Saturday, April 30, 2022

Quote of the day...

“If you said… for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” Buffett said. ”[For] $25 billion I now own 1% of the farmland. [If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check, it’s very simple. Now if you told me you own all of the bitcoin in the world and you offered it to me for $25 I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.”

 -Warren Buffet (from here)

Thursday, April 28, 2022

Elon Musk

Is he really that bad? I confess that I have some decidedly mixed feeling about him. On the one hand I think he is a genius and his electric cars are probably making the world a better place. On the other hand I think he can be a flake and those electric cars always left me feeling like I was trapped in somebody's Play Station. On which note, I wonder how many of these woke scolds that are decrying Musk as the living incarnation of Old Scratch, are also driving one of his cars.

And then there is this. Sometimes the jokes write themselves. 


Wednesday, April 27, 2022

Summer is coming

One of the best investments of the last 12 years

"I recommend the S&P 500 index fund and have for a long, long time to people," billionaire investor Warren Buffett said at Berkshire Hathaway’s annual shareholders meeting last May.‌

That’s been pretty good advice, and I wouldn’t be surprised if he repeated it again at the upcoming shareholder meeting on Saturday.

In a report published last month, S&P Dow Jones Indices (SPDJI) analysts found that 85.1% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2021. It was the 12th straight year that more than half of the managers in this category lagged the index.

In other words, investors following Buffett’s advice have outperformed most professional money managers every year for more than a decade.‌

Sure, the S&P 500 (^GSPC) has been having a rough go lately, falling about 13% from its Jan. 4 high of 4,818.‌

But as SPDJI’s data suggests, it’s incredibly difficult to overweight and underweight stocks in a way where you beat the market.‌

Indeed, many of the most popular stocks in the market have been doing terribly. On Tuesday, Mike Zaccardi tweeted stats showing how Microsoft (MSFT), Alphabet (GOOG, GOOGL), Tesla (TSLA), Nvidia (NVDA), and Facebook parent Meta (FB) are all down between 20% and 53% from their highs.‌

Following last Tuesday’s disastrous earnings announcement, Netflix (NFLX) shares are now down by 70% from their recent high.‌

According to a different report, SPDJI analysts found that only 22% of the stocks in the S&P 500 outperformed the index from 2000 to 2020.‌

No one’s saying that investors should outright avoid trying to pick winners for their stock portfolio. However, investors should understand that stock-picking is incredibly hard, and there’s a pretty good chance that you will ultimately underperform the market.

Thursday, April 14, 2022

Ukraine: The latest news

  • The European Union is reportedly giving serious consideration to a full embargo of Russian oil, an act hitherto considered politically untenable because of the severe effects it could have on Europe's economy.  
  • The Russian cruiser Moskva, flagship of the Black Sea Fleet, has been severely damaged and at least temporarily abandoned. Ukraine claimed last night to have struck the vessel with missiles while Russia has since acknowledged severe damage but claimed it was the result of an accidental fire that set off ordinance. (Setting aside the Kremlin's credibility gap, as a former sailor in the USN I am highly skeptical that this was an accident,) It is unclear if the ship is still afloat.
  • Rumors are flying of a Kremlin purge within the senior ranks of the armed forces and intelligence services. For obvious reasons, hard and verifiable details are not easy to come by. 
  • The US and NATO allies are believed to be shipping much heavier weapons to Ukraine, including artillery, armored vehicles, and some battlefield missiles.
  • Evidence of mass atrocities committed by the Russian army and security services in areas under their occupation continue to mount. 
  • It has been reported that as many as 15 dioceses of the canonical Ukrainian Orthodox Church have ceased commemorating Patriarch Kyril of Moscow. The damage done to the reputation and position of the Russian Orthodox Church as a result of its endorsement of Russia's invasion, both in Ukraine and globally, is difficult to overstate.  
  • The UN is reporting severe disruptions to global food supplies that could have catastrophic consequences in underdeveloped parts of the world due to untenable levels of food inflation. 

Tuesday, April 12, 2022

US Inflation Rate is 8.5%- Highest since 1981

Prices that consumers pay for everyday items surged in March to their highest levels since the early days of the Reagan administration, according to Labor Department data released Tuesday.

The consumer price index, which measures a wide-ranging basket of goods and services, jumped 8.5% from a year ago on an unadjusted basis, above even the already elevated Dow Jones estimate for 8.4%.

Excluding food and energy, the CPI increased 6.5%, in line with the expectation.

