Author Archives: Edward Brownlee

Buffet’s Philosophy on Diversification

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“Diversification is a safety factor that is essential because we should be humble enough to admit we can be wrong.” ~ Sir John Templeton

Billionaire investor Warren Buffett isn’t a big fan of diversification. Buffett has nearly 68% of Berkshire Hathaway’s $361 billion portfolio invested in only four stocks.

It’s important to note that Berkshire Hathaway owns over 40 stocks. However, four stocks— in addition—Apple, Bank of America, American Express, and Coca-Cola—comprise the lion share of his stock portfolio. Essentially, he believes in their businesses. He explained, “When you find a truly wonderful business, stick with it.”

Buffett wasn’t always so heavily invested in these stocks. Coca-Cola and American Express are his two longest-held positions. The stocks have increased so much in value through the years that they’ve become a bigger part of Berkshire’s portfolio.

In 1998, Buffett summarized his philosophy about diversification: “If you really know businesses, you probably shouldn’t own more than six of them. If you can identify six wonderful businesses, that is all the diversification you need, and you’re going to make a lot of money.”

You might follow Buffett’s lead and invest heavily in a small number of stocks only if you can meet the two criteria he specified:

  1. Have a thorough understanding of their underlying businesses.
  2. Find “wonderful businesses.”

However, Buffet did say: “If you are not a professional investor, if your goal is not to manage money in such a way so you get a significantly better return than the world, then I believe in extreme diversification.”

In other words,. Diversification is a good thing for most retail investors.

One important fact:

If you had invested $10,000 in the S&P 500 in 1964, your investment would have grown to approximately $3.1 million by now, reflecting a total return of around 31,223%.

On the other hand, the same $10,000 investment in Berkshire Hathaway would have skyrocketed to an astounding $438.5 million, with a total return of about 4,384,748%.

This dramatic difference highlights Berkshire Hathaway’s exceptional performance under Warren Buffett’s leadership, significantly outpacing the broader market.

Source:

  1. https://finbold.com/this-is-how-berkshire-hathaway-has-outperformed-sp-500-since-warren-buffet-took-over/
  2. Keith Speights, Why Warren Buffett Has 68% of Berkshire Hathaway’s $361 Billion Portfolio Invested in Only 4 Stocks, Motley Fool, April 21, 2024. https://www.fool.com/investing/2024/04/21/warren-buffett-berkshire-hathaway-portfolio-stocks/

Nuclear Energy and Small Modular Reactors

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There’s genuine excitement in the air around nuclear power, heightened by Constellation Energy (CEG) announcing it was restarting a nuclear reactor at Three Mile Island under a power-purchase agreement with Microsoft Corp. (MSFT), and recent announcement that Google and Amazon are investing in small modular reactors (SMR).

Small modular reactors (SMRs), offer cheaper, flexible energy. Producing up to 300 megawatts, SMRs can power factories or neighborhoods, reducing fossil fuel reliance and improving safety.

Currently, nuclear energy’s share of global power generation slumped to 10% in 2021 from 17% in 1990, and much of that dwindling share is powered through aging reactors. Accidents, waste disposal concerns and, perhaps most importantly, costs, have all hampered nuclearoutput.

Construction times for new reactors also are an issue — a new reactor in Finland took 16 years to complete.

But sentiment around nuclear energy is changing. An UBS report says it’s not just technology sector demand for nuclear energy but also the backstopping from governments that can push nuclear forward. “Nuclear is an important source of clean and reliable power that our nation needs to meet the growing demand for energy,” said Ken Griffin, Founder and CEO of Citadel.

Kairos Power is a company focused on developing advanced nuclear reactor technology. Kairos Power is working on the Kairos Power Fluoride Salt-Cooled High Temperature Reactor (KP-FHR), which uses TRISO fuel in pebble form combined with a low-pressure fluoride salt coolant. This innovative technology aims to provide a cost-competitive and reliable clean energy solution.

Recently, Kairos Power signed an agreement with Google to develop small modular reactors (SMRs) to provide up to 500 MW of new carbon-free power to U.S. electricity grids.

Source:  MarketWatch, September 24, 2024, and https://kairospower.com/

Fear of Missing Out Investing

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Most new and seasoned investors make the same mistake with their money over and over:

They buy high out of greed and sell low out of fear.

