wabuffo

The only 800 pound gorilla in the room is the Fed, not the Treasury How do you explain the following -- since Jan 2010 (using the US monetary system): 1) The change in banking required reserves was $ 85B - which in theory the Fed created to supply the US private sector banking system. Not sure the Fed actually had to supply all of that but whatever. So in theory, the banking sector needed $85B in additional deposits which the Fed added through its reserve accounts. 2) The US Treasury spent $8.3T more than it took in federal taxes (and other receipts). This net spending shows up as new deposits in the private sector banking system (eg social security check, payment to defense contractor for new F-35, etc...offset by income tax receipts which reduce banking deposits) So $8.3 trillion for the US Treasury vs $85 billion (maybe) for the Federal Reserve in fiat money creation. My vote is on the US Treasury as the 800-ib gorilla. And again I point out that Europe has a Fed equivalent (ECB) but no US Treasury-equivalent. The individual nations are more like states/provinces which are not fiat-currency issuers and thus face constraints. wabuffo

If Spain or Italy leaves the EU tomorrow, the only way they recover is by devaluing their (new) currency...ECB just needs to print more money...its so easy[/u] and yet we are all making it out to be rocket science. Not a macro guy - but it seems to me, that it's actually not easy to create more fiat currency in the EU system. That's because they have divorced the national political system of flexing deficit spending up and down from the central banking system. IMO - there are two ways that a fiat-currency based system creates new money (ie - new net deposits in the private banking system). I'll use the US federal system as an example: 1) Net federal spending (in excess of taxation) from the US Treasury creates new deposits in the banking system. Federal spending creates new deposits, federal taxation removes deposits. 2) Federal Reserve supplying additional required reserves to the US banking system, when in aggregate it comes up short of required reserves. The Fed has no choice - because it needs to support an interest rate. A little different now with so much excess reserves. A new private sector bank loan creates a new deposit, which if the banking sector comes up a bit short of required reserves, the Fed steps in and creates 1/10 of that new loan in the reserves. Of the two - US Treasury deficit spending is the 800-lb gorilla of new money creation vs the Fed. It isn't even close, really. It has historically dwarfed any new reserves supplied by the Fed. If we compare the US system (or Canada's or Japan's, etc) to Europe - prior to the Euro, each country had an identical system to the US. But since the creation of the euro - France, for example is no longer like the US, it is now more like Illinois. The EU now has a federal reserve equivalent (sort of) - the ECB, despite the banking systems still being largely nationalized. The ECB system really got going after the first Greek banking crisis of 2011. What Europe doesn't have any is a pan-national US Treasury equivalent. The individual national political structures can run out of money because they are more like states/provinces which face real budgetary constraints rather than fiat currency issuers that have no practical constraints (except debasement of their fiat currency due to inflation). This is a real economic problem and it has not been solved. The ECB can't just print - it can only support interest rates and bank lending via its individual national central bank structures. Without the equivalent of a US Treasury, the EU is moribund. In fact, one can argue that ECB pushing negative interest rates on national debts is like a tax since, like a tax, it is a payment from the private sector to the public sector. I would think negative interest rates actually make things worse because they are an additional tax on an already overtaxed system. So instead of negative rates stimulating, they are a drag (like a tax). wabuffo

Where can you see 005389.KS in the DJCO portfolio? Is there some filing? FYI, I looked in the 10K and nothing was mentioned. I believe what wabuffo is saying is that he has inferred the identity of the undisclosed foreign security by looking at the end of quarter marks for DJCO's entire investment portfolio and backing out the known, disclosed positions. 005389.KS lines up with those marks, which as more quarters are reported becomes less and less likely to be a coincidence. gfp is correct. To my knowledge Charlie has never disclosed the identity of the South Korean manufacturing company in the DJCO portfolio. He did disclose that the other foreign manufacturing company on the Hong Kong exchange is BYD (1211.HK) at the AGM last year: https://www.sec.gov/Archives/edgar/data/783412/000143774918002649/djco20180215_8k.htm Using publicly available information, one can easily identify the mystery South Korean stock. Here's a table that shows the start of how to do that. http://i68.tinypic.com/2efpctk.jpg DJCO has to file a 13F every quarter and outline its holdings of its four US-listed stocks (WFC, USB, BAC, PKX). One can back into the quarter-end fair values of its two foreign-listed stocks by subtracting the amounts in the 13-Fs with their total holdings of common stocks reported in the 10-Qs, 10-Ks. We can see that the bigger position is BYD. We can use the BYD information to calculate the quarter-end fair values of the South Korean stock (and then figure out what stock it is). http://i65.tinypic.com/2eoce55.jpg To calculate the quarter-end fair values of DJCO's holding of BYD (1211.HK) we need to peg it to the quarter-end reported fair values of BYD by BRK Energy (a more-or-less permanent holding) in its 10-Qs, 10-Ks. You can see that the annual values (9/30) declared in the foreign currency risk section in the DJCO 10-K tie with the calculated values using BRK Energy's fair values of its BYD holding. Using the fair value of DJCO's BYD holding, we can then back into the quarter-end fair values of DJCO's mystery South Korean exchange-listed security. If we compare the index vs the 9/30/17 fair value of this holding with the calculated USD-value of Hyundai Pfd Series 3 (005389.KS) quarter-end prices converted to USD from South Korean won, you can see that the quarterly index values match exactly. This makes it virtually certain that this is the South Korean-listed stock that DJCO owns. There's other circumstantial evidence that supports this hypothesis. One is the Alfred Munger Trust holdings of Hyundai securities. A second data point is that Li Lu (who manages Munger's money in his Himalaya Capital fund) presented South Korean preferreds (which are actually non-voting common shares) being mispriced versus their voting common equity pairs at a Sohn Conference in 2013 and has probably influenced Munger's thinking in this area (Munger first started buying Hyundai Series 3 Preferred for DJCO during late 2014). https://www.marketfolly.com/2013/05/li-lus-sohn-conference-presentation-on.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+MarketFolly+(Market+Folly) And then again I could be wrong 8) wabuffo

