Whales, Common Sense, and Tribes

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I warned you at the outset that there would be times when I sat down to write without an agenda, just spilling thoughts onto paper. Today is such a time.

We watched "The Whale" last night, and it was one of the most thought-provoking movies I have seen in some time.

The sheer waste of lives caused by warped thinking and misplaced priorities is shocking when reduced to an individual level, as the movie does with almost all of its characters. The film addresses guilt, the search for redemption, misguided priorities, loss, need, and a few other points in disturbing ways, at times feeling like a knife being twisted in the bowels of our emotions.

For me, the most critical moment in the story is when Charlie implores his students and his daughter to write something honest.

Let's do that today.

Football And The Military

We will start with an easy one. I am a huge fan of college football. I am an even bigger fan of college football played by the military academies. Attending an Army-Navy game should be on the bucket list of every sports fan.

Watching these kids march on, about 9,000 between the Brigade and the Corps, is an incredible sight. These kids have the chops and the grades to have gone almost anywhere else and had a much more enjoyable experience (especially freshman) than awaits those at the academies.

Their first years after graduation would involve a lot less saluting and obeying moronic orders, to say nothing of having a dramatically lower chance of finding themselves in active combat.

These kids chose a different path that requires courage, commitment, love of country, and honor. I have been taken to task before for expressing my opinions and respect for the members of the Brigade and the Corps, and I suspect I will be again.

I do not care.

I do not agree with how we use our forces and have not in a very long time. The rules of engagement we force our service members to follow in combat situations are a lot like the prevent defense in football. They make it impossible to achieve victory.

Our foreign policy has been less than our founding father intended for decades now.

We will go down the what-we-do-wrong militarily path another day, but these kids have made a difficult choice, and most of them still believe. Many will greatly disregard our military leaders and politicians, but that is for them to reach. They believe in the possibility this country still possesses, and I respect them all for that.

Again, the discussion about what needs to happen to reach that possibility is a discussion for another day.

There are no easy classes for football players. 99% of them will never see an NFL playing field. They play way above their weight. The game is better when Army and Navy are good teams. This year, out of the gate, they both look very good. As I did yesterday, I will root for both until that pivotal Saturday in December when it is all about Mids.

On a side note, Arch Manning may have everything they promised, which could also be fun to watch.

Currency, The Fed, And Government Spending

Next up, the Fed. I have said it many times, but let us get it down in print. It does not matter what you think about the gold standard. You may hate the Fed. You might want to end the Fed, audit the Fed, or even burn the Fed down. You may think we need a gold-backed dollar, a currency based on bitcoin, or a currency tied to the value of goat manure on the Gobi market. It does not matter what you and I think. The Fed is what we have to deal with in today's world. That is not going to change.

For the record, I worry a lot more about fiscal policy (government spending) than I do about monetary policy (the Federal Reserve policy). What the Fed does has a huge impact on what happens in markets. Marty Zweig was the first one I remember making a big deal about the Fed back in the 1980s, and it has held ever since.

You yell, scream, kick, complain, and get angry at the Fed. A better choice is to pay attention to the Fed and use the information to make money.

Short-Term Trading

Next up: You probably are not going to earn excess returns from short-term trading. Using proven strategies like deep value, momentum, and quality, along with the judicious use of leverage, you are more likely to earn higher returns.

We have been doing a lot of work on this topic, and although I am not ready to discuss it yet, there is plenty of evidence that using leverage along with some timing—and big shock—tracking the Fed comes into play—should easily outperform most of the sure-fire guaranteed millionaire makers that are advertised every day.

For now, you can refer to the work of folks like Julian Robertson, Al Frank, Shelby Cullom Davis, and Rick Guerin, who can all provide some insights on this topic. Those who understand how long-tailed float works in the insurance business understand that Charlie and Warren were using something pretty darn close to unlimited leverage at Berkshire for a very long time.

Take a look at this very well-known graph of the best investors of all time. Keep in mind that the left-hand Y-axis shows the percentage of OUTPERFORMANCE.

