TwoCitiesCapital

Correct. The carrying value is increased for their proportional earnings and decreased for any dividends paid. It's a bit of a crude mechanism assuming the purchase price plus retained earnings is the value, but it's grounded in reason.

It's about dispersion of outcomes. The more you look like the "average" the more your returns will represent the average of 7-9% for stocks you often hear discussed. Concentration allows you to swing wide on either side of that range. So you could get 19% a year. Or -5%. The way I typically look at it is concentration is how you make money while diversification is how you keep it. Return maximization versus risk mitigation. I used to uber-concentrate. And all of my concentrated picks did very poorly while my small positions did exceptionally well. I changed my approach, capped myself at a 10% position limits in any one stock (and it takes me a long time to get there) which forced me to allocate more to smaller positions and to be less emotionally invested/tied to the success of any one company or idea. As of this moment, Fairfax is the only stock that is a 10% position for me and a chunk of that was its outperformance/appreciation relative to the rest of the portfolio. And then Fairfax India and Exor are both roughly ~7-8% positions. 3 stocks are ~25% of my portfolio. It probably rises to 20-25 stocks to get to 50% and the rest is ETFs/mutual funds held in 401ks and HSAs. For me, this has driven acceptable returns while limiting my risk, and emotional investment, in any one single company - but still allowing me dispersion to the upside when my concentrated names outperform.

I added to my starter position in Alibaba and a new position in Prosus. I view them collectively as a growth/repurchase/chinese exposure play. Collectively they are at 4-5% of my portfolio with the vast bulk of that having been established this year.

For sure. And a huge chunk of my equity exposure has been in FFH and Exor. My returns in 2022 were actually quite positive as a result (overshadowed by my large exposure to crypto). But the S&P is an average, and includes 490ish companies that are largely among the leaders in their spaces, and the more and more I look - most have done bad-to-mediocre nominally and horribly on a real-adjusted basis over the last 1, 3, and 5 years for an asset class that is supposedly an inflation hedge. Pending how you structured your fixed income, there's a good chance you outperform a good chunk of the market just owning short/medium term fixed income over this period. The point isn't to say there's no stocks that have done well. The point is to say I'd rather try playing the equity game when most stocks are going up as opposed to try to pick the few that will. Odds are much more in your favor when there's a rising tide and even your mistakes have a good chance of going up. I've done well selecting the few that did this time around - I wasn't as lucky in 2015 or 2018 trying to play that game.

Have been for a bit. Finally get some price movement on my fixed income and not just the coupons. Though would add that the best time to have been buying was BEFORE the odds agreed with the positioning. Also, keep in mind the September effect, that has seen yields rise by 0.25 - 0.75% in September/October each year for the last few years. You might get a better bite at the apple in October even if the Fed does cut in September.

I was in NYC for Sandy. Everything South of 14th Street was a disaster for weeks. The financial district ran off emergency generators on 18-wheelers for months after the storm. The subways flooded and was months to 1-2 years before certain lines where back to normal schedules (like the NJ Path). A real hurricane would mess up the area bigly....

I bought into the ETH story as I watched it unfold from crypto-kitties to DeFi and figured it'd continue. Ultimately, I think there is a lot of potential to DeFi, but the regulatory framework is going to have to change and they're going to have to find better ways to scale it. It was tiresome paying $7-10 everytime I wanted to do something and often times was more as some things require multiple actions (like staking). It's also a pain in the ass to track regular transactions, gains/losses on gas fees, capitalization of gas fees into the basis of new positions, and etc for tax purposes and paid services didn't do this function particularly well either. I started off with ~20k within the DeFi universe and eventually migrated much of that to CeFi counterparties like BlockFi, Celsius, and Ledn because they could better scale the transaction fees by batching customer trades/actions and it simplified the taxes. If 20k wasn't enough to start with, how many people are actually going to be involved in that eco-system? And then, eventually Celsius and Block Fi both went under (amongst others) and the whole trust in that CeFi ecosystem was shattered so where do you go now? As a result, ETH and DeFi ecosystem have really lost their luster. Not to mention there have been few improvements over the last 3-4 years and it could be argued that ETH got worse now that it's PoS instead of PoW. I'm basically 99% BTC and 1% ETH and LINK and that's predominantly just to scratch my trading itch without touching the BTC stack as much.

Nah - I'm still accumulating. Bitcoin often takes a breather during miner capitulation post halving. Not to mention the supply event of the German government selling offset much of the prior ETF accumulation in terms of taking BTC supply off market. Just gotta be patient. Slow accumulation via the ETFs, corporate balance sheets, governments, and retail will eventually eat up the supply which was just halved. Just requires a little patience. I don't mind waiting longer, but I think 100k by December may be in the cards regardless of the election outcome.

Yes - this is why many people include the unfunded liabilities in our total debt calculation. Once you add Social Security and future Medicare/Medicaid liabilities, the numbers are just nonsensical.

