When Warren Buffett Wakes Up In The Morning

Right now, Warren Buffett’s holding company Berkshire Hathaway pumps out about $12 billion per year in annual profit. Because it owns extensive insurance operations that experience fluctuating profits, it is not as easy to determine Berkshire’s normal earnings power as it would be, for say, Kraft’s food packaging divisions which have pretty predictable demand for macaroni and cheese, Oscar Meyer hot dogs, and Maxwell House coffee, but still–$12 billion is a good estimate of what “normal” profits look like each year for Berkshire shareholders.

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Originally posted 2013-07-28 07:57:09.

Dividend Investing Is A Slow Shift From Being A Worker To Being An Owner

I just finished reading this article by Bill McClellan of the St. Louis Post-Dispatch that discussed how a teacher with over 27 years of teaching experience in the Kirkwood area of Missouri lost her job. The interesting thing about the story is that the archdiocese decided to get rid of her, even though she didn’t seem to do much of anything wrong. She was told that “she lost her passion” and would not be retained.

Although this is just one small story, I think it serves as a microcosm of the changing nature of the informal social contract in American society. One of the reasons why some people look back upon the 1950s, 1960s, 1970s, 1980s, and 1990s with fondness is because it represented an American economic era in which you could put together a good life for yourself if you had a strong work ethic, showed up, and didn’t screw things up.

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Originally posted 2013-07-27 07:20:38.

The Ugly Investments That Make You Rich

At the 2018 Berkshire Hathaway shareholder meeting, Charlie Munger excoriated the get-rich-quick attitude of the younger generation that wrote him letter after letter seeking his approval to invest in Bitcoin. Munger responded, in characteristic fashion, by pointing out that everyone wants to start a bar, own the hottest stock, or seek a quick buck in the cryptocurrency market.

Of course, what I have enjoyed about following Charlie Munger throughout my life is that, not only will he explain to you the things that do not work so you won’t continue in folly, but he will often also provide a supplemental illustration of what does work instead.

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Why Mondelez Stock Hasn’t Gone Up

When we track the price of goods or services over time to measure inflation, we often neglect to account for the improvement that represents more value being delivered to the customer. For instance, if someone trades in a Toyota Camry XSE for a Lexus ES, we don’t describe the this switch as inflation even though the Lexus ES costs more because we understand that the latter has more features.

Likewise, even though the we use the same name “Toyota Camry” to describe the vehicle each year, it can be easy to just look at the price changes in the vehicle each year from 2008 through 2018 to calculate the inflation without realizing, of course, than many of the features available in the 2018 version were not available in the 2008 version.

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What The Sequoia Fund Teaches Us About Long-Term Investing

For those of you who are students of stock market history or have been on the investing block for a while, you may know that there was a period of transition between when Warren Buffett ran his private partnership for select investors and when he began using Berkshire Hathaway as his wealth-building vehicle.

During this period of transition from a partnership to Berkshire, Warren Buffett became disillusioned with the high prices in the stock market at the time. During the late 1960s and early 1970s, the major firms in the stock market were going through their “Nifty Fifty” days. This was a wild time when Coca-Cola traded at 40x earnings, Johnson & Johnson traded at 30x earnings, Pfizer traded at 28x earnings, and even Procter & Gamble traded at 28x earnings.

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Originally posted 2013-07-26 07:50:00.