Friday, July 17, 2026

Grandpa Warren

Grandpa Warren


Warren Buffett has been described by many as the greatest investor of all time. ILAF disagrees. Under all those laurels is a mammoth insurance profit center that rakes in premiums by the trainload. For over six decades this has allowed Buffett to deploy excess capital (and there is a shit ton of that) into a relatively small stable of public stocks and many family-owned operating businesses picked up for a song.

With homespun humor and hundreds, nay thousands, of anecdotes Grandpa Warren has crafted a wholesome image and cult following. There are entire blogs devoted to his every interview, not to mention the dozens of biographies all trying to distill and bottle that "special magic" of his investing acumen.

These sheeple never do delve into his early days running a hedge fund and the fees he charged "partners" resulting in his seed capital for Berkshire. Far worse are the ongoing (taxfree) disposal plans for his billions into his children's "foundations" directly impacting millions of unborn lives. 

What the retail world has not been privy to are Buffett's strong-arm tactics of extracting "favorable terms" from family-owned businesses to corporate giants like Goldman Sachs, Bank of America, General Electric and now even Google is in his net. This "investment genius" is rarely discussed on CNBC. 

In retrospect, the Coca-Cola receipt for investing was pretty simply all along: Cobble together monopolistic insurance businesses, collect fat premiums, and invest the float in operating businesses that can be had for a song or a "baker's dozen" of corresponding monopolistic companies in divergent industries. But the insurance float anchors it all.

The insurance float is a "Death Star" of epic proportions in terms of generating income into the vast pool of float. It is an ungodly profit center run like every other insurance company on Earth with the simple mantra of: Delay, Deny, and Defend. Read that again and you will understand why the largest building in almost every major city bears the name of an insurance company. For gamblers out there, imagine a dice game where EVERY roll you win, it is just a matter of HOW MUCH profit.

Survivorship Bias in investing is a very powerful thing. Part of the reason why the S&P 500 Index is so hard to beat is because winners tend to rise to the top while the losers fade away and die. But even a moderate winner with enough time can be amazing. That is pretty much the scenario for insurance companies, survive and prosper.

Should taking hundreds of billions in insurance premiums, paying out as little as possible in claims, and investing the float garner the title "Greatest Investor of All Time?" Nah. Look to who has created the most benefit to humanity as a whole. Increased longevity. Higher quality of living. Great investors are almost always creators improving the human condition at scale.


Tuesday, July 14, 2026

Exit Liquidity

Exit Liquidity


SpaceX has proven to be a busted IPO less than a month after it launched, using retail investor cash to fuel its exit liquidity. Investment banks like lead underwriter Goldman Sachs were only too eager to promote this issue, along with the usual suspects (Morgan Stanley, UBS, Bank of America, etc.) Those high fees to issue, paid by shareholders to the tune of $500M, could not be ignored. 

Ground Control to Major Tom, this should be a FLASHING RED PANEL to all retail investors. 

Big Tech is in cohoots with Big Banking looking to score more lucre. Coming down the pipeline with Trillion-Dollar Valuations include Anthropic and OpenAI. Retail investors need to take pause and consider what happened with SpaceX, as the gameplan Big Tech used with Big Banking is now transparent.

Traditionally the term "Escape Velocity" pertains to the speed at which something, a rocket or spaceship for example, needs to have to be free of the Earth's gravitational pull. For Earth that speed is 25,000 mph. "Exit Liquidity" is somewhat of a similar term in which at what price point can Big Banking, directed by Big Tech, unload a company on the retail investment world.

The goal here is obvious: founders, early employees, and especially venture capitalists are playing a very calculated game of brinkmanship trying to determine what pricing they can shear from the sheeple. All these Gulfstream 650s aren't paying for themselves. Nor is the absolute BOOM in San Francisco real estate (the epicenter of AI) is no coincidence.

Here at ILAF we like new tech and game-changing advances just as much as the next robot, but the shell game being played at the "investment" houses is pretty transparent, especially after the busted SpaceX IPO. Retail investors should be very, very leery of new issues that are simply Exit Liquidity strategies pumped by Big Banking enriching themselves, VC firms, and wildly over-compensated founders.

To date, the biggest retail winners of the SpaceX IPO have been short sellers.