What are you buying today?

[Red Lion]

GOOGL leaps 

[Gregmal]

Nintendo 

[CorpRaider]

LUV und PARA und SLG

Edited February 28, 2023 by CorpRaider

[Saluki]

Sold some of my ATCO (if I don't wait until the freezeout happens, I will  only miss one dividend payment) and bought more TV. Put in a limit order for SWBI but I didn't get a fill

 

(thinking of adding to some of my underwater positions and selling 31 days later to keep my same position but offset some of the gains from the ATCO forced sale. Whenever I try to time things it doesn't usually work out in my favor though).   

[Viking]

Cash. Back up to 50% cash weighting. Opportunity to lock in a 12% gain YTD. Collect 3.5% while i wait in the weeds for Mr Market to serve up the next fat pitch.
—————

i was listening to a podcast today and the host was talking about why Buffett likes to hold so much cash - he likes the optionality it provides. Except today, he is getting paid 5%. Making it even more valuable. 
—————

Warren Buffett's Unique Way Of Thinking About His Cash - Cash As A Call Option

- https://www.businessinsider.com/cash-as-a-call-option-2012-9

 

“Ms. Schroeder argues that to Mr. Buffett, cash is not just an asset class that is returning next to nothing. It is a call option that can be priced. When he thinks that option is cheap, relative to the ability of cash to buy assets, he is willing to put up with super-low interest rates, said Ms. Schroeder, who followed Mr. Buffett for years before she became his biographer.

 

“He thinks of cash differently than conventional investors,” Ms. Schroeder says. “This is one of the most important things I learned from him: the optionality of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.”

It is a pretty fundamental insight. Because once an investor looks at cash as an option – in essence, the price of being able to scoop up a bargain when it becomes available – it is less tempting to be bothered by the fact that in the short term, it earns almost nothing.

 

Suddenly, an investor’s asset allocation decisions are not simply between earning nothing in cash and earning something in bonds or stocks. The key question becomes: How much can the cash earn if I have it when I need it to buy other assets that are cheap, versus the upfront cost of holding it?”

[Castanza]

2 hours ago, Viking said:

Cash. Back up to 50% cash weighting. Opportunity to lock in a 12% gain YTD. Collect 3.5% while i wait in the weeds for Mr Market to serve up the next fat pitch.
—————

i was listening to a podcast today and the host was talking about why Buffett likes to hold so much cash - he likes the optionality it provides. Except today, he is getting paid 5%. Making it even more valuable. 
—————

Warren Buffett's Unique Way Of Thinking About His Cash - Cash As A Call Option

- https://www.businessinsider.com/cash-as-a-call-option-2012-9

 

“Ms. Schroeder argues that to Mr. Buffett, cash is not just an asset class that is returning next to nothing. It is a call option that can be priced. When he thinks that option is cheap, relative to the ability of cash to buy assets, he is willing to put up with super-low interest rates, said Ms. Schroeder, who followed Mr. Buffett for years before she became his biographer.

 

“He thinks of cash differently than conventional investors,” Ms. Schroeder says. “This is one of the most important things I learned from him: the optionality of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.”

It is a pretty fundamental insight. Because once an investor looks at cash as an option – in essence, the price of being able to scoop up a bargain when it becomes available – it is less tempting to be bothered by the fact that in the short term, it earns almost nothing.

 

Suddenly, an investor’s asset allocation decisions are not simply between earning nothing in cash and earning something in bonds or stocks. The key question becomes: How much can the cash earn if I have it when I need it to buy other assets that are cheap, versus the upfront cost of holding it?”

It’s easy to hold cash when you’re already rich, own cash producing companies and hold billions in assets that spit out millions in dividends every year. 
 

How much cash did WB hold in his early days? 

Unless you already have a solid portfolio to hold cash on top of; its just a more eloquent justification for trying to time the market no? 

