How To Invest Based on Cycles

Berkshire Hathaway doesn't pay a dividend, its cash pile keeps growing, and Buffet says it's gotten too big to make acquisitions that can impact the company. Meanwhile, utility ETFs have a steady 3.5% dividend yield. Which will be the better-performing investment going forward?

Topics covered include:

• How has Berkshire Hathaway performed relative to the S&P 500 Index and other active managers
• Why Warren Buffett believes Berkshire's electric utility holdings were a mistake
• Why California has some of the highest utility rates in the U.S.
• Why Berkshire Hathaway will eventually need to pay a dividend even though it doesn't currently
• Going forward, will it be more profitable to invest in Berkshire Hathaway, a utility ETF, or an index fund

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Show Notes

Berkshire Hathaway 2023 Shareholder Letter

The Man Preparing for a Berkshire Hathaway Without Warren Buffett by Justin Baer—The Wall Street Journal

Warren Buffett admits Berkshire Hathaway’s days of ‘eye-popping’ gains are over by Eric Platt—The Financial Times

Active vs Passive Investment Management Barometer Report—Morningstar

Buffett sounds wildfire alarm as utilities industry enters new era by Eric Platt and Myles McCormick—The Financial Times

Paying for Electricity in California: How Residential Rate Design Impacts Equity and Electrification—Next10

Investments Mentioned

Berkshire Hathaway Inc Class B (BRK.B)

Vanguard Utilities ETF (VPU)

Related Episodes

466: Does Dividend Investing Still Work?

463 Plus: Model Portfolios, UK versus US Valuations, MCI Premium, and MFD Proxy Battle

444: Natural Disasters: Are They Truly Increasing? 

242: Should You Let Warren Buffett Manage Your Money?

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Japan's stock market recently exceeded the all-time high first set in December 1989. That's 34 years of zero price appreciation for the stock market. What drove this lackluster performance, will it continue, and what can we learn from it?

Topics covered include:

• How big was Japan's stock bubble, and how much did it contribute to the stock market's underperformance over the past three decades
• How do Japan's demographic trends impact its economic challenges, and what are the solutions
• Why Japan's houses are built to depreciate in value
• What lessons can we learn from Japan's extended bear market

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Show Notes

Japan’s Nikkei 225 index eclipses record high after 34 years by Leo Lewis—The Financial Times

Investors eye further gains after Nikkei breaks through 1989 high by Leo Lewis and Kana Inagaki—The Financial Times

Related Episodes

235: What If Home Prices Always Declined

178: Japan and the Impact of A Shrinking Population

73 Plus: Investing In Japan

38 Plus: Time Wealth and Japan

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How the ETF market is changing, why ETFs should be your preferred investment vehicle, and how to analyze ETFs to generate better investment performance.

Topics covered include:

• How large have fund flows been away from active mutual funds into ETFs
• How big are the largest ETF families and how has their market share grown
• Why the rise of active ETFs blurs the distinction between active and passive investing
• Why there doesn't appear to be an indexing price bubble, but the rise of passive investing has impacted volatility and decreased stock price informativeness
• A framework for how to analyze markets and select ETFs for your portfolio

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Show Notes

Global Fund Flows Dominated by Fixed-Income and ETFs—Morningstar

It’s Official: Passive Funds Overtake Active Funds by Adam Sabban—Morningstar

ETF Issuer League Tables—VettaFi

Global ETF Market Facts: three things to know from Q3 2023 by Samara Cohen—iShares

Rise of Passive Investing - Effects on Price Level, Market Volatility, and Price Informativeness by Pawel Bednarek—SSRN

Investments Mentioned

SPDR® S&P 500® ETF Trust (SPY)

JPMorgan Equity Premium Income ETF (JEPI)

Avantis US Small Cap Value ETF (AVUV)

Related Episodes

426: Which is Best – Active or Passive, ETFs or Funds?

321: How to Analyze Complex Investments

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Stocks that grow their dividends have outperformed non-dividend-paying stocks over the long-term, but not in the past 5, 10, and 20 years. Why are non-dividend paying stocks outperforming dividend growers, and will it continue?

Topics covered include:

• What message do companies say when they initiate, grow, or cut their dividend
• What is dividend smoothing
• How have dividend payers performed relative to non-dividend payers
• Why have non-dividend payers, which are primarily growth stocks, outperformed dividend payers
• How the payout ratio and return on equity impact dividend strategies
• What are reasons to include dividend strategies in your portfolio

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Show Notes

The dividend puzzle by Fischer Black—The Journal of Portfolio Management

Can Dividend Investing Rise From the Dead? by Jon Sindreu—The Wall Street Journal

Einhorn Says Markets ‘Fundamentally Broken’ By Passive, Quant Investing by Matthew Griffin—Bloomberg

Your Mutual Fund Stinks. Can This Wall Street Invention Change That? by Jason Zweig—The Wall Street Journal

Asset Camp

Investments Mentioned

WisdomTree U.S. SmallCap Quality Dividend Growth Fund (DGRS)

WisdomTree Emerging Markets High Dividend ETF (DEM)

Vanguard Dividend Appreciation ETF (VIG)

iShares Core S&P 500 ETF (IVV)

Related Episodes

429: Which Inflation Protection Strategies Worked and Which Didn’t? 

342: Is Another Great Inflation Coming?

