Stagflation - Should Investors Care?

[Parsad]

9 hours ago, frommi said:

But what if that value was only value when the macro prices changed? What if Fairfax was only at 0.6x bookvalue because interest rates were very low and if they stayed low it would have been the fair value for Fairfax?

With HSY its even more obvious, because their COGS has gone up a lot that year, if cocoa prices stayed that high maybe HSY was at fair value at 140$?
Meta is a different story, but if they had continued plowing all their money into the Metaverse maybe than even Meta was at fair value?

 

That's very different than making a macro/speculative bet.  Which is what you are doing if you base it on macro.  My decisions were based on liquidation value (FFH) and discount cash flow (META/HSY).  You can argue this however you want...but macro is just speculation, not investment!  Cheers!

[Parsad]

6 hours ago, John Hjorth said:

 

Thank you for sharing that story, Sanjeev [ @Parsad ],

 

I've read about it from you earlier here on CofB&F, but not so detailed before. You're a blessing for your family.

 

In Danish, we have this proverb : 'Modgang gør stærk' [English : 'Adversity makes strong']. 

 

You've become an adult early in one of the worst scenarios imaginable as background for it.

 

Others have it harder...Dealmaker is a perfect example...fortunately longer term we both came out fine. 

 

That proverb is accurate!  My brother had it tougher...sometimes an angry older brother yelling at him, keeping him in line...father gone and not at soccer games, birthdays, wedding, etc...but I'm very proud of him and how he turned out.  I'm very fortunate my niece and nephew are very close to me and I get to spend a lot of quality time with them...they were over for dinner last night!  

 

In Hindi, the word for "brother" is "Bhaiya".  My brother has never taken my name (Sanjeev) other than in introductions (This is my brother, Sanjeev)...always called me "Bhaiya" from when he was a toddler.  When my nephew was going to be born, the word for "Oldest Uncle" in Fiji Hindi is "Dada", which sounds too close to "Daddy"...and I didn't want the children to be confused by the two words.  So I told my brother for my nephew to call me "Bhaiya", just like his father did his whole life.  So now everyone, including my sister-in-law all call me "Bhaiya"!    Cheers!

[Parsad]

2 hours ago, Sweet said:

Does Dalio have a 50/50 record?  I think that’s generous.  Gundlach, Druckenmiller, Burry etc etc, their macro calls have been just terrible.

 

Blake is right the deficit and debt is a problem but it can be fixed too.

 

 

+1!  Every smart person who has made a macro bet, has gotten it right, and built their reputation on it, eventually lost that same respect with their reputation on another macro bet they got wrong.  It's speculation. 

 

The whole reason we use an intellectual framework to make investment decisions based on discount cash flow or liquidation value is to reduce risk and remove speculative behavior.  

 

Cheers!

[Parsad]

2 hours ago, cubsfan said:

 

Now that is a wonderful story of dealing with adversity and never giving up when it looks like all is lost.  Just think, and some of us are upset about a little market volatility or cloudy macro.

 

In many ways, this is what makes you a man.

 

You and I arguing about politics is probably the worst waste of time we could both spend.  A beer together would be far more useful and enjoyable!  Cheers!

[frommi]

2 minutes ago, Parsad said:

 

That's very different than making a macro/speculative bet.  Which is what you are doing if you base it on macro.  My decisions were based on liquidation value (FFH) and discount cash flow (META/HSY).  You can argue this however you want...but macro is just speculation, not investment!  Cheers!

We can agree that predicting macro is speculation, but seeing macro factors move in the investors favor and the market has ignored it to that point is investing in my view. Its like having insider information or shooting fish in a barrel. I might be wrong on this, but look at MDLZ, the market has completly ignored that cocoa prices have crashed because they are still hedged on high prices, but give it one year and it will be obvious to anyone that it is too cheap right now.

[SharperDingaan]

52 minutes ago, frommi said:

We can agree that predicting macro is speculation, but seeing macro factors move in the investors favor and the market has ignored it to that point is investing in my view. Its like having insider information or shooting fish in a barrel. I might be wrong on this, but look at MDLZ, the market has completly ignored that cocoa prices have crashed because they are still hedged on high prices, but give it one year and it will be obvious to anyone that it is too cheap right now.

