Thrifty3000

Yes! I thought about mentioning that in one of my rants. It’s not going to be easy to contend with.

The home builders have already been whacked. Down 40%. That’s a strong leading indicator of recession.

That’s good insight. That tells me two things. First, Sokol still endorses Abel even when he has little to gain. (Sokol is one of only a handful of people in the world who has really had to consider what would be required to run BRK post Buffett.) Sokol could have just as easily told your friend that he doesn’t envy anyone having to take on BRK post Buffett. Second, Sokol saying it will be worth buying BRK on the death dip assuming Abel will be in the captain’s seat is another implicit Abel endorsement. If Abel follows Sokol’s ruthless management by objectives approach, Ajit keeps the insurers humming, and if Todd and Ted ably source and evaluate deals, we may be able to replicate much of the Buffett brain.

I doubt it will drop below 1.2 or 1.0 times BV. Todd and Ted will be buying back shares like crazy.

Thank you for sharing this. I just read it. I'm still processing it. I think the comments about Abel's work ethic from Ron Olson probably added the most color to my perception. (Sokol said the same about Abel's work ethic, and I know Sokol is a Killer with a capital K, but Sokol Always has an agenda. So I take his input on this with a grain of salt.) My gut is when it comes to Abel we're looking at an affable fella who appears to be a top 1 percentile operator. In terms of likability, work ethic and competence I'm sure he compares favorably to most Fortune 500 CEOs. And, that in itself ain't a small deal. But! Here's what's strange. Buffett is a god - Full Stop. He is capitalism's-da Vinci-meets-Michaelangelo-meets-Mozart-genius-Freak-Of-Buffett damned-Nature). Is it too much to ask for his successor to at least be a demi-god? The mark of a great individual is an organization that fails in their absence. The mark of a great leader is an organization that is stronger 5 years after their gone. Do I think Berkshire will be stronger after 5 years with Abel at the helm? Meh, maybe, but almost certainly thanks to momentum, and not because of Abel. What does being a god look like? In the height of the tech bubble Buffett acquired one of the world's largest and most respected reinsurers (Gen Re), and its massive bond portfolio, using extremely overvalued shares of Berkshire Hathaway as the currency. It was one of the most ingenious business deals of all time. As part of the acquisition, Buffett bagged a gigantic portfolio of bonds for 50 cents on the dollar right before a) the financial world crumbled b) equity prices tumbled back to Earth c) demand for safe haven bonds skyrocketed Not long after the acquisition he recognized Gen Re had a large cache of financial weapons of mass destruction in the form of derivatives, and he forced Gen Re to unwind all of them - no matter what it took. He made that call well in advance of the Great Financial Crisis - starring, you guessed it, financial weapons of mass destruction! Furthermore, Buffett, drawing from his nearly Unmatched encyclo-fu@king-pedic memory recognized Gen Re's numbers were starting to lag the industry and Buffett fired the CEO - mind you, of one of the most respected insurers on the planet! (Buffett has historically been pretty ruthless about obvious underperformance. See Todd Combs being sent in to rescue Geico.) ^That is how a god manages a conglomerate worth hundreds of billions of dollars. It IS absolutely as befuddling and miraculous as rocket surgery. I don't know Abel personally. I have nothing against the guy. But, I'm still pretty certain he ain't a god. I'm not yet convinced he's even a demi-god. And, so, similar to @Parsad's BRK reservations, I believe BRK will outperform the S&P 500 as long as WEB is lucidly in the captain's seat. I'm not anywhere close to convinced it's "humanly" possible for BRK to outperform the S&P 500 for the next 3 or 4 decades. And, certainly not with Abel running the show. Is it possible to find someone better than Abel? God only knows.

Serious question. Is Greg Abel legit? And, if so, why do you believe he is? I can’t name anything outstanding he has done. Do we know for sure he isn’t just a “company guy” that has ridden the coattails of D Sokol - and the Midamerican management team Sokol put in place?

Great news! My doc says I’m not a hypochondriac. I just think I’m a hypochondriac.

^ with that said, I'm only about 10% cash right now. So, I'm not freaking out. Just enjoying the ride.