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Humans are wired to feel regret. Here's how to learn from financial regret to become a better investor.

Topics covered include:

• What cognitive biases make feelings of financial regret unavoidable
• We analyze two regret case studies - one from David and one from a Plus member
• Why do we avoid big regrets but manage through small ones
• Five cognitive tricks to help manage financial regrets
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Show Notes

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb—Penguin Random House

Related Content

448: Where Are Interest Rates Headed Next? Insights from the Jackson Hole Symposium

408: Is Success Due to Hard Work, Talent, or Luck?

What Is Risk vs Uncertainty?

53: Should You Invest In Bitcoin?

Investments Mentioned

Vanguard Long-Term Bond ETF (BLV)

Vanguard Extended Duration Trs ETF (EDV)

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Professional investors and other market participants are lousy at forecasting interest rates. Here are three more options to lock in higher yields today.

Topics covered include:

• The risk of buying long-term bonds and ETFs to benefit from falling yields
• How volatility drag has impacted a long-term bond ETF like TLT
• Why interest rates won't go up just because the government issues more bonds
• How CDs, fixed annuities, and zero-coupon bonds work
• We compare and contrast the seven fixed-income options reviewed in this two-part series

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Show Notes

Investors may be getting the Federal Reserve wrong, again—The Economist

Today's Best Multi-Year Guaranteed Annuities—Immediate Annuities

Zero-Coupon Treasuries Flew Off Shelves During October Yield Surge by Elizabeth Stanton—Bloomberg

Investments Mentioned

iShares 20+ Year Treasury Bond ETF (TLT)

Invesco BulletShares 2029 Corporate Bond ETF (BSCT)

Related Episodes

463: How to Lock in Higher Yields in Case Interest Rates Fall

418: Bond Investing Masterclass

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With cash yields expected to fall, here's how you can keep your portfolio income elevated by purchasing longer-term individual bonds and bullet ETFs

Topics covered include:

• How future short-term interest rates, inflation expectations, and term premiums impact long-term interest rates
• How each of those rate drivers contributed to the close to 1% drop in interest rates in the past three months
• How yield to maturity is our guide to locking in a fixed return using individual bonds or bullet ETFs
• How bullet ETFs work and what are some examples
• What are callable bonds and how to analyze them
• How to analyze municipal bonds
• Why we might want to lock in higher yields today

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Show Notes

Term Premium on a 10 Year Zero Coupon Bond—FRED Economic Data

Investments Mentioned

Vanguard Total Bond Market ETF (BND)

Invesco BulletShares 2030 Corporate Bond ETF (BCSU)

iShares iBonds Dec 2026 Term Trust ETF (IBTG)

Invesco BulletShares 2031 High Yield Corporate Bond ETF (BSJV)

Related Episodes

455: Easier Investing, Richer Life: TIPS Ladders to Annuities

453: The Price of Money – 700 Years of Falling, Can Interest Rates Keep Rising?

452: Beyond Stocks: The Allure and Strategy of Credit Investments

448: Where Are Interest Rates Headed Next? Insights from the Jackson Hole Symposium

418: Bond Investing Masterclass

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We explore reasons for buying Bitcoin using one of the new Bitcoin ETFs. We also consider the risks.

Topics covered include:

• Why the SEC finally decided to approve spot Bitcoin ETFs
• What are the fees and structure of these new Bitcoin ETFs
• How Bitcoin is similar and different from the fiat money system
• Where Bitcoin fits in an investment portfolio

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Show Notes

Statement on the Approval of Spot Bitcoin Exchange-Traded Products - SEC

Coinbase at the Center of Bitcoin ETF Draws Envy and Risks - Bloomberg

Federal Reserve Balance Sheet

Related Episodes

362: Should You Invest in a Bitcoin ETF?

355: Which Money Is Crazier: The U.S. Dollar or Bitcoin?

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The intricate dance between profession, risk, lifestyle, and luck in determining how net worth grows.

Topics covered include:

• The various factors that shape the growth of net worth, including professional choices, risk tolerance, and lifestyle decisions.
• David Stein's personal account of how these elements influenced the trajectory of his financial growth.
• Insights into the range of net worth increases observed in 2023, driven by the performance of financial markets.
• The importance of focusing on one's output quality and personal journey of wealth creation, rather than fixating on comparisons with others' net worth.

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Show Notes

Managing Oneself by Peter F. Drucker—Harvard Business Review

Soloing: Realizing Your Life's Ambition by Harriet Rubin—HarperCollins

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The pros and cons of investing your retirement assets 100% in equity, including half in international stocks. Why the 4% spending rule is too aggressive.

• Why historical asset class return studies that use only U.S. data are biased
• How researchers build a broader database to study retirement outcomes and spending rates
• How a 100% stock portfolio performed compared to balanced portfolios and target date funds
• Why investors should have half their assets in international stocks
• Why a 4% spending rule is too high, and what is the alternative

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Show Notes

Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice by Aizhan Anarkulova, Scott Cederburg, and Michael S. O'Doherty—SSRN

The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets by Aizhan Anarkulova, Scott Cederburg, Michael S. O'Doherty, and Richard W. Sias—SSRN

Related Episodes

421: Beware of Survivorship Bias When Investing

326: The New Math of Retirement Spending and Investing

254: Should You Be 100% Invested In Stocks?

250: Investing Rule One: Avoid Ruin

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