vinod1

Glad I am not the only one who felt like that. It is an ok book, but nothing stood out to me. I always write up notes on a book that I really liked and want to incorporate it into practice. I think I have notes of about 10 investment books, this did not make the cut. Vinod

MA and Visa: I really dont know the whole history especially what happened in other countries, but I think it is because they are the ones who started the network first (the banks who got together and started them) and all the network effects took over. All the things you mention are secondary to this. As to US share of equity market cap, a lot of things come together for this: 1) The US is very capital-friendly; any time there is competition between capital vs consumers, employees, and societal effects, the US tends to favor capital. Very few countries are like this. This results in higher profits relative to GDP in US compared to other countries. 2) There is also all kinds of positive factors that promote innovation - social, educational (look at leading universities), financial (startup funding, private equity, investment management, banking, etc), cultural (there is no one looking down on you if your company goes bankrupt) and you see the impact in places like Silicon Valley, New York, and Boston. This leads to most of the innovative companies being started in US which tend to be faster growing and more profitable. And these profits are from the world over and not just in US. 3) Less social financial support compared to other countries. So more people are going to invest in stock market to finance their retirement. This leads to all sorts of support for assets. When you have these combination, it is not surprising that US would dominate the equity market cap. Take China for example. If Apple is China based, do you think the Govt would like them to keep making $100 billion per year in profits? As far as they are concerned if they make $20 billion in profit and spend the rest $80 billion on something that helps the overall country or people, that is better. You see this again and again in their policies and approach. It might not even be wrong and probably a good approach for their economy, I don't know. But it is not good for shareholders. This is one thing people who invest in China repeatedly overlook and just focus on how cheap and great Alibaba and Tencent are. US stocks can still offer higher returns than international stocks AND become a smaller percentage of the world stock market cap. This happened in the past and likely would in future. China, for example, has increased its overall stock market cap without generating better returns than the world stock market. That is because they issue new shares to fund companies or grow existing companies. Vinod

So, if USA did not run multi-trillion dollar fiscal deficits, - No Chat GPT, no huge capital spending on AI, no run up in NVIDIA and semiconductor stocks - No big increase in profits for the Mag 7, cloud spending would collapse... - No big increase in profits for all the large moat companies (Visa, Mastercard, Costco, etc) Cool story but absolutely nothing to do with reality. The multi-trillion dollar fiscal deficits contributed to inflation, helped improve the balance sheets of lower income families, increased GDP growth rate a little bit, but not much impact on the stock market. Look at where profits grew. They are all in companies with strong moats and they would have performed well even without the deficits. Banks might probably be the one sector that was helped quite a bit due to deficits, but their impact is much smaller compared to the other companies. Vinod

Agree 100% with this. Imagine if Fairfax shot up to $900 when book value was $450 per share just a little while back. It would have been awfully hard not to reduce or sell out of the stock. I would rather have something that can compound at an attractive rate for a long time that is reasonably priced. I am trying not to look at this until 2033 (for a 10 year hold). Vinod

I think there is a fundamental misunderstanding of how Social Security works in a large economy. Not small national states. Social security could have $50 trillion in stocks and bonds and it makes no difference in reality to how much can be paid out. SS transfers the purchasing power from current workers to retirees. If SS taxes are not collected, it just leads to inflation. Someone has to work and take a pay cut (losing some of the purchasing power by paying SS taxes). Imagine 100% of the country is retired and on SS. SS fund is worth $200 trillion. The govt starts paying everyone and no one needs to work. Someone needs to collect the garbage, produce goods, etc. Vinod

Thank you!

