Bonds!

[Eldad]

5 minutes ago, gfp said:

The best way to outperform in a bear market is to have a huge portion of your equity portfolio (consolidated + equity method businesses) not marked to market!

 

Watch those UNP shareholders flail while your BNSF shares stay profitable and stable.

 

Maybe I should get into the non-traded REIT business.  People love this stuff.

Ha yes but for you and me that means PE or RE and you are going to get capital called to death or have to sell at 50% in a real bear market. 

[TwoCitiesCapital]

42 minutes ago, treasurehunt said:

 

This is true if cash returns zero, like it did for most of the past 15 years. But if cash returns 4%, then you have six years to buy at 30% off and come out ahead. That doesn't seem like a terrible bet if you think markets are substantially overvalued.

 

+1

 

And you don't have to wait for the market as a whole to correct. Just individual names.  

 

I picked up plenty of names I already owned in April - Prosus, Fairfax, Ensign, Eurobank, etc. Many of these names were down 10, 20, or 30% while the S&P was only down ~15%. 

 

And I've rolled many of those purchases back to cash at 10-30% realized gains in 4-6 weeks time. 

 

I didn't deploy everything, but making double digit returns on tactical trades while earning 4-5% on the whole over time dissipates cash drag tremendously 

Edited June 4, 2025 by TwoCitiesCapital

[Spooky]

17 hours ago, gfp said:

The best way to outperform in a bear market is to have a huge portion of your equity portfolio (consolidated + equity method businesses) not marked to market!

 

Watch those UNP shareholders flail while your BNSF shares stay profitable and stable.

 

Maybe I should get into the non-traded REIT business.  People love this stuff.

 

This is all fiction though! It's like people in private equity claiming their investments haven't been impaired because they aren't marked to market. 

[73 Reds]

57 minutes ago, Spooky said:

 

This is all fiction though! It's like people in private equity claiming their investments haven't been impaired because they aren't marked to market. 

Respectfully disagree.  People holding investments that lack a daily price quote focus on the business itself rather than the price.  Their thinking is therefore not affected by price swings or market quotations.  These people also often have more significant ties to the underlying investments and have more knowledge and insight than some outsider making a bid.  Such people also tend to be long term investors as opposed to stock investors who mostly have a trading mentality.  Depending on the nature of the business a "bear market" in stocks may have little or no effect whatsoever - in fact some businesses thrive during bear markets.  

[cubsfan]

1 minute ago, 73 Reds said:

Respectfully disagree.  People holding investments that lack a daily price quote focus on the business itself rather than the price.  Their thinking is therefore not affected by price swings or market quotations.  These people also often have more significant ties to the underlying investments and have more knowledge and insight than some outsider making a bid.  Such people also tend to be long term investors as opposed to stock investors who mostly have a trading mentality.  Depending on the nature of the business a "bear market" in stocks may have little or no effect whatsoever - in fact some businesses thrive during bear markets.  

 

+1

[Blake Hampton]

 

Berkshire Hathaway: 2025 First Quarter Report

 

Buffett has basically zero fixed-income, the largest amount of cash relative to total assets in Berkshire's history, and is sounding alarms alongside other financial greats.

 

Quote

Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change. While our ownership in marketable equities moved downward last year from $354 billion to $272 billion, the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio.

 

Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance. Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.

 

Paper money can see its value evaporate if fiscal folly prevails. In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency.

 

Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability as long as their goods or services are desired by the country’s citizenry. So, too, with personal skills. Lacking such assets as athletic excellence, a wonderful voice, medical or legal skills or, for that matter, any special talents, I have had to rely on equities throughout my life. In effect, I have depended on the success of American businesses and I will continue to do so.

 

Berkshire Hathaway: 2024 Letter to Shareholders

 

His ultimate concern is runaway inflation. That's his long-term perspective.

 

However, it's very difficult for him to transition quickly in a crisis. While he belittles cash in his letter, saying that "the great majority of your money remains in equities," I'm almost certain he would hold significantly more if he were managing less capital. He'd simply have more flexibility in deploying it quickly.

 

I understand the idea of being fully invested, and long-term, it should work well if you're invested in the right stuff. But I deeply believe there will be a time where you're sitting on huge principal losses while the market is offering up unbelievable opportunities.

 

It's not every day that the global reserve currency faces a debt crisis.

[73 Reds]

5 minutes ago, Blake Hampton said:

 

Berkshire Hathaway: 2025 First Quarter Report

 

Buffett has basically zero fixed-income, the largest amount of cash relative to total assets in Berkshire's history, and is sounding alarms alongside other financial greats.

 

 

His ultimate concern is runaway inflation. That's his long-term perspective.

