Category: Missives

Back in 1993, a brilliant satirist by the name of Ivan Reitman produced a movie called “Dave.” It was the story of a life-threatening stroke besetting the President of the United States of America. His handlers, not wanting to shake up the country, hid his critical condition by making him a hospital bed below the White House. They then scoured the country looking for a doppelgänger to stand in for the President during his recovery. They found the owner of a temp agency in Boston, played by Kevin Kline, whose name was Dave. […]

At the Berkshire Hathaway Annual Meeting we marked what we believe is the end of an era both for Berkshire and for the S&P 500 Index. In Berkshire’s case, it is the loss of Charlie Munger and the passing of the baton from Warren Buffett to his well-prepared team. In the case of the index, it is the rhymes surrounding the past major peaks in stock market euphoria and what Munger and Buffett have said publicly. […]

We’ve recently been making the case that the current circumstances in the stock market are most like the late 1960s and 1970s. Euphoric enthusiasm for the most aggressive stocks and an economic/national security spending explosion are held in common. However, the most interesting thing about 1968-1969 was the agreement about the stock market future between the greatest growth investor at that time, T. Rowe Price, and the greatest value investor of all time, Warren Buffett. […]

Many investors are bullish, or not fearful, of the future of stock returns. At Smead Capital Management, we continue to explain to our investors how poor the outcomes will be. Some ask when this view will change. To quote Keynes, “When the facts change, I change my mind. What do you do, sir?” The facts are not changing. Instead, we continue to find mountain evidence of the danger present. In this piece, we will explain an analogous instance from the past. […]

[…] As value investors, we go into companies that are out of favor but have characteristics that could lead us to multi-year winners. Our best stocks were found in the holes in the other portfolio manager’s defenses. As we watched a .190 hitter, Kyle Schwarber, bat leadoff for the Phillies in the playoffs last year, purists like us yearn to see Rod Carew and Tony Gwynn again. Our stock picking discipline (our stock market sabermetrics) tells us that growth stock investing is too popular and is about to enter a “dead ball” era of stock performance.

[…] The U.S. Federal Government has set a net zero carbon goal by 2050. Tremendous resources have been applied with borrowed money to fund these goals and subsidize money-losing green investments. After pouring money into green investments, investors are wisely fleeing the fantasies associated with the environmental movement’s agenda. Are we really more together? […]

William Thorndike’s book “The Outsiders” has been considered a classic for some time now. His story teaches readers about the business performance of Henry Singleton, Katherine Graham, John Malone and Daniel Burke. These are people who weren’t household names like Jack Welch, but produced results that would make any investors feel jealous of the success they had. At a moment like today where the world seems vastly different than where we have been for much of the last decade, we would like to use this piece as a way to remind ourselves where “The Outsiders” may sit and provide an example of ones that we’ve witnessed, but others don’t recognize. […]

[…] At Smead Capital Management, prioritizing independent research is not only integral to our evolution as investors but also reflects our commitment to those on whose behalf we invest. Being different is inherently uncomfortable in every possible way, and although it doesn’t guarantee superior returns, we consider it a prerequisite for potential outperformance. As Marks put it, “The real question is whether you dare to do the things that are necessary in order to be great. Are you willing to be different, and are you willing to be wrong? In order to have a chance at great results, you have to be open to being both. […]

The Sherman Antitrust Act was created to stop our democratic republic from being ruined by “the concentration of capital in vast combinations.” The fear was that if too much of the success of industry went to too few people, our system would get disrupted.

The bad news is that the federal government has ignored the original purpose of the act. In our opinion, our society was first disrupted by the success of the FANG stocks and is now being disrupted by the Magnificent Seven. The good news is that the stock market has a history of solving problems on its own. What has happened over time to the largest and most popular stocks as measured by market capitalization? […]

We consider Ben Bernanke to be the father of 21st-century central bank policy. His work in dealing with the credit crisis in 2008-2009 was just the right policy at that time. The problem for economists is that they tend to fight the last war. The Great Financial Crisis was an economic problem where demand was dropping off from credit evaporating. The government tried to spend money to replace this destruction, but couldn’t politically equal the loss of economic output. The central banks could only pray that the most accommodative monetary policy would ease the fiscal belt that wasn’t loosening at that time. This was the last war for economists and has dominated economic research. Like anchoring or recency bias would tell us, this may have little to do with the problems in our future. […]