February 2016 - NorthStar Capital Advisors

What Buffett Wouldn’t Do and You Shouldn’t Either

People often look to Warren Buffett, one of the greatest investors of all time, for guidance what to do. But what about the opposite? The Oracle of Omaha has a great list of “no-goes” enumerated in a recent Bloomberg article:

Investing:

Don’t be too fixated on daily moves in the stock market (from Berkshire letter published in 2014)

Don’t get excited about your investment gains when the market is climbing (1996)

Don’t be distracted by macroeconomic forecasts (2004)

Don’t limit yourself to just one industry (2008)

Don’t get taken by formulas (2009)

Don’t be short on cash when you need it most (2010)

Don’t wager against the U.S. and its economic potential (2015)

Management:

Don’t beat yourself up over wrong decisions; take responsibility for them (2001)

Don’t have mandatory retirement ages (1992)

“Don’t ask the barber whether you need a haircut” because the answer will be what’s best for the man with the scissors (1983)

Don’t dawdle (2006)

Don’t interfere with great managers (1994)

Don’t succumb to the attitudes that undermine businesses (2015)

Don’t be greedy about compensation, if you’re my successor (2015)

Source: Bloomberg

Re-sizing U.S. Counties Based on Local Economies

When you look across the globe, 54% of the world population is city dwellers and 80% of economic activity occurs in cities. Cities are engines of growth that leverage networks and economies of scale to create “economies of agglomeration”.

Max Galka has created a great visualization of the metro economic impact across the United States. In these cartograms, the size of each county is distorted to reflect its relative economic contribution to GDP. (It’s great to see our home-town favorite, the Charlotte Metro Region, holding it own between Greater Atlanta and Greater D.C. !)

U.S. Map Re-sized Based on Local GDP Contributions

Here’s a static frame that shows the heft of the 10 largest U.S. metro regions by GDP. Greater New York City at $1.5 trillion GDP is as big as Boston, Philadelphia, Atlanta, and Washington, D.C. combined!

Source: Visual Capitalist

Don’t Mix Your Politics and Your Investments

Salespeople and product-sales organizations are very astute at selling during political stress. They usually find a hook to sell their products…products that in most cases are not really in your best interest.

As Mike Piper points out in the Oblivious Investor, fear is a powerful sales tool. Salespeople exploit a person’s political views to instill fear and ultimately sell undesirable financial products. Those products are not only intrinsically bad, they come with a huge cost.

The pitch goes something like this,

[Political event X] just happened or is likely to happen.
As a result, the economy will take a nosedive.
You should buy my product to protect yourself.

This strategy is popular because it appeals to people of vastly different political views. To lure in investors with left-leaning views, the pitch evokes a narrative that the markets are rigged by the financial elite. To draw in the right end of the spectrum, the pitch emphasizes over taxation, over regulation, or excess government spending.

The technique is also popular because it can be used to sell just about anything…

The economy is going to hell, and that’s why you should buy gold.
The economy is going to hell, and that’s why you should buy my market-timing newsletter.
The economy is going to hell, and that’s why you should buy this annuity.
The economy is going to hell, and that’s why you should invest in my hedge fund.

If the fact that someone is trying to play you with a sales pitch designed to sell any product to two contradictory sets of beliefs isn’t enough to drive you away, consider this. For the recommended product to be right for YOU the following conditions have to be met:

The salesperson’s political prediction must be right
The salesperson’s economic prediction must be right
The salesperson’s product must indeed be a good solution to the proposed scenario

Good luck getting all that to be true!

Source: OI

Retiring from the NFL

This Sunday’s Super Bowl 50 match-up between our hometown Carolina Panthers and the Denver Broncos is the talk of the town. But what happens after the Super Bowl? Potentially way after the game when a professional football player retires?

It turns out the National Football League has a rather generous pension plan. The NFL is one of the rare 7% of American companies that offers traditional pensions to new hires. That figure is way down from the 62% level seen in 1979.

Only a few years ago the NFL had the worst funded plan of the four major sport leagues, reaching a low 49% of assets on hand to fund future benefits. Their funding ratio has made a dramatic recovery since then to 72% and NFL owners have committed to 100% funding by 2021.

The NFL pension plan has $1.8 billion in assets with 4,200 retirees and 2,100 active players. Players qualify after 3 seasons and are eligible to draw benefits starting at age 55. An 18-year veteran like Peyton Manning would receive an estimated annual pension $107,040 compared to a 3-year, short-timer’s check of $21,360.

Although most corporations have done away with pensions and shifted the risk and responsibility of saving for retirement to their employees, the NFL’s program is strongly in place thanks to the community of active and retired sportsmen. NFL retirees do a great job of communicating the great benefit of the pension to the younger, active players which carries through to the players’ collective bargaining.

Source: WSJ

What Buffett Wouldn’t Do and You Shouldn’t Either

Re-sizing U.S. Counties Based on Local Economies

Don’t Mix Your Politics and Your Investments

Retiring from the NFL

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