Detroit, no offense but all the things you wrote as few points are mainstream news and beliefs. Yes they are held by nearly every single poster/expert in the world today.
It isn’t the Holy Grail; it isn’t thoughts that are so unique that we need some shocking presentation. And, believe it or not, if you aren’t my age these periods will happen many times in your life.
I do not as yet know how I’m going to manage that.
…
By replacing part of your US investment/Berkshire by Nestlé, plus if you require more diversification
maybe a bit of Aussie mining companies and Kiwi Timber (low correlation with stocks/bonds)?
Well, it took me a lot of years to settle on Berkshire as my main vehicle.
It’s going to take some pondering if I’m going to change that.
I have a few things that have worked well for me in the past that I can fall back on, but they also tend to have a strong US focus.
It’s a place that treats capitalists very well. There are certainly great businesses elsewhere, but the owners don’t tend to do as well.
Jim
There are certainly great businesses elsewhere, but the owners don’t tend to do as well.
Maximizing returns is not everything in (investing) life. If you are really concerned about potential risks for your practically exclusively US investments it might make sense to geographically&politically diversify and consciously settle for less return in the interest of what you perceive as greater safety for your family.
What’s the apocalyptic news forthcoming that would batter the citadel of fortress Berkshire?
Alas, I don’t think it’s possible to discuss such things on a public internet board.
Almost any answer might start an endless flame war. Life is short.
I’ll talk about other stuff.
The salient Ferengi rules of acquisition would probably be 0 4 20 35 117
Jim
…but let’s just say I think there is material jurisdiction risk in holding shares of Berkshire..
I, for one, would be very interested in any “jurisdiction” risk you see as material.
I can see it for example in ExxonMobil - i.e. attacking profits as windfalls.
Not as clear for Berkshire. Can you enlighten, even if just areas to consider?
Thanks
I’m spending time thinking about what else might make a good core holding in the same way.
If we could keep it non-partisan it might be worth discussion
I actually think it is worth discussion. As I have practically Berkshire only I thought about that from time to time. Unfortunately apart from Nestle (which I might finally buy if it gets a bit cheaper) I know only of another US stock, Johnson&Johnson, which for me is in the same camp as Nestle until recently was: It will never be cheap enough for me to finally get in.
Nestle as a 2nd core holding would have the beauty that it is geographically&politically diversification — contrary to J&J, even if he latter is getting cheaper (Apparently it won’t; not even now the price is a bit down; it’s too stubborn for that, the company just too good and unavoidable).
Therefore I think it’s a worthwhile discussion for everybody who has practically all his money in BRK and therefore also in $US only and would feel more comfortable with a 2nd core holding in another part of the world.
Long ago I thought Toyota could be that, or Sony, having seen the latter then dominating the world of consumer electronics with ingenious products everybody wants to have, kind of what Apple is today, but apparently both were not what I thought they could be.
So which one (The only one coming to my mind always is Nestle)?
Not as clear for Berkshire. Can you enlighten, even if just areas to consider?
Some things are truly bad for business in a lasting way.
Widespread and lasting civil war. (presumably guerrilla on one or both sides, not two armies with pitched battles)
Splitting into two or more countries, one or more of which might have a non-rational government.
Besides a broken economy, smaller business impacts might be things like octroi. (customs posts / duties payable at state-county-city boundaries)
I would once have considered such concepts to be outlandish tinfoil-hat stuff, but no longer.
A third of Americans now agree with the statement “Violence against the government can at times be justified”, and over 40% of some big groups.
It’s not a prediction, but I think the chances are no longer nearly remote enough to warrant ignoring them.
It might be time for some deworsification.
Hmmm…Koryo Credit Information Co Ltd (Korea)
Price 9010 won.
Dividend 300 won, yield 3.33%
Debt:TotalCapital ratio 0.4722
5 year average ROE: 30.96%
5 year Revenue growth rate 11.34%
5 year EPS growth rate 21.50% (share count apparently flat, so that’s expanding margins given the lower revenue growth rate)
P/E 13.04
Sounds like the sort of business that tends to have a nice tidy moat.
Koryo Credit Information Co., Ltd. provides a variety of financial solution services to
individuals and corporations. The Company’s services include debt collection, credit research and
analysis, and related documents issuing. Koryo Credit Information also operates real estate leasing business.
https://www.investing.com/equities/koryo-credit-information-…
Jim
So which one (The only one coming to my mind always is Nestle)?
I think that, outside Berkshire, the answer has to be “more than one”.
A slate of somewhat smaller positions in good firms.
Few individual firms worth owning are as internally diversified yet bullet proof as Berkshire.
In most ways Berkshire is more like an asset class than a stock.
Contrary to popular assertions, a broad diversified portfolio of a large number of small positions need not approach market returns.
That’s mathematically true, but crucially it’s true only if the firms are picked at random.
I wouldn’t pick them at random.
e.g., picking from the 1700-stock Value Line database, total return figures in the last 21 years:
An equally weighted portfolio of the 50 highest ROE firms beat the S&P by 7.2%/year
An equally weighted portfolio of the 50 highest firms by 5-year sales growth beat the S&P by 5.95%/year
An equally weighted portfolio of all the medical supply firms (average 60) beat the S&P by 10.2%/year, and won almost every year.
Unfortunately those observations are of limited use in my goal of jurisdiction diversification.
Jim
Few points:
…
2). He is implying that this MAY be far worse 2008-2009. Tired of the same old drivel about the banking system being in good shape. The size and bursting of the biggest credit bubble of all time MAY trump this.
Thanks for the summary.
For others wondering whether it’s a good use of an hour, probably so, even if you are not a keen fan of investing based on the macro situation.
