Contrarian Investing in Rural America

By making court appearances on behalf of clients in small towns across Missouri, I have observed that certain businesses have extremely strong footing in each and every small town. People get gas at the Casey’s General Store or the Exxon franchisee station, go to McDonald’s or Dairy Queen to eat, and grocery shop at Wal-Mart or Kroger.

People rarely think in these terms, but of McDonald’s 34,000 locations, almost 22,000 of them are in areas with populations less than 15,000.

I contend that these businesses, when bought at the right initial price of 15x earnings or cheaper, will lead to 10-12% annual returns over the long haul. I also contend that these investor returns will be well-earned, in that one will encounter many doom-and-gloom newspaper headlines as they go through the process of earning these superior returns.

There are two main grounds for why these rural staples of American capitalism … Read the rest of this article!

Some Retirement Advice Is Terrible, Short-Term, and Treats You Like A Yo-Yo

If you received the September 7th copy of The Wall Street Journal, you would have encountered Jason Zweig’s article on the bottom of the first page titled: “Trading Your 401(k) Account: How Bright Can It Be?”

The article discusses the rise of services that encourage you to think short-term within the confines of your 401(k) account, offering advice that is designed to shift strategies every month. Here are the money quotes form Zweig’s article:

“Your 401(k) retirement plan is supposed to be the ultimate long-term holding, with a horizon that for many investors extends for decades. Even so, advisory services are springing up to help you manage your 401(k) over the short term, urging trades every few weeks…

“We think buy and rotate is better than buy and hold,” Mr. DiBerardino says. “We don’t think it’s prudent for T. Rowe Price to suspend people from trading their funds”…

An

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Three Ways To Ruin Your Financial Life

One of the most powerful ways to think that I picked up from Charlie Munger was this: reverse engineer everything. There are generally two ways to do this: first, you determine the outcome you want, and then you break down the steps in reverse order that would be necessary to get you there—and voila!—you suddenly have a blueprint to fulfill a particular dream.

The other approach involves finding happiness by avoiding misery. This means that you identify the life outcomes that you want to avoid, and then you draw up a path that would lead to those undesirable outcomes, so that you can catch yourself if you find yourself drifting in that direction.

For instance, the three leading causes of bankruptcy are:

(1)   Divorce.

(2)   Job loss.

(3)   Health problems.

If you want to be financially miserable, those are three great ways to get you there.… Read the rest of this article!

How To Save The Newspaper Industry

Somewhere in the basement at my parent’s house, there is a collection of newspapers that marked off important historical events from our family’s worldview. Copies of the St. Louis Post-Dispatch on the day that the US won the “Miracle on Ice” hockey game, anytime the St. Louis Cardinals won the World Series, Princess Diana’s death, 9/11, the commencement of war in Iraq, the death of Stan Musial—stuff like that. When I was in town this summer, I remember looking at the papers from a decade ago and thinking one thing—newspapers are total shells of their selves, even counting the not-too-distant past.

That is because, in an attempt to stem the losses from the steep drops in print circulations, most newspapers became more “bloggy” by syndicating a lot of content from Reuters and The Associated Press, while laying off many unique editorial personalities and cutting the size of the newspaper. … Read the rest of this article!

Stocks Get Cheap on Christmas Eve

The typical United States stock lost approximately 20% of its value in December 2018. Technically, we have to go back to the Great Depression to find another example of a December in which stock prices have declined by such a substantial amount, but on an annual basis, we are looking at a 10% or so decline, which is something that U.S. Stocks have done about 4-5 times out of every 20 years since the Civil War.

I wasn’t planning on writing about investments during the heart of the Christmas season, but I am reminded of a client I once represented at trial who had to call and make arrangements for neighbors to take care of the farm during the week-long trial, saying that “the cows don’t know it’s a trial week.” So, too, seems to be the case with the sequence of this year’s returns, with no real December event … Read the rest of this article!