This tweet by Sean Sweeney is, of course, 100% true. It is also true of markets and investing in general. When everyone feels confident, money becomes available, and then returns fall. There's too much competition. But when everyone is scared and liquidity dries up, bargains emerge. Now there's very little competition.
Warren Buffett has made an entire career out of playing this paradox. It's his well-known "be greedy when others are fearful" mantra. But in order to do this, you need to be patient, you need to have the resources, and you need to have the right emotional temperament when things are in meltdown.
I am seeing this first-hand in Toronto real estate. To give just one example, development land is right now worth, oh I don't know, roughly half of what it was before (a broad generalization).
There are very good reasons for this. The value of land depends on what you can do with it, and if you can't do anything with it, then it's not worth very much. But as soon as you can once again do something with it, and clarity returns to the market, the bargains disappear.
So to find the "great deals" you have to be willing to wade into areas where most of the market is unwilling to go in the current moment. Put differently, there's money to be made when you're right about something that most people think is wrong, or when you're able to do something that most people can't do for whatever reason.
All of this is easier said than done, but I think about Sean's tweet a lot these days. It's easy to find reasons to say no right now. But here's the approach I'm trying my best to take: it's a great time to be in real estate. In fact, it's a generational opportunity. And so it's my job to find the great deals.
Cover photo by Sean Pollock on Unsplash
Over the weekend, Warren Buffett and his team hosted some 40,000 people in Omaha for Berkshire Hathaway's annual shareholder meeting. And during the event the 94-year-old announced that he would be retiring at the end of the year. This is after 55 years as CEO, which makes him the longest-serving chief executive of an S&P 500 company.
What a run. Thanks for all the wisdom that you have shared over the years, Warren. In honor of this milestone, I decided to go back and reread his last shareholder letter (which was published back in February). His comments on the insurance industry are particularly interesting, and naturally relevant to real estate.
Over the decades, Warren has talked a lot about the benefits of owning insurance companies, namely the "money-up-front, loss-payments-later" model. It creates a "float" of cash that can be invested in the interim. But the flip side of this benefit is that it can sometimes conceal a shitty business.
As a business, if you have to pay your costs up front before you sell your products or services, then it's pretty easy to determine if you're not making any money. But in insurance, there's a long-tail of liabilities that can be far more insidious and that may not appear for many years, or even decades according to Warren.
There's also climate change bringing more uncertainty:
In general, property-casualty (“P/C”) insurance pricing strengthened during 2024, reflecting a major increase in damage from convective storms. Climate change may have been announcing its arrival. However, no “monster” event occurred during 2024. Someday, any day, a truly staggering insurance loss will occur – and there is no guarantee that there will be only one per annum.
Think back only 135 years when the world had no autos, trucks or airplanes. Now there are 300 million vehicles in the U.S. alone, a massive fleet causing huge damage daily. Property damage arising from hurricanes, tornadoes and wildfires is massive, growing and increasingly unpredictable in their patterns and eventual costs.
In a perverse way, all of this is good for the insurance business. More economic risk means higher premiums and a greater overall need for insurance products. But you have to accurately underwrite this risk:
Trumps' tariffs are supposed to take effect today. Here's a quote from the Globe and Mail, published yesterday:
“Very importantly, tomorrow, tariffs, 25 per cent on Canada and 25 per cent on Mexico, and that will start. So, they’re gonna have to have a tariff,” Mr. Trump said.
But it's still not clear that he understands how these tariffs will work. Either that, or he's lying and trying to trick people. Because he continues to deny that tariffs represent a tax paid by US importers (and ultimately US consumers) on things coming from Canada and Mexico.
Here's another quote:
"It’s not going to be a cost to you [Americans], it’s going to be a cost to another country."
Yeah, that's not how they work:
When the US puts a tariff on an imported good, the cost of the tariff usually comes directly out of the bank account of an American buyer.
“It’s fair to call a tariff a tax because that’s exactly what it is,” said Erica York, a senior economist at the right-leaning Tax Foundation.
