Issue #7 - Brew Your Own Coffee

Mar 01, 2024

Read time: 4 minutes

Hey friends, I've gone to the gym 4 days in the row at 5:30 am this week. Never felt better. Ask me next week if I've kept it up though :) 

As usual a quick thank you to all readers of the Journal as well as the 21 new subscribers this week. 

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1. Personal Finance

I'm sure this will get some coffee lovers very angry pants at me – sorry 🙋‍♂️🫶

But during the era of 0% interest rates, top companies went absolutely bonkers with hiring and spending because of the free money.

Well, today is starkly different and finances are tight. Tech sector layoffs are in the several hundreds of thousands.

And “free coffee” budgets are being removed.

Every-day folks are feeling the same financial pinch.

So, if Fortune 500 companies are cutting the coffee, why don’t you?

Not saying cut it out entirely – having a nice coffee date on Saturday with your wife or friend is wonderful.

But just do a desk audit of your daily spending and cut out the fat.

Time to invest in your future.

So brew your own coffee.

 

2. Stock Markets

Warren Buffet's annual shareholder letter came out last week - the first since his long time friend and "Architect" of Berkshire Hathaway, Charlie Munger, died last year, just 33 days shy of his 100th birthday. 

I've summarized the key points of the letter: 

Charlie Munger's Influence:

  • Buffett credits Munger as the "architect" of Berkshire Hathaway's success, with himself as the "general contractor" executing Munger's vision.
  • Munger advised Buffett to focus on buying wonderful businesses at fair prices rather than buying fair businesses at wonderful prices.

Focus on Long-Term Investors:

  • Buffett emphasizes commitment to investors who trust the company with their savings for the long term, contrasting this approach with those seeking quick gains.

Investment Philosophy:

  • A sound business investment has an "economic moat"; meaning, a durable growth profile, and high return on equity.
  • As well, emphasizing the importance of capable and trustworthy management is critical. 

Understanding Earnings:

  • EBITDA is a banned word at Berkshire Hathaway.
  • Berkshire uses "operating earnings" as a more sensible evaluation metric. 

Market Dynamics:

  • Buffett discusses market unpredictability, the potential for mispriced opportunities during market disruptions, and the importance of avoiding emotional reactions to market fluctuations.

My Take → whether you are a real estate investor or a stock picker - it's all about:

  1. the business 
  2. the people
  3. the price
  4. the time

Find all his shareholder letters here: Berkshire Shareholder Letters

 

3. Real Estate 

Reviewing an "incredible" apartment investment this week:

  • Cap rate is 3.5%
  • $280,000/door
  • For a 1976 vintage building
  • In a rent controlled province!

What? Who the hell buys this stuff?

I'll tell you who:

  • Government funded programs like BC Housing
  • David Eby's $500 Million Rental Protection Fund

Institutions like these and so many more are GIVEN YOUR TAX PAYER MONEY to go buy "rental product" with absolutely NO respect for pricing.

Basically, a team gets created - the mandate is to acquire rental - and at the end of the year in order to be seen as having done a good job, the only question that gets asked is - how much did capital did you deploy?

They think this solves the housing crisis.

Sorry - it just inflates asset prices further you boneheads.

So when you Mr Eby got up on TV last week and blamed central bank interest rates for "increasing inflation pressures" (WTF????) - you lied.

Sorry for the rant.

 

1 Quote

"Without commitment, you'll never start.

But without consistency, you'll never finish." 

-Denzel Washington

 

A Question  

Do you exercise daily? What kind? If not, why not?

 

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If you enjoyed this issue, please forward this email to your friends to subscribe. 

Thank you

Eddie Gudewill, CFA

 

P.S. How I Can Help You

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