We review our performance from Q3, and set out our views on macro, the market and our portfolio
https://librariancapital.substack.com/p/librarian-capitals-monthly-letter-fb8
"Some of the assumptions ... have proved badly wrong"
"Losses on the legacy network ... well ahead of forecasts" (~800k, or >5%, past year)
"3 of the 5-strong ExCom ... have left"
$KKR $TIM
https://www.ft.com/content/eee10b3e-5a61-4e75-bc7e-c815dab30dd6?syn-25a6b1a6=1
Article based on an account by "Sharon Osberg, a close friend and frequent viewing companion"
"Lately, Buffett has been turning to YouTube to remember Munger, who died in 2023"
$BRK.B
Regular link:
https://www.wsj.com/lifestyle/warren-buffett-youtube-watching-cb6bd1d4
The downturn gripping London’s priciest properties is on course to cross a once unthinkable threshold.
Savills’ Prime London index is down about 27% since its peak in 2014, as a cocktail of taxes, political and economic shocks have created more than a decade of misery for the owners of the city’s finest homes. When the Savills data is combined with the consumer price index, the real-terms drop once inflation is factored in is more than 49%, a Bloomberg News analysis shows.
If values merely remain flat and inflation continues at its current rate, then prices are on track to have halved from their 2014 peak in the first few months of next year. Savills does not expect nominal price growth to return until 2028, its latest forecasts show.
“There probably isn’t the stimulus for a recovery,” Savills head of residential research Lucian Cook said in an interview. “That long awaited recovery is held back not just by circumstances but by stamp duty.”
London’s high-end housing market has been in the doldrums since then Chancellor of the Exchequer George Osborne kicked off a series of changes in 2014 that would significantly increase transaction taxes for the most expensive homes. Successive chancellors have since added surcharges on landlords and second home owners, overseas purchasers and those buying property through companies rather than in their own names.
The shocks of Brexit, the pandemic, increasing wealth taxes and the growing threat to London’s status as a hub for the super rich have added to the list of challanges, exacerbating the collapse in values of the city’s finest residences. For dollar based buyers, the reduction is even starker given the decline of the pound over the period.
The 27% drop in the prime London index equates to a 40% drop in nominal terms for American buyers. Factor in US inflation and the plunge would be 58%.
“It means it is looking very good value,” Cook said.
Savills’ index dates back to 1979 and seeks to replicate the price movements of the best properties in London’s most sought-after districts. The latest downturn comes after a burst of exceptional growth in prime London house prices following the global financial crisis.
In the 35-years preceding the current correction, price growth was about 5% above inflation, Cook said.
The scale of the current downturn can be seen in recent transaction prices. An apartment at Academy Gardens in Kensington recently sold for about £10 million ($13.3 million), roughly half the level for which it was previously marketed in 2007, according to Sami Roberston, founder of Harwood Advisory.
"The renewed attacks may already be taking a toll, with early signs that oil flows are beginning to slow ... Iran’s ability to target ships has also improved in recent week"
"Standard Chartered estimates total Saudi exports rebounded to 6.9m barrels a day in September from 2.45m in August ... (But) In September, most of the crude that crossed the Hormuz went via tankers transferring their oil to ships waiting off the coast of the UAE and Oman"
"Bob Diamond ... only intended to ditch alcohol for a month. He’s barely touched a drop for nearly 3 years ... so horrified by the dive in scores on his fitness tracker when he tried to resume “wine with dinner” lifestyle"
"(US) Companies are expected to sell around $100bn of investment-grade bonds in the US this month, down from $132bn in the same month last year, and from nearly $195bn in September"
$MCO $SPGI
FT column: "Large businesses are engines of innovation. Consider Big Tech. In 2024, Amazon, Alphabet, Microsoft, Meta and Apple invested $227bn in R&D"
https://www.ft.com/content/a984ca27-786a-47be-a8b9-9d48201a9e7c?syn-25a6b1a6=1
WSJ, 2012: "Nokia Outspent Apple 9x on R&D ... (In 2004-7) Nokia's total R&D was €17.1 bn ... against Apple's $2.5 bn"
"A class action case ... financed by Fortress Investment Group, backed by Abu Dhabi’s Mubadala"
"Consumers could be in line to receive about £60 each"
https://www.ft.com/content/25272ffd-fd7e-4a69-97b3-cfcb3f98e646?syn-25a6b1a6=1
"Revenue growth this year would be in a “mid-single-digit per cent range”, down from a May upgrade of between 10 per cent and 15 per cent"
https://www.ft.com/content/c7f6d036-abd4-4d8c-a6c8-6dad96cf9fae?syn-25a6b1a6=1#myft:my-news:page
"Extraordinary profitability since the interest rate cycle turned in 2022 ... The benefits flow through to their UK ringfenced banks, businesses for which Barclays and NatWest reported high returns on equity of over 20% last year"
https://www.ft.com/content/b50f39c6-4484-4c06-89cb-2884f9e58bd7#myft:my-news:page
CHARLIE MUNGER: Yes. If you’re planning to teach business valuation, and what you hope to do is teach the way people teach real estate appraising. So you can take any company, and your students, after studying your course, will be able to give you an appraisal of that company, which will indicate, really, its future prospects compared to its market price, I think you’re attempting the impossible.
WARREN BUFFETT: Yeah, probably on the final exam I would take an internet company, and I would say the final exam, the question is, “How much is this worth?” And anybody that gave me an answer I would flunk.
Q3 sales +3.4% LfL GRG-managed shops, +7.7% total
YTD sales +2.6% LfL, +7.4% total
To close 4 sites, 740 roles
~£20m savings, in 2028-29
FY outlook:
Net openings still 100-110 (57 YTD)
LfL cost inflation still 2%
Now sees "modestly improved outcome"
"Makary & Kennedy ... raised concerns about flavoured vaping ... Trump strong-armed the FDA into approving ... flavoured vapes"
"FDA initially rejected Moderna’s ... mRNA flu vaccine ... Makary was summoned to the White House", "a week later, it reversed itself"
https://www.ft.com/content/a1bff0d7-be5a-434f-8856-c45337b9449f?syn-25a6b1a6=1#myft:my-news:page
"The Economist’s Big Mac Index ... shows the price of the sandwich in the US has risen by ~23%" in 2019-25
"This year’s menu of 10 items under $3 ... ~1/3 of franchisees did not follow pricing guidance"
Nov-25: "The UK bank bashing must stop ... Banks have not benefited from a windfall in any normal sense"
FTSE 350 Banks index up ~35% since
Today: "Nik Storonsky’s plan for Revolut: a global bank with ‘effectively zero risk’"
What happens next?
Bloomberg, August: "(Takis) Georgakopoulos ... started (at $FISV) in September 2024 as EVP after being hired by Lyons’ predecessor, Frank Bisignano"
FT, today: "When Georgakopoulos joined, Fiserv was run by Bisignano"
Parkinson's Law of Buildings, Schroders $SDR edition
Schroders new global HQ officially opened in Jul-18, when $SDR was at ~550p
Thereafter shares went into a ~25% drawdown
Acquired at 612p (~10% higher) in 2026
(All-time high was 665p, in Sep-21, ~20% higher 3 years after new HQ)
Why these 2 new positions - Spirax and TP ICAP, and adding to $GAW?
Lindsell Train: "We have been set a reinvestment challenge, as a result of the two bids for major portfolio holdings, Intertek and Schroders"
So "never sell" until forced to sell
The fund has made no gains last 3 and 5 years