He notes that, though the past is not a perfect predictor and the current situation is particularly without useful precedents,
it has historically been a very bad thing when you see rising oil prices, rising inflation, and a rising dollar at the same time.
He’s a big fan of “If equities look really bad, don’t invest in equities”, though mentioning that the usual alternatives like bonds are not looking good right now.
Summary from the link:
06:04 Inflation Above 5%
08:56 The Market as an Economic Predictor
14:25 New Tools, New Toolkit
22:13 Crypto’s Effect on Other Asset Classes
25:00 Bitcoin vs. Gold
27:36 Work Ethic
29:19 Mobile Investing
30:36 Conviction and Being “Hot & Cold”
48:30 Stan’s Advice to a Young Investor
51:31 COVID Investment Inefficiencies
53:28 Bias Toward Growth Stocks
57:40 Stan’s Market “Pain Scale” and Possible Scenarios
1:03:45 Macro Pessimism
1:05:21 Bearish and Bullish
Jim
The salient Ferengi rules of acquisition would probably be 0 4 20 35 117
Well, I like rule 35, but it appears to be the opposite of rule 34. Hmm, life is not simple!
Craig
The salient Ferengi rules of acquisition would probably be 0 4 20 35 117
…
Well, I like rule 35, but it appears to be the opposite of rule 34. Hmm, life is not simple!
It’s amazing how many subtle concepts you can characterize with a specific list of Ferengi rules.
It works better than an emoji or two.
Jim
impacts might be things like octroi
I have not encountered that word in over 70 years.
In about 1950 I lived in St. Germain-en-Laye (near Paris) and there were the remains of a railroad between St Germain and Mantes and it went through a tiny town of Chambourcy where the main business at the time seemed to be the growing of Brussels Sprouts. The tracks were all gone by then, but right next to where the tracks used to be was a small stone or brick building with the sign OCTROI on it. Obviously for customs inspection and collection. This was wholly in France. In fact, in Seine-et-Oise department. So obviously it was built after the invention of the railroad and before 1950 when it could not have been used anymore.
“things you wrote as few points are mainstream news and beliefs”
DRUCKENMILLER has a way better record in public securities markets than WEB
He is the GOAT
I suggest you weigh heavily. Yes he can wrong but not ignored.
DRUCKENMILLER has a way better record in public securities markets than WEB
He is the GOAT
I suggest you weigh heavily. Yes he can wrong but not ignored.
Conversely it’s easy to IGNORE PEOPLE WHO YELL IN ALL CAPS.
There’s a button for it.
Jim
Thanks Jim.
That helps a lot in identifying how deep the divides now existing might actually reach. I.e, what level divides might we now be concerned with. It’s an area I’ve been doing a lot of reading and thinking about. And opening my mind to the possibility it could exist.
I can’t disagree that it’s in the range of possibilities, hopefully low.
Will leave it at that.
Conversely it’s easy to IGNORE PEOPLE WHO YELL IN ALL CAPS.
There’s a button for it.
I agree, and I used the button in the past for that purpose. Not necessarily the message, just the delivery.
More recently I reversed the decision to hear what Druckenmiller had to say. And picked up the same points you listed on your timetable of notes. Time well spent. Left it back on active. Appreciated the link.
Let’s find a middle ground. Don’t toss out the babies with the bathwater.
This was a good post with good comments. Thank you, DBB.
The interview was well-done and extremely informative from a man with a long successful career.
Somehow related, with Mungofitch now worried about jurisdictional risks to Berkshire, I feel more vindicated in the sell-off of 50% of my portfolio earlier this year after reading/listening to Ray Dalio and reading Hussman. Even though, like Druckenmiller, I felt like a dope and bought back in, only to lose more and freaked out a second time.
Now what I wonder?
It doesn’t help when I read that China and Russia did joint flyovers of the Taiwan Straight and now there is more saber-rattling back and forth in that area.
Druckenmiller’s time-out after doubling his losses was helpful, and that is what i had to do. It’s ok not to know and to stay alert. To know when your hot and when you’re not. I have to laugh at myself, talking like i could ever be hot, but in my own little world, to know when I have confidence and when i don’t. When I know stuff and when I don’t.
Jim, thanks for working out book value as you–and all the rest. Can’t thank you enough.
–But, now, from where do you think the jurisdictional risks to Berkshire lie? From within or without? or Both?
Thanks,
Elizabeth
Thanks
At least I say something of use
I never hear a single table pounding idea despite the carnage.
Just pontificating about past relationships and other nonsense.
Self importance is laughable.
Mostly lightweights
"That’s not how I’d sum it up. “Down on the USA” sounds like I’m throwing shade.
How to phrase it delicately?
I wish to be prepared for the immense negative impact on US businesses in general that
would likely arise from certain potential future news items I see as sufficiently
likely that I cannot in good conscience leave my family as exposed to them as we currently are.
I do not as yet know how I’m going to manage that.
Interesting topic.
While we’re picking on the U.S., what about “jurisidctional risks” in other parts of the world?
Where are the “safe” alternative jurisdictions?
China?
Russia?
Africa?
Europe(With the Bear growling at their doorstep, misguided ESG crippling them on the the energy front)?
Or, for you is it just a case of too much concentration in one “bad” jurisdiction vs. another?
Perhaps it’s my bias, but the U.S. still appears to be the best alternative versus all the other worse ones.
https://fragilestatesindex.org
P.S. Am currently reading my Great Great Grandfather’s memoirs of the (US) civil war. It was brutal, but at least it was short.
I wonder if this is the kind of risk Mungofitch is suggesting could happen here in the USA: From today’s Wall Street Journal: https://www.wsj.com/articles/mexico-energy-cfe-obrador-11655…
Mexico is returning to nationalizing some industries. Nationalizing is truly hard on shareholders as they normally get only fractional value and sometimes get no value with nationalizations.