gfp
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Posts posted by gfp
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36 minutes ago, Gregmal said:
Yea I still laugh at the idea rates solve the housing problem, which is the biggest driver of inflation….it costs folks $5k a month to own a $500k home now lol Thanks Jerry
And froze out so many existing homes from coming on the market.
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On 6/2/2023 at 5:27 PM, changegonnacome said:
.we've enjoyed a nice linear journey from 9% down to 5%......folks are extrapolating the progress from 9 to 5 as indicative of the ease by which we will travel from 5 to 2....the issue is the other 50% of that 9% inflation rate (the underlying inflation) is not transitory......the rubber is hitting the road now as we start to hit this sticky inflation......sticky because its been driven by nominal wage increases that are feeding into nominal spending growth that is exceeding productivity growth. Its clear to effect the equation which is driving this 4% sticky underlying inflation that hasn't moved a jot in months that the labor market will need to get hit. So the question isn't if this will happen, the Fed can through its ability to set the most important number in the economy slow it....the question is rather when.
The easy inflation progress 9% to 4.5% is about to run out of steam very soon....4.5% to 2% is gonna be a bitch.......don't see many talking about rate cuts in September anymore.....quite the opposite....another raise is coming in July (if not June).
https://fred.stlouisfed.org/series/T5YIE
You are looking in the rear view mirror.
Also, the Federal Reserve is next to powerless when it comes to inflation - in either direction. If anything, they are increasing inflation with their current policy rate.
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There hasn't really been a "huge rally in equities this year." There has been a very narrow rally in a few very large companies. RSP and IWM are basically flat. Look at 5 year TIPS breakevens. 2%. Exactly what the Fed is targeting. The Fed didn't slay inflation. If anything they made it worse. But it went down on it's own anyway and they can claim it was them and move on with the high-fives.
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The high interest rates increase the deficit spending stimulus to the economy, skewing that stimulus heavily towards those who have lots of money already.
The problem with the Warren Mosler type of lens on deficit spending and the economy / inflation is that it misses a much larger portion of the monetary system that isn't even measured by the US Government. The monetary system outside of the US dwarfs the measured stuff like M2. If the US monetary system was just what the Federal Government had "control" of, we would be roaring higher. Instead we are just putting along because all of this stimulus is being offset by tightening money, flight to safety, hoarding and risk-off behavior globally. The market is telling you inflation is dead for now and deflationary risks are rising. We'll see how far it goes but the risks are higher that things get much worse because there isn't anything the Fed can do. The Federal Reserve is basically powerless and more of a "placebo effect" or hoping that a projection of confidence sends the correct messaging that might effect behavior in the economy and get what they want. The level of the deficit, higher or lower, is much more effective as a policy tool but it won't be used that way except in the depths of a crisis.
The amount of money out there doesn't matter nearly as much as the amount of money that is freely circulating / recirculating. When market participants start with the "risk-off" stuff, the recirculation of money in the economy slows down and that effect dwarfs the small effects of slight changes in the level of deficit spending.
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That Morningstar analyst report reads like it was written years ago.
On another note, does anybody here know if the profits on the total return swaps on FFH's own shares are tax-free to the company? I know that usually transactions in an issuers own stock are not taxed (for example if Biglari Holdings were to ever record a profit on their holdings of own shares the "profit" would be tax-free) - but I do not know if that extends to derivatives on an issuer's own stock.
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23 minutes ago, Sweet said:
All else being equal I’d imagine that those banks with more short term loans are likely to be safer because they aren’t locked into long maturity low rate debt?
For me CMA stands out as being interesting.
Not sure if you are totally getting this chart, but this is maturities of debt owed by the regional banks, not the loans on their books. CMA would be the one on the chart with the most debt coming due this year, not the one with the shortest maturity loan book.
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Yeah I was going to mention that there was a seller in addition to that buyer as well. I do think it is likely that the block trades get taken by FIH itself. I guess we'll find out later when they file on SEDI.
There are probably investors looking to reduce their exposure to emerging markets and their currencies in this environment. The Indian currency looks to want to go on another leg lower against the US dollar. The central bank is intervening almost every day to supply dollars and prop up the INR. But it is still weak, bumping along the line in the sand at 82.75. It may be more of a general shortage of dollars in Asia than India-specific weakness. We'll see.
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6 minutes ago, Gamecock-YT said:
Think that's the treasury direct/retail rate that you have circled
That is the coupon-equivalent yield on a $35 Billion bill auction for 21-day bills.
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Meanwhile, Berkshire just keeps bidding on these distorted T-bill auctions!
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Unfortunately it seems like the debt ceiling will probably not come to a head this week, as the Treasury is signaling for $64 Billion of net new issuance on 6/1 so we will probably have to sit through another month of this "negotiation."
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Yeah I don't usually pay much attention to global macro either, but I don't hold any cash and I am super bearish and fully invested at the same time. This exact moment is a new high in every account I manage, yet I am adding to shorts in RSP and actually buying TLT. But I'm not going to sell the 5 stocks I own in size just because I am super bearish.
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I'm not of the belief that what the Fed does matters much but I do find it surprising that markets are pricing in an additional 25 basis point hike in Fed Funds in the next meeting or two. Even copper has come down a lot - and there are legitimate supply shortages there. Commodities are telling you demand is weak. Shipping prices are telling you demand is weak. Oil prices will probably hold up because of the cartel but even oil prices are pretty weak considering the fundamentals. Demand is weak everywhere. China reopening was a dud.
I would anticipate the market pops higher on the debt ceiling resolution and then immediately gets sold.
