Red Lion Posted June 25, 2022 Posted June 25, 2022 I think there are lots of good deals in the markets right now, but I think we might be quite far from a bottom. I could see the FED raising interest rates until something breaks. I'm not a market expert by any means, but I have not seen signs of forced selling which seem to be the hallmarks of equity bottoms. Maybe this is because people pulled equity out of their homes to invest in the markets rather than using margin loans. I have a large cash position, because I've been hoping for an opportunity to deploy into real estate. Right now I'm seeing a lot more in the public markets that looks interesting, if we see signs of forced selling I'm going to probably consider just putting this money into public markets instead of real estate.
Gregmal Posted June 25, 2022 Posted June 25, 2022 (edited) I think if you want to see “break” look at the segment(didn’t get a lot of attention of course) on MBS selling with Powell testimony. Already adapting because what? Market froze up or was manipulated for a day? I too am holding out hope for cheap private market real estate, but as the days go on the odds of that get smaller. I have yet to see a single intelligent and relevant bear argument for housing getting whacked big. It’s all stupid “look at the chart, 2005 again!” which misses every underlying fundamental. Or contradictory shit like 6% mortgage will kill housing prices(as prices continue to set records) but then talk up inflation and high housing prices lol. Or how rents are gonna soar forever but there s a glut of multifamily being built. Can’t have it both ways. Or “there’s lots of price drops in my market!” And it’s like yea so what? Remember all the “Zillow paid too much!” And then they offload everything at better than expected prices in a couple months. I see tons of price cuts in lots of markets I follow. 95% of them are just listings that were not based in reality in the first place. The overall core of the housing market is insanely strong. I said a couple years ago we were in the first or second inning of a housing super cycle. One that would follow the tech bubble cycle, IE 1990s first wave followed by 2010-2020 act 2 that dwarfs act 1. Imagine selling the Nasdaq at the 4000 mark or whatever earlier this decade when it hit that cuz you were an idiot who just said “look at the chart, 1999 all over again!”? So maybe now we are in the 3rd inning. It’s never straight up with no pullbacks. This phase looks like the one where all the folks with 2008 PTSD think they’ve got it figured out and get smoked. By the end of the cycle everyone in the world will think housing is indestructible just like they did with the FANGs last year. Gonna be fun. Edited June 25, 2022 by Gregmal
Guest Posted June 25, 2022 Posted June 25, 2022 20 hours ago, Parsad said: I've only been below 20% cash like 5 times...2000-2001 (Tech Bubble - Value Cheap), 2003/2004 (FFH Collapses From Shorts), 2009/2010 (After Financial Crisis), 2020 (Pandemic), and now again. I'm always early to buy and early to sell, but I get the periods of cheap stocks right almost all of the time! Sadly because I tend to sell early, I usually miss a year or two of upside returns, but then that is made up by the cash holdings which start early too and I don't get hit by the bear markets (other than the pandemic)...for example, I'm up this year 3-4%, while markets are down 19-28%...but as the bull market returns at some point, I'll probably sell a year early at least from the peak! C'est la vie! Cheers! That's an amazing return this year, Sanj, so congrats on that! With that being said, if your cash had been 0% or there about and you had just invested in SPY or Berkshire over the past 20 years, would your returns look better or worse? For most people, I think having excess amounts of cash has a negative impact on overall returns. However, I get that running a fund is far different than trying to just maximize returns.
