Warren Buffett’s Million-Dollar Commission on Berkshire Hathaway Stock

I recently reviewed Warren Buffett’s first purchase of Berkshire Hathaway stock. On December 12, 1962, Warren Buffett obtained 2,000 shares of Berkshire through his investment partnership at a price of $7.50 per share. He paid his broker Tweedy Browne & Co. $20 to execute this trade.

It is crazy to calculate the half-century impact of this $20 brokerage trade. If Buffett bought his initial shares of Berkshire Hathaway through one of these modern discount brokerage houses that offer two months of free trades or something similar, he would have ended up with approximately 3 more shares of Berkshire Hathaway. More specifically, he could have bought 2.8888 more shares of Berkshire.

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About Those $4.95 Charles Schwab Brokerage Fees

Americans were rightly jolted last summer upon learning of the Equifax hack that comprised the data of nearly half of America, giving hackers access to sensitive information such as social security numbers, mother’s maiden names, and in some cases, even estimates concerning the amount of assets that each individual owns.

The safeguards necessary to protect electronic data of customers will deservedly occupy the attention of regulators in the coming years, as it is the type of harm that is easy to ignore—from the point of view of the data custodian, there is no immediate business payoff to protecting data and the risk of hacking seems like a remote possibility.

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The Hidden Risk of Royalty Exchange Music Investing

Royalty Exchange is a platform that exists to permit amateur and professional investors alike the opportunity to purchase the royalty rights from musicians that seek to sell the residual earnings claims / digital rights. It has found early success by tapping into attractive concepts—the desire for regular income and the desire to own an asset that provides psychological satisfaction in a way that investing in, say, sewage dumps and funeral homes cannot.

Unfortunately, the ease of purchasing music royalties enables royalty purchasers to dramatically overvalue the worth of the royalty stream due to naivete with the industry.

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Benjamin Graham’s Investing Tips Live On

There are two insights from Benjamin Graham’s classic “Security Analysis” that I believe are appropriate to keep in mind today.

They are:

  1. “Putting excessive weight on recent past history, as opposed to a rational prior, is a common judgment error in psychological experiments and not just in the stock market.”
  2. “Investors may very well equate well-run companies with good investments.”

There is no doubt that we are living through a period of unusually high enthusiasm for investing right now. Based on the 20%+ gain in the S&P 500 in 2017, it would have been difficult to devise a diversified common stock portfolio last year that did not deliver at least double-digit annual returns.

As a result of these recent stellar returns, you are beginning to see extreme enthusiasm for investing in high-risk junk. If the media coverage of Bitcoin in recent months doesn’t strike you as a modern incarnation of what John Maynard Keynes meant when he spoke of “animal spirits”, what would?

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Buying and Holding Blue-Chip Tech Stocks

A cornerstone of Jeremy Siegel’s research in “Stocks for the Long Run” is that high-tech investments have a strong tendency to fizzle out over time. If you look at the best performing businesses over the past sixty years, they tend to sell products that are similar to what was being sold in the 1960s.

Colgate-Palmolive has been one of the best performers since 1956, and it is still selling toothpaste and soap. 3M is on the list, and its famous Post-It notes are still around. Pepsi is still on the list, and America continues to eat potato chips. A bunch of oil companies–Exxon, Shell, and Chevron–are on the list, and they’re still selling and transporting oil, chemicals and natural gas.

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