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]

7 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. 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 2 hours ago 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.