NCI: Buffett Bows Out, Trump Deals In Tariffs, Trade Wars, AI Upheaval

NCI_Buffett Bows Out, Trump Deals In Tariffs, Trade Wars, AI Upheaval

Speaker1: [00:00:00] Welcome to Non-Consensus Investing. I'm Rahm Alia, your host, and CIO at Lumina Wealth, where we specialize in the craft of alternative investments. At Lumina, we help guide clients through the intricacies of managing wealth so they don't have to shoulder the burden alone. Through this podcast, we draw back the curtain to reveal the strategies employed by the best in the business for their clients so that you too can invest beyond the ordinary.

Speaker2: Welcome. Welcome everyone. We have an incredible guest, Rahm Alia, CEO of Lumina Wealth Rom. It's always a pleasure. Welcome back. 

Speaker1: It's always so much fun. Angela, thanks again for having me. Pleasure to be here 

Speaker2: and I hope the audience enjoys it. I've known Ron for many years. He's one of the most incredible critical thinkers, original thinkers and investors that I know, and by like long form, there's no way that I could do just an hour with this guy.

So this is gonna be long. We're gonna cover everything. I hope you're really gonna enjoy it. And my goal. Is to get [00:01:00] the best out of Rom and there probably will be some things, maybe geopolitically as I keep abreast of Rom's ex account of course, that I think we have some varying opinions and disagreements, but that's what makes this awesome.

I am gonna start rom, given that I am your elder after all, man, I go back to understanding some investing from even the late seventies. And this guy was a legend back then. So Warren Buffett's retirement impact. How will Buffett's departure, we saw it play out a little bit the last two weeks, but impact more importantly, market sentiment and value investing, which I've always questioned that moniker.

What 

Speaker1: do 

Speaker2: you think 

Speaker1: when B, when Buffet bowed out after the Berkshire Hathaway conference, that was the top in Berkshire Hathaway stock. That's one observation from a market sentiment perspective, I. People are feeling more depressed, that he's buying out. You can see in the prices. [00:02:00] Two is Buffett was the first investment influencer and he created a cultural ritual and a pilgrimage of traveling to Omaha.

And if you go on that pilgrimage, you'll see all the different brands from Dairy Queen to Coca-Cola and to other confectioners and consumer staples and sees candy there and people go there and they have old friends there. And that's all moved to a digital world now, right? But Buffet did pioneer that.

Third is, buffet has been the buyer of last resort that we saw in the 2008 financial crisis where he stepped in and created confidence with the banks like Goldman Sachs and Bank of America. His signaling value is tremendous. So there's no comparable voice to buffet that can play that role or fill that shoes.

There's no one that can play that movie. I'm gonna 

Speaker2: throw one that you expect at you. But before I quite get to that, I mean I can't help but chuckle. Who doesn't [00:03:00] love a good watt? Maybe Diet Coke, seas candy and a good blizzard at Dairy Queen. A Warren Buffett is not exactly the epitome of things I should do for health and wellness, but that guy at 95 and his mental clarity, man, it might be genetics.

I don't know what it is. I don't think it's the Dieta Coke Sees Candy and Blizzards. 

Speaker1: He said for agent longevity, look, he's clearly not following the Brian Johnson for the two things. One is he got up and he went to work every day and he never stopped doing what he enjoys doing. Two, he's part of the community.

Community's a big driver of longevity. Having friends, feeling valued, creating meaning in the lives of others. So he was doing that day in and day out. He retired. 'cause he said that for the first time he noticed. That Greg Abel, his successor could just run faster than him, and Buffett couldn't run as fast as he used to.

So I think there's a lesson in all of that. Retirement. When you hang up your kind of work efforts, that is the [00:04:00] beginning of decline. You have to remain active, right? Nature, rewards, activity, 

Speaker2: and contribute. It's extremely pardon me, but it's extremely difficult to ever replace a Warren and Buffet. So sure short term is gonna be gyrations in the stock.

Like you mentioned, Greg, I'm sure is highly capable. Otherwise Buffet wouldn't be doing this. But that being said, markets are not always logical. There's no question. There must be some vulnerabilities I would think, relative in Berkshire Hathaway. What would you do if you were an allocator? Do you sit and wait?

Do you be tactical now? And what's your perspective as it relates to Berkshire Hathaway or markets in 

Speaker1: general, 

Speaker2: which 

Speaker1: we'll start with Berkshire. Berkshire is overvalued. It's more expensive than the s and p 500. That's number one. Okay. So if Buffett is the paragon of value investing, Berkshire isn't getting you, that you're paying for comfort when you own Berkshire Hathaway.

