We have entered the phase when the body politic and public opinion are aware that Facebook is disturbing our society. This is very important to us as investors, because the big tech companies make up a disproportionately large part of the S&P 500 Index.
The media and the economics profession are treating inflation like it is a friendly puppy dog. They think you can take it out of its pen and play with it for a while. The popular theory is that you bring it out in a severe dip in economic activity and when the economy gets back on its feet, you kindly ask inflation to crawl back into its pen like any good puppy dog would do.
The talk of inflation today looks much like housing did in 2007. Evidence is mounting everywhere that this is a real long-term problem that is only getting worse. You can read this in the media, but yet security prices don’t reflect how damaging this may be.
Let us share some of the “bizarre red-blue lights flashing” in the S&P 500 Index.
Investors often ask our team at Smead Capital Management what we spend our time on. We believe reading is the best use of our time to learn and think about the way that we can profitably apply capital for our investors.
We have argued for years that the biggest mistake being made by Berkshire Hathaway was not giving shareholders access to the thoughts and investment discipline of their two talented stock pickers, Ted Weschler and Todd Combs. After all, Buffett calls the shareholders “partners” and has not allowed his partners to understand anything about the strategies and results of upwards of $30 billion of shareholder capital.
We have been in many discussions with our investors, people in the media and the investment management industry on where housing is today.
In the summer of 2020, we didn’t know quite a few things about how Americans would react when they got their social and entertainment choices back.
On the insistence from a friend and a colleague, I watched the movie There Will Be Blood over the weekend.
We’ve been thinking about John Locke’s “Law of Fashion” in the context of the U.S. common stock market.
The great philosopher, John Locke, brilliantly captured the way the world works.
At a minimum, the latter part of 2020 and the first half of 2021 will go down as one of the strangest psychological times for common stock investors.
Halfway through the year 2021, we must be reminded to “not confuse brains with a bull market.”
Most millennials have never seen an era where value has done well.
We have been long-term owners of Amgen (AMGN), Merck (MRK) and Pfizer (PFE) among the major pharma/biotech companies
Now that investors are reconsidering active stock picking and are especially interested in value stock strategies, let’s analyze where excess stock market returns come from.
As Amazon prepares to buy MGM Studios and announced an effort to put pharmaceutical stores all over the U.S., we are reminded of one of my favorite comedy movies, Silent Movie
My recent reads have been stuck in the 1960’s, including Adam Smith’s The Money Game and Andrew Knowton’s Shaking the Money Tree.
“History doesn't repeat itself, but it often rhymes.” – Mark Twain
To say that we were surprised by some of the discussion at the Berkshire Hathaway Annual Meeting would be an understatement. The conversation Warren Buffett and Charlie Munger leaned into on inflation was possibly the most interesting. Warren and Charlie gave large credit to Larry Summers for his willingness to stand alone on the effects of today’s fiscal and monetary policy on prices. We thought this was an ideal time review Buffett and Munger’s discussion and see what conclusions we could draw.
The Berkshire Hathaway Annual Meeting was a mixture of caution, wisdom and honesty.
Now that the leaders of the most popular tech companies are going into outer space, we thought it appropriate to consider the return implications of this urge to “explore strange new worlds.”
As we have been holding calls with prospective and current investors of our firm, we have been arguing that the stock market is underwhelming the success of the economy.
Even before the war is over, the winning side needs to consider how to “win the peace” which will follow.
Dumb and Dumber was a 1994 movie which tells the story of Lloyd Christmas (Jim Carrey) and Harry Dunne (Jeff Daniels)
My generation, millennials (those born from 1980 to 2000), have been noted for much of the last 10 years to be a risk averse group.
Lina Khan is being appointed to the Federal Trade Commission by President Biden’s administration.
My wife are new residents to the Phoenix-area, since moving here in the middle of 2020. We haven’t fully settled on where to send a couple of our kids to school.
