Sometimes, I Feel Like I Live in Oakfield from Fable II
(or “The Utility of Home Ownership”)
In the most recent Berkshire Hathaway shareholder letter, Warren Buffett remarked that the three best investments he ever made included his home in Omaha (the other two were wedding rings). He conceded that he would have had more money if he had instead rented and invested the cash, but the utility of the home far outweighed the opportunity cost.
Now that I am in my late twenties, I understand what he meant.
I woke up this morning with light streaming through the windows of my bedroom, sweeping views of the forest behind my house, with the Oakfield theme from Fable II playing through the speakers. I opened the MacBook Pro that I keep nearby and checked on some of the market orders that had been put in place last night for our equity portfolios. Seeing that they had cleared, I made another purchase of one of my favorite companies for what we refer to as our “permanent capital”.
The past week has been one of substantial change for our investments in that I sold off several major holdings as a percentage of assets and redeployed them into shares that I believe are significantly undervalued. There hadn’t been any major additions or subtractions to our positions since last Autumn, when I was buying oil and tobacco stocks (you knew a little bit about this because a few of the companies made it into the small KRIP portfolio, which is one of the experiments I run, as long-time readers of the blog are aware). Now, though, there are these bizarre areas of valuation dislocation in the market, a result of which I have drastically increased our concentration in a few, core holdings.
It’s like people forget that $1 of earnings is $1 of earnings, regardless of whether it comes from a “sexy” company that is en vogue or a boring company such as one that treats waste sewage. Profit is profit. Your job as an investor is to buy the most profit at the lowest possible price. That is my mantra and the lens through which I manage my financial affairs.
Life comes down to 1.) relationships, 2.) experiences, and 3.) utility. A lot of these are amplified by ritual and tradition. But that is a different essay for a different day. Though, by retirement, I would have had more cash in the long-run had I rented and instead reinvested the cost difference, the utility gained to me through ownership, the ability to modify the property for my own needs, and the joy of having family dinners, playing video games, reading late into the night, and sitting on the porch with old friends as we look out over the water flowing through the trees, on a piece of land that I own far outweigh the utility of extra greenbacks when I’m in my twilight years.