Qui Bono?

 Qui Bono?

The Roman people regarded Lucius Cassius as a wise and honest judge. He was in the habit of frequently asking "Qui Bono?" or "to whom might it be for a benefit?" Why the history lesson? Because responsibility has become a very touchy subject. But it shouldn't be a partisan one. Hence the utility of an impartial judge from 2,000 years ago.

What Cassius was getting at with the simple question of "Qui Bono?" is who benefits from an outcome? By and large, purposeful decisions over time result in outcomes. You study hard in high school, go to college, get a good job, further your education, etc. Generally you turn out with a decent outcome. Same with investing. If you start young and are diligent and have some luck along the way you generally compound your money over time. The LA Fires are an outcome.

Much will be written and hopefully studied during the autopsy of these fires. A "blue-ribbon" panel would be welcome. There are many important questions that need answers from Gov Gavin Newsom, Mayor Karen Bass, and Insurance Commissioner Ricardo Lara.

Having the courage to ask "Qui Bono?" is an important first step, whether you are evaluating a business deal, looking at an investment or in this case trying to understand an outcome like the LA Fires. LA, California, and yes US citizen taxpayers will be (not "could be" or "may be") on the hook for billions of dollars. We deserve better than the LA Fires outcome.

The challenge of asking "Qui Bono?" aloud is there are many intellectually weak and morally bankrupt  individuals who will instinctively label you a "conspiracy theorist" or worse. Hold your head up high and ask away, this isn't China. Very apropos for the LA Fires oddly though, in an almost mystical way calling back from the past some 50 years ago, is the required viewing of "Chinatown." Test your metal like Jake Gittes and follow the money...it will lead to the truth, perhaps one as Californians we do not want to admit.

Reverse Engineering

Reverse Engineering

Generally speaking, stock prices increase with increased earnings. When a company makes more money, in general, their shares are worth more because investors put value in growth and reward it by bidding up the share prices of companies that increase their earnings. Naturally, the opposite is also true. Granted, there are always exceptions to the rule, but for the most part earnings drive the market higher.

Along those lines, investors should be able to reverse engineer a portfolio based on their spend habits, or even consider the spend habits of a typical cohort. So for example, if you have a breakdown of your monthly expenses you can also typically trace that spending to broad sectors, and specially individual brands. This provided a good backdrop to the Chinatown adage of "follow the money."

A classic Maslow's hierarchy of needs also works well in this example. For the "average" American, the top three expenses on a recurring monthly basis are housing, medical, and food. Now for people who are NOT self-employed, that medical cost might not be too high because your employer is picking up the tab. Consider their cost in our example as yours.

So right from the start we can see from a percentage basis how much of our monthly income feeds the banks for mortgages or the landlord, the medical plan operator, and the food prodders. Depending on your situation, there most likely will be energy costs (fuel and/electric), clothing, entertainment, and many others. List them out and I suspect you'll start to see the brands behind the sectors popping up. Take note of the specific brands you utilize both as a function of your purchase, but also your time. You might only buy a smartphone once a every couple years, but you most likely are using it frequently. Same for a computer. TV. Internet.

All of these purchases and time uses trickle down to brand utilization. The brands with the most utilization should be ones you pay attention to from a portfolio perspective. You are probably not alone in your brand utility. And generally speaking, yet again, the fewer brands choices you have for a good or service or time usage the more of the total market that brand is capturing.

This reverse engineering exercise should reveal some very powerful, some would say monopolistic, brands in your life. Maybe you should consider owning them?

 

Follow the Money

 Follow the Money

One of my favorite movies of all time is "Chinatown." One of the best lines in that movie is "follow the money." It rings true today just as it was spoken in 1974. It has undoubtedly been true since the invention of money. "Follow the money" will lead to the truth more often than not; why does this matter?

Today's Wall Street Journal published an important piece in the Opinion section questioning an "official" report from the WHO about the origin of COVID-19 which has now killed over 2,000,000 people around the world. Over 500,000 of those deaths in the USA alone. In terms of scale, COVID-19 single-handedly is on par with a World War. In addition to the deaths, the economic, social, political, and societal damage has been vast. This is why the origin of this virus matters. 

Attached is the WSJ Opinion article published today for your perusal. It is important to share this with your friends, family, and colleagues.

Daylight is a great sanitizer to fiction, lies, and bogus data. As Sherlock Holmes famously said, "If you eliminate everything that is not possible, then you are left with what is the solution, however unlikely." Well dear readers a careful read of this Opinion article should reveal a very definite money trail (yes, that's our own taxpayer-funded National Institutes of Health) from the NIH to the Wuhan Institute of Virology (WIV) to expressly support the development of gain-of-function on coronaviruses. Why? That is a very good question. Ostensibly it is done for the purpose of creating vaccines. The truth is out there, we still need to find it.

USA Farmland

 Is there any more fitting graphic for this blog than the price per acre of USA Farmland? A special "Thank You" to one of my blog readers for tipping this image out to me. Superb. And very revealing. As many of you know "Chinatown" is one of my favorite movies of all time. It deals with water theft in California to enrich a handful of greedy speculators. Fiction? Well dear readers read on.

As a California resident I find it odd that the highest cost per acre can be found in CA, despite the tremendous "drought conditions." How could that be? Indeed, probably no other state has had such massive disruption to its natural environment (the Hoover Dam does come to mind NV readers) as California. Aptly termed "Water & Power: A California Heist," this documentary by National Geographic is the true-to-life theft of water which makes California agricultural land just so valuable. Worth watching if you enjoy blatant political graft exposed.

The true value of the farmland is the underlying value of the water that services not only the land above it, but also the population surrounding it. Mineral rights in the United States have long been a contentious issue, and probably water has become the greatest concern.

When you take a look at this map consider two factors; what is the crop which grows and who controls the water? The answers to those two questions directly impacts the underlying value of the land. And as a Financial Farmer...what are the brands and who controls the cash flow?