At the top of the market, investors can’t buy fast enough. At the bottom, they can’t sell fast enough. And investors repeat that over and over until they’re broke.

Can you imagine doing this in any other setting? Imagine walking into an Audi dealership and saying, “I need a new A6.” The salesperson says, “Oh my gosh, you’re in luck, we just marked them up 30%.” And you say, “Awesome, I’ll take three!”

Investors are hardwired to get more of what gives us security and pleasure, and run away as fast as we can from things that cause pain. That behavior has kept people alive as a species. Mix that with investors desire to be in the herd, the feeling that there’s safety in numbers, and you get a pretty potent cocktail.

(FOMO – fear of missing out):  When everyone else is buying, it feels like if you don’t join them, you’re going to get eaten by the financial version of a saber-toothed tiger.

But it doesn’t take a genius to see that this behavior is terrible for individuals when it comes to investing.

Source:  Carl Richards, How fear and greed kill returns

National Estate Planning Awareness Week

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Creating an estate plan is about making sure your loved ones are protected after you’re gone.

An estate plan is a valuable set of documents outlining plans for your assets and family after you die. While everyone’s needs differ, ensuring your property and family are cared for is essential. It also has tax benefits.

Estate planning is the process of creating legal documents that outline:

  • How to distribute your property after you die
  • Who will get custody of your children and pets
  • Who will make financial and medical decisions on your behalf once you can no longer make them yourself

In addition to this documentation, an estate plan can include life insurance and long-term care insurance policies.

The goal is to protect you, your family and your assets. An estate plan ensures your property is transferred to the appropriate people while limiting estate taxes to maximize the legacy you pass to your heirs. The tax burden can vary based on your estate’s value and your state’s tax threshold, with larger estates typically incurring higher tax bills.

Dying without a will is called dying intestate. If you die intestate, your state’s laws determine who gets your property and who gets custody of your children. An estate plan allows you to make these choices based on your wishes and your family’s best interests.

An estate plan may involve a will, trust, power of attorney (POA) and health care directives. You can use an online service or work with various professionals — such as your financial planner, estate attorney and accountant — to create these documents.

Source:  Alison Tobin, Estate Planning Checklist, Money Magazine, Nov 27, 2023.

This Too Shall Pass

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“We can endure much more than we think we can; all human experience testifies to that. All we need to do is learn not to be afraid of pain. Grit your teeth and let it hurt. Don’t deny it, don’t be overwhelmed by it. It will not last forever. One day, the pain will be gone and you will still be there.”

— Harold S. Kushner

“Life is painful if you do it right. Life will inevitably hurt you and the quality you need is not to lead a charmed life so that you’ll never be tested,” writes Rabbi Harold Kushner.  “The quality you need is the resilience to get over that. The answer is: live bravely. Live bravely in an unreliable world.”

The phrase “this too shall pass” is a powerful reminder of the transient nature of all things, both good and bad. It encourages you to stay grounded and maintain perspective during challenging times, knowing that they are temporary.

Incorporating this mindset into your daily life can be a form of gratitude practice. By acknowledging that difficult moments will eventually pass, you can focus more on the present and appreciate the positive aspects of your life.

Simple ways to practice gratitude:

  1. Keep a Gratitude Journal: Write down three things you’re grateful for each day. This helps you focus on the positive aspects of your life.
  2. Express Thanks: Take a moment to thank someone in your life, whether it’s through a note, a call, or a simple “thank you.”
  3. Mindful Moments: Pause during your day to appreciate the small things, like a beautiful sunset, a good meal, or a kind gesture.
  4. Gratitude Jar: Write down things you’re grateful for on slips of paper and put them in a jar. Review them whenever you need a boost.
  5. Reflect Before Bed: Spend a few minutes before sleeping to reflect on the good things that happened during the day.
  6. Acts of Kindness: Perform random acts of kindness. Helping others can increase your own sense of gratitude.
  7. Meditation and Prayer: Incorporate gratitude into your meditation or prayer practice, focusing on the blessings in your life.

Always be grateful!

National Debt and Fiscal Deficits are Dire and Critical

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The current U.S. National Debt is over $35 trillion and growing.

To pay for annual fiscal budget deficit, the federal government borrows money by selling Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities.

U.S. Annual Federal Tax revenue or receipts are approximately $5 trillion. 

