May Newsletter to Clients

Enjoy this month’s edition that features some of my favorite Warren Buffett quotes, a review of investment returns through April and some advice on how to foil AI scammers.

At the annual Berkshire-Hathaway annual meeting on Derby Day Warren Buffett announced he would step down as chief executive of the firm at the end of the year. For many people around the world, Buffett is known as the best investor in history. He purchased a failing textile manufacturer over 60 years ago and turned it into a $1.1 Trillion conglomerate. From 1964 until now Berkshire’s average annual return was 19.9%, versus 10.4% for the S&P 500. His claim to fame is as a value investor – “buying wonderful companies at fair prices, rather than buying fair businesses at wonderful prices.” 

Most companies hold their annual shareholders’ meetings in hotel ballrooms where, if lucky, a few analysts and media show up. Coined “Woodstock for Capitalists”, Berkshire-Hathaway holds theirs in the CHI Arena & Convention Center in Omaha, Nebraska with a capacity of over 17,000. (Our Steve Byars attended a few years ago)

Part of Buffett’s charm and the reason for the draw at those annual meetings is his ability to provide saving, investing and life advice that is succinct and easy to digest. Here are ten quotes from the “Oracle of Omaha” that relate well to how we at Moneywatch view saving and investing:

•    Do not save what is left after spending; instead spend what is left after saving;
•    Cash combined with courage in a time of crisis is priceless;
•    Be fearful when others are greedy. Be greedy when others are fearful;
•    No matter how great the talent or efforts, some things take time. You can’t produce a baby in one month by getting nine women pregnant;
•    The stock market is a device for transferring money from the impatient to the patient;
•    If you buy things you do not need, soon you will have to sell things you do need;
•    An idiot with a plan can beat a genius without a plan;
•    If you’re in the luckiest one per cent of humanity, you owe it to the rest of humanity to think about the other 99 percent;
•    Reading could be the BEST addiction one could have. The only proven side effect is imagination and an edge in knowledge;
•    Risk comes from not knowing what you are doing.

While there has been a lot of noise this year about the stock market and volatility, investment returns so far are not that unusual. And diversification is doing its job – here are some key returns through the end of April:

•    The S&P 500 Index of large, U.S. stocks was down 4.5%;
•    The Russell 2000 Index of small, U.S. companies was down over 11%;
•    The U.S. Aggregate Bond Index was up over 3%;
•    International stocks, as measured by the MSCI EAFE Index, were up 13%. 

To paraphrase my friend Warren, the best advantage in investing is time and having a plan. 

Artificial Intelligence is an exciting development that will probably alter how we learn, teach and work for decades to come. Unfortunately, AI is also another potential tool for criminals to deceive and commit fraud. For instance, deepfakes are artificial intelligence-generated videos or audio clips that make it appear as though someone is saying or doing something they never did. Below are some tips to help reduce the chances that a criminal creates a deepfake of you:

•    Share with care: Limit the amount of data available about yourself , especially high-quality photos and videos, that could be used to create a deepfake. One option is to set your social media platforms so that only trusted people can see what you share;
•    Enable strong privacy settings on websites where you store photo files;
•    Watermark photos: When sharing images or videos online, consider using a digital watermark on them;
•    Use multi-factor authentication for your accounts;
•    Use long, strong and unique passwords: Every password should be at least 16 characters long, unique to the account and contain a random mix of upper and lower case letters, numbers and special characters.

Thank you for your continuing confidence.