+1 I've learned that the system doesn't work or hold people accountable. Only works for the rich and powerful 1) was rear ended by an uninsured driver from behind. I had to pay rentals and my insurance deductible. Never saw a penny from the driver at fault even after getting a judgment to cover the out of pocket expenses 2) had a landlord steal $5k deposit. Never saw a penny after getting a judgment. Paid sheriff's to collwct and they simply asked him nicely for the money . Eventually gave the claim to collections and never saw a cent 3) had my girlfriend's parked car totalled in the apartment garage by a drunk driver. We found the car with damage in the correct spot, paint transfers matching the vehicles, and an empty bottle of tequila in the front seat. Sent photos to the cops. They didn't do anything - not even question the guy or pull the footage from the garage cameras. GF now has a new car note and higher insurance as a result. 4) my condo building had a fire in November which ruined the rooftop, and subsequently my condo unit occupying the two floors beneath. Everyone is in agreement that this is the building's insurance responsibility. Here we are in August (8 months later!) and work just started for replacing the roof. For the last 8 months nothing was done, my condo would flood every time it rained, and the building owner and management company who have been bungling this from day 1 offered no relocation assistance nor ever demo'd the unit to prevent mold. Now the unit has mold throughout and the neighbors beneath have been dealing with increasing amounts of water damage from flooding through my floor. Lawyers I hired agreed it was clearly a breach of contract, came up with some grand legal plan to file suit against building owner and management company, took my 4k retainer, and then advised I not move forward with the suit as I wouldn't win enough to cover the legal fees The system doesn't work for normal people. And god forbid you find yourself on the wrong side of it without the means to fight

Quite honestly, it's probably because they can't. The idea of using insurance liabilities to invest in long duration equity assets SHOULD be terrifying. High leverage with a very uncertain repayment schedule gives you a duration mismatch worse than banks. Which is why it's so important to get the underwriting piece right, and then having ample liquidity, so you don't ever have to force-sale equities at inopportune times. Most people shouldn't be trusted to do it and regulations have since been passed to prevent many from trying to do things like this. What expertise do these finance guys have in underwriting insurance liabilities? Moving to more exotic forms of fixed income DOES make a lot more sense with less danger. It's surprising to me that it's taken this long for people to do it. When Exor bought PartnerRE, the first thing they did was flip the fixed income into corporates. Surprising that they didn't already own those and that it was so easy to pick up another 1-2% on float.

Ideally, 1) the way this works is that Fairfax closes the TRS 2) counterparty dumps the FFH shares they were long as a hedge to the short-swap position 3) FFH price gets depressed 4) Fairfax keeps hoovering up excess shares at depressed prices

Yup. I'm excited. I add every once in awhile. But it first traded at this price in 2017.... Book value keeps growing, they keep repurchasing, and I'm satisfied - but not going all in on the discount to NAV that may, or may not, close in the next 5 years.

That's because names like BofA were up over the last 2-3 years while fundamentals and profitability deteriorated at the same time. Sentiment is only now catching down to the performance they've been displaying as a business.

Probably how it would work. In other news, Fairfax probably made a quarter billion, or more, on their bonds today and the stock is down 5%. Basically completely undoes the unrealized loss from Q1 while adding $100 million to their coffeers - but today isn't the only day interest rates have fallen, nor will it be the last.

I would love to see it for a tactical trade, but highly doubt it. I don't expect them to go much past the duration of their book of insurance TBH Prem made an about face in 2016 from deflation positioning to inflation positioning and was willing to sit basically not earning anything on bonds for ~5 years. I don't think he's gonna suddenly view bonds as being attractive again. While they may tactically add/reduce duration to play rates or but a handful of long Treasury futures, I would be shocked if they were making big swings into long bonds when their view is time isn't the friend of the bonds.

There are plenty of examples of people being involved with Fairfax subs that did not feel "fair and friendly" with the take-outs/take-unders/sale of share of the underlying investments you could have been coinvested with them on. I'm not saying I have issues with Fairfax - but I am saying you probably cannot rely on them to act in a way that protects you as an investor in a vehicle alongside them. They're going to do what is best for Fairfax - not what is best for you.

Sounds like what you'd say if you didn't have a plan for the coming electricity shortage...

Snowballs get bigger as they roll downhill In 2019, people thought it was absurd to think institutions would be buying it or that countries would adopt it. Then we had MicroStrategy, Tesla, and Mass Mutual adopt it as on balance sheet asset, El Savador adopt it as legel tender, the SEC forced into approving the ETF, and now U.S. politicians falling over themselves to establish a strategic reserve and distance themselves from Bitcoin naysayers.... All of that happened in 5-years. What does the next 5 look like for Bitcoin?

+1 There are way more frivolous uses of electricity going on, at scale, every day like having your A/C at home while at work. I personally think the electricity used to support the only sound money system in existence is well worthwhile. But it's not really up to me, or the government, or Munger, or anyone else to decide which uses cases of electricity are meaningful. It is up to those paying the prices to use it which is why I don't b*tch at the neighbors in my neighborhood for "wasting" electricity to make their properties gawdy every Christmas.

+1 This is a great observation I don't think Buffett is infallible - but there's a reason he's buying utilities, railways, and etc

People still listening to these guys when they've been way behind the ball on this name for the last 3 years?!?!?!

Why wait? Perhaps either the capital constraints OR the desire to skip the 3.0 renovation and go straight to 4.0 on the remainder of the stores. Either way - it's something have a partner with deep pockets and a willingness to forego immediate dividends helps and having to publicly report results that would get thrashed by the upfront investment/depreciation accounting. We could very well see all of the stores renovated in the next 3-5 years instead of waiting at the current pace of ~20 per year and then Fairfax re-IPO....

I'm indifferent to it - though I've not looked into it in depth At this point - unless if its obviously lighting money on fire - I trust the management. People complained about Stelco too - Fairfax made out like bandits on that one. Other than Eurobank with its oligopoly that was bought on its way to bankruptcy - what Fairfax investments have "moats"? Fairfax is a classic value investor. Not a "buy and never sell" like Berkshire where the moat would be more important.

Oil prices have proven resilient - $75 has largely been the bottom-ish of the last 2-year range for WTI- which is above the highs of the 2014-2020 range. Share prices on the other hand? Largely have stagnated over the last ~18 months despite consolidation, deleveraging, and shareholder friendly policies. I suppose that spring is re-coiling...