 

Edited February 28, 2023 by Castanza

[SHDL]

58 minutes ago, Castanza said:

It’s easy to hold cash when you’re already rich, own cash producing companies and hold billions in assets that spit out millions in dividends every year. 
 

How much cash did WB hold in his early days? 

Unless you already have a solid portfolio to hold cash on top of; its just a more eloquent justification for trying to time the market no? 

 

 

Berkshire has a “fat wallet problem” in that they can’t easily sell their stocks quickly to raise cash when a great deal comes along. At least that was Buffett’s explanation for why he likes to hold so much extra cash. He also did say that if he were managing a “normal sized” portfolio he’d be fully invested. IIRC BPL was modestly levered most of the time.

[hasilp89]

1 hour ago, Castanza said:

How much cash did WB hold in his early days?

pretty sure it was negative (ie. leverage).

 

 

 

[aws]

From an early Buffett letter regarding work-out positions: 

 

 

"This category will produce reasonably stable earnings from year to year, to a large extent irrespective of the course of the Dow. Obviously, if we operate throughout a year with a large portion of our portfolio in work-outs, we will look extremely good if it turns out to be a declining year for the Dow or quite bad if it is a strongly advancing year. Over the years, work-outs have provided our second largest category. At any given time, we may be in ten to fifteen of these; some just beginning and others in the late stage of their development. I believe in using borrowed money to offset a portion of our work-out portfolio since there is a high degree of safety in this category in terms of both eventual results and intermediate market behavior. Results, excluding the benefits derived from the use of borrowed money, usually fall in the 10% to 20% range. My self-imposed limit regarding borrowing is 25% of partnership net worth. Oftentimes we owe no money and when we do borrow, it is only as an offset against work-outs."

 

 

However I'm also pretty heavy in cash at the moment, about 33%, as I'm not as confident in my own abilities as Buffett might have been in my shoes. A large part of that is tax related though and will come down a lot by April 15th.

[Paarslaars]

Added some more BRK.B

[Dave86ch]

Added 9988hk Alibaba

[Spekulatius]

In his early days, his fund was small and the environment was opportunity rich. Valuations overall were fairly low back then as well.

 

Now Berkshire is huge and he has a significant operating business with large pot. Liabilities  in his insurance business. He is also more in wealth preservation than wealth building , the last letters make this fairly clear. That’s why he holds more cash now than in his early years.

 

Different size, different business (investing vs operating business), different environment,  different goals.

[Xerxes]

13 hours ago, Viking said:

Cash. Back up to 50% cash weighting. Opportunity to lock in a 12% gain YTD. Collect 3.5% while i wait in the weeds for Mr Market to serve up the next fat pitch.
—————

i was listening to a podcast today and the host was talking about why Buffett likes to hold so much cash - he likes the optionality it provides. Except today, he is getting paid 5%. Making it even more valuable. 
—————

Warren Buffett's Unique Way Of Thinking About His Cash - Cash As A Call Option

- https://www.businessinsider.com/cash-as-a-call-option-2012-9

 

“Ms. Schroeder argues that to Mr. Buffett, cash is not just an asset class that is returning next to nothing. It is a call option that can be priced. When he thinks that option is cheap, relative to the ability of cash to buy assets, he is willing to put up with super-low interest rates, said Ms. Schroeder, who followed Mr. Buffett for years before she became his biographer.

 

“He thinks of cash differently than conventional investors,” Ms. Schroeder says. “This is one of the most important things I learned from him: the optionality of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.”

It is a pretty fundamental insight. Because once an investor looks at cash as an option – in essence, the price of being able to scoop up a bargain when it becomes available – it is less tempting to be bothered by the fact that in the short term, it earns almost nothing.

 

Suddenly, an investor’s asset allocation decisions are not simply between earning nothing in cash and earning something in bonds or stocks. The key question becomes: How much can the cash earn if I have it when I need it to buy other assets that are cheap, versus the upfront cost of holding it?”