Thrifty3000 Posted June 25, 2022 Posted June 25, 2022 (edited) 9 hours ago, gfp said: I think he is "legit." This FT article with quote from Sokol and several inside stories about Greg is helpful if you haven't read it. Warren Buffett’s heir apparent comes out of the shadows | Financial Times.pdf 1.78 MB · 19 downloads Thank you for sharing this. I just read it. I'm still processing it. I think the comments about Abel's work ethic from Ron Olson probably added the most color to my perception. (Sokol said the same about Abel's work ethic, and I know Sokol is a Killer with a capital K, but Sokol Always has an agenda. So I take his input on this with a grain of salt.) My gut is when it comes to Abel we're looking at an affable fella who appears to be a top 1 percentile operator. In terms of likability, work ethic and competence I'm sure he compares favorably to most Fortune 500 CEOs. And, that in itself ain't a small deal. But! Here's what's strange. Buffett is a god - Full Stop. He is capitalism's-da Vinci-meets-Michaelangelo-meets-Mozart-genius-Freak-Of-Buffett damned-Nature). Is it too much to ask for his successor to at least be a demi-god? The mark of a great individual is an organization that fails in their absence. The mark of a great leader is an organization that is stronger 5 years after their gone. Do I think Berkshire will be stronger after 5 years with Abel at the helm? Meh, maybe, but almost certainly thanks to momentum, and not because of Abel. What does being a god look like? In the height of the tech bubble Buffett acquired one of the world's largest and most respected reinsurers (Gen Re), and its massive bond portfolio, using extremely overvalued shares of Berkshire Hathaway as the currency. It was one of the most ingenious business deals of all time. As part of the acquisition, Buffett bagged a gigantic portfolio of bonds for 50 cents on the dollar right before a) the financial world crumbled b) equity prices tumbled back to Earth c) demand for safe haven bonds skyrocketed Not long after the acquisition he recognized Gen Re had a large cache of financial weapons of mass destruction in the form of derivatives, and he forced Gen Re to unwind all of them - no matter what it took. He made that call well in advance of the Great Financial Crisis - starring, you guessed it, financial weapons of mass destruction! Furthermore, Buffett, drawing from his nearly Unmatched encyclo-fu@king-pedic memory recognized Gen Re's numbers were starting to lag the industry and Buffett fired the CEO - mind you, of one of the most respected insurers on the planet! (Buffett has historically been pretty ruthless about obvious underperformance. See Todd Combs being sent in to rescue Geico.) ^That is how a god manages a conglomerate worth hundreds of billions of dollars. It IS absolutely as befuddling and miraculous as rocket surgery. I don't know Abel personally. I have nothing against the guy. But, I'm still pretty certain he ain't a god. I'm not yet convinced he's even a demi-god. And, so, similar to @Parsad's BRK reservations, I believe BRK will outperform the S&P 500 as long as WEB is lucidly in the captain's seat. I'm not anywhere close to convinced it's "humanly" possible for BRK to outperform the S&P 500 for the next 3 or 4 decades. And, certainly not with Abel running the show. Is it possible to find someone better than Abel? God only knows. Edited June 25, 2022 by Thrifty3000
Parsad Posted June 25, 2022 Author Posted June 25, 2022 1 hour ago, stahleyp said: That's an amazing return this year, Sanj, so congrats on that! With that being said, if your cash had been 0% or there about and you had just invested in SPY or Berkshire over the past 20 years, would your returns look better or worse? For most people, I think having excess amounts of cash has a negative impact on overall returns. However, I get that running a fund is far different than trying to just maximize returns. I outperformed by about 7 percent annualized in the personal accounts in aggregate between November 1999 and the end of May 2022...14.2% annualized including dividends...a couple of times there was like just one stock in the portfolio (BRK in 1999/2000 and FFH in 2003) as well as a nearly 60% holding of FFH again between late 2020 and mid-late 2021...so the concentration at times helped. The fund on the other hand, had a lot of PDH for the last 8 years and the concentration there did not help...so well...SPY or BRK easily did better! Cheers!
Dinar Posted June 26, 2022 Posted June 26, 2022 2 hours ago, Thrifty3000 said: Thank you for sharing this. I just read it. I'm still processing it. I think the comments about Abel's work ethic from Ron Olson probably added the most color to my perception. (Sokol said the same about Abel's work ethic, and I know Sokol is a Killer with a capital K, but Sokol Always has an agenda. So I take his input on this with a grain of salt.) My gut is when it comes to Abel we're looking at an affable fella who appears to be a top 1 percentile operator. In terms of likability, work ethic and competence I'm sure he compares favorably to most Fortune 500 CEOs. And, that in itself ain't a small deal. But! Here's what's strange. Buffett is a god - Full Stop. He is capitalism's-da Vinci-meets-Michaelangelo-meets-Mozart-genius-Freak-Of-Buffett