Japan GDP Q1: +3.5% (annualized) vs. 2.7% expected. [View news story]
Very quick impact on GDP if this is Abenomics inspired. It will be interesting to see if the Q2 figures continue to support this trend. Tsunami reconstruction is just picking up steam and this might also distort the underlying growth.
Berkshire Hathaway Intrinsic Value Pie Chart [View article]
Interesting analysis Eric - and I do support your overall conclusions. I do think that it is dangerous to assume that 'float' is overstated, as the P&C insurance business is highly cyclical, and the current cycle is downward, a slope compounded by low yields. BH as I explored in a recent article, http://seekingalpha.co... - are taking a much more aggressive market position, and this could reduce the accounting inefficiency of insurance liabilities running off better than reserved. It is easy to look at float as an asset, but all it is is the underwriters best estimate of the cost of future claims.
Very interesting Steve. I wonder how clean a perspective on profitability combined ratio is for a hedged portfolio - which I assume is how alphacat operates. For example, does Validus provide a wrap for the reinstatement of the upfront cat contract, or run other basis risk that increases the volatility of the retained exposure - ultimately requiring a lower combined ratio to generate the same economic outcome?
I agree that the sector is a buy, timing is tricky. The reinsurance sector is awash with capital from hedge funds, pension funds and others seeking yield, and this is putting pressure on pricing. Berkshire Hathaway is also pumping in capital. Buying after major events should be a good strategy, but I would choose the stronger and more diversified companies. Look at Partner Re after the NZ and Japan EQ to see the impact of being overweight to the market in a major loss. Check out http://seekingalpha.co..., if you want to read more on the sector, and http://seekingalpha.co... where I look at what Ajit Jain at Berkshire is up to. Brian, the sector heavyweights are the big European players, have you thought of including those in your reviews?
Thanks Dwi - yes the p/e multiple is 15, not 15%, as a multiple I agree the correct format is 15. If I was being pedantic, I would point out that a ratio has to have two components, so the p/e ratio is 15:1. The earnings to price ratio could be a percentage (6.6%) being the reciprocal of 15:1, or the p/e ratio could be 1500% - luckily I don't feel pedantic today as I did make a typo....... Salamat Pagi !
Yes, you are correct - the text should more accurately read "For the sake of completeness, here is how IF has performed vs SPY since inception in 1990." My key point is the volatility of Indonesian investments, much of which has been currency related. The IDR/USD fx rate is telling. http://bit.ly/10N4CJT. This shows how th Rupiah shot from 2000/USD to 16000 in the 90's, then stabilised in a (wide) range between 8000-12000 since then. A comparison from 1990 bears the devaluation in full. While as I mention in my article currency risk remains high, a repeat of this devaluation could be considered a 'tail' event.
Thanks - independence was declared in 1945, but wasn't recognised by the Dutch until 1949, I chose the latter date as a milestone in economic and political development, as undisputed sovereignty heralded a new era for Indonesia.
The Singapore Story: No Longer A Sure Thing For Investors? [View article]
Not short of controversy around this article are we? I always find it interesting to consider polarised arguments, as the truth is often in between. I lived and worked in Singapore for most of the 90's have more of my friends there than anywhere else, and am a frequent visitor. The issue for both Singapore and Hongkong as I see it is one of competitive advantage over neighbours as an entrepot economy. As China and S East Asian countries develop more open economies, reduce protectionism, and increase the supply of educated employees - one degree better becomes increasingly hard to maintain. This leads to tougher cost benefit equations for employers, employees, residents and other 'investors'. Singapore specifically I see as having progressed fast up the cost curve, while managing to maintain an edge over neighbouring countries. Every time I visit KL, Bangkok, Jakarta, Manila, Ho Chi Minh, I see the edge in evidence, but also how much these places have progressed, and how tenuous is Singapore's grip on the leaderboard. I certainly don't write it off, but the city state has its work cut out to keep ahead - as an entrepot is is essentially dependent on its neighbours - IMHO I think that there will always be a role for Singapore to play, but the real upside for future growth lies elsewhere. LKY used to picture Singapore as the "Switzerland of Asia" maybe look to Switzerland to anticipate how things might look in Singapore in the future.
Berkshire Hathaway's Insurance Businesses - Float Or Sink? [View article]
Thanks for the feedback. To reiterate, I am long BH because I do see the value in the model, and of the management. The stimulus for the article was that I observe a significant shift in underwriting strategy for BH that has emerged over recent months. This shift has coincided with the reduction in bond yields, which are now, in US generating negative real returns, as Buffett himself has observed. BH seem to be shortening their underwriting risk duration, which means writing more catastrophe business (such as the deals in Asia) and writing broader portfolios (less focused on rigid risk selection, such as the Aon and Marsh deals.) These latter deals are more like selecting a sector and buying an Etf than trying to pick the best individual stocks in the sector. My assertion is that this shift in strategy is driven by the need to generate liquidity to replace the lost bond returns. I accept that BH are not solely invested in T bills (see the split mentioned in my article) but use the 10 year Treasuries to highlight the yield reduction - expecting similar basis point drops from a higher base in other bond classes. The net impact on investment yields should be consistent. I do agree that the BH team has had a consistent 30 year track record, but over this time the yield environment has not moved so sharply against them. This seems to be one explanation for the observable shift in underwriting strategy. I do not think that they are doing anything ill considered, but do think that there is a short term shift up risk, and that the impact of this will be likely to lower their market combined ratio outperformance.
