How REITs Are Your Way Out of Buffett's "Casino"

Were you forwarded this email? Subscribe here for free.

Premium Update

The long weeks of travel have finally come to a halt. We are safely ensconced in our new place here in Greensboro, North Carolina. So far, we love every bit of it. We've done a little exploring and already found a couple of great restaurants. Everything is slowly but surely getting moved in, and the dogs are really loving the backyard.

I'm not quite sure how I feel about all the hills in this particular neighborhood. It has involved using muscle groups we haven't used in a long time during our walks—in Florida, there are no hills. That's been a new experience, but we're really excited about it. Still have a couple deliveries coming, but we'll be back to regular video production soon, barring some unforeseen catastrophe next week. For this week, we'll be in just a written format again.

Berkshire Hathaway Meeting

This weekend, in honor of my birthday, Kentucky threw a horse race and Warren Buffett had a big party in Omaha. It was the "Capitalist Woodstock" as the Berkshire Hathaway meeting got underway.

I've never felt the need to join 25-30 thousand Buffettologists out there in Omaha and spend all weekend eating steaks and hash browns—although that part does sound wonderful. Nor did I get around to watching it this week because there's just too much going on as we're trying to get everything moved in, balancing delivery schedules against production schedules for you guys. I did read the transcripts earlier this morning. One advantage of having dogs, especially my dogs: they like to get up early, so we get lots of extra reading time these days.

Buffett had a lot of interesting things to say. He's 94 years old. He did name his successor, and I think it's a pretty good choice, but it doesn't matter who you put in that chair. There will never be another combo like Warren Buffett and Charlie Munger. Charlie, of course, passed away a couple of years ago at the ripe old age of 99, just a few weeks shy of turning 100.

Warren was asked whether Berkshire had taken advantage of the recent volatility and found any bargains to put some of their billions of dollars to work. He said, "This was nothing so far. This has been nothing."

And he's absolutely correct. There's been a lot of noise and excitement, but this wasn't the crash of '87. It wasn't the declines of the early and mid-1970s. It was not the Great Financial Crisis. It was not that 40% decline during COVID. This was just a beep, a kind of rounding error, and it's almost worked itself out at this point. Whether that holds long-term or not, this was not some massive inventory-creation buying opportunity by any stretch of the imagination.

Capitalism and the Market

Buffett also made a comment that "capitalism is the cathedral and the market is the casino." This is a great example. In Baltimore, when I was a younger man and my daughter was born, we belonged to a Catholic church in East Baltimore. Every year they had a big carnival, and the carnival was basically a casino. They had card games, spin wheels, bingo, and all sorts of little gambling efforts and games, along with hamburgers, hot dogs, cotton candy, and some rides for the kids to keep them busy while mom and dad gambled.

That little carnival casino had one purpose: it was to take as much money as it could out of your pocket and transfer it into the church or the cathedral. And the market is exactly the same way. It's designed to take money out of your pocket—the impatient, looking for a good time, getting the adrenaline rush—to take that money and transfer it to the patient folks inside the cathedral of capitalism.

You've got to decide which side of this you want to be on. Eventually, the casino is going to get your money and transfer it to the longer-term perspective. It's being a part of the longer-term perspective that over time makes you enormous amounts of money. Playing in that casino—only a very, very small number of incredibly mathematically gifted people or people that just inherently have a knack (and there seems to be a few of those on the planet) for playing the game—prosper. Besides those few, it's the very patient cathedral that makes more sense for us, particularly if we can get paid big fat cash dividends along the way.

Be a part of the cathedral. Take advantage of distortions created by the casino that give us an opportunity to get money to work on a much longer-term basis at much more advantageous prices. And that's what we're looking to do here with the Melvin Real Income Report (as well as at my recently re-launched Community Bank Investor).

Speaking of, let’s go over the Total Return Portfolio and look at how the REITs there have fared recently (spoilers: anyone invested should be quite pleased).

Subscribe to Premium to read the rest.