CIBC says Fairfax is likely to be added to the S&P/TSX 60 in December 2024 - sell decisions

[73 Reds]

6 hours ago, Viking said:

What i find very interesting is how a person is wired when it comes to things like risk management and portfolio concentration etc largely comes from their life experiences. The people who lived through the great depression (or people who have lost everything) are a great example. The chances of total loss might be small. But if the consequences are going to be severe...

 

My guess is most people think they are being rational when it comes to risk management. More likely, they are unknowingly betting that something really bad doesn’t happen. For most people it won’t. And that will be confirmation for them that they were right. Even though they were actually wrong. They just got lucky.

 

It is such a fascinating topic.  

For me the issue of concentration comes down to control.  When you have no control over each of your investments, diversification is sensible.  OTOH, when you pour your life savings into your own business, diversification makes no sense and in any event is not even feasible.   

[modiva]

6 hours ago, Parsad said:

 

Yes.  Being prepared for outlier events is something that flies against modern portfolio theory or insurance actuarial practices.  Both tend to focus on the remote possibilities being remote and probably won't affect most people most of the time.  Like a massive earthquake in the Cascadian belt that happens only once every 500 years. 

 

But often, they even tend to ignore things that may happen once every 20-30 years because it hasn't happened in a generation or they ignore the accumulation of risk.  The psychology leaves you bewildered, but it is real.  

 

Cheers!

The outlier events apply to any business, and so to the entire stock market. The only protection is perhaps having a % in safe assets like cash/gold/treasuries. Although, today’s safe asset might turn out to be unsafe tomorrow. 
 

@Parsad @Viking what are your safe assets today and what % of portfolio do you generally keep in them?

[Jaygo]

@modiva

To me safe assets need to be based on age and ability. At 20 a safe asset is some books and the balls to take calculated risks. At 80 a safe asset is probably a house, some gold for the grandkids and a friendly jurisdiction with sunny weather. 

 

My safe asset is my 39 year old frame and my mind. Getting less safe by the day btw. But i'm still in growth mode backed by the understanding I am entering the best 15 years of my earning power. Its foot to the floor on asset gathering right now.

 

I wish, wish, wish someone told me to lever up when I was young. My father was such a play it safe guy he always advised caution but now I see the meager yearly savings of my 20's is a days swings in my portfolio now. What would have been 100k of margin on the TSX in the year 2003?, terrifying at the time but not much really. 

 

Safe would have been borrowing from my future self and buying assets to protect from inflation.

 

 

[villainx]

42 minutes ago, Jaygo said:

My father was such a play it safe guy he always advised caution but now I see the meager yearly savings of my 20's is a days swings in my portfolio now. What would have been 100k of margin on the TSX in the year 2003?, terrifying at the time but not much really. 

 

That's too harsh.  The lost opportunity from past was fine tuning your sensibility and biases.  And you got a strong base from the play it safe approach.

 

You never know, a bad trade at a young age might have meant taking a long break in the market.  But glad we are all here now, trying to squeeze out some nice gains.

 

 

[Jaygo]

33 minutes ago, villainx said:

 

That's too harsh.  The lost opportunity from past was fine tuning your sensibility and biases.  And you got a strong base from the play it safe approach.

 

You never know, a bad trade at a young age might have meant taking a long break in the market.  But glad we are all here now, trying to squeeze out some nice gains.

 

 

 

 

Thank you for pointing this out, If it sounded harsh towards his influence it certainly was not intended.

 

My dad was about the kindest, smartest and most reasonable person you could imagine, He was my hero and north star but he was shaped by immense poverty as a child, growing up hungry and in the debt of others until he moved to canada. He grew up on gruel, they called it gachas in Spain. He shared a dirt floored room with his older sister, they didn't get concrete floors until he was a teenager. Two siblings died as toddlers.

 

Basically he was forced to work around age 7, he only had 3 years of school until he started working full time. 

 

He is the definition of the Canadian dream. He came here and worked like a possessed man. But the one thing he was terrified of was losing it all and going back to poverty so his risk barometer was ultra sensitive. To him the stock market was gambling, debt was a ball and chain to escape from not an instrument to get ahead with.

 

I feel blessed to have grown up with his influence but I have had to work outside of his guidance in many respects.

 

 In his eulogy my final parting message was this.