U.S. federal tax revenue is made up of the total tax receipts received by the government each year. Most of it is paid either through income taxes or payroll taxes. The rest is made up of estate taxes, excise and customs duties, and interest on the Federal Reserve’s holdings of U.S. Treasuries.

The U.S. government estimates its total revenue to be $5.49 trillion for fiscal year 2025.

Per the White House’s projections, income taxes are slated to contribute $2.6 trillion. Another $2.2 trillion should come from payroll taxes. This includes $1.3 trillion for Social Security, $399 billion for Medicare, and $56 billion for unemployment insurance. Corporate taxes would add another $467 billion.

U.S. Annual Fiscal Deficit is running approximately $2 trillion. 

A fiscal deficit occurs when the federal government’s spending exceeds its revenues. The federal government has spent $1.83 trillion more than it has collected in fiscal year (FY) 2024.

To pay for government programs while operating under a deficit, the federal government borrows money by selling U.S. Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to investors who purchased these securities.

National Debt to Gross Domestic Product (GDP) is currently 120%, according to St. Louis Federal Reserve. 

The debt-to-GDP ratio compares a country’s sovereign debt to its total economic output for the year. Its output is measured by gross domestic product (GDP).

U.S. Government Revenue (or Tax receipts) per GDP is 29%.

How much national debt is too much and is there a tipping point at which it becomes a big problem for a country?

One way to gauge the size of a country’s national debt is to compare it with the size of its economy—the ratio of debt to GDP. (GDP serves as a measure of an economy’s overall size and health, measuring the total market value of all of a country’s goods and services produced in a given year.)

Cayenne Pepper Health Benefits

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Cayenne pepper offers several health benefits for men, thanks to its active ingredient, capsaicin.

Capsaicin is the active component in chili peppers that gives them their characteristic heat. It has a variety of health benefits and uses that include:

  • Pain Relief: Capsaicin is commonly used in topical creams and patches to relieve pain from conditions like arthritis, muscle pain, and nerve pain.
  • Weight Loss: It can boost metabolism and help reduce appetite, which may aid in weight management.
  • Heart Health: Capsaicin has anti-inflammatory properties that can help reduce the risk of heart disease by lowering cholesterol levels and improving blood flow.
  • Digestive Health: It stimulates the digestive tract, increasing the production of digestive enzymes and gastric juices.

Here are some key Cayenne Pepper benefits:

  1. Improves Blood Circulation: Capsaicin helps dilate blood vessels, promoting better blood flow throughout the body, which is essential for overall cardiovascular health.
  2. Boosts Metabolism: It can increase metabolic rate, aiding in weight management and energy levels.
  3. Reduces Pain and Inflammation: Cayenne pepper has anti-inflammatory properties that can help alleviate pain from conditions like arthritis.
  4. Supports Digestive Health: It stimulates the digestive tract, increasing the flow of enzyme production and gastric juices, which aids in digestion.
  5. Enhances Immune Function: Rich in vitamins A and C, cayenne pepper can help strengthen the immune system.
  6. Potential Sexual Health Benefits: Improved blood circulation can also benefit sexual health by promoting healthy blood flow, which is crucial for erectile function.

Incorporating cayenne pepper into your diet can be as simple as adding a pinch to your meals or making a spicy tea. Have you tried using cayenne pepper in your cooking before?

 

 

 

Socialism Equates to Failure

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“There are only 2 places where Socialism [and Communism] will ever work—in Heaven where it is not needed & in Hell where it is already in practice!” ~ Winston Churchill


Western politics lean more towards socialist economic policies and philosophy.

Governments have become overly obsessed with making everything economically and socially equal, they’ve forgotten about the importance of merit and productivity.

Socialism sounds good in theory, but it has never worked and will never work in practice.

Socialism and Communism = Failure and Evil

Reading, Writing, and Thinking:

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Give yourself time each day to read, write, and think.

Reading:

Pick up a book and lose yourself in the pages of a fascinating story, or open your mind to a new way of thinking or approach to life.

You don’t have to read for hours, but start giving yourself time each morning or night to read. A few pages a day can go a long way to helping you think more clearly.

Writing:

Pick up your pen and write. One of the things I make sure I do every morning and night is to write in my journal, connecting with my thoughts, feelings, and ideas.

Writing will help you think more clearly, organize your thoughts, and process your challenges and opportunities on paper.

Writing in your journal should be part of your morning and evening rituals. There should be no rules or format you follow. Write it down if it’s in your head and heart! Let your words, feelings, and thoughts flow.