 

If Christopher Blomstran were to read this he would say: "The Media and Viking are having a field day about Mr. Buffett's headline cash position, ignoring the liabilities"

 

 

[Castanza]

2 hours ago, Spekulatius said:

In his early days, his fund was small and the environment was opportunity rich. Valuations overall were fairly low back then as well.

 

Now Berkshire is huge and he has a significant operating business with large pot. Liabilities  in his insurance business. He is also more in wealth preservation than wealth building , the last letters make this fairly clear. That’s why he holds more cash now than in his early years.

 

Different size, different business (investing vs operating business), different environment,  different goals.

 

Yeah I saw that in the letter. Sounded like holding large amounts of cash to reduce any risk to the underlying businesses is the plan moving forward. Can certainly see the benefit at the scale of Berkshire.

 

@Viking I can see your point though and how cash can be like a "non-expiry" call option. I'd say that line of thinking can lead to underperformance though as it leans towards market timing. Can't remember who posted this last week, but this article was pretty interesting from a performance viewpoint.

 

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

[Xerxes]

To be fair to Viking, I think while his post put up references about a podcast and the call-option framework, the reality is that he is (i think) retired from working for somebody else (an employer). Therefore, he has to think about his family needs in the short term as well as the long term. And not just long term.

 

Whereas the "time in the market beats timing the market" is valid more for someone who has steady flow of cash coming and just investing the surplus, knowing that he/she does not need them.

[Castanza]

5 minutes ago, Xerxes said:

To be fair to Viking, I think while his post put up references about a podcast and the call-option framework, the reality is that he is (i think) retired from working for somebody else (an employer). Therefore, he has to think about his family needs in the short term as well as the long term. And not just long term.

 

Whereas the "time in the market beats timing the market" is valid more for someone who has steady flow of cash coming and just investing the surplus, knowing that he/she does not need them.

 

Good points Xerxes, investment approach and how you handle your resources definitely changes with time and your situation. 

[CorpRaider]

Buffett talked about that option value of bills/cash stuff a fair amount during 2020 AM, if I recall.

[Gregmal]

13 minutes ago, CorpRaider said:

Buffett talked about that option value of bills/cash stuff a fair amount during 2020 AM, if I recall.

Almost exactly when he should have been using it!

 

Otherwise, jokingly, I think it also helps to have a super cash fund where you can be 70% in cash, have 30% market exposure to stuff that returns 15-20% and then end up +30% on the whole enchilada every year. Both RBC and Axos are getting back to me on where to find this sort of financial product. 

[Luke]

10 minutes ago, Gregmal said:

Almost exactly when he should have been using it!

 

Otherwise, jokingly, I think it also helps to have a super cash fund where you can be 70% in cash, have 30% market exposure to stuff that returns 15-20% and then end up +30% on the whole enchilada every year. Both RBC and Axos are getting back to me on where to find this sort of financial product. 

@GregmalHow big is your nintendo position now?

[Gregmal]

2 minutes ago, Luca said:

@GregmalHow big is your nintendo position now?

~8%

[Saluki]

Bought a little Fairfax India in my Retirement account, a little VTS and a nice big slug of TV on the dip  

 

I also bought some BABA and NETI on which I have some losses, but plan to sell the earlier shares in 31 days which will help reduce some of my gains on the ATCO I was squeezed out of.  I plan on reclycling that capital and doing that again and again with other down positions until the end of the year and hopefully end up not having to write a big check this year to the tax man. I'm making an actual written note to myself to sell, because in the past I've tended to hold on "well I SAID I would sell in 31 days, but it still looks pretty cheap, so maybe I should just hold on longer." 

[Red Lion]

Nintendo

[nwoodman]

7974.T Nintendo 

[Red Lion]

Rolled some t bills that matured yesterday to more maturing September of 2023 and 2024 for 5% ytm and a significant tax advantage compared to keeping money in a money market or high yield bank account.
 

Rolled a lot more into my home remodel fund. 

[Castanza]

PCYO, BRKb

Edited March 1, 2023 by Castanza