damned-Nature). Is it too much to ask for his successor to at least be a demi-god? The mark of a great individual is an organization that fails in their absence. The mark of a great leader is an organization that is stronger 5 years after their gone. Do I think Berkshire will be stronger after 5 years with Abel at the helm? Meh, maybe, but almost certainly thanks to momentum, and not because of Abel. What does being a god look like? In the height of the tech bubble Buffett acquired one of the world's largest and most respected reinsurers (Gen Re), and its massive bond portfolio, using extremely overvalued shares of Berkshire Hathaway as the currency. It was one of the most ingenious business deals of all time. As part of the acquisition, Buffett bagged a gigantic portfolio of bonds for 50 cents on the dollar right before a) the financial world crumbled b) equity prices tumbled back to Earth c) demand for safe haven bonds skyrocketed Not long after the acquisition he recognized Gen Re had a large cache of financial weapons of mass destruction in the form of derivatives, and he forced Gen Re to unwind all of them - no matter what it took. He made that call well in advance of the Great Financial Crisis - starring, you guessed it, financial weapons of mass destruction! Furthermore, Buffett, drawing from his nearly Unmatched encyclo-fu@king-pedic memory recognized Gen Re's numbers were starting to lag the industry and Buffett fired the CEO - mind you, of one of the most respected insurers on the planet! (Buffett has historically been pretty ruthless about obvious underperformance. See Todd Combs being sent in to rescue Geico.) ^That is how a god manages a conglomerate worth hundreds of billions of dollars. It IS absolutely as befuddling and miraculous as rocket surgery. I don't know Abel personally. I have nothing against the guy. But, I'm still pretty certain he ain't a god. I'm not yet convinced he's even a demi-god. And, so, similar to @Parsad's BRK reservations, I believe BRK will outperform the S&P 500 as long as WEB is lucidly in the captain's seat. I'm not anywhere close to convinced it's "humanly" possible for BRK to outperform the S&P 500 for the next 3 or 4 decades. And, certainly not with Abel running the show. Is it possible to find someone better than Abel? God only knows. A very good friend of mine has known Sokol for nearly two decades. (Sokol was an investor in the business that he started nearly twenty years ago and finally sold two years ago.) Sokol told my friend that he thought Abel was very good, that in his opinion, BRK is very cheap on sum of the parts basis, and the time to buy it is when Buffet dies and the stock sells off. Then it will be an insane bargain.
LearningMachine Posted June 26, 2022 Posted June 26, 2022 17 minutes ago, Dinar said: A very good friend of mine has known Sokol for nearly two decades. (Sokol was an investor in the business that he started nearly twenty years ago and finally sold two years ago.) Sokol told my friend that he thought Abel was very good, that in his opinion, BRK is very cheap on sum of the parts basis, and the time to buy it is when Buffet dies and the stock sells off. Then it will be an insane bargain. Looks like very high certainty that event will likely be happening within the next 5-10 years. How many days/months do we think it will take to reach bottom after that event? What will be the signal then that it has reached bottom at the time? It would be good to get all that thinking done now to be ready.
Gregmal Posted June 26, 2022 Posted June 26, 2022 53 minutes ago, LearningMachine said: Looks like very high certainty that event will likely be happening within the next 5-10 years. How many days/months do we think it will take to reach bottom after that event? What will be the signal then that it has reached bottom at the time? It would be good to get all that thinking done now to be ready. I think micro wise you’re in the right ballpark but bigger picture asking the wrong questions. The right questions IMO would be…how unassailable are the Berkshire businesses? Obviously the equity portfolio is a huge question mark. The subs? I think they are generally quite stable and setup in a way that allows autonomy and independence which derisks a lot of the Warren will go away fear. There is great simplicity to much of Berkshire but also much complexity in terms of the structure and risk assignment.
Thrifty3000 Posted June 26, 2022 Posted June 26, 2022 1 hour ago, LearningMachine said: Looks like very high certainty that event will likely be happening within the next 5-10 years. How many days/months do we think it will take to reach bottom after that event? What will be the signal then that it has reached bottom at the time? It would be good to get all that thinking done now to be ready. I doubt it will drop below 1.2 or 1.0 times BV. Todd and Ted will be buying back shares like crazy.
Spekulatius Posted June 26, 2022 Posted June 26, 2022 25 minutes ago, Thrifty3000 said: I doubt it will drop below 1.2 or 1.0 times BV. Todd and Ted will be buying back shares like crazy. What makes you think that Berkshire will drop much at all when WEB passes on the baton? I think BRK will drop less than 5% in this case. I would not be surprised, if the fall would be very small (<2%) and quickly reversed.