 

However, it's very difficult for him to transition quickly in a crisis. While he belittles cash in his letter, saying that "the great majority of your money remains in equities," I'm almost certain he would hold significantly more if he were managing less capital. He'd simply have more flexibility in deploying it quickly.

 

I understand the idea of being fully invested, and long-term, it should work well if you're invested in the right stuff. But I deeply believe there will be a time where you're sitting on huge principal losses while the market is offering up unbelievable opportunities.

 

It's not every day that the global reserve currency faces a debt crisis.

Blake, you could be waiting a long time.  Throughout my investment lifetime there have always been well-respected economists predicting doom and gloom.  Their stories were always compelling.  

[Blake Hampton]

1 minute ago, 73 Reds said:

Blake, you could be waiting a long time.  Throughout my investment lifetime there have always been well-respected economists predicting doom and gloom.  Their stories were always compelling.  

I disagree.

And no one can tell you when it'll happen, just that it will.

 

Edited June 5, 2025 by Blake Hampton

[73 Reds]

1 minute ago, Blake Hampton said:

I disagree.

Feel free to disagree.  But try not to confuse Buffett's holding a lot of cash with the notion that there is nothing for you to invest in.  He is in a league all his own but the world is your oyster.

[SharperDingaan]

It's useful to look at the UK experience when GBP was the reserve currency, that ceded reserve currency status to the USD following WWII. Like it or not there is a debt ceiling, and the US has hit it. There is a reason for the 5% treasury yield, and the more Trump uncertainty the wiser it is to hold asssets other than USD.

 

Solid businesses should do well, but expect a lot of adverse volatility, and recognise that investor and business time horizons are often quite different. That former great business in a country that HAD reserve status, may also not be worth it anymore. However the volatility may be a very good opportunity (TACO trades).

 

Arguably there is a lot more to be made investing  against the US than is to be made investing with it. So long as nobody breaks Trumps fingers 

 

Not what many want to hear.

 

SD

 

 

 

 

[Eldad]

54 minutes ago, SharperDingaan said:

It's useful to look at the UK experience when GBP was the reserve currency, that ceded reserve currency status to the USD following WWII. Like it or not there is a debt ceiling, and the US has hit it. There is a reason for the 5% treasury yield, and the more Trump uncertainty the wiser it is to hold asssets other than USD.

 

Solid businesses should do well, but expect a lot of adverse volatility, and recognise that investor and business time horizons are often quite different. That former great business in a country that HAD reserve status, may also not be worth it anymore. However the volatility may be a very good opportunity (TACO trades).

 

Arguably there is a lot more to be made investing  against the US than is to be made investing with it. So long as nobody breaks Trumps fingers 

 

Not what many want to hear.

 

SD

 

 

 

 

Except that the US has 350 million red blooded capitalists and a system that is set up to cater to them. US News country rankings are a complete joke. America is the most innovative and has the most pro business government by a mile. 
 

I wouldn’t bet against America even though it is currently fashionable. 

[Eldad]

34 minutes ago, Eldad said:

Except that the US has 350 million red blooded capitalists and a system that is set up to cater to them. US News country rankings are a complete joke. America is the most innovative and has the most pro business government by a mile. 
 

I wouldn’t bet against America even though it is currently fashionable. 

Also, in Jamie Dimon’s recent interview he tied American reserve currency status to its remaining the worlds most powerful military. This is not talked about often but with a few exceptions (Venetian and Dutch although they had very strong navies) the reserve currency usually follows military might. At the beginning of WW2 the US and UK were on a somewhat equal footing in military power. By 1945 it was not even close and then the NWO forced the UK to give up its colonies and they were done as a world super power. 
 

The US dollar should say backed by 11 aircraft carriers, 1000s of nukes, etc. etc. 

Edited June 5, 2025 by Eldad

[Spooky]

3 hours ago, 73 Reds said:

Respectfully disagree.  People holding investments that lack a daily price quote focus on the business itself rather than the price.  Their thinking is therefore not affected by price swings or market quotations.  These people also often have more significant ties to the underlying investments and have more knowledge and insight than some outsider making a bid.  Such people also tend to be long term investors as opposed to stock investors who mostly have a trading mentality.  Depending on the nature of the business a "bear market" in stocks may have little or no effect whatsoever - in fact some businesses thrive during bear markets.  

 

I understand your point and for a lot of private investments it is valid. However, a lot of private equity funds and others pretended that when the fed raised rates from near zero to close to 5% the value of their funds / investments didn't take a hit. Rates going up like that means a decrease in the PV of these assets. I'm seeing this at work now where PE funds need to sell assets to return money to their LPs but they do not want to sell at lower marks for reputational reasons so are trying to get creative with structuring even if it is just superficial so they can look good for their LPs. 

