Highlights from Warren Buffett letter

David MoonBlog

Every February, Berkshire Hathaway publishes CEO Warren Buffett’s shareholder letter, an eagerly awaited annual missive. Most CEO letters are either meaningless happy talk written by communications directors, or they are stuffed full of industry-specific technical jargon designed to intimidate or impress mere mortal shareholders. Instead, Buffett’s letter is uniquely folksy and readable – and is always full of insights from one of the world’s richest men on a wide variety of topics. This year’s letter lived up to expectations, although it did begin on a somber note. Buffett addressed the passing of his long-time partner Charlie Munger who died last … Read More

Lies, darn lies and statistics

David MoonBlog

An old joke claims that 72.35 percent of all statistics are made up on the spot – and the more precise the conclusion, the more likely the claim is to have been contrived from thin air. That’s why I tend to question highly specific conclusions drawn from statistics that are buried multiple links away from the headline. I recently read an article titled Gun Laws Save Lives, which described a study that compared per capita gun deaths with a compiled index of 50 different policies related to gun laws, each weighted by some factor determined by the study’s authors. As … Read More

Technology facilitates fraud, rewards reputation

David MoonBlog

When I was a kid, anything in the National Enquirer was assumed to be fiction and anything on the CBS Evening News with Walter Cronkite was granted almost gospel status. Technology now makes it possible for any teenager to produce believable video and audio evidence of Bigfoot emerging from a Martian spaceship in the middle of a Tennessee football game, taking Tim Burchett hostage, and whisking him away to the Kremlin to officiate the wedding of Taylor Swift and Donald Trump. If you see that video, the first thing you need to do is verify the credibility of the platform … Read More

Super Bowl and super money

David MoonBlog

The Kansas City Chiefs paid its quarterback Patrick Mahomes $59.3 million this season, the fourth year of a 10-year contract that is scheduled to pay Mr. Mahomes a total $450 million. His annual income from football is 1,000 times greater than the $56,000 average salary of a Knox County public school teacher. There are plenty of reasons this massive disparity exists, none of which are that being a very good NFL quarterback is more important than being a very good schoolteacher. As tempting as it is for high wage earners to fully credit hard work for discrepancies in income, the … Read More

Higher rates squeeze federal budget

David MoonBlog

The fastest growing category of U.S. federal government expenditures isn’t national defense, intelligence gathering, Medicare, Social Security, education or immigration related. It is interest on the national debt. The duel financial cancers of exploding government debt and higher interest rates has resulted in an almost doubling of federal interest costs from 2020 to 2023, from $345 billion to $659 billion. This year, federal interest expense will approach $1 trillion. To put that into perspective, annual interest cost is about equal to what the federal government spends on transportation, housing and food/agriculture – combined. We will spend as much on interest … Read More

Q4 2023 letter

David MoonUncategorized

January 2024 Dear clients and fellow shareholders: If there was anything that economists were clear about a year ago, it was that the U.S. was in for a challenging 2023. More than two-thirds of the economists at the 23 large financial institutions that do business directly with the Federal Reserve predicted an impending recession. The reasons were evident—the housing market was declining, banks were tightening lending standards, interest rates had reached their highest levels since 2008, inflation stood at 7%, real wage growth was negative, and the Conference Board’s Leading Economic Index had fallen for nine consecutive months. Instead of … Read More

Unintended consequences of Fed actions

David MoonBlog

Last week, JP Morgan CEO Jamie Dimon made a comment about the Federal Reserve’s plan to somehow unwind the nearly $8 trillion in bonds it began purchasing during the mortgage crisis of 2008, using money it created from thin air. Dimon said that he doesn’t understand the implications of this Fed action. Dimon is one of the guys who is both smart and wise. He runs a company with $3 trillion in assets and knows as much about the workings of the financial system as anyone. If he doesn’t understand the potential unintended consequences of this Fed policy, no one … Read More

Lessons from a snow day

David MoonBlog

I learned a few things during our snow event in Knoxville this week and was reminded of some others. Snow is one of the crystalizing forces of nature. You reveal what is important to you when it snows. When snow was forecast last Monday, I made sure I had plenty of firewood in the house. When I was younger, a snow forecast sent me in search of a place to ski. In the blizzard of 1993, Knoxville was closed for a week, but I got on the road and managed to get to West Virginia to ski. After clearing off … Read More

Be wary of economic forecasts

David MoonBlog

If a group of the country’s leading economists can’t even come close to forecasting the near-term health of the U.S. economy, you don’t have a chance of consistently guessing accurately. And whether you stick your finger in the air or rationalize your forecasts with reems of data and massive spreadsheets, a short-term economic forecast ultimately is little more valuable than the toss of a coin. A year ago, the consensus among experts was that higher interest rates would push the U.S. into a recession in 2023. The WSJ experts placed the probability of recession last year at 61%, a historically … Read More

Some thoughts on college football and NIL

David MoonBlog

The three college athletes expected to have the highest estimated 2023 earnings are Lebron James’ son, Deion Sanders’ son and Livvy Dunne, a gymnast at LSU. Dunne is estimated to earn $3.5 million annually for her various Name, Image and Likeness (NIL) agreements. LSU women’s basketball player Angel Reese is 9th on the NIL list, earning an estimated $1.7 million in 2023. (The average WNBA player’s salary is $113,000.) If you don’t like the anarchy version of college football, don’t blame NIL. Angel Reese’s earnings didn’t ruin anyone’s enjoyment of her team’s 26-6 season last year. Don’t even blame the … Read More