LearningMachine Posted June 26, 2022 Posted June 26, 2022 2 hours ago, Gregmal said: I think micro wise you’re in the right ballpark but bigger picture asking the wrong questions. The right questions IMO would be…how unassailable are the Berkshire businesses? Obviously the equity portfolio is a huge question mark. The subs? I think they are generally quite stable and setup in a way that allows autonomy and independence which derisks a lot of the Warren will go away fear. There is great simplicity to much of Berkshire but also much complexity in terms of the structure and risk assignment. Right, a lot of the subs are probably on cruise control. So, Sokol’s opinion might be biased because of his viewpoint. Indeed, the big question marks will be the equity portfolio upon Buffet’s passing and the negative float upon Ajit’s passing. Not many insurance companies have both negative float and great investment results without a leader who is great at risk management. So, BRK would be worth less with both of their passings.
Parsad Posted June 26, 2022 Author Posted June 26, 2022 5 hours ago, LearningMachine said: Looks like very high certainty that event will likely be happening within the next 5-10 years. How many days/months do we think it will take to reach bottom after that event? What will be the signal then that it has reached bottom at the time? It would be good to get all that thinking done now to be ready. Really? Making money is that important?!
Parsad Posted June 26, 2022 Author Posted June 26, 2022 3 hours ago, Spekulatius said: What makes you think that Berkshire will drop much at all when WEB passes on the baton? I think BRK will drop less than 5% in this case. I would not be surprised, if the fall would be very small (<2%) and quickly reversed. I would imagine it would be at least a 10% drop the day the news is announced and 20-40% drop over a period of time as hedge fund managers, small investors mull it over and sell. It will also depend on how much cash Berkshire has and how much support the stock gets from BRK buybacks when it starts dropping. As well as value fund managers probably buying stock too. It would be back up near fair value within 12-18 months once sellers clear and equilibrium returns and people realize the stock will still do reasonably well long-term. Cheers!
Sinbius Posted June 26, 2022 Posted June 26, 2022 (edited) I'm the only one surprised and sad that Buffett in all his life was not able to find a real successor...Or I am wrong and Ted and Todd will actually move also hundreds of billions in a year without constraints? I'm ok as an investment to think the future of BRK like a no growth-utility company that just make buyback but it is sad that Buffett doesn't pass all his investment knowledge to someone that keep going... Edited June 26, 2022 by Sinbius
Sinbius Posted June 26, 2022 Posted June 26, 2022 (edited) I think that Ted and Todd if they are extremely good ( likely) should become the new Berkshire...and I think that if they will not....they will just say...it was a nice experience, bye bye (and I will move my BRK money to them). Edited June 26, 2022 by Sinbius
Parsad Posted June 26, 2022 Author Posted June 26, 2022 1 hour ago, Sinbius said: I'm the only one surprised and sad that Buffet in all his life was not able to find a real successor...Or I am wrong and Ted and Todd will actually move also hundreds of billions in a year without constraints? I'm ok as an investment to think the future of BRK like a no growth-utility company that just make buyback but it is sad that Buffett doesn't pass all his investment knowledge to someone that keep going... Well, the two guys that were supposed to lead...Ajit Jain and David Sokol...one has gotten older and the other departed on poor terms (and is also older). Finding such quality people is like finding a needle in a haystack. It is sad, but are we really surprised that there aren't a lot of Buffetts or even lesser Buffetts floating around everywhere? Berkshire shareholders were not just lucky...they won the lottery with the man! He's not just a great investor, businessman and leader, but he's one that survived so long and was able to continue running the business for so long. That's a lottery win! Cheers!
Benderok Posted June 26, 2022 Posted June 26, 2022 At which point should the expectation of Buffett passing get priced in? Or maybe it already is and the sad news should become a catalyst for the stock to move higher instead (with maybe a modest drop initially)? As @Parsad pointed out, firstly fund magnets would start selling upon the news, and after that value managers would pick up on buying. But it seems to me that with every passing day we get closer to the inevitable and therefore it should be getting 'priced in more and more everyday. And because of that, those fund managers should presumably already be selling out (to support my theory) until the final headline comes out, marks the bottom, and invites value investors on standby at the moment.
Sinbius Posted June 26, 2022 Posted June 26, 2022 (edited) 58 minutes ago, Parsad said: .... Finding such quality people is like finding a needle in a haystack. ... Not if you have the reputation on being the number one in the world...with such a huge network of high value people...Buffett and Munger have access to anything...and investors go to contact them... In decade you have never bumped/searched for a great investor to succeed you? I thought it was Ted and Todd...Do you really think they were hired just to allocate "only" 34 Billion? If they will not have huge control over BRK future investment it means someone screw up... Edited June 26, 2022 by Sinbius
mjm Posted June 26, 2022 Posted June 26, 2022 7 hours ago, Spekulatius said: What makes you think that Berkshire will drop much at all when WEB passes on the baton? I think BRK will drop less than 5% in this case. I would not be surprised, if the fall would be very small (<2%) and quickly reversed. always think of Buffett's quip saying that he hoped the stock did not rise too much when he died.