 

" I think a good father is someone who is not flawless, but someone who lives so open and honestly that we could learn from his victories and his defeats. He built his life so we could stand on his shoulders to achieve new heights while avoiding the hazards that befell him" 

 

I personally feel debt today, while it can be dangerous used incorrectly is the only way to escape the velocity of currency devaluation. I wish this was not the case, I wish hard work was still the only answer because I feel society may be better off with some dirt under its fingernails.

 

[villainx]

 

2 hours ago, Jaygo said:

Thank you for pointing this out, If it sounded harsh towards his influence it certainly was not intended.

 

Yep, I sensed you meant it more in this way.  

 

And you are right that 39 age onward - done right - should be wonderful.  The example I gave definitely applied to me, I levered around dot com bust, and it took me awhile to recover as well as the awareness to get back into the market.  Right in time for the GFC, but that ended up being a blessing.  A bit older, I was able to keep a more level head about things.  

[Viking]

11 hours ago, modiva said:

The outlier events apply to any business, and so to the entire stock market. The only protection is perhaps having a % in safe assets like cash/gold/treasuries. Although, today’s safe asset might turn out to be unsafe tomorrow. 
 

@Parsad @Viking what are your safe assets today and what % of portfolio do you generally keep in them?

@modiva , over my investing career I have always been comfortable with cash / cash equivalents. I flex my cash position up at times (when i like the risk/reward set-up). And i flex it back down at times (when i don’t like the risk reward set-up). It continues to amaze me how often ‘once in every 10 or 20 year’ investments come along (often one or two comes along every year). But to capitalize, you often need to have cash on hand. Today my cash weighting is about 15%. If markets continue to rip higher, I will probably increase my cash weighting to 20%. 
 

In terms of ‘safe’ assets, when it comes to equities, I think broad based ETF’s/index funds like VOO and XIC.TO fit. But only if you are a long term investor and ok with volatility, sometimes extreme volatility. About 50% of my portfolio is in broad based index funds. I am a new convert to this asset class, making my first purchases about a year ago. So far, I love it. 
 

I am also going to be doing some digging to see if I can find a balanced ETF/index fund that is 60% equities and 40% fixed income. My wife is VERY risk averse. A 100% stock ETF/index fund is not a good fit for her (should I no longer be around). So i want to find a fund (perhaps 2) that is a good fit for her and shift some of her assets into it. Just so she knows what to do if I get hit by a bus one day. 

If we get a melt-up in stocks, i like the idea of shifting into a balanced fund. I think this is also what Boggle did with his portfolio. 

 

My views on risk and concentration are evolving. Age and situation are definitely factors. As usual, i am trying to be inquisitive and open minded. Rational. And action oriented. Try stuff, see how I feel, make any necessary course corrections. For me its a pretty dynamic process.

Edited November 22 by Viking

[John Hjorth]

4 hours ago, Jaygo said:

... Thank you for pointing this out, If it sounded harsh towards his influence it certainly was not intended.

 

My dad was about the kindest, smartest and most reasonable person you could imagine, He was my hero and north star but he was shaped by immense poverty as a child, growing up hungry and in the debt of others until he moved to canada. He grew up on gruel, they called it gachas in Spain. He shared a dirt floored room with his older sister, they didn't get concrete floors until he was a teenager. Two siblings died as toddlers.

 

Basically he was forced to work around age 7, he only had 3 years of school until he started working full time. 

 

He is the definition of the Canadian dream. He came here and worked like a possessed man. But the one thing he was terrified of was losing it all and going back to poverty so his risk barometer was ultra sensitive. To him the stock market was gambling, debt was a ball and chain to escape from not an instrument to get ahead with.

 

I feel blessed to have grown up with his influence but I have had to work outside of his guidance in many respects.

 

 In his eulogy my final parting message was this.

 

" I think a good father is someone who is not flawless, but someone who lives so open and honestly that we could learn from his victories and his defeats. He built his life so we could stand on his shoulders to achieve new heights while avoiding the hazards that befell him" 

 

I personally feel debt today, while it can be dangerous used incorrectly is the only way to escape the velocity of currency devaluation. I wish this was not the case, I wish hard work was still the only answer because I feel society may be better off with some dirt under its fingernails.