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22 minutes ago, Spekulatius said:
TYX (30 year treasury bond index) crept up from 3.5% to almost 4% in the last few weeks. Its quite interesting and unusual that growth/tech stocks have been so strong while LT treasury yields have been going up at the same time.
Why is that unusual? The main thing that would make the TYX yield go down would be economic weakness and the main thing that would cause the yield to go up would be economic strength. Just think about it as reflation/bullish vs deflation/bearish.
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2 hours ago, MMM20 said:
Yes that has been my experience with Fidelity as well. I'm sure Ken Griffin gets his cut but we don't see "commissions." I also don't always get a fill on marketable orders.
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17 minutes ago, dartmonkey said:
But what is this V. Watsa business? Does anyone know what the V stands for?
Prem's first name is Vivian
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attached
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31 minutes ago, backtothebeach said:
Added 20 million shares of AAPL (unless they just moved the shares that were previously in a separate filing, I forget which subsidiary).
They finally cleaned up the separate holdings at Gen Re New England Asset Management. They all show up on Berkshire's 13F now. No new AAPL shares have been acquired since the Allegheny purchase.
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41 minutes ago, Luca said:
Micron now the biggest holding for Fairfax for the US in latest 13 F. Atlas was sold 100%, 220% increase for Occidental. Interesting!
Well I'm not sure it is accurate to say "Atlas was sold 100%."
(if anything it was an "add" since they exercised warrants for $78.7 million in cash during the quarter)
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25 minutes ago, ourkid8 said:
FFH did purchase 4.93% of FIH shares on Feb 16, 2022 from two exiting shareholder at USD$12. If there is a large block sale at an attractive price which FIH cannot repurchase, FFH will most likely take it.
That's right. They also bought 58,185 shares at 10.85 on June 19th 2022, 1,532,864 shares on May 26th at $10.61. They let Fairfax India have first dibs on repurchasing shares because they can do it under an automatic plan (x% of average daily volume plus "take blocks"). As an insider with nonpublic information, Fairfax is not able to buy FIH shares any time it wishes. Plus there is a low public float as it is (OMERS owns a block - something like 20m shares).
Lots of purchases by Ben Watsa, Brian Bradstreet and other reporting insiders. The biggest buyer is FIH itself under an automatic plan - including a $10.7 million block trade last week.
And every time Fairfax buys FIH or FIH buys shares in itself they are giving up fees they would otherwise be earning on those shares.
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1 hour ago, MMM20 said:
Am I thinking about this wrong?
Yeah. They consolidate it so there is a lot of minority interest. Think of it this way, the market value of all of Fairfax India currently is $1.76 Billion, and Fairfax India's market price is way below book value.
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2 hours ago, MMM20 said:
Short answer = with FFH you get Fairfax’s pretty big as a % of NAV (~15%?) investment in FIH plus others (maybe their best) + full alignment with Prem + valuation much cheaper on cash flows
I don't understand what you are saying here. You think Fairfax India represents 15% of the NAV of Fairfax Financial or Fairfax Financial's total investment portfolio?
*edit to point out that Fairfax's ownership in Fairfax India shares is something like $625 million inside a $57 Billion investment portfolio (1%) or a $16 Billion market cap company (3.9%).
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2 hours ago, MMM20 said:
like Digit which is in FFH but not FIH b/c it’s an insurance company, I guess?
Yes, this has been very explicit from the beginning - Fairfax India will not compete with Fairfax in the Insurance space. Pure insurance companies would go to Fairfax parent company.
I own both securities but I will say the main reason to own Fairfax India and not just participate through Fairfax Financial is that FIH.U is tiny inside Fairfax's investment portfolio. You aren't really getting much exposure to Fairfax India by owning Fairfax parent. So if you like the assets and the prospects of the India operation, you can size it how you want by owning Fairfax India additionally. And when you own both the fee structure won't bother you the same - or at least it doesn't bother me (but I own Biglari Holdings so obviously I have made peace with this type of incentive payment when it is based primarily on performance).
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22 minutes ago, MMM20 said:
I should really have a more precise sense of that but i guess I put that in the known and manageable risks bucket. I believe Ajit said the pricing had risen to such an attractive level that they’d essentially break even (at the policy level) at worst and make a ~50% return if no bad hurricanes.
I think Ajit said at worst they would "take a loss of $15 Billion" and if no major storm hits Florida they could make "several billion dollars." The $15 B number would be across all exposures, up to their limits, including GEICO, boats, etc..
Fairfax stock positions
in Fairfax Financial
Posted · Edited by gfp
Here is the Fairfax press release on the deal. Love it.
https://s1.q4cdn.com/579586326/files/doc_news/2023/PRFFH-June-5-2023-KW-June-2023-Transactions.pdf
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Taking into account the discount at which Fairfax acquired the principal balances of the Loans, Fairfax expects the average annual return on the capital deployed by Fairfax in connection with the Loans to exceed 10%. All of the Loans are secured by real property located in the United States with an average loan-to-value ratio of approximately 51% and are supported by completion guarantees issued by the project equity sponsors. More than 70% of the Loans relate to multifamily or student housing development projects with the balance being a mix of industrial, hotel and life science office property development projects."
and
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In addition to the Transaction, Fairfax also agreed to make a $200 million preferred equity investment in Kennedy Wilson. Under the terms of the agreement relating to the investment, Fairfax will acquire perpetual preferred stock that carries a 6.0% annual dividend rate and is callable by Kennedy Wilson at any time. Additionally, Fairfax acquired 7-year warrants for approximately 12.3 million common shares with an initial strike price of $16.21 per share, based on Kennedy Wilson’s closing price on June 2, 2023."