Halls of Shrewd'm / US Policy❤
No. of Recommendations: 1
Before this cycle ends those who think Brookfield presentations are "analysis" will be somewhat dismayed. Presentations from hard driving salespeople designed to raise funds for fee managment are a far cry from what investors in a stock may want to consider as analysis.
It is a difference not often held or perceived by Brookfielders. Brookfield presenters, while performing more euphorically than ever are also more dramatic than in the past, and much more futher into the future.
There are some very obvious dynamics that will make things interesting with Brookfield if and when higher interest rates aren't headed lower --- lower rates as Brookfied managment has assured investors. All kinds of assets, and that's including the trophy ones, have changed economic settings. And even the asset managers 100% certain hyper growth at some point also has a more complex game to play if rates do not subside as planned and presented.
And all that carry, that may or may not get carried.
BN has 73% of the asset manager, but if rates stay high won't get anywhere as much "growth" of the asset manager as 73% suggests.
Life is great...if you can stand it.
Now for the 35 page cut/paste Brookfield presentation...
No. of Recommendations: 8
but if rates stay high won't get anywhere as much "growth" 1925-1999 2000-2022
3 month t-bill 4% 1.5%
10 year treasury yield 5% 3%
Real short rate 1% -1%
SP500 dividend yield 4% 2%
SP500 P/E ratio 14x 19x
Rates are not historically high. Above is the average for the range. They have merely reverted back to the 20th century average. We had a long period of unusually low rates after the 2008 global financial crisis as a result of ZIRP and QE.
Nobody knows what rates will do in the future, but the point to contemplate is that nominal rates don't matter as much as long as they are in some normal sensible range. Nominal rates will be high or low depending on what inflation does. But in both scenarios, investors are looking for a positive real return and nominal bonds won't meet the need. Real yield on TIPS was negative during the last decade. At least now, it's in the positive 1 - 2% range. But Brookfield funds promise a significantly higher real return. What's an institutional investor going to do? Buy treasuries at 5% or TIPS at 2%? That's not enough real return for them to meet their obligations. That's why I feel raising funds won't be a problem for Brookfield even in today's higher rate environment. Financial assets may get priced lower at say 14x instead of 19x, but I fully expect fee bearing capital to reach 1 trillion in the next 5 years.
No. of Recommendations: 1
Very nice and precise low blow there Baybrooke taking a few of my words and deliberately using them complete out of context.
Jim called me an ass on the Berkshire board for calling him out on his non-Berk stock picks. I'd call you something too, but I'll refrain.
Garbage dude, nothing but trash.
No. of Recommendations: 1
Let me explain given reading is a skillset. If interest rates do not regress as most, but not all, expect? Then in my view it is highly likely that the non-asset manager parts of Brookfield will not grow as fast as most think, but surely not as fast as the certain (certain according to management) 20% manager fee business of BAM.
Thus, whatever the value is of BN ex the asset manager, will be plagued by both only having and "being" 73% of the asset manager (hard to word that accurately) and the subs drag on value growth. So given and equal start as related to real value, I'd expect the manager to do "better" from any actual intrinsic value start if and only if management's wildly positive predictions do come true.
The subs "growth" of FFO and DE will be quite interesting given all the drags that seem to be developing. Interest rates, carry, BAM fees, performance fees...and more fees, and the fact that renewables and other new era energy businesses seem to be hitting a wall of profit problems. Lots of hands in the cookie jar, and to me there's use of FFO where FFO should simply not be the valuation model, businesses by increasing number that elsewhere do not use FFO are given FFO with Brookfield.
And to go a step further in my view, years ago we had a gulf between those who used management presentations as analyst expertise on a number of Brookfield entities and that didn't turn out well at all. The gulf wasn't small, it at times was several times the market cap of the existing business within a year or two.
What you believe, or don't believe here with Brookfield, is likely enormous. Management vs the few who question the upscale excitement of the investor day presenters.
No. of Recommendations: 16
Very nice and precise low blow there Baybrooke taking a few of my words and deliberately using them complete out of context.
My intent was not to take anything out of context nor was my intent to rebut your post. Your full post is anyway available for everyone to read. I was simply using your sentence as a prop to make some general comments on interest rates and thinking that higher interest rates may not have too much of an impact on fund raising. It will very helpful if someone can provide more insight into this from an institutional investor's perspective. How do they evaluate investing in Brookfield funds versus all the other alternatives available to them. Is there an article someone can point to?
By the way, please don't assume people are being adversarial. This is not a debate where we need to dig in, take sides and prove the opposing team wrong. It's just a friendly discussion, an attempt to find out what is actually true.
Jim called me ... on the Berkshire board for calling him out on his non-Berk stock picks. I'd call you something too, but I'll refrain.
Thank you for refraining. When TMF shut down the old boards, I would have assigned a ZERO percent probability that someone would create a replica. The fact that these boards exist is truly a miracle. No need to trample on this heavenly gift by using unseemly language.
Garbage dude, nothing but trash. What you believe, or don't believe here with Brookfield, is likely enormous.
Well, it's highly unlikely that investing in BN will result in a permanent loss of capital. This is not a speculative penny stock we are discussing. But I agree it's very much possible that future returns will be significantly less than expected, not index beating, and that would be very disappointing indeed.
My defense against stupidity and overconfidence is conservative position sizing, trading discipline and seeking out opposing view points. So please continue positing, if possible in a gentler tone.
No. of Recommendations: 2
Dealraker,
You have mentioned often that you have been invested in Brookfield and its predecessor companies for many decades.
You recent posts show a great deal of skepticism of Brookfield's prospects as well as management's over optimistic forecasts.
Are you making any changes to your Brookfield holdings?
What percentage of your total portfolio is invested in Brookfield?