 

The more recent and extreme example is o/g. The reality is always look at the basin macro first, to determine  the current incentives; drill, buy, pay down debt, buy back, or special dividends. Thereafter trust in your conclusions, and execute well ahead of your competition ... the fish in a barrel.

 

The 'push-back' is always being out of sync with the  industry 'story telling' ... everyone else (who didn't blow up last month) suddenly an expert, earnestly trying to convince you that you're wrong. As with walking onto a factory floor, assess via the overall volume and tempo of the noise heard ...  Takes years of practice 

 

SD

[Viking]

1 hour ago, frommi said:

We can agree that predicting macro is speculation, but seeing macro factors move in the investors favor and the market has ignored it to that point is investing in my view. Its like having insider information or shooting fish in a barrel. I might be wrong on this, but look at MDLZ, the market has completly ignored that cocoa prices have crashed because they are still hedged on high prices, but give it one year and it will be obvious to anyone that it is too cheap right now.

+1. In late 2021, Fairfax sold their corporate bonds at a 1% yield (locking in close to a $300M investment gain). They moved the average duration of their fixed income portfolio to 1.2 years. People consider it a macro bet. It wasn’t. They correctly assessed that fixed income investors were not getting paid for duration risk. It was about risk mitigation. 
 

Fairfax’s positioning made the company billions when interest rates spiked. (By made I mean opportunity cost). It also allowed them to grow more aggressively in the hard market. 
 

The key point is investors need to be as rational as possible. Simple to understand. But very hard to do. 

[dipod]

Just want to say that this forum has been very helpful to growing as a young investor. As I scurry through this thread and see mistakes highlighted and lessons learned, I see how sometimes we go through a cycle of life. Sometimes this forum reads like an investing textbook to me.

 

Macro makes one feel smart but as I have seen in my short investing life, batting averages are piss poor. What seems to be more reliable is rationally calculating value, examining current pricing, and then making a decision based on how both compare while largely disregarding "marketers".

 

I still make mistakes here and there (see recent LLY calls lol) but this website has been a God send for an individual willing to read and learn. Especially one that is starting out in the investing game.

[DooDiligence]

A lot of the macro discussions go over my head, but the more I read them, the more they make sense. I also really enjoy learning about monetary plumbing. Neither subject does me much good with investing, but I like having a casual understanding of what goes on behind the curtain, and how it might affect the overall economy. For the most part, I lack the ability for higher order thinking in financial analysis. What I really find useful is discussions about behavior.

[Parsad]

3 hours ago, Viking said:

+1. In late 2021, Fairfax sold their corporate bonds at a 1% yield (locking in close to a $300M investment gain). They moved the average duration of their fixed income portfolio to 1.2 years. People consider it a macro bet. It wasn’t. They correctly assessed that fixed income investors were not getting paid for duration risk. It was about risk mitigation. 
 

Fairfax’s positioning made the company billions when interest rates spiked. (By made I mean opportunity cost). It also allowed them to grow more aggressively in the hard market. 
 

The key point is investors need to be as rational as possible. Simple to understand. But very hard to do. 

 

Managing Fairfax is also very different than one managing their own portfolio.  We invest in Fairfax for them to manage that risk.  Fairfax is a very leveraged business with insurance contracts/payables that need to be assessed regularly, and the portfolio invested in a manner that matches the duration of the insurance contract risks. 

 

Our own personal portfolios aren't structured like that...very few of us, if any, use the type of leverage Fairfax uses.  We don't run insurance businesses.  We aren't public companies exposed to the whim of capital markets.  We don't have extraordinary expenses in operations.  A whole host of things that are entirely different. 

 

So, what Prem often does at Fairfax is very different than what any average investor would be doing with their own portfolio.  Including making macro decisions that really aren't particularly important to our personal portfolios, whereas interest rate risk/currency risk/etc could create significant issues for Fairfax because of their global business.

 

Cheers!

[Gregmal]

Whelp, remember when we d have to listen to that cherry picked bullshit about Buffett “dumping stocks”? 
 

https://www.cnbc.com/2026/03/31/warren-buffett-says-he-sold-apple-too-soon-and-would-buy-more-of-it-though-not-in-this-market-.html