Hendershot Investments, Inc., founded in 1994, provides professional investment advisory services. We are devoted to helping you improve your long-term financial success. Our personalized service is designed to grow and conserve your wealth by investing in high-quality, well-managed companies. Hendershot Investments is subject to a stringent overarching fiduciary duty that requires investment advisers to act in the best interests of clients and to place the interests of clients before their own. “Best interest” is defined as acting with the care, skill, prudence and diligence of a prudent person acting in a like capacity, and as considering the aims, investment objective, risk tolerance, financial circumstances and needs of the investor without regard to the financial or other interest of the individual adviser or their firm.

We encourage you to read our brochure and explore our site to learn more about the services we provide. Should you have any questions or would like more information on our firm, please email us or call us at 703.361.6130. We look forward to hearing from you.

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Interview with Ingrid Hendershot on Value Investor with Chris Swatta show on 3-11-17 available for replay:  http://www.sportstalk570.com/

 Our Twenty Year Anniversary Special Edition demonstrates our investment strategy by chronicling events of the last two decades through excerpts from past issues.

NEW: Berkshire Hathaway 2017 Annual Meeting Notes

HI-Quality Company Updates

Thursday, May 18, 2017
reported that its Board of Directors approved an increase in its quarterly cash dividend to $0.10 (10 cents) per share, representing an increase of 11 percent over the current dividend rate. The Board subsequently declared a quarterly cash dividend of $0.10 per share that will be payable July 19, 2017, to shareholders of record of the common stock at the close of business on July 6, 2017. Since 2003, Gentex has consistently grown its dividend as an efficient and consistent level of return of capital to shareholders, which represents an approximate 2 percent yield based on the Company’s current stock price. This dividend increase continues to be a key part of the Company’s overall capital allocation strategy and is evidence that the management and board of directors continue to believe in the importance of returning value to Gentex shareholders while representing further confidence in the Company’s future earnings potential.

Remedy Pharmaceuticals, a privately-held pharmaceutical company focused on bringing life-saving treatments to people affected by central nervous system diseases and injuries, announced that Biogen-BIIB completed an asset purchase of its Phase 3 candidate, CIRARA. Biogen made an upfront payment of $120 million to Remedy and may also pay additional milestone payments and royalties.

Express Scripts-ESRX, through a wholly owned subsidiary, Innovative Product Alignment, LLC, today announced it will participate in Walgreens Boots Alliance-WBA Development GmbH (WBAD) group purchasing organization. In addition, Econdisc Contracting Solutions, a group purchasing organization that contracts with manufacturers to source generic pharmaceuticals on behalf of its participants, will have access to WBAD's sourcing efforts through an arrangement between Econdisc and Innovative Product Alignment. These two organizations will immediately begin developing a transition plan to maximize supply chain efficiencies.

Wabtec-WAB has signed a contract worth about $40 million to design, install, test and commission Positive Train Control (PTC) for the South Florida Regional Transportation Authority (SFRTA), which operates the Tri-Rail commuter rail service. Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for 42 locomotives and cab cars, a back-office server, wayside communications and signals, a dispatch system, training, and system integration.  Installation is expected to be completed by the end of 2018.

Qualcomm-QCOM demonstrated dynamic electric vehicle charging (DEVC), which allows vehicles to charge while driving. Based on the Qualcomm Halo™ wireless electric vehicle charging technology (WEVC), Qualcomm Technologies designed and built a wireless DEVC system capable of charging an electric vehicle (EV) dynamically at up to 20 kilowatts at highway speeds. Qualcomm Technologies also demonstrated simultaneous charging, in which two vehicles on the same track can charge dynamically at the same time. The vehicles can pick up charge in both directions along the track, and in reverse, further showcasing how the Qualcomm Halo DEVC system has been designed to support real-world implementation of dynamic charging.

