Semper Augustus

[John Hjorth]

@Luke ,

 

The man, who raised me professionally, he had a saying, that only came from him under verbal overflow, when he was frustrated about something : 'John, please remember, if we did not have all these clients, we would not have any problems at all!' [<- Huh?, try to think about it!].

 

He passed away much too early, twelve years ago [his heart decided to call it a day], three years into his retirement, he never really got to enjoy the good times without demanding work and with enough money in his purse and on his bank account.

 

Think Munger about billing clients when he was practising law. One have to be mentally wired in a very special way to have fun chasing the combination of AUM and returns, in stead of returns alone, I think.

 

To this day I still think that Buffett using Berkshire as a permanent capital vehicle  to buy NICO was not a mistake.

 

I would argue, that the world does not necessarily fall apart, if we don't have any of these light blue things : Ferrari, car colour matching sports shoes, pool.

 

But each to their own, of course.

[Luke]

Point is, it is morally of lower character to charge money for investing other peoples money while then outsourcing that capital to someone else who invests the money for you. While that's not exactly what guy spier and Semper are doing, they are still half way with the foot in the water. IF you are smart enough to give someone like guy spier your money, shouldn't you be smart enough to just copy him/invest your money into BRK etc? Thats where I wonder, who are their investors? If you are smart enough to not invest in your expensive local bank fund and find intelligent guys like the ones I mentioned, why wouldn't you just skip the middleman? Guy doesn't do any trading, you can find all of his positions online. You can simply copy it and be done. Yes in a crash maybe he does a few things but id say with his style of investing the best really is to do nothing. 

 

A mystery! 

 

[Luke]

But then again, i am thankful for these guys to publish really high quality letters readable for free and I think investing with semper etc is still the second best thing one can do with ones money. (first being investing your own money)

[Gamecock-YT]

I look forward to reading the 50 pages in his annual letter about why it was a bad decision

[Xerxes]

3 hours ago, Luke said:

….While that's not exactly what guy spier and Semper are doing, they are still half way with the foot in the water.

 

fund of fund !

[DooDiligence]

2 hours ago, Xerxes said:

fund of fund !

 

Hey, that's something new!

/s

[cubsfan]

16 hours ago, John Hjorth said:

 

Yeah, @charlieruane ,

 

For my part, Monish Pabrai is in his very own separate and individiual leage here, but for me based on personal and subjective evaluations and assessments about his motives and actions about and why he is doing what.

 

He has been giving up basically about everything he earns - and have done so for many years now, by giving it to Dakshana Foundation. And I would say say, with tremendous success, simply keep the ball rolling and creating opportunities for young people with a technical background, who want to proceed and succeed in life.

 

He is simply the catalyst to make good things happpen, for other people than himself, which is amazing.

 

Nobody can paint a picture to something similar about Mr. Bloomstran or Mr. Spier, compared to Mr. Paprai's doings so far.

 

No doubt, well put @John Hjorth

[charlieruane]

12 hours ago, Luke said:

Point is, it is morally of lower character to charge money for investing other peoples money while then outsourcing that capital to someone else who invests the money for you.

 

To play devil's advocate for a second: is investing in any given company not merely outsourcing one's capital allocation to someone else (i.e. the CEO of that company)? 

[UK]

For what it is worth, I like him doing a reasonably good and detailed estimate of BRK earnings power (or look throught earnings), which you can find every year by searching this 100+ pages document (searh for 'Net Income Basis'). You can then adjust it if you wish and use for PE calculation, instead of this nonsensical gaap only PE, used by some. It seems it is ~17x for BRK vs ~23 for the market as of today on a F24 basis.

 

Edited September 8 by UK

[Luke]

9 hours ago, charlieruane said:

 

To play devil's advocate for a second: is investing in any given company not merely outsourcing one's capital allocation to someone else (i.e. the CEO of that company)? 

To a degree yes, but its different if I give you money and you invest it in mega-cap quasi asset managers or a multitude of harder-to-understand small caps with tons of upside, everyone can buy Berkshire and do moderately well even from here I guess. You don't need an MBA for that and if you make millions a year for buying Berkshire then IMO you are not being honest with the service you are providing considering the salary you are getting for it. This is not communicated transparently and honestly. Guy charges families a yearly fee if you come in with 500k, I think fee is something like 1.5%. For holding Berkshire and these other asset manager large caps? Seriously? 