Thinking:

Give yourself time to think, ponder, and let your mind wander. If you’re always busy or connected to your devices, your mind won’t have time to relax and think clearly.

One of the main principles is to give yourself time each day to be still and alone with your thoughts. Allow yourself time to slow down and think things through.

Having a clear head and feeling more in control and confident about yourself and your life is vital to your performance and well-being.

Write down your thoughts. Journaling helps you clarify your ideas, track progress, and express gratitude.

Reading, Writing, and Thinking:

Building a habit of finding a few minutes a day to read, write, and think is simple once you give yourself permission to look after yourself and prioritize your well-being and mental health.

Make reading, writing, and thinking part of your daily routine. In this way, you will Continue to learn and grow throughout your life. Engaging in lifelong learning keeps your mind active and curious, adding richness and depth to your life.

Doing these small and life-changing things will bring more joy and happiness to your life.

Additionally, you must commit to continuous self-improvement and lifelong learning. Recognize that cultivating gratitude is an ongoing journey. You should always seek ways to express your gratitude, better yourself, and contribute positively to the world around you.

John D. Rockefeller’s Health Issues and his Philanthropic Turn.

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John D. Rockefeller’s health issues had a profound impact on his perspective on life. When he fell seriously ill in his early 50s, he faced severe physical pain and the emotional toll of losing all his hair due to alopecia. His health deteriorated to the point where he could only eat simple foods like soup and crackers. This period of suffering made him realize that his immense wealth couldn’t buy him good health or happiness.

This period of illness led him to a profound realization about the limitations of his wealth and to a significant shift in his priorities. He began to see the importance of using his wealth for the greater good. Rockefeller decided to devote a large portion of his fortune to philanthropy, focusing on areas like medical research, education, and public health. This change in perspective resulted in the establishment of the Rockefeller Foundation, which has had a lasting impact on various fields.

Recently, a story about John D. Rockefeller (July 8, 1839–May 23, 1937), the founder of Standard Oil, appeared in a periodical. Rockefeller was once the wealthiest man in the world and the world’s first billionaire. The story demonstrated the relationship between health, faith, gratitude, service to others, and great wealth.

“In his lifetime, Rockefeller amassed a net worth of at least $1 billion in 1916. When Rockefeller died in 1937, his net worth was estimated to be approximately $340 billion today’s dollars.”

By age 25, he had one of the largest oil refineries in the United States. He was 31 when he became the world’s largest oil refiner. At 38, he controlled 90% of the oil refined in the United States. At fifty, John was America’s richest man. As a young man, every action, attitude, and connection was crafted to establish his wealth.

But at the age of 53, he fell unwell. His entire body became wracked with pain, and he lost all his hair. In total anguish, the world’s lone millionaire could buy anything he wanted but could only eat soup and crackers…he could not buy good health.

According to an associate, “He couldn’t sleep, wouldn’t smile, and nothing in life meant anything to him.” His personal, highly trained physicians indicated that he would die within the year. That year passed painfully slowly. As he approached death, he awoke one morning with the faint understanding that he would not be able to bring any of his fortunes with him to the next world.

Rockefeller realized that he had no control over his health and personal life. He informed his solicitors, accountants, and management that he intended to devote his assets to hospitals, research, and charity work. John D. Rockefeller started his foundation.

The Rockefeller Foundation financed Howard Florey and his colleague Norman Heatley’s penicillin research in 1941. But arguably, the most astounding aspect of Rockefeller’s narrative is that when he began to give back a fraction of all he had gained, his body’s chemistry changed dramatically, and he recovered.

After being told he would never see his 54th birthday, John D. Rockefeller lived to be 98 years old.

John D. Rockefeller’s remarkable health change coincided with his noteworthy shift in mindset and heart. What happens when you begin to believe and act with gratitude and faith is amazing.

Rockefeller learned gratitude returned the bulk of his money, which made him whole. It’s one thing to be healed; it is another to become fit.

Rockefeller believed in the biblical principle from Luke 6:38: “Give, and it will be given to you.” He generously supported causes like building schools, churches, and hospitals; before he died, he wrote in his diary: “God taught me that everything belongs to Him, and I am merely a conduit to carry out His will. My life has been one long, happy holiday since then, entire of work and play. I let go of my worries along the road, and God was incredible to me every day. footnote