Wednesday, May 17, 2017
Cisco Systems-CSCO
reported third fiscal quarter revenues of $11.9 billion, down 1% year-over-year, with net income increasing 7% to $2.5 billion and EPS rising 9% to $0.50. A modest uptick in Product revenue was offset by a 2% decline in service revenue.  The uptick in Product revenue to $8.9 billion was led by Wireless and Security, which increased by 13% and 9%, respectively. Switching revenue increased by 2%. NGN Routing, Collaboration, Data Center and Service Provider Video revenue decreased by 2%, 4%, 5% and 30%, respectively. During the quarter, Cisco continued to make progress on its multi-year transformation of the business from hardware to software and services with 31% of revenues generated from subscriptions, up from 29% during last year’s third quarter.  By geographic segment, Americas revenues of $7 billion were flat on weakness by the Federal Government sector due to uncertainty surrounding the budget and weakness in Mexico. EMEA sales of $3 billion were also flat on currency headwinds in the UK and uncertainty surrounding oil prices in the Middle East. APJC sales of $1.9 billion were down 2% on tough China comps. Operating income increased 6% thanks to an 8% decline in operating expenses. As part of its restructuring efforts, Cisco announced plans to lay off an additional 1,100 people with $150 million of additional pre-tax charges expected.  During the quarter, Cisco generated $3.4 billion in cash flow from operations, up 10% year-over-year. Cisco returned $2 billion to shareholders during the quarter through repurchasing about 15 million shares at an average price of $33.71 per share for an aggregate purchase price of $500 million and dividends of $1.5 billion, up 11% from last year. In the third quarter of fiscal 2017, Cisco completed its acquisition of AppDynamics, which provides cloud application and business monitoring platforms designed to help companies improve application and business performance. Cisco also announced plans to acquire companies that will expand offerings in software-defined wide area networks, advanced analytics and AI. Cisco ended the quarter with $68 billion of cash on its sturdy balance sheet, with $65 billion of the cash held overseas. Looking ahead to the fourth quarter, the company expects revenues to decline by 4% to 6% with EPS of $0.46 to $0.51, down from $0.56 last year. 

Qualcomm-QCOM file a complaint in the United States District Court for the Southern District of California against FIH Mobile Ltd. and Hon Hai Precision Industry Co., Ltd., (together known as Foxconn), Pegatron Corporation, Wistron Corporation, and Compal Electronics, Inc., the four manufacturers of all Apple-AAPL iPhones and iPads sold worldwide, for breaching their license agreements and other commitments with Qualcomm and refusing to pay for use of Qualcomm's licensed technologies.  Qualcomm seeks an order that would require the defendants to comply with their long-standing contractual obligations to Qualcomm, as well as declaratory relief and damages. Despite a long history of consistently paying royalties under their license agreements with Qualcomm, the manufacturers now are refusing to pay royalties on the Apple products they produce.  While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay. The license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.  Further, the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products.  Qualcomm has already filed a separate claim against Apple for its unlawful interference with the license agreements between Qualcomm and these manufacturers.

Tuesday, May 16, 2017
The TJX Companies-TJX
rang up first fiscal quarter sales of $7.8 billion, up 3% year-over-year, with net income increasing 5.5% to $536 million and EPS increasing a fashionable 8% to $0.82. Despite unfavorable weather in many parts of the country, comp store sales increased 1% over last year’s 7% jump, driven by customer traffic as the company gained market share in each of its four divisions. Domestic Marmaxx sales increased 2% to $5 billion while HomeGoods sales increased a fancy 11% to $1.1 billion. TJX Canada sales increased 8% to $739 million while TJX International sales dipped 3% to $957 million, pressured by transactional foreign currency headwinds. Operating margins declined by 20 basis points, as hedging gains and a strong merchandise margin were offset by wage increases and additional investments in the supply chain, IT, new concepts, new stores and remodels to support future growth.  During the quarter, TJX added 50 new stores including 17 new HomeGoods stores. In a few months, the company will open its first U.S. HomeSense store, a new concept in home goods off-price retailing that is expected to drive future growth. During the quarter, TJX generated $190 million in free cash flow, up 6% from last year. The company returned $519 million to shareholders through share repurchases of $350 million, at $77.78 per share, and dividends of $169 million.  During the quarter, TJX increased the per share dividend by 20%, marking the 21st consecutive year of annual dividend increases. TJX ended the quarter with $3 billion in cash and investments and $2 billion in long-term debt on its sturdy balance sheet.  Looking ahead, TJX expects second quarter sales to increase 4% to $8.2 billion with EPS of $0.81 to $0.83 versus $0.84 reported last year. Second quarter earnings are expected to be squeezed by wage increases and the negative impact from foreign currency, partially offset by a benefit from a change in accounting rules for stock-based compensation. For the full 2018 fiscal year which includes a 53rd week, sales are expected in the $35.3 to $35.6 billion range, up 6% to 7% from last year. The company raised the bottom range of its EPS guidance range with EPS now expected in the $3.82 to $3.89 range, up from $3.46 reported in 2017. The company expects to repurchase $1.3 billion to $1.8 billion of its shares during fiscal 2018.