Almost everyone at the top of the chart uses value or momentum, leverage, and a huge appetite for volatility.

I see all the same ideas you do. I know what the publishing industry is pushing out there as the next big thing. I have been around more than long enough to understand that a lot of it is crap.

Get-Rich-Quick Schemes And The End Of The World

There are two themes that seem to garner a lot of attention. One is the idea of making you rich by next Tuesday. That is laughable. I saw one promo a few years back that was a huge seller promising big returns. The returns were, in fact, so high that if you had been able to earn these suggested numbers, you would have owned half the planet's GDP in less than six months.

I have watched people who claim to have predicted everything that has happened in the economy, the markets, and the world over the last few years or so lose money for readers with alarming speed and consistency.

The other best seller is that the world is blowing up and the bankers, the Fed, and the government are going to cause the end of this once great nation, and the only way you can protect yourself and yours is to join this investment service.

What does an investment portfolio have to do with the collapse of the United States? Not a damn thing.

They are selling you membership in the tribe of people who are worried about what's going on in this country, do not trust the government, fear that politicians are really as stupid and self-serving as they appear, are tired of taxes, scared by persistent inflation, and are worried about making enough money to live comfortably.

There is no need to pay to join that tribe. You are already a member.

We’ve Always Been At Each Other’s Throats

This country has been going to hell in a handbasket since about ten minutes after the last signature was affixed to the constitution back in 1789. Politics have been contentious since the beginning. We are no more divided than we have always been. We have the internet now.

Imagine the fun we would have with Jefferson calling Adams "His Rotundity" and the Adams camp accusing Jefferson of being a fan of prostitution, incest, and adultery.

In 1868 the opposition suggested that Ulysses S. Grant was "stupid as a saddle" and nothing more than a "drunken trouser maker."

Back in the 1920s, H.L. Mencken suggested that "Democracy is the art and science of running the circus from the monkey cage."

Not to be outdone, in 1946, Albert Jay Nock penned the opinion that "I could see how 'democracy' might do very well in a society of saints and sages led by an Alfred or an Antoninus Pius. Short of that, I could not see how it could come to anything but an ochlocracy of mass-men led by a sagacious knave."

Generally speaking, I have found that most people unconcerned about taxes are so rich they do not notice or are not paying much.

Disliking politics is the first sign that you are a good person.

I have long suggested that anyone who runs for any office should be disqualified on moral grounds.

Moving Forward

You are in the tribe. When looking for financial advice, look for someone who worries more about what works than what sells.

You want someone who is up late testing data and reading about companies, not fine-tuning the marketing campaign.

Look, I earn a living at this. I charge what I think is a fair price for my services. As the late, not lamented, Don Barzini informed his fellow commission members, "We are not, after all, communists."

In return, I will work my rear end off finding ideas that math, history, and analysis suggest have a high probability of making you money. I will always put credit conditions and a margin of safety first. No big promises of short-term goals.

If I fail, fire me.

I cannot fix America's problems, and I do not believe we are going over a cliff anytime soon. If I am wrong and we go over a cliff, all your stocks will go to zero.

The hedge for the end of America is canned food and bullets, not tiny tech stocks and gold miners.

I have a new tribe for you to join.

It is the tribe of people who (I think it was Marty Whitman who suggested this, but I cannot find the reference anymore) understand that most of life's problems can be fixed by spending less than you earn, minimizing taxes, and achieving a 15% after-tax rate of return.

It is the tribe of people who do not care what your politics are and, along with Nock, believe that Belgian novelist Pierre Louÿs had it correct when one of his characters suggested that "Hurt no man, and then do as you please" is a pretty good creed to carry one through life.

Since I started this, I have walked the Yorkie around the property twice (she can escape through the fence and there are several predators large enough to eat her in the neighborhood) while the pit mix and flat coat retriever cavorted, watched the Orioles find yet another interesting way to lose a baseball game, and been sidetracked by numerous tiny chores.

Now, it is obvious that the pork roast my wife has had roasting all day is nearing the end stage of the process, and it is time to call it a day.