“There’s no way around it. It is a tax on people who buy things from foreign businesses,” she added.
In any event, in the real world, tariffs are bad. They're bad for everyone. So much so, that
This tweet by Sean Sweeney is, of course, 100% true. It is also true of markets and investing in general. When everyone feels confident, money becomes available, and then returns fall. There's too much competition. But when everyone is scared and liquidity dries up, bargains emerge. Now there's very little competition.
Warren Buffett has made an entire career out of playing this paradox. It's his well-known "be greedy when others are fearful" mantra. But in order to do this, you need to be patient, you need to have the resources, and you need to have the right emotional temperament when things are in meltdown.
I am seeing this first-hand in Toronto real estate. To give just one example, development land is right now worth, oh I don't know, roughly half of what it was before (a broad generalization).
There are very good reasons for this. The value of land depends on what you can do with it, and if you can't do anything with it, then it's not worth very much. But as soon as you can once again do something with it, and clarity returns to the market, the bargains disappear.
So to find the "great deals" you have to be willing to wade into areas where most of the market is unwilling to go in the current moment. Put differently, there's money to be made when you're right about something that most people think is wrong, or when you're able to do something that most people can't do for whatever reason.
All of this is easier said than done, but I think about Sean's tweet a lot these days. It's easy to find reasons to say no right now. But here's the approach I'm trying my best to take: it's a great time to be in real estate. In fact, it's a generational opportunity. And so it's my job to find the great deals.
Cover photo by Sean Pollock on Unsplash
Over the weekend, Warren Buffett and his team hosted some 40,000 people in Omaha for Berkshire Hathaway's annual shareholder meeting. And during the event the 94-year-old announced that he would be retiring at the end of the year. This is after 55 years as CEO, which makes him the longest-serving chief executive of an S&P 500 company.
What a run. Thanks for all the wisdom that you have shared over the years, Warren. In honor of this milestone, I decided to go back and reread his last shareholder letter (which was published back in February). His comments on the insurance industry are particularly interesting, and naturally relevant to real estate.
Over the decades, Warren has talked a lot about the benefits of owning insurance companies, namely the "money-up-front, loss-payments-later" model. It creates a "float" of cash that can be invested in the interim. But the flip side of this benefit is that it can sometimes conceal a shitty business.
As a business, if you have to pay your costs up front before you sell your products or services, then it's pretty easy to determine if you're not making any money. But in insurance, there's a long-tail of liabilities that can be far more insidious and that may not appear for many years, or even decades according to Warren.
There's also climate change bringing more uncertainty:
In general, property-casualty (“P/C”) insurance pricing strengthened during 2024, reflecting a major increase in damage from convective storms. Climate change may have been announcing its arrival. However, no “monster” event occurred during 2024. Someday, any day, a truly staggering insurance loss will occur – and there is no guarantee that there will be only one per annum.
Think back only 135 years when the world had no autos, trucks or airplanes. Now there are 300 million vehicles in the U.S. alone, a massive fleet causing huge damage daily. Property damage arising from hurricanes, tornadoes and wildfires is massive, growing and increasingly unpredictable in their patterns and eventual costs.
In a perverse way, all of this is good for the insurance business. More economic risk means higher premiums and a greater overall need for insurance products. But you have to accurately underwrite this risk:
Trumps' tariffs are supposed to take effect today. Here's a quote from the Globe and Mail, published yesterday:
“Very importantly, tomorrow, tariffs, 25 per cent on Canada and 25 per cent on Mexico, and that will start. So, they’re gonna have to have a tariff,” Mr. Trump said.
But it's still not clear that he understands how these tariffs will work. Either that, or he's lying and trying to trick people. Because he continues to deny that tariffs represent a tax paid by US importers (and ultimately US consumers) on things coming from Canada and Mexico.
Here's another quote:
"It’s not going to be a cost to you [Americans], it’s going to be a cost to another country."
Yeah, that's not how they work:
When the US puts a tariff on an imported good, the cost of the tariff usually comes directly out of the bank account of an American buyer.