Friday, May 12, 2017
announced Corning Incorporated will receive $200 million from Apple’s new Advanced Manufacturing Fund as part of the company’s commitment to foster innovation among American manufacturers. The investment will support Corning’s R&D, capital equipment needs and state-of-the-art glass processing. Corning's 65-year-old Harrodsburg facility has been integral to the 10-year collaboration between these two innovative companies and will be the focus of Apple’s investment. Apple has committed to investing at least $1 billion with US-based companies as part of the fund, which is designed to foster innovative production and highly skilled jobs that will help lay the foundation for a new era of technology-driven manufacturing in the US. In the US, Apple now supports 2 million jobs across all 50 states, including 450,000 jobs attributable to Apple’s spend and investment with US-based suppliers. Last year alone, Apple spent over $50 billion with more than 9,000 domestic suppliers and manufacturers.

Becton Dickinson-BDX announced exercise of option to purchase additional shares by underwriters of public equity offerings, increasing total gross proceeds to $4.95 billion. Becton Dickinson intends to use the proceeds from the offerings to finance a portion of the cash consideration payable in connection with the previously announced acquisition of C. R. Bard, Inc. The acquisition is expected to close in the fall of 2017.

Wednesday, May 10, 2017
increased its regular quarterly dividend by 20 percent, to 12 cents per share from 10 cents per share.  The new dividend rate will be payable initially Aug. 28, 2017 to shareholders of record Aug. 14, 2017.  This is the seventh consecutive year Wabtec has increased its dividend.

Priceline-PCLN reported first quarter revenues rose 14% to $2.4 billion with net income and EPS up 22% year-over-year to $456 million and $9.11 respectively. First quarter gross travel bookings were $20.7 billion, an increase of 24% over a year ago (or approximately 27% on a constant currency basis.) Gross profit was $2.3 billion, a 16% increase from the prior year (or 17% on a constant currency basis.) International operations contributed gross profit in the first quarter of $2.0 billion, a 17% increase (or 19% on a constant currency basis.) Booking.com's total property count now stands at over 1.2 million, which represents a year-over-year increase of 36%. The Booking.com platform now includes approximately 640,000 instantly bookable vacation rental properties, which is a year-over-year growth rate of 51%. During the first quarter, room nights booked increased 27% to 173 million while rental car days grew 15% driven mainly by Rentalcars.com. Free cash flow increased 6% to $310 million in the first quarter with the company repurchasing $212 million of its own shares. Priceline ended the quarter with $5.4 billion of cash and short-term investments and $7.3 billion of long-term debt on its balance sheet. Management’s outlook for the second quarter is for a 16%-21% increase in the room nights booked, a 12%-17% increase in gross total bookings, a 14%-19% increase in gross profit and EPS in the range of $12.55 - $13.25 which, at the midpoint, is up by about 11% versus prior year.

Tuesday, May 9, 2017
The Walt Disney Company- DIS
reported second fiscal quarter sales increased 3% to $13.3 billion with net income up 11% to $2.4 billion and EPS up 15%, on fewer shares outstanding, to $1.50. By segment, Media Networks sales increased 3% to $5.9 billion and operating income dipped 3% to $2.2 billion. The decrease in operating income was due to higher NBA programming costs, partially offset by advertising revenue growth thanks to higher rates that were partially offset by a decline in subscribers. Management continues to work through disruption caused by the shift from tradition cable platforms to mobile digital platforms.  Given the strong demand for live sports, Disney’s iconic brands and management’s embrace of change in the rapidly evolving media landscape, Robert Iger, Chairman and CEO, remains confident that no other company is better positioned to benefit from the disruption in the media marketplace.  Disney continues to invest in digital technology including BAMTECH, a direct-to-consumer livestream platform that will provide consumers with flexible subscription options with a broad array of live sporting events.   Parks and Resorts revenues increased 9% to $4.3 billion with segment operating income increasing a magical 20% to $750 million. Operating income increased on the heels of growth at Disney’s domestic parks and resorts and last year’s third quarter opening of Shanghai Disney Resort, which expects to soon welcome its 10 millionth guest. Studio Entertainment revenues dipped 1% to $2 billion and segment operating income increased 21% to $656 million. Consumer Products & Interactive Media declined 11% to $1.1 billion and segment operating income increased 3% to $367 million. During the quarter, Disney generated $2.6 billion in free cash flow, up 7% year-over-year. The company ended the quarter with about $8 billion in cash and investments and $17 billion in long-term debt, which represented about 36% of shareholders’ equity. During the quarter, Disney repurchased 18.6 million shares for $2 billion. The company now expects to repurchase $9 billion to $10 billion of its shares during 2017. Looking ahead, management expects modest growth for this fiscal year with robust growth returning in fiscal 2018.

Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2017 increased by 3.5% with book value equal to $178,073 per Class A share as of 3/31/17. The $9.9 billion increase in shareholders’ equity was due to the company’s $4.1 billion in net earnings and approximately $5.8 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation. 

Berkshire’s major investment holdings had mixed results since 12-31-16. Wells Fargo’s stock rose a scant 0.7% to $27.8 billion. Apple became the apple of Buffett’s eye as the position size more than doubled since year end to $19.2 billion through appreciation and additional purchases.  Since year end, American Express rose 7% to $12 billion and Coca-Cola’s stock popped 2% to $17 billion.  On the other hand, IBM dropped 17% to $11.2 billion as Buffett shed a third of his IBM shares.  

Berkshire’s first quarter operating revenues rose 26% to $64.5 billion, reflecting in part the $10.2 billion in cash premiums received in connection with the retroactive reinsurance agreement with AIG during the quarter.  Excluding the premium, operating revenues rose 6% during the quarter.  Net income declined 27% during the quarter to $4.1 billion, reflecting the decline in investment and derivative gains to $504 million compared to the prior year gains of $1.9 billion related to the P&G and Duracell transaction.   Operating earnings (excluding investment and derivative gains/losses) declined 5% during the first quarter to $3.6 billion, due primarily to weakness in the insurance businesses. 

Berkshire’s insurance underwriting operations generated a $267 million loss during the first quarter compared to a $213 million profit in the prior year period. Increased underwriting gains from GEICO and Berkshire Hathaway Primary Group were more than offset by underwriting losses from General Re and Berkshire Hathaway Reinsurance Group due to increased loss estimates for prior years’ loss events, higher losses from current year catastrophe events and increased deferred charge amortization related to the reinsurance businesses.   Insurance investment income was relatively unchanged at $908 million during the quarter.  The float of the insurance operations approximated $105 billion as of 3/31/17, an increase of $14 billion since yearend 2016 related in large part to the AIG deal.

Burlington Northern Santa Fe’s (BNSF) revenues rose 9% during the first quarter to $5.2 billion with net earnings chugging 7% higher to $838 million, reflecting a 3% comparative increase in average revenue per car/unit and a 6% increase in volume to 2.5 million cars/units driven by a rebound in freight revenue growth from coal and broad-based growth from consumer products, industrial products and agricultural products thanks to improving economic conditions. 

Berkshire Hathaway Energy reported revenues increased 3% to $4.3 billion during the first quarter with net earnings charging 14% higher to $501 million due to improvements at most of the utilities as well as a lower tax rate. 

Berkshire’s manufacturing businesses reported a 15% increase in revenue growth in the quarter to $12.1 billion with operating earnings relatively flat at $1.5 billion. The revenue increase reflected in part the acquisitions of Precision Castparts and Duracell.  Operating earnings included a pre-tax loss of $184 million in connection with the disposition of an underperforming business acquired by Lubrizol. Excluding this loss, pre-tax earnings for the manufacturing businesses increased 13% during the quarter.