 

Off topic :

 

- - - o 0 o - - -

 

@Jaygo,

 

Thank you for sharing that personal very touching story.

 

In a way it is also a fascinating story about much that a priori may have seemed about impossiible, actually is possible and achieveable, if the right attitude and flexiblity to obtain better life conditions and social mobility is at place, or embedded and dormant, to surface, after being triggered some way.

 

It's also a fascinating story about progress in our world over the long term.

 

Again, thank you for sharing.

 

- - - o 0 o - - -

 

Now, back to topic again.

[yesman182]

On 11/20/2024 at 8:14 AM, 73 Reds said:

Can you think of an example of an outlier event that Buffett or Watsa would not have thought of?  If the outlier event is truly "outlier" does it fall within the definition of "insurable"?  Before an insurance company writes an insurance contract, any outlier event, no matter how remote, should be a part of the equation.

Buffett explained that workers comp issue at the twin towers on 9/11 was an outlier event that was not thought of.

[73 Reds]

12 minutes ago, yesman182 said:

Buffett explained that workers comp issue at the twin towers on 9/11 was an outlier event that was not thought of.

And my guess is he learned the importance of a properly crafted insurance contract leaving no ambiguity for an insured event and an exclusion.  How can an insurance company properly account for any risk that cannot be contemplated in advance?  Answer: It has to be excluded from coverage. 

[Haryana]

https://www.livescience.com/space/extraterrestrial-life/first-contact-with-aliens-could-easily-end-in-genocide-scholars-warn

 

Include an Alien Colonization plan as another example of a truly outlier and uninsurable event?

 

“I saw... its thoughts. I saw what they're planning to do. They're like locusts. They're moving from planet to planet... their whole civilization. After they've consumed every natural resource they move on... and we're next. Nuke 'em. Let's nuke the bastards.”

talking about the aliens

Bill Pullman - President Thomas J. Whitmore

[Parsad]

13 hours ago, modiva said:

The outlier events apply to any business, and so to the entire stock market. The only protection is perhaps having a % in safe assets like cash/gold/treasuries. Although, today’s safe asset might turn out to be unsafe tomorrow. 
 

@Parsad @Viking what are your safe assets today and what % of portfolio do you generally keep in them?

 

I only put money in short-term T-bills or really short-term corporate bonds that have almost zero chance of default...about 50% of my portfolio is in them presently.  I can't find enough stuff that I like that is cheap. 

 

I was fully invested and even used some leverage in late 2020...I've slowly sold stuff as it has rebounded dramatically and now sit on a lot of cash or cash equivalents.  Cheers!

[Parsad]

12 hours ago, villainx said:

 

That's too harsh.  The lost opportunity from past was fine tuning your sensibility and biases.  And you got a strong base from the play it safe approach.

 

You never know, a bad trade at a young age might have meant taking a long break in the market.  But glad we are all here now, trying to squeeze out some nice gains.

 

 

 

+1!  Cheers!

[Parsad]

11 hours ago, Jaygo said:

 

 

 In his eulogy my final parting message was this.

 

" I think a good father is someone who is not flawless, but someone who lives so open and honestly that we could learn from his victories and his defeats. He built his life so we could stand on his shoulders to achieve new heights while avoiding the hazards that befell him" 

 

I personally feel debt today, while it can be dangerous used incorrectly is the only way to escape the velocity of currency devaluation. I wish this was not the case, I wish hard work was still the only answer because I feel society may be better off with some dirt under its fingernails.

 

 

Not true!  Taking on debt is not necessary to achieve a comfortable life.  And I wouldn't worry about currency devaluation if you have assets that go up in value or even operate in multiple jurisdictions where the currency risk is diversified.  Coca-cola will always go up in price faster than inflation, because consumers will pay a few pennies more for the brand.  If a business has pricing power, is global and is in demand, it will always be worth more after inflation.  Why?  Because any inflationary pressure can be passed on to consumers. 

 

And your eulogy for your father was excellent!  I would re-read your own statement and remember that he also didn't come to Canada to watch you lose everything he worked for and you worked for.  In other words, being cautious is the foundation for you to build on...not destroy.  Cheers!

