January 26, 2015

Investing Articles

A Basic Overview of What Happened with the Swiss Franc and Nestle’s Share Price

Houang Stephane
M Le Macaron 
Macaroons from Bordeaux (France) from Flickr.   Image made available under Creative Common Attribution 2.0 Generic License

By now, all of you know what happened recently with the Swiss Franc, Euro, and, as an extension, the price change of Nestlé shares in the United States.  It caused a stream of messages to come in through the contact form like I haven't seen in a long time, all with the same theme.  Here are just two, randomly chosen, that sum up the gist of what my inbox looked like on January 15th and 16th. First off, I would like to thank you for your time and for being so willing to share your knowledge of bu … [Read more...]

Thoughts on Stock Market Benchmarks (and an Update to Our 5 Year Investment Returns)

Joshua Kennon Aaron Green 5 Year Investment Results 2014

Over the past 3-4 months, I've had a lot of people write me asking about benchmarks as they pertain to their investment portfolio.  I haven't had time to respond to these messages so I'm going to address the broader topic here and use it as a sort of catch-all to explain how I think about these things and the reason I approach them the way I do. The short version: While benchmarks have their place, I think a lot of investors use them foolishly.  To be specific, I see three major problems with … [Read more...]

The Night Black Wall Street Burned to the Ground

Tulsa Race Riot Official Report 2

When I became obsessed with investing as a child, convinced it offered me the greatest probability of escaping what I saw as an economic dead end due to the community in which I lived, I spent years reading everything I could about any and every event tied to the financial markets and those who shaped them.  Biographies, old newspapers, archived magazines; if it played a role in this country's economic history, I wanted to know about it because these men and women were, in a very real sense, my … [Read more...]

About that Reckitt Benckiser Spin-Off of Indivior …

Lysol Reckitt Benckiser

Have you ever woken up one morning to find that you are suddenly, directly, in what amounts to the synthetic heroin business?  That you're making money off of cocaine addicts and alcoholics trying to kick the habit?  Such are the unexpected oddities of holding a well-diversified, strong investment portfolio. Awhile ago, I had my mother acquire shares of Reckitt Benckiser for a retirement portfolio of global blue chip dividend stocks that she holds through a tax shelter we set up a decade ago. … [Read more...]

How to Give Shares of Stock as a Christmas Gift

Liquidity Discounts IRS

I am sometimes asked how to buy shares of stock as a Christmas gift for someone, often a younger family member such as a child, grandchild, niece, nephew, godson, goddaughter, or, in a handful of cases, retired parents who could use the additional passive income.  It can be a wonderful idea that teaches a lot of important life financial lessons, such as the power of compounding and the joy of dividends, checks regularly arriving in the mail throughout the year; a constant reinforcement of the b … [Read more...]

Watching Oil Decline 45% Has Made Me Excited

Exxon Mobil 2013 Annual Report

The global benchmark for crude has collapsed an astounding 45% since the summer, with no sign that it will abate anytime soon.  Historically, this is nothing.  To see what a real oil crash looks like, you should read old news articles, magazine essays, and biographies to get some context.  I remember $10 a barrel oil back in the 1990's during my sophomore year of high school, with everyone on television and in print talking about it.  This was around the time I was obsessed with studying the gild … [Read more...]

Here’s an Astounding Stock Market Fact You Probably Haven’t Heard

Facebook Valuation

Imagine that I raise $225 billion.  I create a new business called Kennon Super Company, Inc.  We then go out and buy seven other companies using that money, paying the current market capitalization of the public stock.  A flurry of paperwork follows and, by the time it is all settled, this is what our business looks like: Kennon Super Company, Inc.  Clorox at a price tag of $12.87 billion generating $558 million in after-tax profits Hershey at a price tag of $22 billion generating $820 … [Read more...]

Foreign Currency and Your International Investments

CME Building Wikipedia

One of the more interesting problems you'll face as you amass more capital is how to approach the issue of foreign currency income, either in the form of dividends, interest, rents, or capital gains.  You can solve this problem by reminding yourself that, ultimately, money exists to be used - either by yourself, your heirs, or the charity of your choosing - so the question really comes down to, "How can a person extract the most utility out of his income when it arrives in a fiat not native to th … [Read more...]

Investing in The Hershey Company Has Made Generations of Investors Rich

Hershey Icon for Investment Post

As we approach the end of 2014, I'm looking back on the year.  One of the major changes from an investing perspective what a modification Aaron and I made in the investment policy manual.  That doesn't happen often.  We added a handful of companies to the list of permanent business; those companies we consider so exceptional that we buy them with no intention of ever selling.  The Hershey Company was one of those firms. One of the biggest mistakes of my investing life, and a lesson that took m … [Read more...]

I’m Building a Ghost Ship Portfolio for Someone; A Sort of Index Fund on Steroids

Ghost Ship Passive Investment Portfolio

I'm putting together a retirement portfolio for several people I know.  One of them is proving to be a fun intellectual exercise.  Essentially, the mandate calls for me creating a ghost ship of a portfolio that, once it has set sail, will drift almost untouched for the next 30+ years when it will be gifted to the children at the end of the life expectancy of the owner.  Beginning in 7 to 10 years, the owner will start taking 3% to 4% distributions to augment an otherwise secure retirement.  The p … [Read more...]