July 4th Links

• Berkshire CEO Warren Buffett began buying shares in Occidental earlier this year and has rapidly increased Berkshire’s stake since March. Since mid-June, Berkshire has purchased about 20 million shares. Buffett seems to like buying Occidental shares at a price of $60 or less. Barron’s estimates that Berkshire’s total cost basis for its Occidental stake is around $53 a share, meaning Berkshire now has a paper profit of more than $1 billion. As a holder of more than 10% of Occidental, Berkshire must disclose trades in the stock within two business days via a filing with the Securities and Exchange Commission. The fresh purchases may fuel speculation that Berkshire will add further to its stake and reach 20%, or potentially bid for the entire company. At 20%, Berkshire likely would get a different accounting treatment for Occidental that would let it reflect a proportional share of Occidental’s earnings in its own results. [Barron's]
• Although it appears that the long cheap Value/short expensive Growth train has indeed left the station, we believe that there is still plenty of track remaining before it reaches its destination. At least until very recently, the insatiable desire for Growth equities had pushed valuation disparities to levels not seen since the peak of the Internet bubble. Unlike that period, however, this one has permeated much more widely, touching all sectors (as we wrote about in April) and all countries. [GMO]
  
• In the 2020 election, Hispanic voters moved sharply away from the Democrats. Both Catalist and States of Change (forthcoming) data agree that it was around a 16 point pro-GOP margin shift (two party vote). States of Change data indicate this shift was heavily driven by Hispanic working class voters, whose support for the Democrats declined by 18 points. This pattern could be seen all over the country, not just in states like Florida (working class Hispanic support down 18 margin points) where they fell short but also in states they narrowly won (Arizona down 22 points; Nevada down 15 points). Hispanic voters are overwhelmingly working class, around three-quarters in the States of Change data—higher than among blacks and much higher than among Asians. The working class character of Hispanic voters is even higher in key states like Nevada and Arizona. [The Liberal Patriot]
• Officially, the FDA contends that Juul failed to provide sufficient evidence for the toxicological safety of its vape pods. It’s arguable, however, that the FDA is undermining the aims of public health to punish the company for past misdeeds and avoid political controversy. “It looks like the FDA searched for a pretext for denying Juul’s products and this is the best they could come up with,” says Clive Bates, a former director of Action on Smoking and Health in the United Kingdom who now advocates for tobacco harm reduction. [Jacob Grier]
• The Oregon Compulsory Education Act of 1922 would have disallowed parochial schools, including Catholic schools, in that state. The Knights of Columbus challenged the law in court, and, in a landmark 1925 ruling (Pierce v. Society of Sisters), the U.S. Supreme Court struck it down. [wiki]
• Interestingly, there is almost zero correlation between economic growth and equity returns, over the past 20 years, as well as the 1900-2000 period among 17 developed nations. For example, Latin America has relatively poor GDP/capita, but generally, solid equity returns, while China has grown spectacularly since 1990 while generating low equity returns. This suggests the equity return is more like an equilibrium feature of a negotiation, which varies based on the cultural and legal framework as opposed to anything generated by a representative agent with a standard utility function. This has the nice implication that if the US becomes a basket-case like Argentina, those fortunate enough to have capital will still find equities an attractive investment. [Eric Falkenstein]