[Parsad]

6 hours ago, Viking said:

@modiva , over my investing career I have always been comfortable with cash / cash equivalents. I flex my cash position up at times (when i like the risk/reward set-up). And i flex it back down at times (when i don’t like the risk reward set-up). It continues to amaze me how often ‘once in every 10 or 20 year’ investments come along (often one or two comes along every year). But to capitalize, you often need to have cash on hand. Today my cash weighting is about 15%. If markets continue to rip higher, I will probably increase my cash weighting to 20%. 
 

In terms of ‘safe’ assets, when it comes to equities, I think broad based ETF’s/index funds like VOO and XIC.TO fit. But only if you are a long term investor and ok with volatility, sometimes extreme volatility. About 50% of my portfolio is in broad based index funds. I am a new convert to this asset class, making my first purchases about a year ago. So far, I love it. 
 

I am also going to be doing some digging to see if I can find a balanced ETF/index fund that is 60% equities and 40% fixed income. My wife is VERY risk averse. A 100% stock ETF/index fund is not a good fit for her (should I no longer be around). So i want to find a fund (perhaps 2) that is a good fit for her and shift some of her assets into it. Just so she knows what to do if I get hit by a bus one day. 

If we get a melt-up in stocks, i like the idea of shifting into a balanced fund. I think this is also what Boggle did with his portfolio. 

 

My views on risk and concentration are evolving. Age and situation are definitely factors. As usual, i am trying to be inquisitive and open minded. Rational. And action oriented. Try stuff, see how I feel, make any necessary course corrections. For me its a pretty dynamic process.

 

+1!  You know, Ericopoly on here turned $80K into $20M in just over 10 years with only 5 bets.  Yes, they were massive bets, but he just waited for those single opportunities where he swung for the fences...the fat pitch! 

 

If people focused on Buffett's 20 punch-card philosophy of investing, they would become rich without too much effort.  But you have to be patient, alert and committed.  As well, you need to trust your analysis when you swing.  Your investment in FFH over the last few years is a living testament to that philosophy.  It works like a charm!

 

Cheers!

[Parsad]

5 hours ago, 73 Reds said:

And my guess is he learned the importance of a properly crafted insurance contract leaving no ambiguity for an insured event and an exclusion.  How can an insurance company properly account for any risk that cannot be contemplated in advance?  Answer: It has to be excluded from coverage. 

 

You can't exclude something you didn't see coming.  For example, you can't say there is a general exclusion for anything not in the contract that might happen.  Otherwise insurers buying reinsurance wouldn't buy a contract for a specific risk, and in turn, general insurers could not offer that protection to consumers/businesses.  Cheers!

[MMM20]

7 hours ago, Parsad said:

You know, Ericopoly on here turned $80K into $20M in just over 10 years with only 5 bets.

 

Whoa, I'm newer here and didn't know this - which exact years and what were the bets?

[John Hjorth]

1 hour ago, MMM20 said:

 

Whoa, I'm newer here and didn't know this - which exact years and what were the bets?

 

One of them was on BAC in the early days of CoBF with BAC post GFC at about 6 [I think], and betting hard on the underlying earnings power still there, which the market did not acknowledge, only its litigation and balance sheet problems, then afterwards  removing any downside risk by the use of options, where both the stock and the options were mispriced severely. I think you can find it the early days of the BAC topic.

 

- - - o 0 o - - 

 

The day of 'CoBF Big Bang' on the former Simple Machines forum platform [there was an older platform even earlier than that, which content is now gone, I think] can be seen as the date Sanjeev registered as the first person ever here on CoBF, in his profile info. 

Edited November 22 by John Hjorth

[Redskin212]

Back in the day Ericopoly's post were legendary like Viking's are today.  His posts were very informative and transparent - we all learned a ton from him.  

[73 Reds]

8 hours ago, Parsad said:

 

You can't exclude something you didn't see coming.  For example, you can't say there is a general exclusion for anything not in the contract that might happen.  Otherwise insurers buying reinsurance wouldn't buy a contract for a specific risk, and in turn, general insurers could not offer that protection to consumers/businesses.  Cheers!

Sure but doesn't the risk have to be identifiable in advance?  Otherwise how does an insurance company price its insurance for unidentifiable risks?