The data reflected price rises not seen in the U.S. since the stagflation days of the late 1970s and early ’80s. March’s headline reading in fact was the highest since December 1981. Core inflation was the hottest since August 1982.

However, core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate.

Despite the increases, markets reacted positively to the report. Stock market futures rose and government bond yields declined.

“The big news in the March report was that core price pressures finally appear to be moderating,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. Hunter said he thinks the March increase will “mark the peak” for inflation as year-over-year comparisons drive the numbers lower and energy prices subside.

Still, due to the surge in inflation, real earnings, despite rising 5.6% from a year ago, weren’t keeping pace with the cost of living. Real average hourly earnings posted a seasonally adjusted 0.8% decline for the month, according to a separate Bureau of Labor Statistics report.

The inability of wages to keep up with costs could add to inflation pressures.

The Atlanta Federal Reserve wage tracker for March indicated gains of another 6% which is “symptomatic of inflation pressures continuing to broaden,” said Brian Coulton, chief economist at Fitch Ratings. Coulton pointed out that the core inflation deceleration was due largely to a drop in auto prices, while other prices continued to show increases.

Read the rest here.

Tuesday, April 05, 2022

World may be on cusp of new inflationary era, says central bank chief

The world economy may be on the cusp of a new inflationary era with persistently higher growth in consumer prices due to the retreat of globalisation, a leading central bank chief has said.

Agustín Carstens, head of the Basel-based Bank for International Settlements – which is known as the central bank of central banks – said there was a strong risk that prices would rise uncontrollably without a sharp rise in interest rates above existing plans.

In a speech setting out risks for persistently higher rates of inflation, Carstens said higher borrowing costs could be required for several years to curb the risk of spiralling prices wreaking long-term damage on the economies of the industrialised world.

However, his comments are disputed as other experts warn that high inflation will probably choke consumer spending and economic growth – reducing the urgency for significantly higher interest rates.

Data has shown inflation heading towards 10% in several countries, mostly in response to rising gas and oil prices after Vladimir Putin’s invasion of Ukraine. In February, the consumer prices index hit 6.2% in the UK – the highest level since the 1990s. In March, the CPI in Germany and Spain hit 7.3% and 9.8% respectively.

The Bank of England is on course to raise its base rate to 2% next year according to City investors, up from the current level of 0.75% after Threadneedle Street began hiking rates from a record low of 0.1% in December last year.

Last month the US Federal Reserve approved a 0.25 percentage point hike from near zero, the first increase since December 2018, with a signal it plans several more rate rises this year.

Read the rest here.

Friday, April 01, 2022

More News from Rome (and none good)

Here, here and here.

HT: Dr. Tighe

Oberlin College Loses Defamation Appeal

An Ohio appeals court has upheld a ruling that awarded more than $30 million to a bakery that accused Oberlin College of damaging its business and libeling it with false accusations of racism.

A three-judge panel on the Ninth District Court of Appeals issued a unanimous decision to uphold a 2019 ruling by Lorain County Judge John Miraldi, who initially awarded the bakery more than $40 million in punitive and compensatory damages, reported. However, the sum was later reduced to $25 million, though the bakery was awarded more than $6 million for lawyers’ fees.

Gibson’s Bakery sued the college in 2017, accusing the school and one of its administrators of hurting its business and libeling it over an incident in which the son of the bakery owner stopped three black Oberlin College students, one of whom was stealing wine bottles from the store, in November 2016.

Students from the school protested the bakery after the arrest, handing out fliers outside the shop telling patrons to shop elsewhere. The fliers also accused the Gibsons of having a long history of racial profiling, citing the November 2016 incident, according to Legal Insurrection. Witnesses who testified at the trial said Oberlin College Dean of Students Meredith Raimondo participated in the protests, handing out stacks of fliers for others to distribute.

Oberlin College regularly purchased baked goods from the bakery for its student dining service but suspended its purchasing for a month after the incident.

The Gibsons denied any wrongdoing and asked for a public apology from the college to repair the reputational damage done to the bakery, though it has never received one, according to the report.

The students pleaded guilty to a misdemeanor in 2017 and said Allyn Gibson’s actions were not racially motivated.

Oberlin College and Raimando appealed Miraldi’s 2019 ruling, seeking to overturn the compensatory and punitive damage awards, while Gibson’s Bakery challenged the ruling, looking to restore the initial $33 million punitive damages award. The bakery argued the Ohio tort reform reduction was unconstitutional.

Read the rest here.

This is good news. Oberlin's actions were outrageous. The damages are believed to be the largest ever awarded for defamation in the state's history.