gfp

That's right - it's not great for long tail and retroactive business. And Berkshire certainly has some of that business. But most insurance is repriced each year and auto policies are generally repriced twice a year. As the linked article does a good job of illustrating - the value of everything needing to be insured continues to march upward. Inflation is only part of that. Fairfax should do well with their global insurers just from the development of those economies and the current low penetration of insurance coverage in many of those places. This chart is average annual losses, not size of market - but this illustrates the growth, and it is over a relatively short time. Even better for an AJG or BRO.

You could kind of see Ajit and Warren let out a little gleeful grin when Ajit pointed out that inflation isn’t necessarily bad for the insurance business.

No, I was young and stupid and had low expenses. I took the last two years of college tuition money (my entire net worth at the time) and started investing, switched to a few a-la-carte night classes in accounting (first two years were computer science major), don't have a university degree, made my first real money with that capital and Freeport McMoRan, which used to be based in New Orleans before the phelps dodge merger. I was and am routinely over 40% in one position - I have often been very concentrated in one, two or three securities and the rest just dribs and drabs. Also, 100% of my capital is taxable capital. My wife has an old Roth-IRA but that is the only tax-deferred capital that we have personally.

In my experience (my last 9-5 paycheck was 24 years ago from a company called EnvestNet) as a full-time investor, I tend to keep more cash in my regular checking accounts earning next to nothing. I don't try to optimize return on the cash or anything like that. I might not always have a years worth of expenses sitting in there but it's way more than it "should" be or needs to be. We have residential multifamily rental income that comes in near the first of each month, which is when many of my outgoing bills are drafted - roughly cancelling each other out. I know other folks here like to do it differently, pre-pay expenses and have plenty of ready credit available for cash management / buying time, etc... We just run it sub-optimally and sleep soundly. Since I started as a full-time investor with no salary, there have been 3 major bear markets. 2001-2003, 2008-2009 and the blip in 2020 that turned out pretty benign. I was lucky that at the beginning of my career I was focused on commodities and precious metals which were starting a bull market at that time (I am a reformed gold bug). I started buying Berkshire a few months before the 9/11 attacks and purchased most of the original BRK position right after the market re-opened following 9/11. I think a B-share was around $2000/sh at the time. Might have dipped back into the 1900s. That started me as a "value investor" or whatever you want to call being rational and careful with your investments. To answer some of the questions on how do you get some cash - if my cupboards are getting low I sell a little of something, always considering the tax consequences, and re-fill the cash accounts so I don't have to think about it. I tend to have more cash early in the year and less cash in December, absent any type of real estate refinancing or something like that.

I thought this article on Verisk's recent modeling was interesting. I don't think it has a paywall. Not sure where to post it so seems like Fairfax is as good as any. https://www.theinsurer.com/reinsurancemonth/industry-should-now-expect-average-annual-cat-losses-of-151bn-verisk/

Thanks, Cheers!

I fotget, @SafetyinNumbers - are you on the board of directors of an affiliate or another Wexford-affiliated junior miner? I can't remember if it was you or which security it was. Not Mako I assume.

If these NFTs don't get the last of you intellectual stragglers on board for the future I don't know what will! Now get your dough over to World Liberty Financial before its too late! https://x.com/worldlibertyfi?ref_src=twsrc^tfw|twcamp^tweetembed|twterm^1829141447087648796|twgr^b5d1068ca5352a591e14fff3944e33add3de5045|twcon^s1_&ref_url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2024-08-29%2Ftrump-says-he-ll-announce-a-plan-to-make-us-the-crypto-capital-of-the-planet "Beware of Scams" says the bio

I don't see why the IRS should care. I am allowed to naked short calls on any stock and have the exercise result in a short position that I can cover whenever I choose to cover. Fidelity, for instance, lets me hold a long position and a short position in the same security at the same time - I know because I have accidentally put on an offsetting separate position when trying to close both long positions and short positions in the past. They have their "buy to open", "buy to close", "sell to open", "sell to close" buttons.

It has to be done within the settlement window. Just like when you sell some stock and have a day or so (lately, used to be a few days) to adjust which cost basis lot you would like the sold shares to come from.

