Author: jc

Everlasting Gobstopper Business

Referring to the movie, Willy Wonka & the Chocolate Factory.  From Wikipedia: “The Everlasting Gobstopper is a candy from Roald Dahl’s 1964 children’s novel Charlie and the Chocolate Factory that is intended, according to Willy Wonka, its creator, “for children with very little pocket money”. It not only changes colors and flavors when sucked on, but also never gets any smaller or disappears.”

We are looking for an Everlasting Gobstopper in business form.  We just need one every so often for our returns to be acceptable, if not well above average.  We also need management that understands that they are running a one-of-a-kind business and they are doing the right things to optimize the business.  When we find one, we will buy enough to make sure it counts.

Your money invested like our own, be assured we’re partners in every investment.

* Past results are no guarantee of future performance.

** Weekly prices are an estimate, the month end price is precise when the accounting review is complete.

This blog does not constitute an offer to sell, or a recommendation of any security, this update is for informational purposes only.

The Plan

Our plan is always the same.  We strive to buy businesses that have an enduring competitive advantage, are simple to understand, run by people we admire and offered at a fair price.  This is more than a slogan or tagline.  We don’t change this general mode of operations based on who the politicians are, what the Fed is doing, what the stock market is doing, the weather, or pandemics. The future is always uncertain.  All projections going into 2020 were smooth sailing.  To offset perennial uncertainty, we buy investments that we are confident can weather a storm and we can add to if the price is right.  It has worked well in the dislocations of 2020, 2008 financial crisis and 2000 tech wreck.

Your money invested like our own, be assured we’re partners in every investment.

* Past results are no guarantee of future performance.

** Weekly prices are an estimate, the month end price is precise when the accounting review is complete.

This blog does not constitute an offer to sell, or a recommendation of any security, this update is for informational purposes only.

 Our Financial Plan

1. Only buy things you need. A want becomes a need, when after about 3 times you could have used the item. A drill press is nice, but if you could have used one 3 times in the past but didn’t have one and you like that type of activity, a drill press becomes a need instead of a want. Vacations, new cars, etc. are the same. Invest the savings.
2. There is no doubt that annuities dampen the year to year fluctuations in the value of your portfolio. Annuities have very high annual expenses. The expenses over the long term are a very large drag on your net worth. Insurance companies take advantage of investors’ short term fears and it costs them dearly.  On top of that, the insurance company has your money and all you have is a contract that nobody understands, except the insurance companies lawyers.  They will win every time.   You can create your own annuity type investment and over the long term end up with a likely considerably larger nest egg.  How do you do that?  Just figure out how much you need to take out of your investments each year to maintain your annual expenses.  Make sure that you put around 3 years of funds in a no risk investment, i.e. CD’s, etc.  You can use these funds for annual expenses.  If the stock market is cheap, then let your no risk investments drain down to a year or so, if the markets are high you might extend your no risk funds out a bit.  By doing this, the dips in the stock market don’t affect your lifestyle.  It’s not likely you will have to sell your stock investments at a bad time.  It turns out over longer periods, stocks are less risky than no risk funds like CD’s. Why? Inflation causes a higher loss of buying power than the stock market risk over the long term.
3. The Dow Jones has been going up since 1896. Without dividends, it’s up 81,000%. Insurance companies are betting on America’s growth because otherwise they couldn’t pay off those annuity contracts.  You should too.
4. If annuities were such a great deal, Warren Buffett would own them. Warren Buffet doesn’t own any annuities in his investment portfolio. You shouldn’t either.
5. No insurance company can guarantee a 3% to 6% return in today’s world. The safest thing is a 10 year US Treasury note currently that yields 1.68%. What happens is the annuity contract is impossible to read and buried in the contract is the annual expenses that are deducted from the return. These expenses can be 2.5% to 3%.

3 Reasons Annuities Are a Bad Long-Term Investment

https://www.fool.com/retirement/2019/01/30/3-reasons-annuities-are-a-bad-long-term-investment.aspx

Your money invested like our own, be assured we’re partners in every investment.

* Past results are no guarantee of future performance.

** Weekly prices are an estimate, the month end price is precise when the accounting review is complete.

This blog does not constitute an offer to sell, or a recommendation of any security, this update is for informational purposes only.