[Jaygo]

9 hours ago, Parsad said:

 

Not true!  Taking on debt is not necessary to achieve a comfortable life.  And I wouldn't worry about currency devaluation if you have assets that go up in value or even operate in multiple jurisdictions where the currency risk is diversified.  Coca-cola will always go up in price faster than inflation, because consumers will pay a few pennies more for the brand.  If a business has pricing power, is global and is in demand, it will always be worth more after inflation.  Why?  Because any inflationary pressure can be passed on to consumers. 

 

And your eulogy for your father was excellent!  I would re-read your own statement and remember that he also didn't come to Canada to watch you lose everything he worked for and you worked for.  In other words, being cautious is the foundation for you to build on...not destroy.  Cheers!

 

I think you may be underestimating how difficult it is to gather assets for young people today. I see it in my employees who are basically spending every cent they earn just to pay for gas, insurance, rent etc. Maybe the smart ones can save enough to max their TFSA

 

In the past 4 years we have had a 40 % increase in the money supply on about 10% economic growth. That is a 30% devaluation imo.

 

Lets say 4 years ago one of these guys borrowed 100K or 2 years of pre tax income. They buy the XIU or VOO or whatever.

 

They would receive a decent tax refund for the interest expense of about 2000 a year,  they would be up to about 150k portfolio value and would be getting about 5k in yearly dividends.

 

The interest would be about 6k per year or 24K in total. Roughly equal to the tax savings and dividends. 

 

I think we, Parsad you in your 50's and me in my late 30's are a little blind to how out of hand things have become. My first house was 300k that same house just sold for 1.4M 3 months ago. (Not by me sadly) 

 

 

 

 

[Castanza]

What you're seeing is the results of societal (US) individual spending addiction problem exacerbated by inflation. I would believe it is difficult to accumulate assets if I didn't see so many 20 something year olds with $3k mortgage payments, $1k car payments, 80k in student debt with 5k yearly vacation budgets all on combined incomes of less than 150k.

 

But I don't think it is only this because my wife and I did this. Neither of us had college paid for. I had 30k of debt after 2 years of college, took two years off, continued worked fulltime (UPS 40kyr 1 - 80k yr 4) 10-12 hour days and finished school my last two at night (it SUCKED). My wife worked as a nurse and had 40k in student loans made probably 60k up to 75k. She graduated in 2015 I graduated officially in 2017. We rented a shitty apartment for $840 in South Western Ohio, continued to drive our High School beaters and I paid cash for my additional schooling something like ~740 a month. By 2019 we had no student loans, one new vehicle and a new (used vehicle which I still have and drive). Maxed Roth IRAs and something like 10% funded 401ks for each of the respective years. We managed to do some trips (explore some national parks in a van out west, Canada, etc.) Fast forward we continued heavily saving and are in our early 30's with new locations, new jobs, a paid off house (cashflow choice), a rental property, multiple vacations (Rivera Maya, Punta Cana, Canada, Western US), two used vehicles paid off (50k miles and 100k miles), 1 child and roughly 4x the recommended retirement savings by age (big thanks to this forum). Right now we save roughly 55% of our income and my wife has reduced her work to about 1/3rd to raise our child. I have never used significant leverage to accomplish any of this. I've made some poor investments, squandered time in the market and had a few good investments. But the majority of our "success" if you can call it, that was just saving and being frugal/rolling with the punches of life.

 

Stuff has gotten more expensive....but peoples spending habits have barely changed. Drive a beater, rent a shitty apartment, shop at Goodwill, buy used furniture, reduce your monthly subscriptions, eat out less often and give yourself a weekly splurge....Do this for 5 years....just 5 and it will make a world of difference. Focus on saving and paying off student loans. Sometimes you have to do things you don't want to and make decisions with a long-term focus. Be thankful for opportunities and live life. Too many pessimists out there.

 

_______________________________________________________________________________

 

Now Canada? I'm not sure....seems like things are further out of whack North of the border. Especially regarding rent and housing. The 30 year fixed rate mortgage we have here in the US is an asset like none other. 

 

@Jaygo Appreciate the story of your late Father. Similar threads with my Dad. How do you think he would view todays younger generation and their spending/saving habits? 

 

 

[73 Reds]

6 minutes ago, Castanza said:

What you're seeing is the results of societal (US) individual spending addiction problem exacerbated by inflation. I would believe it is difficult to accumulate assets if I didn't see so many 20 something year olds with $3k mortgage payments, $1k car payments, 80k in student debt with 5k yearly vacation budgets all on combined incomes of less than 150k.