To think that WEB, CM, or anyone could do 50% for even 5 years in a row without leverage I don't think WEB explicitly ruled out the use of leverage in that 50% boast. He has always used leverage - specifically in market-neutral special situations. Not just at BRK or the Buffett Partnership, but even in his pre-Buffett Partnership days. wabuffo

Which Hyundai entity is it? (There are quite a few - Hyundai Motors, Hyundai Engineering & Construction, Hyundai Dept Store, Hyundai Fire & Marine, Hyundai Green Food, Hyundai Merchant Marine, Hyundai Heavy, Hyundai Corp, Hyundai Mobis, Hyundai Steel, Hyundai Mipo) By isolating the quarter-end fair value dollar amounts and comparing the Q-to-Q change in fair values to quarter-end prices (converted to USD), I believe Munger has also purchased Hyundai Motors Preferreds in the DJCO portfolio. Specifically, the 005389.KS ticker on the South Korean stock exchange. It hasn't been a winner for him, so far. wabuffo

We wants it. We needs it. Must have the precious alpha! wabuffo

There are no economies of scale in the taxi business. Each and every current Uber/Lyft trip is uneconomic and has to be "sold" to the rider at below its cost. Uber/Lyft are the quintessential examples of losing money on every ride but trying to make it up on volume, LOL. The only way Uber/Lyft can make money is to take more of the gross billing from the driver. But this is problematic since even at current pricing levels, the average Uber driver makes less per hour (<$10/hr) than working at McDonalds (with no benefits) based on this detailed study of Uber driver earnings. https://www.ridester.com/2018-survey/ I'm not sure how much more Uber/Lyft can take from drivers without losing them (even though there is some informational asymmetry between these companies and their drivers). And of course, raising gross fares to allow both the driver and the company to make money will drive away consumers/invite more competition. I seriously doubt that these are viable businesses. There's zero innovation here, just a huge subsidy that is unsustainable - though the IPO proceeds will keep it going for a little while longer. But going public now also exposes the financials to the light, so we'll see if they can continue to defy the laws of economics. wabuffo

I would highly recommend Jim Chanos's interview. He's a great analyst and does a thorough job with his overview of the role played by the investment banks in the mortgage crisis. FWIW. wabuffo

I think it was from here - McGill University's Digital Library of Annual Reports -- lots and lots of old reports mostly from Canadian companies (or Canadian subsidiaries of US multinationals). https://digital.library.mcgill.ca/hrcorpreports/search/uncat.php wabuffo

It is a mystery to me as to why investors spend so much time on the question of buybacks both at Berkshire and many other companies. From March 8, 2000 (day when Buffett first mentioned that he would consider making repurchases) vs AutoZone (serial repurchaser). http://i67.tinypic.com/jfw6s1.jpg Snowball...man, snowball! wabuffo

i think this will now change in the future. More importantly, i think Buffett finally is ok with Berkshire making significant purchases of shares. But for this to happen, Buffett first felt he needed to do a couple of things: Perhaps it is just a matter of Buffett needing to set the stage properly: Buffett wanted to make sure all shareholders had the same information from his annual letter before doing any share repurchases ... in March, 2000! It's the same siren song for almost 20 years! I am afraid he's no Henry Singleton. wabuffo

https://buffett.cnbc.com/annual-meetings/ Here you go. Click on a particular year (going back to 1994) and then go to the morning/afternoon video of session. If you click there, you not only get the complete video, but a complete trancript of every Q&A as well. wabuffo

