Category: Missives

Tech is Bullish on Oil

The news of the shocking OPEC+ announcement of a supply cut is saturating the minds of investors and market prognosticators. We would like to remind our investors of the longer-term implications of what we are seeing around the economy and markets pertaining to the energy business. We normally understand this from purely looking at the energy business, but also want to look at it from a technology lens. […]

⟶ Keep Reading

Funding Unprofitable Growth

We have been reminding everyone that we believe we are unwinding a financial euphoria episode that Charlie Munger called “the biggest of his career, because of the totality of it.” In the process of its unwinding, the sins committed during the euphoria episode will have a price to pay. Many investments got over-capitalized by nearly free money. […]

⟶ Keep Reading

The 2022-2023 Regime Change

The events that began with Thursday’s tumult in financial stocks and precipitated the FDIC takeover of Silicon Valley Bank and Signature Bank were swift. The only thing that ran through my mind was the regime change that we are continuing to see. This didn’t remind me of something I’ve seen personally before, but instead one of the best movies of the last 20 years, Argo. […]

⟶ Keep Reading

Musings from Buffett’s Letter

There were many good things to think about from Warren Buffett’s letter to shareholders which came out recently. In this piece, we’d like to drill down on two subjects that Buffett highlighted. […]

⟶ Keep Reading

Drilling for Oil on the NYSE

As a young stockbroker in the 1980s, I was very enamored with T. Boone Pickens. Pickens recognized the huge value that built up in common stocks in the inflationary 1970s and began to use the financial backing of the Junk Bond King, Michael Milken, to become an activist on Wall Street. His little company, Mesa Petroleum, started investing in undervalued large cap oil stocks and threatened to do large leveraged buyouts (LBOs) with the assistance of Milken’s firm, Drexel Burnham Lambert (my employer). […]

⟶ Keep Reading

Ramblings From My Idol, Charlie Munger

On February 5, 2023, Charlie Munger sat down as the Chairman Emeritus of the Daily Journal Corporation (DJCO) to answer questions from shareholders and the public. We think of it as the question-and-answer session of the Berkshire Hathaway meeting with an extra serving of pithiness and wit. We at Smead Capital Management believe Mr. Charles T. Munger is one of the wisest people to walk the earth today, particularly in the category of worldly wisdom. We stand at attention anytime he decides to opine on subjects. I wanted to write on a few of the subjects he touched on as we believe they are helpful for our investors. […]

⟶ Keep Reading

Happy Days Are Here Again

[…] Stock market history argues that the next bull market in stocks will emerge when all the sinful behaviors of the last financial euphoria have been cleansed from the system. It will be marked by stock market failure and there will be no urge to recreate the woogie-like euphoria of the prior period. We believe success in common stock investments will come from companies which benefit from persistent inflation and a relatively strong economy led by 92 million Americans aged 25-45 years old. Is it different this time?

⟶ Keep Reading

A Sharpe Rebuke

We are closing in on what we think may be the question of the decade. If a majority of stock market capitalization in the US is passive or indexed, does this cause problems for stock markets? Bloomberg columnist John Authers addressed this conundrum by saying, “Logic dictates that not all assets could be run passively. If that were to happen, the market would stop functioning and cease to have any use in pricing and allocating capital.” We disagree with the ceasing to function. Markets were made by God to clear, but one question remains: at what price? […]

⟶ Keep Reading

Recession Fear Investing

A recession is two consecutive quarters of economic contraction. Historically, highly inverted yield curves like we have now are predictive of recessions. The 10 Year Treasury Bond interest rate has dropped from 4.3% at the peak to 3.5% currently, even as the Federal Reserve Board reinforces the idea that short rates will be taken above 5%. This has created very high short rates relative to longer-term rates reinforcing the recession predictions. […]

⟶ Keep Reading

Not the Cool Kids

[…] In the stock-picking world of the last 40 years, we consider Warren Buffett, Charlie Munger, Peter Lynch, John Templeton and other long-duration value investors to be the “cool kids.” They took dramatically less risk by investing where others feared to tread and required a high margin of safety. They bought part of a company as if they owned the entire business. […] 

⟶ Keep Reading
Scroll to Top