“It’s fair to call a tariff a tax because that’s exactly what it is,” said Erica York, a senior economist at the right-leaning Tax Foundation.
“There’s no way around it. It is a tax on people who buy things from foreign businesses,” she added.
In any event, in the real world, tariffs are bad. They're bad for everyone. So much so, that
Properly pricing P/C insurance is part art, part science and is definitely not a business for optimists. Mike Goldberg, the Berkshire executive who recruited Ajit, said it best: “We want our underwriters to daily come to work nervous, but not paralyzed.”
This reminds me. I was speaking with one of our insurance advisors a few years ago and he made a comment that he was going to be "on risk for the project." I responded by half-jokingly saying "it's funny, you see only risk, and I see an opportunity to create something special for the city." Both of us then laughed, but there's obviously some truth to these two perspectives.
I guess I chose the right profession.
Cover photo by Chris Nguyen on Unsplash
“Tariffs are actually, we’ve had a lot of experience with them. They’re an act of war, to some degree,” said Buffett, whose conglomerate Berkshire Hathaway has large businesses in insurance, railroads, manufacturing, energy and retail. He made the remarks in an interview with CBS News’ Norah O’Donnell for a new documentary on the late publisher of The Washington Post, Katharine Graham. “Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?’”
So let's look at "and then what" when it comes to the automotive sector.
The auto sector is the largest component of trade across Canada, the US, and Mexico. It makes up 22% of all the goods and services the flow across our borders. And in 2023, we produced some 16 million cars together, which generally include parts and materials from all three countries. We're extremely integrated. The WSJ recently broke this down, over here, and if you look at something like pistons, you'll see that this component alone typically crosses a border about 6 times:
What this means is that if you start forcing US importers to pay a tariff on Canadian and Mexican goods, and then Canada and Mexico retaliate with the same (because we/they have to), the entire model breaks down, unless of course consumers are comfortable paying a lot more. Of course, most of you already knew this. Last year, $1.6 trillion worth of goods moved back and forth across the US, Canada, and Mexico. It would be better for all three of us if this number went up, and not down, this year.
Cover photo by CHUTTERSNAP on Unsplash
Properly pricing P/C insurance is part art, part science and is definitely not a business for optimists. Mike Goldberg, the Berkshire executive who recruited Ajit, said it best: “We want our underwriters to daily come to work nervous, but not paralyzed.”
This reminds me. I was speaking with one of our insurance advisors a few years ago and he made a comment that he was going to be "on risk for the project." I responded by half-jokingly saying "it's funny, you see only risk, and I see an opportunity to create something special for the city." Both of us then laughed, but there's obviously some truth to these two perspectives.
I guess I chose the right profession.
Cover photo by Chris Nguyen on Unsplash
“Tariffs are actually, we’ve had a lot of experience with them. They’re an act of war, to some degree,” said Buffett, whose conglomerate Berkshire Hathaway has large businesses in insurance, railroads, manufacturing, energy and retail. He made the remarks in an interview with CBS News’ Norah O’Donnell for a new documentary on the late publisher of The Washington Post, Katharine Graham. “Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?’”
So let's look at "and then what" when it comes to the automotive sector.
The auto sector is the largest component of trade across Canada, the US, and Mexico. It makes up 22% of all the goods and services the flow across our borders. And in 2023, we produced some 16 million cars together, which generally include parts and materials from all three countries. We're extremely integrated. The WSJ recently broke this down, over here, and if you look at something like pistons, you'll see that this component alone typically crosses a border about 6 times:
What this means is that if you start forcing US importers to pay a tariff on Canadian and Mexican goods, and then Canada and Mexico retaliate with the same (because we/they have to), the entire model breaks down, unless of course consumers are comfortable paying a lot more. Of course, most of you already knew this. Last year, $1.6 trillion worth of goods moved back and forth across the US, Canada, and Mexico. It would be better for all three of us if this number went up, and not down, this year.
Cover photo by CHUTTERSNAP on Unsplash
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