We're about six months into this decline. 2000 Tech Bubble: - It took TWO abysmal YEARS to slowly griiiiind down to a bottom. Then took about FIVE MORE years to revisit the tech bubble peak for about a split second. 2007 Housing Bubble: - It also took nearly TWO abysmal YEARS to slowly griiiind down to a bottom. Then took about FOUR MORE years to revisit and sustain the housing bubble peak. (During those bubbles the Fed had loads of fire power and readily jumped in to help.) 2021 Everything Bubble: (This time around the Fed has already accepted defeat on staving off recession. The Fed's out of ammo and believes its only option is to pick the economy's poison; either high inflation or high rates.) - After only six months, has the market fully baked in the implications? Or will it take TWO YEARS of declining purchasing power, bankruptcies and a sidelined Fed for Mr. Market to root his way to a bottom? It sure feels like we're still a bit ahead of our skis.

wow I didn’t even open the press release email when I got it because I assumed it was noise. Seems like a nice time to have an extra bil lying around. Bravo, FFH.

isnt there some risk of bonds being paid back at par while insurance claim costs increase with inflation?

Well, I’m betting Powell means business when it comes to snapping inflation. So, in that case, the Fed will push rates to 3%. In the meantime, certain highly speculative sectors of the economy will go into full cardiac arrest (SPACs). We’ll all feel the pain of speculators panicking and selling good equities like BRK to cover their margin calls, fuel costs, grocery bills and rent. Depending on how hard-assed the Fed wants to be the pain could last from several months to several years. (Fairfax will buy a few billion worth of high grade corporates and munis in the 5% to 6% range. Investors will appreciate a few hundred mil or so of added interest income, but will also fault Prem for not going all in at the peak - even though FFH will be set up to earn materially more than it does today. And, Prem will shrug it all off because he’ll still be a big swinging billionaire.)

HA! The AI misspelled “it” Dumbass! #fishy

Remember when gas prices skyrocketed in 2007 and people started ditching SUVs? It “drove” Hummer right out of business. https://www.businessinsider.com/rise-and-fall-of-hummer-recession-general-motors-bankruptcy-arnold-schwarzenegger-2020-2

+1

Oil is currently around $120 per barrel, on its way to $150 to $200 per barrel. Oil will be earning more than its fair share of GDP for a while. (I wonder if that’s why the smartest investor in history has been investing in oil lately?) Welcome to stagflation, people.

The Economist has been tracking and reporting on excess deaths for a while now. With a 95% confidence interval the Economist estimates 21.4 million excess deaths resulting from covid-19. This compares to 6.3 million "official" global covid-19 deaths. https://www.economist.com/graphic-detail/coronavirus-excess-deaths-estimates

Yeah, 20% pullbacks happen pretty frequently. Maybe once every 2 years. Pullbacks of 30% or more happen probably once a decade. But 20 percenters shouldn’t come as much of a shock. This is our third pullback of this magnitude or greater since 2018. Right on schedule I say.

you might be out of bullets, but hopefully the companies you invested in aren’t and are able to buy more of their own stock back for you and increase your ownership. PS. Having vicariously learned a very hard lesson from Ben Graham - who had no dry powder during the Great Depression - I recommend not running completely out of bullets until the market has dropped 90%. Holding onto a handful of bullets that will likely never be shot is painful at times like this, but probably not as painful as bankruptcy. I like to believe the modern financial system will never result in markets dropping 90%. I also like to believe I’ll be able to pick up some BRK for $30 per share and FFH for $50 if it ever does.

Here is an excerpt from Jamie Dimon’s 2018 Annual Letter addressing the volatility experienced during the 2018 flash crash… “The fourth quarter of 2018 might be a harbinger of things to come. Going into the final months of last year, optimism about the global economy prevailed, and this was reflected in the stock and bond markets. But in the fourth quarter, growth slowed in Germany; Italy repudiated European Union rules; Brexit uncertainty remained; and fear spiked around America’s trade issues with China. Among other geopolitical tensions, the U.S. government shutdown began. In addition, more questions arose about interest rate increases in the United States and the effect of the reversal of unprecedented quantitative easing, particularly in this country. These issues, which reduced growth forecasts and increased uncertainty, should legitimately cause stock prices to drop and bond spreads to increase. However, stock markets fell 20%, investment grade bond spreads gapped out by 36% and certain markets (like initial public offerings and high yield) virtually closed down. Even at the time, these large swings seemed to be an overreaction, but they highlight two critical issues. One, which we never forget, is that investor sentiment can veer widely from optimism to pessimism based on little fundamental change. And second, for the fourth or fifth time in this recovery, there were excessive moves in the market with rapidly increasing volatility accompanied by steep drops in liquidity.”

+1 2018 flash crash. deja vu all over again