[Luke]

But thats the goal of fund managers, maximum marketing, do moderately well even if you slightly underperform and make your investors believe that the future is brighter than the past. This way you can make more than 99% of hard working people by doing not nearly as much work as them. Its lazy, its intransparent, its of morally lower character. 

 

Just give back the money to your investors and tell them to keep holding Berkshire, Nestle, Exor etc for the next 10 years and retire FFS. 

Edited September 8 by Luke

[Luke]

Thats not saying that i think investing in a fund is per se bad. There are fund managers that are really smart and significantly outperform and do that by not investing in asset manager mega caps. I respect that. 

Edited September 8 by Luke

[John Hjorth]

On 9/7/2024 at 12:17 PM, Luke said:

... Thats where I wonder, who are their investors? ...

 

... A mystery!

 

@Luke ,

 

Somewhere else, - in the 'BerKshire / Buffett - General News' topic, a short time ago Charlie [ @dealraker ] mentioned his personal considerations in that respect, that to me actually might make some sense, while I still think [speculate] the majority of the members of CoBF are on a personal level wired totally different than that  [ Link ] :

 

Quote

I think it is accurate that some investors feel protected by the likes of Bloomstran (who replaced Tilson).  There are others and their message is pure homespun - playing to the childlike hopefulness and safety seeking of human nature.  An example is his milking of a pretended Berkshire connection - the best selling vehicle of his selling model.   Like so many successful asset gatherings of the past - the 50 page Berkshire analysis is cream of the crop to lace up those shoes.

 

With a 5th graders logic and brain development it is beyond easy to know when to buy the stock of Berkshire.  But if you make the analysis of Berk a 1000 page book?   It sells you as lord protector. ...

 

All stated by me based on that I don't know anything  about Semper Augustus' modus operandi of client services and handling except from knowing the contents of the public available client letters. Client services and handling may contain things we aren't aware of.

Edited September 8 by John Hjorth

[SafetyinNumbers]

What do you think of his analysis of BRK vs FFH and why he chooses BRK?

[Luke]

3 minutes ago, John Hjorth said:

 

@Luke ,

 

Somewhere else, - in the 'BerKshire / Buffett - General News' topic, a short time ago Charlie [ @dealraker ] mentioned his personal considerations in that respect, that to me actually might make some sense, while I still think [speculate] the majority of the members of CoBF are on a personal level wired totally different than that  [ Link ] :

 

 

All stated by me based on that I don't know anything  about Semper Augustus' modus operandi of client services and handling except from knowing the contents of the public available client letters. Client services and handling may contain things we aren't aware of.

Yeah well, if you are smart enough to understand berkshire is a good vehicle then you should be smart enough to understand that the best thing you can do is hold it through ups and downs. Thats literally what buffett and munger preached all the time. If you think you need to pay 1.5% insurance+outperformance fees for a case that something at berkshire changes so significantly that YOU dont understand but semper understands then well...pay him the money

[Luke]

5 minutes ago, SafetyinNumbers said:

What do you think of his analysis of BRK vs FFH and why he chooses BRK?

Did he ever say anything about that? 

[Luke]

2 minutes ago, Luke said:

Yeah well, if you are smart enough to understand berkshire is a good vehicle then you should be smart enough to understand that the best thing you can do is hold it through ups and downs. Thats literally what buffett and munger preached all the time. If you think you need to pay 1.5% insurance+outperformance fees for a case that something at berkshire changes so significantly that YOU dont understand but semper understands then well...pay him the money

But also, if you invest i think 1m then your annual fee drops to 0.5% and higher it drops to 0. But still, id hate to pay 20% of my gains above 6% to some guy who does 0 trades for 8 years drinking coffee at home and reading books

 

Consider this: You give Guy Spier 800k of your money. He takes 1.5% annually of that->12k a year, for investing close to half of his fund into Berkshire, Exor, Prosus and Nestle. So i pay him 500 bucks a month just to hold these stocks HA! And mastercard, bank of america? Are these hard to understand mega cap stocks you need to have 5 years of training to understand when to buy and when to sell? 