The Insurance Insight By Warren Buffett [View article]
Paolo, Mr. B has indeed put his finger on a tricky issue, but one that impacts companies in the sector very differently depending on their business mix. This is explored in some detail in this article http://seekingalpha.co.... I plan to publish some analysis on the BRK.B insurance businesses in the next few days.
Thailand: Taking A Stake In A Changing Economy [View article]
I think next will look at Indonesia, or Malaysia, but Philippines will follow. For now there are so many questions on this article I will follow up on Thailand.
Japan GDP Q1: +3.5% (annualized) vs. 2.7% expected. [View news story]
Berkshire Hathaway Intrinsic Value Pie Chart [View article]
- are taking a much more aggressive market position, and this could reduce the accounting inefficiency of insurance liabilities running off better than reserved.
It is easy to look at float as an asset, but all it is is the underwriters best estimate of the cost of future claims.
Reinsurance Update: Interim 2013 Q1 Earnings Comparisons [View article]
Reinsurance Update: Interim 2013 Q1 Earnings Comparisons [View article]
Buying after major events should be a good strategy, but I would choose the stronger and more diversified companies. Look at Partner Re after the NZ and Japan EQ to see the impact of being overweight to the market in a major loss. Check out http://seekingalpha.co..., if you want to read more on the sector, and http://seekingalpha.co... where I look at what Ajit Jain at Berkshire is up to. Brian, the sector heavyweights are the big European players, have you thought of including those in your reviews?
Indonesia: Share The Wealth [View article]
Indonesia: Share The Wealth [View article]
My key point is the volatility of Indonesian investments, much of which has been currency related. The IDR/USD fx rate is telling. http://bit.ly/10N4CJT. This shows how th Rupiah shot from 2000/USD to 16000 in the 90's, then stabilised in a (wide) range between 8000-12000 since then. A comparison from 1990 bears the devaluation in full.
While as I mention in my article currency risk remains high, a repeat of this devaluation could be considered a 'tail' event.
Indonesia: Share The Wealth [View article]
The Singapore Story: No Longer A Sure Thing For Investors? [View article]
The issue for both Singapore and Hongkong as I see it is one of competitive advantage over neighbours as an entrepot economy. As China and S East Asian countries develop more open economies, reduce protectionism, and increase the supply of educated employees - one degree better becomes increasingly hard to maintain. This leads to tougher cost benefit equations for employers, employees, residents and other 'investors'.
Singapore specifically I see as having progressed fast up the cost curve, while managing to maintain an edge over neighbouring countries. Every time I visit KL, Bangkok, Jakarta, Manila, Ho Chi Minh, I see the edge in evidence, but also how much these places have progressed, and how tenuous is Singapore's grip on the leaderboard. I certainly don't write it off, but the city state has its work cut out to keep ahead - as an entrepot is is essentially dependent on its neighbours - IMHO I think that there will always be a role for Singapore to play, but the real upside for future growth lies elsewhere.
LKY used to picture Singapore as the "Switzerland of Asia" maybe look to Switzerland to anticipate how things might look in Singapore in the future.
Berkshire Hathaway's Insurance Businesses - Float Or Sink? [View article]
BH seem to be shortening their underwriting risk duration, which means writing more catastrophe business (such as the deals in Asia) and writing broader portfolios (less focused on rigid risk selection, such as the Aon and Marsh deals.) These latter deals are more like selecting a sector and buying an Etf than trying to pick the best individual stocks in the sector.
My assertion is that this shift in strategy is driven by the need to generate liquidity to replace the lost bond returns.
I accept that BH are not solely invested in T bills (see the split mentioned in my article) but use the 10 year Treasuries to highlight the yield reduction - expecting similar basis point drops from a higher base in other bond classes. The net impact on investment yields should be consistent.
I do agree that the BH team has had a consistent 30 year track record, but over this time the yield environment has not moved so sharply against them.
This seems to be one explanation for the observable shift in underwriting strategy. I do not think that they are doing anything ill considered, but do think that there is a short term shift up risk, and that the impact of this will be likely to lower their market combined ratio outperformance.
The Insurance Insight By Warren Buffett [View article]
Thailand: Taking A Stake In A Changing Economy [View article]
Thailand: Taking A Stake In A Changing Economy [View article]
Thailand: Taking A Stake In A Changing Economy [View article]
Thailand: Taking A Stake In A Changing Economy [View article]
Thailand: Taking A Stake In A Changing Economy [View article]