Yeah, and now it's [00:05:00] lagging, as I mentioned, ever since he bowed out. But Greg Abel, his success successful is a highly regarded op operator and very good at capital allocation. That's really what Buffett was doing is capital allocations. Where do you allocate the free cash flow to the 80 controlled privately held businesses?

And then capital allocation of the public markets with acquisitions or investments. But I haven't been terribly impressed with. Berkshire Hathaway's Holdings. When I look at their holdings every quarter I do 13 F analysis, my team and I and like serious XM Satellite Radio, I don't get it. That's 

Speaker2: in decline.

None of us do, but Warren is. Warren. Maybe he saw something we didn't. Although if you judge it by the returns of that underlying holding, probably not real. We 

Speaker1: usually see what he's doing though, like American Express. That makes sense. The big banks like Wells Fargo, when you owned it, that made sense.

Selling Delta at the lows. That didn't make sense. Oxy, I look at Oxy every month. I'm saying, what am I missing here around Oxy Petroleum used to defend the [00:06:00] bid at $60. He stopped doing that. Now it's at $42 and it's in a bear market. I don't get it. And even by buffet's own standards, it's very hard to understand the thought process behind some of these.

It's possible that Buffet maybe had checked out some point sometime before. And also something you and I have talked about before is size of the enemy of returns. If you're an elephant. Hunter, you've gotta find elephant sized deals to move the market, to move your own performance. And on his last conference, he also said that, someone asked him, what'd you do if you're starting over again?

He said, I'd find small cap stocks and that I agree with finding good opportunities are smaller, less trafficked, under owned, that are compounding smaller insurance companies. They're out there, they're doing well. So yeah, I think it's, I think we'll miss his voice and his humor and his wisdom and his grace.

A lot of people hate on buffet. I don't think it's really well deserved. I'm in the buffet camp of, he is, he's like an American legend. He's apple pie. I'll miss his voice. He [00:07:00] came out against not taxing carried interest, I think. Yeah, maybe you should do that. But he's opined on American policy.

He's usually been ejected when that happens. Or he flirted with politics in the early eighties. He had a recipe to fix the California budget deficit, and they said, Hey, no thanks Buffet. Why don't you go back to Omaha? We'll take care of this. Yeah. Look, I think he's, you'll be missed. I'll certainly miss him.

Speaker2: Of course. How could you not agree with that? Yes. Some of the recent statements from my perspective politically, I probably wasn't the biggest fan of, but there's no question if there's Mount Rushmore of investors, how can he not be on it? And you and I would probably, we gotta put Stan on there too. Of course.

Rah. We'll get to a little bit of that shortly. Staying a little bit on that theme, Berkshire Hathaway's amount of cash is for the all time records. Buffet is right. I'd like to hope more than he's wrong and he is stepping back. Is he seeing something broadly? Is he connected to something globally that we [00:08:00] don't see that's a little scary moving forward?

There are two things he's looking 

Speaker1: at, and the first is actually a marker of his legacy. One is. We live in the age of quality growth at a reasonable price that is Buffet, that's actually among our influence Buffet to shift to that style of investing businesses like American Express or Coca-Cola to pay up for a dominant market leader with a brand for a higher price to own a great business.

All those businesses are expensive. I have a list called Berkshire Hathaway type businesses and honestly owned by him, but the kind of thing that Berkshire is supposed to own, like a JP Morgan, like a, we talked about American Express, like a Philip Morris or a Costco, or a JP Morgan, a FIC. So these are world class businesses and they're all expensive.

They all are extremely expensive, right? Costco is my, my, the poster shelf for this. I poke fun [00:09:00] of Costco every now and then. The four PEs now 55 up from 50. Trailing PE is 60. So you've gotta wait 60 years, assuming earnings is flat, to get your principal back on that business. That doesn't make much sense.

That's one thing. The other thing he is looking at is the ratio of market cap to GDP. That's a famous buffet statistic. It's also known as Tobin's. Q Tobin was like, an economist came up with this, the ratio of financial assets to a real GDP. So yeah, I think those are the metrics. He's gonna, he's usually a year early when he rotates into cash.

So in April he looked highly prescient during the correction. Now markets are recovering, so it's ah, maybe buffet's missing this. But I'd say those are the two things that. He's looking at, 

Speaker2: I'm gonna pick on one of them a little bit with you. I hinted at it effectively in my open question. I don't, yes, I know.

Technically what value investing is comparative to growth. [00:10:00] I think it could be a little bit of a, maybe a word I would use as a false moniker. Any stock I invest in, I want to, I want it to grow in the future. I want it to be great. If I could get it, I guess you could say at a discount, arguably that means there's something wrong where people are looking at it wrong.

It's undervalued. Sure. But we all know periods where value investors have gotten whipped for, actually a good part of this century, 

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