources, like McKinsey & Co, etc: Only about 20% of P&C insurance volume is due to non-human related risk events. The 80% that’s human-related is concentrated in three areas: - Auto ($300 billion) - General/Professional liability ($100 billion) - Workers comp ($35 billion) Current forecasts are projecting 30% to 50% DECLINES in claims volumes in those lines of business by 2040 (including some offset for emerging AI related risks like systemic hacking). Decline will continue beyond 2040, with certain lines - like auto accident policies - being all but extinguished. Ergo, I’m starting to think it might be sensible to start forecasting no more than maybe 3% annual premium volume growth through 2029, and then to start REDUCING premiums by a negative case of, say, 3% annually from there on out! ^ And that, ladies and gentlemen, helps explain a lot of what we’ve been seeing from FFH management recently. They’re repositioning for a P&C Industry in runoff! (Ps. I have a penchant for drama.)

For me it’s worth a discussion until I can model the key variables/assumptions needed to handicap the risk (or identify any glaring red flags). Variables like: - percentage of business derived from insuring human-related risks - human-related risks that likely will be materially reduced by AI/Robotics - a reasonable timeframe The AI cliff is similar to the interest rate cliff we used to talk about on this forum. Yes, it’s impossible to forecast interest rates and AI adoption. But, it’s not impossible to estimate how a business will be impacted by some reasonable negative case scenarios. I sleep better having a model estimating FFH’s revenue in a zero bound interest rate environment. And, of course, I’m thrilled we’re not in one. However, I don’t yet have any such model related to AI impact, which I find irksome.

Among other things it’s based on: - an awareness that roughly half the cost of all things purchased today is labor cost - a basic understanding of the vector mathematics and technology driving AI and robotic advancement (proofs of concept by Waymo, Tesla, etc.) - understanding there are 150 million jobs in the US and that Tesla alone is scaling production to 11 million bots annually. - an expectation that many human-related risks will be rapidly removed from the insurance equation leaving insurers with a higher proportion of non-human risks like cat risk. (Ie. What will happen to the insurance cost of a trucking company when you remove those pesky driver-related risks from the equation - bots don’t fall asleep at the wheel. What happens to medical malpractice cost - bots don’t mind 24 hour shifts? Workers comp insurance - see ya. You get the point.) ^ this is happening. The internet materially impaired staples in our lifetime like newspapers and indoor malls (not destroyed, impaired). Robotics materially impairs the business of insuring human-related risk. Fairfax has time to respond, and they’ve already started diversifying.

Because they’re facing a very real existential threat playing out over the next two decades, where the cost of repairing/replacing all things insurable will decline precipitously (along with insurance profits), so they are having to diversify into more durable cash streams that will sustain as long as humans; think real estate, food, banking, shipping, mattresses/sleeping. This is why it pays to invest in intelligent/talented capital allocators with well-aligned interests. (And to size this investment accordingly, the way Prem and Wade have demonstrated this year. Be a lot in, but not all in.)

According to Grok (which I take with barely a grain of salt) 20% to 30% of daily FFH volume is likely quants/HFTs, etc. Those guys thrive on momentum, so I assume they’ve been driving the price action. No matter what the reason I love FFH being able to sop up shares down here. What a gift.

Seems to me like investing in US Bonds blurs the lines a bit between macro and micro... As a Fiduciary the Fairfax team has an obligation to assess the financial strength and behavior of the borrower. In the case of lending to the US gov I don't think Brian B. has to look too hard to see government actions and circumstances that make shorter duration a perfectly rational choice. (See Japanese bonds for reference.)

Don’t forget to overlay charts of BRK’s PE Ratio and Price to Book over that timeframe. I think it’s fair to say BRK’s valuation got pretty frothy at times. I doubt many people would argue FFH’s current valuation is too lofty - unless they work for Morningstar.

Keep in mind swaps are just a derivative - an asset that derives value from the value of another asset. Swaps do not convey any ownership of the underlying asset.

My understanding is swaps (even on your own shares) are taxed as ordinary gains.

Yup, you got it. That's what I meant.

I love speculating, so here’s my 2 cents: Mr. Market loves momentum. If/when FFH reports blowout earnings this year of $175+ thanks to what is looking like a mild year of cat expense, etc (at the end of this week hurricane risk will be about 80% less than it was at the beginning of the season.) AND If FFH aggressively buys back shares at the current price OR Raises the dividend (unlikely) OR Prem starts going on CNBC at least quarterly to pump FFH (when hell freezes over) THEN FFH will see an earnings multiple expansion to 12x to 14x. Call it a share price of $2,275 USD in 2026. ——- If we see the scenarios above play out in 2025 and then again in 2026 then the earnings multiple will almost certainly surpass 15x (at least for a while). #momentum