1987 Magellan Fund Reminder: Your Advantage Over The Professional Investors

During the third week of October in 1987 when stock prices declined by over 30% in two days, Peter Lynch (the legendary mutual fund manager that generated 29% annual returns over a thirteen-year stretch) learned that the Magellan Fund had lost $2 billion (about 20% of the fund’s assets under management) and had to deal with a rush of redemptions on the fund. Even though Lynch was the best mutual fund manager in his day, and even though his Magellan Fund owned a mixture of the highest quality and fastest growing companies in the world (a total of over 1,000 of them!), he still had to deal with so many redemptions that he had to strategically sell off some of his stocks (for the record, Lynch sold off most of the Magellan Fund’s British holdings because the British stocks had not gotten hit as badly as the American counterparts).

This … Read the rest of this article!

How To Turn Part Of Your Life Into A Dividend Machine

There is something to be said about arranging a small portion of your overall financial life so that it truly runs on autopilot and builds wealth organically without any additional effort on your behalf. The objective would be to create an infrastructure that allows you to convert one-time savings efforts into a literal dividend machine that creates permanent income without any further efforts on your part.

If you are interested in creating such a set-up, here’s how I’d go through the process.

Step One. You visit a credit union and open a checking account has no minimums. Fund it with $1,000 or so as your safety valve.

Step Two. Acquire cash-generating assets in a taxable account that can be directly sent to this checking account. For instance, if you had investments in Royal Dutch, BP, and Realty Income that combined to yield 5% of your total investment, you would have … Read the rest of this article!

The Earliest Video Footage of Warren Buffett

Even back then, Warren Buffett had it.


I think I finally dug up the earliest known video footage of Warren Buffett, and it looks like it was an interview with an Omaha TV station that never actually managed to hit the airwaves.

For me, that’s the fun part to speculate: What was it that made KMTV desire to interview Warren Buffett in 1962, yet, upon actually conducting the interview, decide not to air it? My guess is that Buffett was too rational, sober, and precise in giving his opinions, and some executive producer decided that would not be appealing to a mass audience.

That’s the unfortunate thing about stock market investing—if CNBC’s editorial decisions are indicative of mass tastes, then it means that people are much more interested in *stock prices* over the next twelve months than trying to figure out the relationship between current … Read the rest of this article!

Dividend Investing: Getting Rich During Retirement

One of the bogeymen that we have to address when structuring our financial lives is the fact that every dollar that we create for ourselves will be worth around $0.97 next year, around $0.94 the year after that, and then $0.90 or so in the third year.

If you want to separate yourself from most people out there, you need to borrow a couple chapters from Irving Fisher’s The Money Illusion, and condition yourself to think in terms of purchasing power. Most people aren’t equipped to do that. Even if you had a guarantee that the United States would experience 3% inflation over the next year, my guess is that a lot of people would think that $10,000 deposited in the bank today was less than $10,250 deposited in the bank account next January.

In terms of nominal dollars, sure.  But if inflation hits 3% on average over the next … Read the rest of this article!

The Difference Between Seth Klarman And Warren Buffett


When asked to compare himself to Warren Buffett in an interview with Charlie Rose, Klarman said:

“Warren evolved through three stages. He went from buying cigar-butts and getting the last few puffs for free, to buying great businesses at really cheap prices, to buying and holding great businesses at so-so prices. And maybe even this new area of buying weird securities from crappy businesses at better than market prices—like B of A [Bank of America] preferred or whatever. I’m still in phase one. We’re still buying cigar butts, there’s a good business there in buying them and it’s a lot of fun.”

On this site, the priority is #2, #3, and #1. Yeah, if we can get an excellent business like McCormick at $30 per share, or Brown Forman at under $50, party on and buy. A top-quality business at an excellent price is the fertile soil sprinkled with … Read the rest of this article!