Stocks on the pink sheets don't trade on any real exchange. In fact, in certain cases, the stocks aren't supposed to trade at all yet buys and sells happen on paper?/electronic spreadsheets? In the case of OTC stocks that are liquidating, the Company will often direct their transfer agent to cease trading in the stock. Yet the OTC brokers will continue to record transactions in the stock well after the transfer agent has frozen the final shareholder list. Thus, there are no shares transferring hands, just a bunch of brokers keeping records on their own. This sometimes creates problems with liquidating distributions, record dates and ex-dividend dates since the Company and its transfer agent "send" the distributions to the shareholder of record as of the cease trading date. The OTC brokers' back offices then have to redirect the liquidating distributions beyond the transfer agent's instructions based on the brokers' own understanding of who owned which shares on what date dependant on FINRA's interpretation of record dates and ex-dividend dates. The confusion isn't about whether you owned a stock or not after the cease trading date, but instead, confusion over what the Company's instructions mean and how they are to be executed beyond the cease trading date. Companies don't really understand the world beyond their transfer agent and this confusion can lead to people who shouldn't get a distribution to get it and vice versa. It is a bit of the wild, wild west and there have been occasional flustercucks because of this kind of activity in OTC-land. wabuffo

No answer to your question - but a couple of observations: One reason for higher median wealth in Canada is the importance of Canadian home values (particularly Toronto/Vancouver). Most of Canadians' net worth is tied to their home equity. And as we know Canadian home values are unusually high and never really collapsed in the Great Financial Crisis of 2008-2009. Costco in Canada has no club store competitors (Sams Club made a tiny attempt to enter Canada and but quickly folded up shop). Costco US competes not just with a very significantly-sized Sams Club but also BJs Wholesale Club. wabuffo

A propos of this subject -- the median stock rose 14.5%*... in January! How's your portfolio return doing so far in 2019 vs a bunch of dart-throwing monkeys? wabuffo * as per the Wilshire 5000 Equal-Weighted Index for the month ending on Jan 31st.

In some cases, though they may not have publicly-traded equity, some private companies may have publicly traded debt that requires them to continue to file SEC financials. BNSF is an example - its equity is 100% owned by BRK, but it has publicly traded debt and continues to file with the SEC. wabuffo

I vaguely remember a quote from Buffett from the late 90s when he was railing about forcing companies to expense the cost of their employee options on the income statement. He used an example that Berkshire/Buffett would just replace the 10-year employee options issued annually for cash at about a third of their strike price when BRK made an acquisition of a company with employee options. At the time, I worked out similar numbers (using a 7% long-term borrowing cost and a 35% tax rate). Buffett thinks of it as being economically similar to the company borrowing the full cost of the shares at the strike price at the time of issuance. If you then bring the total cost of the interest paid on the loan over the ten years by the company back to present-value and deduct taxes, you get a good estimate for the value given up by the Company in issuing the options every year. Today, at long-term borrowing costs of 4% and a 21% tax rate, the cost would be lower -- probably around a quarter of the strike price over 10 years. Of course, he was talking generically and not specifically about overvalued or undervalued situations. wabuffo

Great economics blog - thanks for the link. wabuffo

A preference for buying back A-shares? It definitely would be easier to spot the volume increase if that's what he targets. wabuffo

If Canada dismantled its supply management system, wouldn't the center of gravity of dairy production move west where dairy farming would be lower cost due to land availability/herd size scale advantages? I think this as much an East/West issue as a North/South issue. My own 2-cents is that Canada would be world-competitive in dairy production but it would become an BC/Alberta/Sask. industry and not a Quebec/Eastern Ontario industry anymore. Much like the US where California/Idaho dairy farms are lower cost milk producers vs Wisconsin/upstate NY. Of course, its never gonna happen in our lifetime. wabuffo

I think its important to distinguish between owners & business models that show zero/negative GAAP profit and zero Taxable profit (from an IRS POV) but generate large amounts of positive Operating Cash Flow during their rapid expansionary growth phase. Bezos/Amazon (large positive cash inflows from working capital) and Malone/TCI (positive cash flow used to finance cable company acquisitions for additive synergies) are good examples that are/were both misunderstood because of this focus on GAAP profits by traditional analysts. These both had inherently profitable core businesses but felt the opportunity to grow rapidly was more important strategically than showing a GAAP profit and paying taxes. A business that loses money but also shows large cash outflows on an operating basis is still a bad business and can only expand to the extent that debt/capital markets remain open to it. That's not to say it can't work, but the failure rate is much, much higher than companies with "profit-less", positive cash flows. wabuffo

Summary: 1) Buffett issued (ie, sold) overvalued BRK shares (instead of selling overvalued KO, G) to buy fair-valued Gen Re (an insurer with basically a big bond portfolio). 2) After the Gen Re purchase, Buffett had exchanged overvalued assets for fair-valued ones and reduced equity % of BRK's portfolio from 80% to 60%, IIRC. He didn't sell his overvalued KO, G stock directly, but reduced his exposure to them in a tax-free, value-added way (though Gen Re did end up creating some headaches for him down the road). wabuffo

Where are you seeing that? wabuffo

Thanks Gamecock! wabuffo

DJCO 10-Q is out: Confirms that Munger sold 54,900 PKX ADR shares for $4.044 million (@ $73.72 per share). He also spent $10.977 million on one or more common stocks. Since the 13F-HR did not show any other position changes (besides PKX) reported to the SEC - and Charlie didn't receive confidentiality for any new positions -- it's obviously shares purchased on a foreign exchange. wabuffo