If I remember correctly, a representative of the NYSE actually visited Buffett in Omaha a few days before that A-share volume reporting switch. In my imaginary version of events Warren mentioned that it was a pet peeve of his, as the most active market participant in the A-class trading, that the A-share volume was hugely inflated / misreported every day since fractional share trading became "a thing." Tiny fractions of A-shares purchased on robin hood or other fractional brokers are being logged as Volume = 1 and Warren is very aware of the actual A-share daily trading volume because when the shares are in his buying zone his trade execution firm is in the market daily buying a certain percent of the actual A-share ADV. Miraculously, a couple days after the NYSE management visit to Omaha, the reported A-share volume returned to something - if not totally correct - at least a lot closer to reality. It pays to speak up Warren! LOL edit: - Oh yeah, I remember why they visited him - they were playing cleanup over the erroneous trade fiasco on June 3rd! https://fortune.com/2024/06/04/warren-buffett-berkshire-hathaway-discount-deals-canceled/

I'm not claiming Berkshire is trading off of KIE fund flows - those are probably small. I'm saying Berkshire is just trading like the rest of the insurance companies.

As a fella on a different forum pointed out. BRK looks an awful lot like the KIE insurance ETF if you squint

Well buying back shares works against the market cap growing to $2 trillion and $4 trillion but I guess you have switched the metric to per share returns.

I like the part where he explains how Berkshire will double every 5 years so we are only 5 years from $2 Trillion and 10 years from $4 Trillion. Easy peasy!

The simple truth is that insurance companies are breaking out to new highs and Berkshire shareholders do not sell much stock. In fact, because Berkshire shareholders by and large do not want to realize capital gains but sometimes sell covered calls you get an effective synthetic short squeeze in the stock around these options expirations (Friday was one). Berkshire has traded like this for a long time. Sideways for a while and then an abrupt adjustment that violates a bunch of sold call option strike prices. Then sideways for a year or two. Buffett is not repurchasing stock at these levels. You can see him trail off on repurchases as the price rose last quarter. I would bet the only stock he repurchased last quarter was incoming calls offering A-shares. He repurchased nothing at all in June. The Gates foundation is still receiving annual grants of Berkshire shares and is still selling in the same manner as they have been (basically every day). Warren is still alive. Even if Warren dies tomorrow they still have a lot of Berkshire shares to sell each day.

Yeah, Berkshire can dividend out a lot more than $31 Billion from the insurance companies but they would have to ask first. They had to ask to take out BNSF and it was no issue. There are some advantages to leaving capital in National Indemnity and having it absurdly over-capitalized. National Indemnity is also a flexible capital provider to many of Berkshire's operating subsidiaries but a lot of that gets eliminated in consolidation in the filings. National Indemnity just refinanced all of Pilot's expensive bank debt for instance. They also provided the funding for the Dominion Energy deals that BHE did through a preferred stock. They lend to Lubrizol, etc..

no, not likely

No, not at all.

Change the name to "Fairfax Mattresses and More!" and they get in sure thing

I love Apple but all the calculations involving equity (like ROIC and ROE) will be more and more distorted by their repurchase program running equity down towards zero (and then into negative numbers in the not too distant future). Apple is great - they make $100 Billion every year that they don't need to reinvest. That figure has been pretty stable. But $3.5 Trillion is a lot.

I just keep imagining the Fairfax Bros as Berkshire analysts celebrating, "DUDES! Warren has just sidestepped the entire bond bear market and LOCKED IN $12 Billion of annual interest income for THE NEXT THREE YEARS! " Woo Hoo!

I think he likes having the cash vs. what is available in the market to him presently. Are you crazy bullish at the moment or what? Sure he would love to buy stuff, but there is nothing for sale at a price he is willing to pay. And lowering his standards just to do a deal is the worst type of precedent to set right before you hand over the reigns.

I'm describing him taking 2/3 of the "cash" and extending duration into lower yielding "notes." There would be less "cash" and a completely conventional bond portfolio for an insurance business this size. Not more cash. Fewer complainers

What if he put $200 Billion in bonds slightly longer than the t-bills so they weren't classified as cash (like Fairfax) and reminded everybody that Berkshire was one of the largest insurance companies in the world - would that quiet the cash issue down?