 

I am envious, he makes bank for doing quite literally nothing   

 

Thats why i think Nick Sleep was the best fund manager ever. He told you the truth: Get out of this fund and just buy Berkshire, Amazon and Costco and do nothing. Thats transparent, thats honest and thats of high moral character. 

 

And also @John Hjorth, if you want to invest with Semper or Guy you need to prove yourself to be of the right "character" for the fund, they ask you if you panic liquidate etc so you HAVE to have background knowledge in investing in order to get in at the first place. 

[Luke]

With semper at least you get 60% of the PF in relatively less mega cappy stocks: 

 

 

 

[Luke]

Change my mind! 

[John Hjorth]

14 minutes ago, Luke said:

Change my mind! 

 

@Luke,

 

I do not disagree with you, nor am I trying to change your mind, but I try to stay a bit more openminded and forthcoming towards reasoning and arguments from persons with other approaches or stances than mine, that is like a hardcore anal cheapskate attitude towards fees and commisions of all kinds! [To get the notes, you have to collect and hoard the coins!]

[SafetyinNumbers]

1 hour ago, Luke said:

Did he ever say anything about that? 

This is all he writes and I think it’s a flawed argument but that’s what makes a market.

 

[John Hjorth]

51 minutes ago, SafetyinNumbers said:

What do you think of his analysis of BRK vs FFH and why he chooses BRK?

 

Mr. Bloomstran obviously prefers the strength of Berkshires oufit and setup compared to that of Fairfax.

 

SAI 2023 Client Letter, p. 125 :

 

Quote

... Underwriting requires reserves to cover losses. Equities are arisk asset (railroads even more so). North American reinsurers excluding Berkshire allocate more than two-thirds of invested assets to investment grade fixed-income and nearly 10% to cash. Risk assets comprise Jess than a quarter and in addition to common stocks of public companies include non-investment grade bonds and alternatives such as private equity, real estate, venture capital and hedge funds. Markel, Fairfax, and formerly Alleghany, are often compared to Berkshire in structure, but none come close to Berkshire by surplus capital. Of all North American Reinsurers, Fairfax and Markel come closest to Berkshire in asset mix, but with only a third or so of invested assets in risk assets. Fairfax writes more premiums than equity but must lean heavily on the retrocessional market to do so. Earned premiums were $8 billion less than written and three times equity in 2022. Written premium volume was unchanged in 2023 but they retained more business. Stocks are less than 15% of investment assets. Fixed income and cash exceed written premium. It's a similar story at Markel, where risk assets comprise roughly a third of invested assets. Markel retains more premium volume and premiums earned match statutory capital. Stocks comprise one-third of investments with bonds and cash totaling the remaining two-thirds. Several investments in private businesses are made largely with surplus capital but will necessitate having the preponderance of investments in fixed income and cash until capital relative to premiums earned grows. ...

 

I have no idea of his level of insight to or interest in Fairfax, all stated while I think what has been going on at Fairfax might have skipped the attention of the general investment community, while the pocket and odd corner of that called CoBF might be a strong exemption to that.

[SafetyinNumbers]

14 minutes ago, John Hjorth said:

 

Mr. Bloomstran obviously prefers the strength of Berkshires oufit and setup compared to that of Fairfax.

 

SAI 2023 Client Letter, p. 125 :

 

 

I have no idea of his level of insight to or interest in Fairfax, all stated while I think what has been going on at Fairfax might have skipped the attention of the general investment community, while the pocket and odd corner of that called CoBF might be a strong exemption to that.

I was just referring to the argument on surplus capital without regard to leverage.

[John Hjorth]

1 hour ago, SafetyinNumbers said:

I was just referring to the argument on surplus capital without regard to leverage.

 

It is certainly also about the way capital surplus is put to work [buying operating businesses in stead of just hoarding more bonds], thus just the use for my part of one word alone 'strength' as the common denominator, but please just let it go from here. 

Edited September 8 by John Hjorth

[SafetyinNumbers]

38 minutes ago, John Hjorth said:

 

It is certainly also about the way capital surplus is put to work [buying operating businesses in stead of just hoarding more bonds], thus just the use for my part of one word alone 'strength' as the common denominator, but please just let it go from here. 

Yes, he thinks the capital surplus can earn a higher return invested in equities which is a reasonable position but wouldn’t it make sense to consider buying the company growing capital surplus the fastest?