My Brain Food This Week...

Apr 20, 2024

(Mansa Sithole)

Key takeaways:

Warren Buffett's investment strategy involves selecting companies that dominate their industry or sector, have a long-standing history of at least 30 years, and are globally recognised brands. These companies are typically mature in their life cycle, providing stability and high dividends to shareholders even during economic shocks.
Buffett's interest in Japanese trading companies like Mitsui & Co and Marubeni Corporation involves a unique strategy. Rather than converting US dollars to Japanese Yen to purchase shares, he issues Japanese debt at a low interest rate (around 1%). This allows him to profit from the dividend yield exceeding the debt coupon and reduces his exposure to exchange rate fluctuations by betting on the US dollar's appreciation against the Yen.
Buffett's approach mitigates exchange rate risk by maintaining a long-term perspective. The investments in Japanese trading companies offer exposure to various currencies, including the euro, US dollar, Australian dollar, and Japanese Yen, reducing the impact of currency fluctuations on the companies' revenues. This strategy ensures that regardless of exchange rate movements, the value of the investments appreciates over time, contributing to Buffett's long-term success as an investor.

🌎 Global

An internal presentation at Microsoft revealed plans to utilise OpenAI's DALL-E, an image generation tool, for military purposes in collaboration with the U.S Department of Defense (DoD). The presentation outlines potential applications of OpenAI's tools, including DALL-E and ChatGPT, for tasks such as document analysis and battle management systems. While Microsoft emphasised that it hadn't yet initiated the use of DALL-E for military training, the presentation suggests its potential to create synthetic training data for battlefield software. Despite OpenAI's assertion that it hasn't sold tools to the DoD and maintains policies against weapon development, ethical concerns persist regarding the indirect contribution to civilian harm through military applications. The discussion reflects broader debates on the ethical implications of AI technology in military contexts and raises questions about responsibility and accountability in its use.

Costco's venture into gold sales has proven highly lucrative, with analysts estimating monthly revenues between $100 million to $200 million, a sharp increase since its introduction in 2023. The success is attributed to aggressive pricing and customer trust, reflected in rapid online sell-outs and Reddit discussions. Costco sells 24-karat gold bars slightly above spot price, benefiting from gold's 13% surge in 2024 amid inflation and fiscal concerns. However, despite boosting general merchandise sales by 3%, the low profit margin due to premiums and cash-back offers limits bottom-line impact. Nonetheless, gold remains an attractive investment amid geopolitical unrest, prompting central bank purchases and reinforcing its status as a hedge in diversified portfolios.

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