Mandevilla Vines on Statue

Kennon-Green & Co. Fiduciary Financial Advisor, Wealth Management, Global Value Investing

The first dividend from United Technologies came in today.  Actually, it was deposited two days ago, but I forgot to note it when I checked the accounts.  I told you when I added the position to the KRIP portfolio, and then later answered questions about the valuation of the stock.  It is such a small position that it isn’t really meaningful but I imagine it will grow to be something substantial over time.  Shares are only a little bit below fair value right now, but buying a collection of businesses with these economics, and a history of returning surplus earning to owners in the form of dividends and buy backs, is not a particularly bad position to be in when putting together a collection of assets for a 25+ year horizon.

[mainbodyad]I woke up and had to finish one last unexpected thing on the refinance of my primary residence, which we’ll close when I get back from California.  (Those of you who have been around a long time know that one of the few debts I allow my household to carry is a tax-deductible mortgage against a secured piece of real estate with ample equity.)  We were supposed to already be done with it but right as we went to pay it off, the mortgage servicer transferred it to a different mortgage servicer and we had to wait several business days for the payoff quote to appear in their system.  The move will drop my rate by 1.25% per annum, put an extra $5,000 to $6,000 per year in my pocket, and effectively let me go short the United States dollar for thirty years at a rate below historical inflation and considerably below the dividend yields that can be achieved on high quality oil stocks.  It’s going to take all of my self-restraint not to pay it off early but it would be irrational to do so give my opportunity cost.  

We went to Dick’s Sporting Goods and picked up some running shoes.  The one bad thing about living in the Midwest is the fashion at most stores is designed to appeal to the masses instead of being unique.  That’s why online businesses are kicking you across the floor; it’s not the sales tax advantage (which is offset by shipping in most cases.)  I found one pair that I love, though, so I did get those.  The rest I’m going to have to get online, which is fine since I can save money with Upromise.  

The funny thing that no one except Aaron and my siblings will ever quite fully understand because they were there at the time and got to see it is that whenever I walk into a Dick’s Sporting Goods, I feel a twinge of sadness for my extended family for reasons I’ve explained in the past.  They squandered what would have been tens of millions of dollars in lost wealth; gone forever, despite having a base that most Americans can only dream of possessing.  Imagine going back a couple of decades ago.  You wake up with a business pumping out the inflation-adjusted equivalent of seven figures in revenue, six figures in profit, hardly any debt, no meaningful competition, the Internet doesn’t exist in any substantial way, and own the real estate in which you conduct your operations so that even the lease payments are ending up back in your own pocket.  It should have been a recipe for long-term compounding that ended with $30 to $50 million in stocks, bonds, and real estate after 30+ years in business.  It didn’t.  They screwed up, big time.  They had no internal controls, lost countless amounts to embezzlement, stopped expanding beyond a single store, drained the enterprise through excessive salaries and dividends, and then closed their doors after years of running losses sustained solely by liquidating a quarter-of-a-million dollars in high quality inventory and never replacing it.  By the time they woke up, it was too late.  They had starved the golden goose and had to shut the doors.  At this point, they had almost nothing saved.  There was no capital working for them.  They will retire dependent almost entirely on Social Security and odd jobs.  It was a tragedy that happened solely because of a refusal to recognize reality, respond to it, and treat the enterprise with respect.  

It makes me sad.  It’s so pointless.  I hate seeing good platforms wasted or neglected. 

Ravenna 4 Running Shoes

I picked up a pair of Ravenna 4 running shoes.  We’ve been heading out to some trails several times a week to make up for this winter’s baking obsession, which caught up with me.  It’s been a great way to think about strategy.  I put my iPod on, walk through the trees, and end up coming up with ideas that seem perfectly obvious as if I should have seen them sooner.  It’s going to end up being good for the bottom line, as well as my health.

Afterwards, we picked up a pound of coffee and some drinks at Starbucks then headed home.  We had to move the flowers back to the porches and the deck restoration project is finished.  

Pansies in Garden Joshua Kennon

The pansies are doing well, but they are too fragile for my taste.  I don’t think we’ll ever grow them, again, despite how beautiful they are.  Plus, I’ve fallen too in love with growing these.


Mandevilla Vines on Statue

The Mandevilla vines grow really quickly.  They were thriving so much in another area of the house we decided to use them as a wall of flowers in the back area, so they will climb up to be 10 to 15 feet per vine in the next few months.


Thai Prince Next to Mandevilla Vines

At night, sitting out here by this light, with the water running, and lanterns lit, is really productive and peaceful.  It helps me think.  Too many people don’t sit alone, in silence, and just think.  I believe that’s probably got a lot to do with my success in life.  I think about what I want and don’t want; what I should do and shouldn’t do; what is happening and what isn’t happening that should be; where I’m going and how I want to get there; the people in my life, the conditions of my investments … sometimes, I compose songs (people forget I was a music major), read, or draw out projects that I give a code name in the file cabinet.  Aaron does the same thing.  He is working on a Chinese / Japanese Garden he wants to build someday, looking at the structures, how it would be setup, etc.


Raw Chicken and Vegetable Skewers Grill

For dinner we put chicken vegetable skewers on the grill …


Chicken and Pepper Skewers

They turned out fantastically.  I couldn’t have been happier with them.

The Dick Clark rose bush is not turning out at all like I expected, by the way.  Some of them are now really dark, while other blooms are not.  

Dick Clark Rose Grown by Joshua Kennon

The Dick Clark roses are coming out with color spectrums all over the place … some of them are so dark they almost look black then fade to light.  Others are like this.  It’s weird.  The plant is growing like crazy, though, and the foliage is beautiful, so time will tell.

This evening, I need to clean up my home study, finish some personal accounting work, go through a stack of about 100 tear sheets on companies I’m considering for one of my personal portfolios, and wrap up some other small items on projects that I track.

All in all, this has been a wonderful day.  I expected to work the entire time but all of these distractions are the benefit of owning your own businesses and being able to do whatever you want.  I’m so glad my life is arranged this way.  Yesterday, my brother and soon-to-be-sister-in-law rang the doorbell and asked if they could camp out and watch the third season of Game of Thrones so we took the day off and watched that with them.  This really is the way to live; at least for my personality.  When I get obsessed with work, I more than make up for the downtime.