106: What I'm Reading 11/3/23; Substack Pledges
Highlights from this week's research / reading
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What I’m Reading
I’m writing this for both me and you. First, as a log/reflection of the more important data/information I consumed this week. Second, I subscribe to a few “professional curators” who add value to my reading habits, so I thought you might gain from my filter.
Bank Director Magazine (Subscription): This article talks about the coming credit storm and the $1 trillion in credit soon to be maturing in a higher interest rate environment. Additionally, many - perhaps even most - bankers have not experienced an environment of inflation and high rates, which last occurred in the 1980s. We’re sure to see banks/bankers make mistakes in such an environment. Or, perhaps these mistakes have already been made and we’re about to see them materialize. Delinquencies are on the rise: from 2020 to today they’ve risen from 0.8% to 8% for lodging, from 1.2% to 3.7% for retail; and 0.6% to 2.7% for office properties.
Some Negative Press at Berkshire (Energy): The WSJ reports that BRK subsidiary Rocky Mountain Power (owned by PacifiCorp which is owned by BRK Energy), is seeking to raise rates by 29%, including a temporary 7.6% hike to pay for rising fuel costs. Unfortunately, the citizens of Wyoming put the blame on the renewable (mainly wind) assets put in place, which Rocky Mountain Power says actually saves them money. Even with the proposed increase the utility’s customers will still have a rate below the national average. This is a prime example of Munger’s contrast misreaction tendency where a big jump in price (in this case) is felt more than a series of smaller increases. BHE prides itself on keeping rates low, and I wonder how much of this was avoidable either by asking for smaller increases sooner and/or over time. At the end of the day, I trust Greg Abel and team know what they are doing.
Charlie Munger podcast (link): The lucky ducks at Acquired got to sit down with Charlie. It’s nice to hear Charlie opine on things old and new. He’s still so sharp at 99 it’s amazing! He waxes poetic about Costco and references Home Depot and Floor N Decor as copycats. Charlie’s audio isn’t the best but it’s always a treat to hear the man speak!
Troubles In The Freight Market: The WSJ reported on the fall of Convoy, a freight broker that went bust. Two Amazon employees founded Convoy, which had the backing of Bezos and Gates. Basically they tried to make a business model out of bottom feeding, picking up the scraps of barely profitable freight brokerage business that only made sense with lots of technology and scale. The market pulled back and ultimately sank the company.
Charlie Munger Interview (link): This short WSJ interview touches on a number of fronts. Here’s my favorite line: “I think that one of the reasons I was as economically successful as I was in life is because I read so damn much all my life, starting when I was about six years old. I don’t know how to get smart without reading a lot.”
Substack Pledges
I’ve had a number of readers pledge support to this ragtag venture. I’m going to *try* turning on payments so these readers can actually support my work. An added benefit for all subscribers should be more frequent content. I think having it go from a free venture to something earning a small amount of money will keep my brain more focused on writing here.
Supported Substack vs. Paid Deep Dives
To be clear, any pledges turned into support (the $10/mo or $100/year plans) are for this Substack only and are not full Deep Dives subscriptions.
Readers choosing the $249/year plan will be given access to the private pages and back issues at WatchlistInvesting.com and also invited to participate in monthly meetups and the private Discord server.
I’m hoping this won’t cause too much confusion!
Stay rational! —Adam
