Mother's Day wisdom:
My 13 year old told me today about her mixed feelings toward the Mother's Day.
She said that it feels fake to her, "If a child loves his mother, he/she will show it every day. Then there is no need for a special day to show the love. But if a child doesn't love his mother it will be very obvious every day, and one day in a year will be not only not enough to show love, it will also be fake because there is no love to show."
I only had to agree...
According to multiple news outlet articles, the greatest investor Warren Buffet still lives in his "humble $31,500 house which he bought in 1958".
I heard this several years ago but I never checked how humble that house is...
Recently I was watching a YouTube video related to an older true crime story from the fifties and a "$40,000 mansion" was mentioned, with images of a that particular mansion - a large house with pool and luxury features. I immediately remembered the "humble" Warren Buffet's house and decided to finally check it out.
Below is the Google maps image from his house.
It is actually a 6,570 sq. feet house!
Compare the size of the roof or the driveway to the neighbor's house below it and decide for yourself how "humble" that house it really is.
The house below has one car parked in the driveway and has space for one more. How many cars can park in the drive way of the "humble" house above it?
But $31,000 really doesn't sound that much.
How does it look historically?
If I zoom in on 1958, the blue line (the nominal, non-adjusted for inflation) shows that the average house price in 1958 is below $20,000. Warren Buffet's house was clearly above average house price in 1958.
Humble or not, the prices keep going up.
If I calculate the price per sq. foot on Buffet's house, it is $4.8 per sq. foot.
If I enter the $4.8 into the inflation calculator for 1958, then the price per sq. foot in 2023 is calculated to be $50.13. In 2023 it is well above that: the costs to build a house are about $260-$300 per sq. foot.
This means that the increase for house prices is significantly higher than the average inflation, whatever they measure...
There are so many opinions on this topic!
I have no opinion, because really I don't know.
But since we have high inflation, I wanted to see, how markets behave during times of high inflation.
This is the SPX chart for the last 100 years (from microtrends.net).
The first graph is logarithmic, shows recessions in gray and is NOT adjusted for inflation. It is just nominal price.
I drew in yellow rectangular "boxes" where the SPX didn't move much up.
I put the about 45 degree yellow lines between the boxes in areas when the market moved up.
It is interesting that the boxes and the lines are similar size in duration. Looks like the market is going up in steps.
In the image below, I highlighted the years with high inflation.
One thing I can see that during times of high inflation the markets don't go up in a 45 degree line. They stall.
Now, I compare it to a chart which is ADJUSTED for inflation.
The highlighted inflationary areas are declining, which means that the real returns are declining in times of inflation. But due to inflationary increase in prices, the non-adjusted returns are flat.
By the way, officially the inflation in 2007 was 4.1%, which probably should be highlighted too.
Inflation is a beast. It eats up the savings and there is not much you can do about it.
But is the inflation rate really that what they tell us officially? I have a feeling it may be higher. A very strong feeling...
So I started my own "basket".
In the table below I have the products I mostly use. I will try to update at the beginning of each month.
The prices are from Walmart, I will be checking the in the beginning of each month. It is easy and fast to do online.
Red is increase in price and green is decrease in price.