Service and Retailing revenues rose 3% during the quarter to $18.2 billion with pre-tax earnings up 5% to $481 million. Service revenues rose 11% to $2.6 billion with operating earnings soaring 16% to $260 million primarily due to improvements at NetJets and volume increases at most of TTI’s operations.   Retailing revenues declined 2% during the quarter to $3.5 billion with operating earnings up 34% to $133 million. The revenue decrease reflected a decline in revenues at Berkshire Hathaway Automotive (BHA) due to lower vehicle units sold and the timing of the Easter shift at See’s Candies. The increase in earnings was due to lower operating expenses at BHA and Nebraska Furniture Mart.  McLane’s revenues rose 3% during the quarter to $12. 1 billion due to a 4% increase in grocery sales. Operating earnings declined 35% to $88 million due to pricing pressures in an increasingly competitive business environment. 

Finance and Financial Products revenues rose 8% during the quarter to $1.9 billion with net income declining 3% to $303 million. The revenue increase was due to a 31% increase in home sales at Clayton Homes, reflecting a 20% increase in unit sales and higher average prices.  Earnings were negatively impacted by the transportation and equipment leasing business due to lower railcar sales, lower railcar and trailer fleet utilization rates and lower volume and demand for cranes and other products and services. 

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $293 billion as of 3/31/17. Excluding utility and finance investments, Berkshire ended the quarter with $266.4 billion in investments allocated approximately 50.1% to equities ($133.4 billion), 8.6% to fixed-income investments ($22.9 billion), 5.7% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($15.3 billion), 5.8% to Kraft Heinz ($15.4 billion, with a fair value of $29.6 billion as of 3-31-17), and 29.8% in cash ($79.4 billion). 

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $19 billion with Buffett admitting his trigger finger is itchy after no substantial business acquisitions in 15 months. With total cash at Berkshire approximating $100 billion and earning next to nothing, Buffett spoke of paying  dividends if attractive investment opportunities do not appear over the next three years.

Free cash flow more than doubled during the first quarter to $16 billion, due primarily to the big boost to float from the AIG deal.  During the first quarter, capital expenditures declined 17% to approximately $2.4 billion, including $865 million by Berkshire Hathaway Energy and $674 million by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $6.5 billion over the balance of 2017 for these two businesses. During the first quarter of 2017, Berkshire purchased a net $11.3 billion in Treasury Bills and fixed-income investments and purchased a net $7.1 billion of equity securities, including the purchase of Apple and reflecting the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.  

Berkshire Hathaway’s stock appears fairly valued, currently trading at $246,589 per A share and $164 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $196,000-$252,000 per share and the B shares to trade between $131-$168 per share.  Hold.

FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share.  The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share.  The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet’s common stock at the close of business on May 31, 2017.


March 20, 2017

Tweedy, Browne Investing Guidelines
Snippet from the Tweedy, Browne Semi-Annual 2016 report:

"From time to time people ask us what they should do (we are flattered they should ask) and our general response is not unique. First, you are in a 10,000-meter race; don’t measure your progress by each 100-meter lap. Second, remember what you are investing for – it should extend your time horizon, which is a good thing to do. Third, don’t carry too much debt – if you don’t owe anybody anything, they can’t tell you what to do. Fourth, keep several years of living expenses in the bank. While it won’t earn much today, it will help keep you calm if there is a financial storm. Fifth, as Stuart Alsop once said in so many words, when you open the paper, turn to the sports page first; then, go to the news – it will help you emotionally, and controlling your emotions is an important part of this game. And finally, and perhaps somewhat selfserving, try to understand how the person you have entrusted some of your money to makes decisions. It should help you make sense of the world when it is seemingly making no sense and help you make an informed decision. "

Feb. 27, 2017
Not In Bubble Territory

In a recent CNBC interview, Warren Buffett, CEO of Berkshire Hathaway-BRKB, was asked about the current market valuation after the Dow’s rapid run to 20,000. Here is a tidbit from the interview with the full transcript linked below:

"We are not in a bubble territory or anything of the sort. Now, if interest rates were 7 or 8 percent then these prices would look exceptionally high.  But measured against interest rates, stocks actually are on the cheap side compared to historic valuations. But the risk always is, is that — that interest rates go up a lot, and that brings stocks down. But I would say this, if the ten-year [Treasury] stays at 2.3%, and they would stay there for ten years, you would regret very much not having bought stocks now. If you buy a 10-year bond now, you're paying over 40 times earnings for something whose earnings can't grow. And you know, you compare that to buying equities, good businesses, I don't think there's any comparison. But that doesn't mean the stock market can't go down 20 percent tomorrow. I mean, you never know what it's going to do tomorrow, but you do know what it's going to do over ten or 20 years. And people talk about 20,000 being high. Well, I remember when it hit 200 and that was supposedly high.  You know, you're going to see a Dow that certainly approaches 100,000 and that doesn't require any miracles, that just requires the American system continuing to function pretty much as it has.