 

But I don't think it is only this because my wife and I did this. Neither of us had college paid for. I had 30k of debt after 2 years of college, took two years off, continued worked fulltime (UPS 40kyr 1 - 80k yr 4) 10-12 hour days and finished school my last two at night (it SUCKED). My wife worked as a nurse and had 40k in student loans made probably 60k up to 75k. She graduated in 2015 I graduated officially in 2017. We rented a shitty apartment for $840 in South Western Ohio, continued to drive our High School beaters and I paid cash for my additional schooling something like ~740 a month. By 2019 we had no student loans, one new vehicle and a new (used vehicle which I still have and drive). Maxed Roth IRAs and something like 10% funded 401ks for each of the respective years. We managed to do some trips (explore some national parks in a van out west, Canada, etc.) Fast forward we continued heavily saving and are in our early 30's with new locations, new jobs, a paid off house (cashflow choice), a rental property, multiple vacations (Rivera Maya, Punta Cana, Canada, Western US), two used vehicles paid off (50k miles and 100k miles), 1 child and roughly 4x the recommended retirement savings by age (big thanks to this forum). Right now we save roughly 55% of our income and my wife has reduced her work to about 1/3rd to raise our child. I have never used significant leverage to accomplish any of this. I've made some poor investments, squandered time in the market and had a few good investments. But the majority of our "success" if you can call it, that was just saving and being frugal/rolling with the punches of life.

 

Stuff has gotten more expensive....but peoples spending habits have barely changed. Drive a beater, rent a shitty apartment, shop at Goodwill, buy used furniture, reduce your monthly subscriptions, eat out less often and give yourself a weekly splurge....Do this for 5 years....just 5 and it will make a world of difference. Focus on saving and paying off student loans. Sometimes you have to do things you don't want to and make decisions with a long-term focus. Be thankful for opportunities and live life. Too many pessimists out there.

 

_______________________________________________________________________________

 

Now Canada? I'm not sure....seems like things are further out of whack North of the border. Especially regarding rent and housing. The 30 year fixed rate mortgage we have here in the US is an asset like none other. 

 

@Jaygo Appreciate the story of your late Father. Similar threads with my Dad. How do you think he would view todays younger generation and their spending/saving habits? 

 

 

@Castanza you and your wife are inspiring examples of what can come from a little sacrifice early on.   Reminiscent of some of the subjects of one of the best books I've ever read - The Millionaire Next Door.  

[Jaygo]

22 minutes ago, Castanza said:

@Jaygo Appreciate the story of your late Father. Similar threads with my Dad. How do you think he would view todays younger generation and their spending/saving habits? 

 

Total thread derail so sorry to all.

 

He would likely just be shocked by it all. The waste especially, It made him sick. His was a mentality based on fear of going back, to going hungry again. All the while as his kids we lived very well here, not spoiled but pretty damn close to it.

 

He had a depression era mindset that he couldn't shake and its really strange how these things get passed down through generations. My grandfather Aurelio spent 18mths in a concentration camp in on the border of France.  Our side lost to the Franco fascists. They survived off watery gatchas and if lucky vermin they trapped. So later in life he is part of a rapidly rising fortune of Spain but would not waste anything. Food, paper, clothing, metal cans from beans. Everything was saved. Everything that is garbage in today's society.

 

Ill never forget him coming over to Canada for a visit in the 1995. we go out for chicken wings and he would be polishing the bones, not a morsel left, cartilage and all. My dad too and as kids it became a thing make sure that chicken bone is spotless.  Now my kids do it too and they even say "look dad, just like great grampa"

 

 

[Whensthepaintdry?]

@Castanza sounds kind of like my wife and I. I didn’t have college debt, but my starting salary was 28,500. I don’t think I made it out of the 30s until 7 years ago. Thankfully I worked extra shifts/jobs and my wife and I are both frugal. We still traveled every year more than once, but never extravagantly. We now are very Comfortable compared to our peer group. I try to give advice where I can, but most of the time it falls on deaf ears. A recent example, recently  we are allowed to take hardship loans out of our 401ks due to a natural disaster in the area. I kid you not it feels like half of my employees pulled the max out for anything you can imagine but an actual hardship or other investment opportunity. 

Edited November 22 by Whensthepaintdry?