Photo Credit: Michael Dales || Futuristic, and with a twist Well, I am back. This post will test whether images will post or not. My guess right now is not, so maybe I have more work to do. Once I know that images will post, I will repost the deleted articles. On to tonight’s piece: =================================== There are many who get annoyed at the concept that the market is rallying while unemployment is soaring. Though this is not true now, others get annoyed at the market falling when the economy is humming along quite nicely. My friend Howard Simons said something like, “Stocks aren’t GDP futures.” There are several reasons for this: When corporate bond yields fall, stock valuations tend to rise. When corporate bond … [Read More...]
The Troubles of Hedging Inflation in Retirement
Photo Credit: frankieleon || Even with low inflation, money shrinks. Wages move with inflation, few assets do. There’s no free lunch. The ideal of an inflation-protected defined benefit plan was indeed wonderful, but the costs were prohibitive. Few companies were willing to shoulder the costs of them, and what few were willing ran into the roadblock of the IRS telling them they could not put too much into their defined benefit plans — for the IRS feared it was a tax dodge. By nature the IRS is shortsighted, and could not appreciate the idea that you needed more assets than the liberal (meaning you don’t need to contribute much today) funding formulas said they would need. The IRS wants taxes now. They don’t … [Read More...]
Don’t Lose Your Head
Photo credit: David Seibolid || Oh dear, you lost your head! So we had a hard market day yesterday. Maybe COVID-19 will resurge in the USA. The great thing about the USA is that no one is ever truly in charge. Power is shared. Most of the time, that’s a good thing. I am not saying that it is time to buy, unless it is small trades. I bought 0.7% of stocks yesterday as the market fell 5%+. My aggregate cash position is around 20% of assets. After buying as the market fell in March, I was selling off stocks in May. Did I not believe the rally? Sure I did, but there are degrees of belief, and I kept selling bits as the market rose. … [Read More...]
Saving, Investing, and Storage
Photo Credit: Jason Woodhead || Forget the United States Oil Fund — if you want to own oil, buy a tank and store the oil on your own property. This should be a short post. Buffett likes to own T-bills when he doesn’t have anything that he wants to buy. Why? He is storing value until the time comes when he can buy something that he thinks offers a superb return over the long haul. And now for something that seems completely different: commodity investing, when it was introduced in the nineties, offered “yield” from rolling the futures contracts from month-to-month. That ended when the trade got too crowded, and the “yield” went negative. The ETFs that pursued these strategies were … [Read More...]
What I Wasn’t Looking For
Image Credit: Sean MacEntee || Should I have gotten a picture of a guy in a bathrobe? Dear Friends, I may occasionally write opinions that are controversial, but I try not be controversial as a rule. So, when I wrote my piece yesterday, I was not looking to make any huge statement regarding Berkshire Hathaway. Yes, I might be a little disappointed in Buffett’s lack of action, but I still think very highly of him. Of all investors alive today, he is the one who most deserves to be studied. Ben Graham had no better pupil. Same for Phil Fisher. And as far as Henry Singleton goes, Buffett has outdone him. As such, I was more disappointed than excited when I saw the article at Marketwatch … [Read More...]
The Challenge for Warren Buffett
Photo Credit: Javier || THis is a much younger version of Buffett. Has the present Buffett learned to adapt? Barron’s ran an article called Why Berkshire Hathaway Stock Has Rarely Been This Cheap. It was written by Andrew Bary, a man that I respect. I wrote a comment at the article, and it reads as follows: So long as the government & its commercial paper financing arm (The Fed) is willing to create grants and credit out of thin air to rescue businesses, Buffett will not get opportunities to buy stock at the discounts that he has liked to see in the past. The cash pile will grow, & BRK stock will likely muddle. Buffett’s justification for the cash pile changed at his last annual … [Read More...]
The Rules, Part LXVI
Photo Credit: Heather R || Round and round it goes, where it stops, nobody knows Don’t bet the firm.Attributed to the best boss I ever had, Mike Cioffi. I learned so much from him. I was surprised to see how many times I mentioned at this blog how I considered and dropped the idea of writing floating rate Guaranteed Investment Contracts [GICs]. A lot of effort went into that decision, and unlike most decisions like that, the failures of competitors with a different view happened quite rapidly. Also, this blog highlighted those that wrote terminable floating rate GICs later, and insurers that wrote contracts that had clauses allowing for termination upon ratings downgrades. But that’s my own story. What of others? The best recent … [Read More...]
Hertz Donut
Photo Credits: Michael Gray & Brian Turner || And thanks to Pine Tools for concatenating the images When I was in Eighth Grade, I wasn’t very popular, and in World History class, I sat behind a guy who was even less popular than me, and he was usually quite shy. Still it was my policy not to look down on anyone because I knew what it was like to be lonely, so occasionally I tried to be friendly to him. Well, one day he came up to me and said: “Have you heard of Hertz Rent-a-Car?” DM: “Of course.” Guy: “Have you ever heard of a Hertz Donut?” DM: “What’s a Hertz Donut?” He gives … [Read More...]
The Federal Holiday Polls via Twitter
Photo Credit: GPA Photo Archive || FIreworks over New York City — beautiful, huh? Though my adopted children were all black to some degree, I had not heard of Juneteenth until yesterday. When I read a little more about it, and the efforts of some to make it a Federal Holiday, I thought, “Okay, if Juneteenth became a Federal Holiday, which other Federal Holiday would likely disappear?” Now some might ask, “Why not just add another Holiday?” I don’t think there’s a free lunch there — if there is less labor, people would get paid less, and that would affect poor people more than those better off. Anyway, that made me think of doing a Twitter poll to see what holiday … [Read More...]
Estimating Future Stock Returns, March 2020 Update
Graphic Credit: Aleph Blog, natch… same for the rest of the graphs here. Data is from the Federal Reserve and Jeremy Siegel As I said last time, a lot can happen in 3 months. At the end of March 2020, a rally was starting that would become a new bull market. At that time, the market was poised to deliver a return over the next 10 years of 6.84%/year. As I write this evening, after the rally the likely return over the next ten years is 4.63%/year. Hee are a few more graphs, and then I will come to my main point for this post. 25 scenarios — one down, 24 up over ten years, with an average likely return of 4.63$/year. In general, this model fits the data … [Read More...]