Thank you! We use canola oil for cooking, would that be just as bad as vegetable oil? Do you recommend olive oil for cooking or something else? I kind of understood what you are saying at a broad level but do not really understand it well enough. Vinod

Hi boilermaker75, I am aware of the warnings about the other things, but am surprised at limiting vegetable oil consumption. Could you please explain why? Thanks Vinod

Not to nitpick. There is a subtle unintuitive mistake in this calculation. It would seem obvious that you would use net buybacks to calculate returns, but that is not correct. The stock dilution is already incorporated in the earnings calculation i.e. the earnings are penalized for the stock issued to employees/executives. So you should not be penalizing that again by only calculating net buybacks. You just have to use the total amount of buybacks. Vinod

Show me a person who calls the current environment "Everything Bubble", I can show you a person who has underperformed the stock market. Every.Single.One.Of.Them. Zero exceptions. Vinod

I always wonder about this: I know a couple of illegal immigrants from Mexico who cannot speak any english, do not have a permit to work legally in the US, are not qualified/employable in vast majority of the available jobs. Yet, they are able to earn enough money to not only sustain themselves, but send money to support their families back home. I believe this is fairly common. How is it then that someone who is born in the US, who is eligible to work, speaks the language, knows the system, yet is not able to support themselves? Outside of physical or mental health issues, I think anyone born and brought up in the US, should be able to live a comfortable life. On an entirely separate point.. Living paycheck to paycheck might be a very rational decision. Maybe those of us on the forum are the suckers? Every year of life counts as much as any other. Your happiness in the year when you are age 27 should have the same weight as your happiness in the year when you would be 77. So if someone is spending their entire salary to optimize for current happiness, why should that be looked down upon? Those of us furiously saving in younger years for presumed happiness from being able to spend in later years, might not be so different when happiness is weighted equally over all years of life. I was thinking about the above specifically from a children's education point of view: should children be working hard, optimizing for college admissions, later career payoffs, etc. but it also seemed applicable to this case. Vinod

The very fact that you ask questions means you are on the right track. I read several posts where you are missing something very fundamental. If interested read this book end to end, make notes, read it again, give it a few months, read your notes again. I spent 6 months on this book after completing all three levels of CFA and it was an eye opener. https://www.amazon.com/Investment-Valuation-Techniques-Determining-Second/dp/0471414883 The point is to understand the fundamentals very thoroughly. Saves you so much time the rest of your investment life. Good luck. Vinod

Let me change my suggestion a little. I was focusing entirely on monthly needs without considering any lump sum needs for unexpected contingencies. 1. If she needs long term care, do you have a plan to fund that? That is a significant risk. Might want to keep aside $150k to $200k for that kind of situation, if you are not able to get a cost effective long term care insurance. Plus you need something like $50-$100k for emergencies. You might want to use laddered individual TIPS (1 year, 2 year and 3 year should be enough) for this to protect from unexpected inflation. A sudden one time inflation of any significant amount would be a killer to nominal bonds. 2. No matter what, an annuity is a no brainer in this case. Only question is how much and who to get it from.

I ran the numbers a whole while back, but if they have indexed their bond and stock portfolio, they would have pretty much achieved close to that without that really stunning first year. The main thing is the model. Run an efficient P&C company -> Gather long term float -> Invest that float in stocks and bonds You dont have to be spectacular in underwriting and if you can just get the index returns for stocks and bonds, especially when interest rates are normal, you get outstanding results. Attributing performance is not straightforward. And take Fairfax claims of bond and stock performance with a grain of salt. It is basically an example of "How to Lie with Statistics". But I do not attribute that to any attempt to mislead, just plain enthusiasm. I would give Fairfax one thing, they did the right thing in sticking with cash when bond yields are low, resisting the institutional imperative (as many many investors on this board must have done as well), and invested in bonds when they normalized. Not easy, but they did that really well. Vinod

You did an outstanding job of asset allocation. Just great! Buy an annuity with a small portion of the portfolio. It would be perfect for someone like your grandma. If you buy a $150,000 annuity, she would get about $2700 per month payout for rest of her life. This should pretty much cover her remaining expenses after SS. Keep in mind this is not inflation adjusted, but she has 75% of the portfolio for growth and income. Use the cash portion to buy this. You should be getting $9000 in dividends from VOO, SCHD and FZILX which would be growing. So total you have $3450 in cash coming in per month and you have not touched about $90,000 that is still in money market.