Feb. 25, 2017

Fear Is Your Friend

Snippet from the Berkshire Hathaway-BRKB annual report:

"American business--and consequently a basket of stocks--is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that. Moreover, the years ahead will occasionally deliver major market declines--even panics--that will affect virtually all stocks. No one can tell you when these traumas will occur. During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well."

Feb. 14, 2017
A Love Letter to Warren Buffett
Tidbit from Fortune:
Please read the entire heartwarming letter from Bill and Melinda Gates.  It tells a story in numbers. The big one is 122 million, the number of children’s lives that have been saved since 1990 by fighting infant mortality. The Gates letter says 86% of children now receive the most important vaccines they need to live healthy lives, the highest number ever.

Feb. 3, 2017
Invest For the Long Term
In a recent speech at Columbia University, Warren Buffett, CEO of Berkshire Hathaway-BRKB, repeated his basic investment philosophy:

"It's much easier to invest for the long term because you know what is going to happen. You know, in my view, with a very high probability you know what is going to happen 10 and 20 years from now in a major way, and I don't have the faintest idea what is going to happen tomorrow or next week."

When selecting investments, he looks for:
1. A business with a moat
"I am looking for durable competitive advantage," says Buffett. "I am looking for something that has a moat around it for a considerable period of time."

2. Strong leadership
"I am looking for an honest and able management to run [the company] because I don't know how to run it myself," says Buffett.

3. A good price for a good company
"I am looking for a purchase price that is not excessive," says Buffett. "It is better to pay a little too much for something that is a very good business than it is to buy some bargain but really a company without much of a future," says Buffett.

Jan. 12, 2017
Expert Opinion

The latest memo from Howard Marks expounds on his opinion on opinions. Here is a tidbit:
Since I’ve discussed these things at great length over the years, I‘ll try here to sum up succinctly:
• There are no facts about the future, just opinions. Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty.
• Developments in economies, interest rates, currencies and markets aren’t the result of scientific processes. The involvement in them of people – with their emotions, foibles and biases – renders them highly unpredictable.As physicist Richard Feynman put it, “Imagine how much harder physics would be if electrons had feelings!”
• It’s one thing to have opinions on these subjects, but something very different to be confident they’re right (and act on them).
• Taking bold action based on forecasts of things that are uncertain isn’t just misguided; it’s dangerous. As Mark Twain said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for certain that just ain’t true.”

 Nov. 23, 2016
Six Keys to Investment Success
Brian Rogers, Chairman of T. Rowe Price-TROW, shared these six keys to investment success:
1) Be An Optimist
2 )View Crises as Opportunities
3) Price Determines Success
4) Be Humble
5) Avoid Complexity
6) Avoid Investment Cults

Stocks Are Cheap, If...
Snippet from Warren Buffett as he addressed questions from university students at the University of Maryland:

"Interest rates are to asset valuation as gravity is to matter.  It will take a lot of movement in interest rates (similar to Paul Volcker in 1981-2) before stocks are too high.  The interest rates on 30 year Treasury bonds have declined from 14 ½ % to 2 ½ % from 1982 to 2016.  Recently, the 30 year Treasury moved from 2.6% – 2.8%.  Stocks are cheap if long term rates are at 4%, four to five years from now.  “We are buying more shares than selling everyday unless interest rates move appreciably higher”.  A profitable trade would be to short the 30 year bond and go long the S&P 500 (assuming no margin calls).  But this is difficult to do on a big scale.  Borrowed money causes more people to go broke than anything else. Charlie Munger has said, smart people “go broke from liquor, ladies and leverage”.


Nov. 12, 2016
Buffett on the Stock Market and the Election

Investor Warren Buffett, CEO of Berkshire Hathaway, said "The stock market will be higher 10,20 and 30 years from now and it would have been with Hillary and it will be with Trump." Buffett added that he had been buying stocks in the weeks prior to the election and he continued to buy stocks after the election. http://money.cnn.com/2016/11/11/investing/warren-buffett-donald-trump-stock/

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