Today’s stock market looks like the love affair between Danny and Sandy at Rydell High. Sandy is “hopelessly devoted” to Danny, even though he is the leader of a Los Angeles high school gang.
Warren Buffett’s annual letter was great in all the easy ways and disappointing in the ways that matter the most to his shareholder partners
We think this is an excellent time to ponder the thoughts of Buffett and Munger.
The object of the game was to get to the finish line first and then become the leader the next round. The stock market has its own game of “Simon says” and that is in the mall property world.
Fortunately, human behavior has a history of repeating itself at extremes. The worst buying decisions are made at the top. Just like bonds, the convexity is true when yields rise going forward. It’s a slippery slope and could be vexing.
We have enjoyed watching what happens in the late stage of a financial euphoria episode play out in the escapades of millennial investors on Reddit, who seem to “rule the nation.” While politicians, regulators, the media and others try to sort this out, we thought some historical perspective might be helpful.
There have been a small number of consistent alpha-creating axioms in the U.S. stock market over time. Value beat growth over long time frames, tech stocks hit bottom in the summer and crowded trades separate you from your money, to name a few.
Our outlook for 2021 is formed by the need to get away from the crowd and to expect some very stormy weather in the U.S. stock market. We are not afraid of drowning. Therefore, we will review the circumstances at the bottom of the market in 2009 with today’s market to see where the crowd is and where we need to go to avoid the coming storm.
As we begin 2021, the investing public is tied up in a “frenzy,” to quote Charlie Munger from a recent interview. This “frenzy” can be captured a couple ways.
As we enter 2021, it appears that Buffett had things upside down in 2020. The things which had gone up the most by the end of 2019, went up the most in 2020.
We were fortunate to watch a recent interview Charlie Munger did with Cal Tech as a distinguished alum. We consider him to be one of the most successful contrarian investment thinkers on the planet. At 96 years of age, he has no fear of being politically incorrect. We contrast this with the mountain of writing, media and rhetoric associated with the topic of climate change.
There appears to be a few huge statistical bargains available in the stock market based on the simplified version of Benjamin Graham’s intrinsic value calculation.
My wife brought me a box of ornaments that my mother has given to us over the years. I decided to check what I could sell them for on eBay (EBAY). What a great way to look at what is going on in equity capital markets!
In all this tech euphoria and COVID-19 quarantining, investors are missing a key fact. People need people.
As Buffett said, this looks like “one helluva party” with the individual investors, professional investors and insiders all joining in the fun. As a former fraternity member in college, the best parties were always when you couldn’t find anyone missing. It wreaks of that today in the stock market.
We came up with a theory many years ago to address how important psychology is to owning common stocks. We found that the risks go up in a stock market, or in an individual stock, when a “well-known fact” (WKF) was acted on in the extreme.
When you run an equity portfolio which is concentrated in 25-30 common stock selections, there are usually three stocks which stick out as particularly attractive at any given time.
Our experience tells us that we have hope from the indignity and humiliation of the present circumstances.
David Dreman’s book, Contrarian Investment Strategies, was gospel to investors when it was first published in 1979. Investors had been decimated by markets going nowhere over the prior 10 years. Stock investors were ready for something new. Dreman had produced a lot of success as an investor and wanted to share his gospel of contrarian value investing.
We recently read Peter Doran’s book, Breaking Rockefeller, which is a fabulous economic history of the world from 1840-1920 and focuses on how the monopoly created by John D. Rockefeller was broken from 1890-1910. We also watched a documentary called, “The Social Dilemma,” which explains, through the eyes of some of the social media creators, how incredibly damaging the monopolies, created by internet technology, are to society.
Anyone who owns U.S. large cap stocks must understand what can happen from the actions of the government to enforce the laws on the books for antitrust. Contrary to popular opinion, these laws are not set up to primarily protect consumers from being gouged on price by someone with a monopoly.
We became extremely bearish on energy in 2011. At the time, we saw interest in Seattle for hybrid and electric cars. This convinced us that 10% of the cars on the road nationwide might be hybrid and electric by 2020.