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Charlie Munger Passes, What’s in Warren Buffett’s Will With Gary Pulford, Year End Stock Rally

The Compound and Friends

Tue Nov 28 2023



Philanthropy and Wealth Distribution:

  • Warren Buffett intends to give away 99% of his $121 billion net worth, leading to a discussion on the distribution of wealth philanthropically by families who have been successful.
  • Gary Pulford, a financial advisor at Ritholtz Wealth, emphasizes the importance of teaching family values to younger generations in wealthy families and highlights the significance of mentoring and sharing experiences with heirs.

Warren Buffett's Will and Testamentary Trust:

  • Warren Buffett's recent letter to shareholders discusses distributing shares to four family foundations and appointing his three children as executors and trustees of the trust receiving 99% of his wealth.
  • The use of a will for this purpose is highlighted, emphasizing transparency through public record disclosure at the courthouse in Omaha.

Charlie Munger's Legacy:

  • Charlie Munger's passing is acknowledged as a significant loss in the investing world, marking the end of an era given his long-standing partnership with Warren Buffett.
  • His consistent investment philosophy and contributions to Berkshire Hathaway are recognized as part of his enduring legacy.

Small Cap Tech Investment Opportunity:

  • Discussion about the potential of small cap tech as an investment opportunity due to historical outperformance during bull cycles, particularly in the context of the Russell 2000 technology sector.
  • It's noted that while small cap tech can be volatile and may not offer a great long-term investment strategy, it is considered tradable in the current market environment.

Specific Stock Performance Analysis:

  • The episode features detailed analysis of specific stocks within the Russell 2000 technology sector, including individual charts for companies like Braze, Couchbase, Frexworks, and Elastic.
  • There is emphasis on their performance trends and potential trading opportunities based on their current status.

Market Volatility and Equity Returns:

  • An analysis of volatility levels with a focus on the VIX (volatility index) and its implications for forward equity returns.
  • The discussion highlights that low VIX levels are not necessarily indicative of bearish sentiment but could lead to decent forward equity returns.
  • Additionally, there's an examination of S&P 500 30-day standard deviation as a measure of average move relative to the norm.

Corporate Profits and Stock Market Rallies:

  • Emphasis on record corporate profits as a key factor accompanying stock market highs.
  • The episode notes a rebound from an earnings recession and emphasizes the significance of corporate profitability in justifying stock market rallies.
  • Insights into changes in S&P 500 year-over-year earnings are also highlighted.

Holiday Retail Spending Trends:

  • Insights into holiday retail spending trends, including online sales data on Thanksgiving and Black Friday.
  • The episode indicates robust consumer activity during this period, challenging narratives about inflation impacting consumer behavior.
  • Further details include information about Cyber Monday breaking records for online shopping activity supported by corroborating data sources such as MasterCard and Salesforce.

Amazon's Dominance in Logistics Industry:

  • Amazon's significant presence in the logistics industry is discussed, noting its surpassing of both FedEx and UPS in package delivery volume.
  • This development underscores Amazon's growing dominance as a shipping company globally.

Amazon's Dominance in Package Delivery:

  • Amazon has surpassed FedEx and UPS in parcel volumes, delivering more packages than both companies.
  • The company's strategy is to ensure effective shipping for its sellers on the platform, prioritizing customer satisfaction and taking control of the delivery process.

Impact on Competitors:

  • Both UPS and FedEx have experienced revenue declines, potentially attributed to Amazon's growing presence in the package delivery market.
  • The leaked 2013 documents from Amazon projected a revolutionary system to compete with established shipping companies like FedEx and UPS, which has now become a reality.

Tech Disruption Across Industries:

  • Tech disruption extends beyond package delivery, evident in pharmaceuticals and automakers as well. Rising stock prices are enabling tech companies to replicate what was previously considered unreplicable.

Challenges of Stock Picking:

  • A significant decrease in the percentage of S&P 500 stocks outperforming the index indicates challenges for stock pickers.
  • Companies diluting their market cap through equity compensation pose potential long-term implications for investors.

Shopify's Success and Buy Now Pay Later Trend:

  • Shopify has seen substantial growth this year, driven by news about Black Friday sales hitting a record high.
  • The buy now pay later trend is gaining traction due to high credit card rates, presenting an existential threat to traditional credit card issuers.