How to Sleep at Night During TEOTWAWKI
It doesn’t matter to what political party you belong—everybody’s worried about the election. It doesn’t matter what your ideology is; it doesn’t matter who you like or what you want. Everybody’s anxious and worried to the point of saying, “It’s the end of the world.” It’s the end of the world unless we vote a certain way, buy a certain product, or … (you fill in the blank…). While it might be “TEOTWAWKI” (The End Of The World As We Know It), it’s not the end of the world. The end of the world as we know it is different [...]
Letter to My Daughters: On Politics and Markets
Your mother asked me to write about "The Impact of Political Uncertainty on the Markets,” which is pretty simple. The markets hate uncertainty; they hate not knowing what the rules of the game are or are going to be; and the more uncertain things are the worse the markets behave (meaning they go down and you lose money). However, there are more nuanced, subtle, and complicated impacts that politics have on markets, economies, and prosperity for individuals and nations. Over the last several months (or has it been years?), I’ve been writing to you about the importance of work, the [...]
Thoughts On: The Yo-Yo Problem with Investing
The job of a professional money manager is to make people money. As difficult as that is, the job of the client service manager can be even harder. Client Service has to make people happy. I used to think that if we made people money, then they would be happy. I have learned we have to help people be happy long enough for us to make them money. Out of necessity, I have formulated some ideas about helping people be happy about their investments. The most critical (and some might think the most obvious) lesson I have learned is that [...]
Thoughts On: Corrections, Crashes, Recessions, and Inflation
On Tuesday, August 6, I had two separate conversations with two very different people: a client with a million-dollar portfolio and a friend who has some Bitcoin. And they asked the same question, “What should I do?” I had not been paying attention to the world since Thursday, so my first question was “About what?” They replied, “The Market!” and caught me up on all the terrifying things that were happening. Once I was up to date my immediate (and terse) response was “Nothing, don’t worry about it.” They found that less than satisfactory and asked me to elaborate just [...]
Letter to My Daughters: On Financial Freedom
Your Grandpa and your Uncle Jeff have written a LOT about how to work, save, and invest. So you should read Grandpa’s book[1] and Uncle Jeff’s article because I’m not going to repeat what they have already written. Instead, I want to talk about some fundamental principles that I think are the core for being free financially. If you really own these ideas everything else will fall into place. 1. Be a profit center. Before you can save a nickel (or a dime, or better yet a quarter) you have to make a dollar. And at your age, that’s probably [...]
The Language of Investing
So much of our conversation assumes that each word has only one meaning, no matter who uses it. But my experience is that different people have different definitions for the same words–which is one reason I think there is so much confusion surrounding investing today, and why I think it is useful to look at the multiple definitions that exist for some common investment terms. I want to start with what most people might think are statements of investment fact, but that I think are statements of investment opinion: Statement 1: Stocks are riskier than bonds. Statement 2: You [...]
How to Choose a Money Manager
Warren Buffet has said people should be limited to 3 investment decisions in their lifetime. Well, hiring a money manager would certainly count as one of those three, and you wouldn’t want to waste it. Link to the full PDF: How to Choose a Money Manager by Tony Muhlenkamp
Memorandum #150
In their Quarterly Letter, Jeff and Ron Muhlenkamp explain why they are still watching for signs of a recession due to the inverted yield curve but also think that there is a possibility of an inflationary boom. Tony Muhlenkamp shares two articles with us this quarter: “View from the Front Office: Maxims” and “Letter to My Daughters: What Grandpa Taught Me.” Link to full PDF: Memorandum #150, April 2024
Our Investment Process
Owning Good Companies We are only interested in owning good companies, but we can turn a good company into a bad investment if we pay too much for it. We use a business-like evaluation of each company designed to identify what a company is worth as a business. Return on Equity and Price per Earnings Since World War II the average return on corporate shareholder equity has been about 14%. We like better than average companies, so we look for companies with ROE over 14%. In a climate of 2 1/2% inflation and 4-5% interest rates we need to see [...]
Thoughts On: How to Structure a Trust
I have conversations with clients about estate planning, and the topic of Trusts invariably comes up. Trusts can be good solutions to specific problems, but they can be expensive and complicated solutions to problems that have easy, inexpensive solutions. Trusts are used to leave money to people you do not trust—right now—to take care of your hard-earned assets. To know whether a Trust is the solution to your problem, we start by defining the problem (or problems) the Trust is intended to solve through a series of questions. Are you worried about what the heirs will do with an inheritance? [...]