Spekulatius Posted June 26, 2022 Posted June 26, 2022 (edited) 4 hours ago, Parsad said: I would imagine it would be at least a 10% drop the day the news is announced and 20-40% drop over a period of time as hedge fund managers, small investors mull it over and sell. It will also depend on how much cash Berkshire has and how much support the stock gets from BRK buybacks when it starts dropping. As well as value fund managers probably buying stock too. It would be back up near fair value within 12-18 months once sellers clear and equilibrium returns and people realize the stock will still do reasonably well long-term. Cheers! I think a decline of 20-40% just on Buffett’s passing isn’t plausible. Do you really think a large part of the investor base will just sell? I don’t think so, there is no Buffett premium in the stock price currently, based in SOP or any other ratio. Interesting discussion and the vast divergence of views is always valuable to see. We won’t know until it actually happens. Edited June 26, 2022 by Spekulatius
boilermaker75 Posted June 26, 2022 Posted June 26, 2022 1 hour ago, Spekulatius said: I think a decline of 20-40% just on Buffett’s passing isn’t plausible. Do you really think a large part of the investor base will just sell? I don’t think so, there is no Buffett premium in the stock price currently, based in SOP or any other ratio. Interesting discussion and the vast divergence of views is always valuable to see. We won’t know until it actually happens. Although I think his passing is probably priced in, you are exactly right we won't know till it happens. But in hind sight it will be obvious to everyone!
Sinbius Posted June 26, 2022 Posted June 26, 2022 (edited) I have a different point of view... For example let's say Buffett die tomorrow...was really "priced in" that Buffett will die tomorrow or was more priced in that he will die 5 years from now?... ...and yes it makes a great difference especially if is "priced in" his added value on the "priced in" eventual recession that's coming before the 5th year from now... I don't believe much in this priced in stuff...people need time to digest changes...and spend more time and effort on understanding the implication only if forced to do so (because it really happened)...and if in part gets priced in it is priced in the average of the outcomes...or generally the most probable... Edited June 26, 2022 by Sinbius
SharperDingaan Posted June 26, 2022 Posted June 26, 2022 (edited) Always the heretic we would put a few things to you .... While WEB lives, a lot of things that should be happening, aren't. WEB dies, following a suitable period of mourning - BRK goes through a modernization. Not much different to the British Royalty .... do you really think that the British Royalty is going to look anything like it currently does - after the queen is dead? Riches to rags in 3 generations. This first turnover is from a god to a mere mortal, historically they do not work out so well. Most would expect fund managers to initially sell into the 'legacy' euphoria in recognition of that, hence 20%+ downside. Then quietly buy back as 12-18 months later, mourning is over, the cash pile gets 'distributed', BRK gets broken up into multiple entities each trading at much more affordable share prices, and everyone raving as the sum of parts is now worth > than the whole. Its also known as asset stripping. Nothing wrong in that, but if you think that post WEB, BRK simply remains as it is - the odds are very likely against you. SD Edited June 26, 2022 by SharperDingaan
no_free_lunch Posted June 26, 2022 Posted June 26, 2022 (edited) To go back to the original question of the thread, I would not be surprised if inflation has peaked and if so, the stock market decline may peak over the next 3-6 months before receding to more typical 3-4% levels. I wouldn't be surprised to see stocks drop substantially further in that interval but after that, they probably stabilize and move up. I keep doing these litmus tests where I look at various companies and think whether it's reasonable for them to get 10%+ revenue increase needed to justify inlation. A lot of cases it seems a stretch to expect that kind of revenue bump. I can do the same experiment with friends jobs, again not many are getting double digit raises. Then factor in the colossal deflation from stock / crypto crashes, some future deflation from real estate cooling, it's tougher and tougher to see it going on. Perhaps the energy prices stabilize, the price increases ripple through the system (in smaller and smaller increments as you get further from oil usage) and things just stabilize. We are all a little poorer but inflation then returns to more normal levels. Edited June 26, 2022 by no_free_lunch
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