Edited June 5, 2025 by Spooky

[Marco Van Basten]

Procter & Gamble announced that they will fire 7000 people, or 15% of non-office jobs or 7% of total employment over the next year or two.  I wonder if there is a lot of fat in many US firms, and if they and the government slim down some, it could a lid on inflation from both supply side (lower costs) and demand side (lower incomes.)

[TwoCitiesCapital]

2 hours ago, Marco Van Basten said:

Procter & Gamble announced that they will fire 7000 people, or 15% of non-office jobs or 7% of total employment over the next year or two.  I wonder if there is a lot of fat in many US firms, and if they and the government slim down some, it could a lid on inflation from both supply side (lower costs) and demand side (lower incomes.)

 

Tarriffs are deflationary in the long term.

 

Higher prices means lesser quantity sold AND/or consumers trading down. Either way, it's a net loss of revenue across the system from a combination of trading down and buying fewer units (some winners, more losers). 

 

And while those losers are losing revenue and unit sales, they just beefed up inventories which will then need to be liquidated. Further deflationary impulse. 

 

Prices go up temporarily in the short term and then get obliterated in the second order evolution. 

 

Not to mention all of the uncertainty is delaying purchases, investment, etc that slows the demand of base commodities, slows the velocity of money in the system, and typically will result in an appreciating currency which should also be a disinflationary/deflationary impulse. 

Edited June 5, 2025 by TwoCitiesCapital

[SharperDingaan]

6 hours ago, Eldad said:

Except that the US has 350 million red blooded capitalists and a system that is set up to cater to them. US News country rankings are a complete joke. America is the most innovative and has the most pro business government by a mile. 
 

I wouldn’t bet against America even though it is currently fashionable. 

 

Agreed; when the place works, the US is formidable.  But, today .. most folks would hazard that this isn't a reasonable possibility for at least the next 2-3 years. The tide is going out, and investors need to act accordingly.

 

Waving executive orders around for photo ops, is not the same thing as executing on them. Maybe 10% of the orders will actually get traction, and of those - maybe 50% of the direction will actually become a reality.   

 

SD

[Gregmal]

“Continued weakness in energy and services prices helped offset some of the increases, and a handful of other key items expected to show tariff-related increases, vehicle and apparel prices in particular, actually posted declines.”

 

 

 

LOL tell me more about inflation 

[gfp]

I'm a member of a bunch of car dealer groups online and new cars are routinely being offered for thousands of dollars below MSRP/sticker - sometimes $7-10k below depending on the price of the car.  Just like the old days.  Turns out demand is an important component to the whole "pricing power" equation.

[Gregmal]

16 minutes ago, gfp said:

I'm a member of a bunch of car dealer groups online and new cars are routinely being offered for thousands of dollars below MSRP/sticker - sometimes $7-10k below depending on the price of the car.  Just like the old days.  Turns out demand is an important component to the whole "pricing power" equation.

Yea but if they go through with tariffs they have to raise prices which means people have to pay more!

[dwy000]

30 minutes ago, gfp said:

I'm a member of a bunch of car dealer groups online and new cars are routinely being offered for thousands of dollars below MSRP/sticker - sometimes $7-10k below depending on the price of the car.  Just like the old days.  Turns out demand is an important component to the whole "pricing power" equation.

Isn't this the standard for June as the 2024's are cleared out to make way for the 2025's?  Those cars on the lot being discounted would have been made before the tariffs.

[gfp]

Obviously POTUS can't put 6' 4" Bessent in as Fed chief.  Anybody know how tall Kevin Warsh is?  We need a lap-dog that is lap-dog sized

 

 

 

 

 

 

[dcollon]

So good GFP  

[Blake Hampton]

2 hours ago, gfp said:

Obviously POTUS can't put 6' 4" Bessent in as Fed chief.  Anybody know how tall Kevin Warsh is?  We need a lap-dog that is lap-dog sized

 

 

Those are some great images.

 

That first one though does Bernanke injustice. 5’8”, and he looks like a midget.

[Blake Hampton]

While he was praising Powell, Buffett said once that some Fed chairs would’ve watched the world fall around them in 2020.

 

I think he was talking about Yellen.

[Marco Van Basten]

3 hours ago, gfp said:

I'm a member of a bunch of car dealer groups online and new cars are routinely being offered for thousands of dollars below MSRP/sticker - sometimes $7-10k below depending on the price of the car.  Just like the old days.  Turns out demand is an important component to the whole "pricing power" equation.

What brands and models are discounted the most?  Thank you.  I am in the market for a new car, or at least so I have been told by my wife.