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Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

The best description of Warren Buffett's investment style - "simple but not easy" - came from the man himself. The 50/30/20 rule for personal finance sounds very similar,

"The 50/30/20 rule that states you should spend roughly 50 per cent of your income on necessities (housing, transportation, healthcare and other bills), 30 per cent of your income on wants (dining out, travel, entertainment, etc.) and 20 per cent of your income on savings or paying off debt … I'm not trying to judge people on how much they spend on their house and car or where they live. Finances aren't everything in life but if you're struggling to get ahead financially it makes sense to consider the cost of living where you decide to put down roots."

"Where You Live & the 50/30/20 Rule" – A Wealth of Common Sense

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U.S. inflation data was reported Wednesday morning and was far stronger than expected. CNBC's Carl Quintanilla noted that the last time the consumer price index came in higher than 2.3 per cent was 2008. Investors, according to Bloomberg, should be careful what they wish for, however:

"While pricing power is an obvious fillip to economies and earnings, its restoration does funny things to price-earnings ratios. So says a study by Strategas Research Partners on data since 1950, which found the higher the consumer price index, the lower the S&P 500 Index's valuation."

"Inflation Alarms Expose Vulnerability in Richly Priced S&P 500" – Bloomberg
"Consumer Prices in U.S. Increase by Most Since February 2013" – Bloomberg

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The 13-F reports, a regulatory requirement forcing hedge funds to list top positions, are often dangerous for investors to take seriously. Some hedge funds, for instance, have large futures positions offsetting top stock holdings that aren't reported.

Where Berkshire Hathaway is concerned, 13-F reports are more useful because of the fund's buy and hold strategy and because futures positions are rare. The most recent release shows a large increase in holdings of Apple inc.,

"In a regulatory filing, Berkshire reported owning 57.4 million shares of Apple as of Dec. 31, which would now be worth $7.74 billion, up from just from 15.2 million shares in the iPhone maker three months earlier. Berkshire also reported a $9.3 billion airline stake, with investments topping $2.1 billion in each of American Airlines Group Inc. , Delta Air Lines Inc., Southwest Airlines Co and United Continental Holdings Inc."

"Berkshire takes huge bite of Apple, boosts airline stakes" – Reuters

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Megan McArdle details a column on the stubbornly high costs of education and health care that was the primary topic of discussion over the weekend. It amazes me that the costs in these areas – two of the biggest expenses for most governments – doesn't get more attention. Education and health care are vital, and seemingly immune to productivity increases,

"Things we have to have -- a roof over our head, schooling for our children, treatment when we're sick -- seem to have spun out of control. Even when people can afford these things, they worry that they won't be able to in the future, and this contributes to a pervasive feeling of unease about our economic futures.

"But describing what has happened doesn't necessarily get us closer to understanding why it has occurred. Scott Alexander has a long post exploring the matter, and I recommend that you read the whole thing. He's asking whether the traditional explanation, an economic phenomenon called Baumol's cost disease, can really explain what's going on in these sectors. And the answer he comes up with is, basically, 'I'm skeptical.' I'm skeptical too."

"Why Some Consumer Costs Just Grow and Grow" – McArdle, BloombergView

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Tweet of the Day: "@BenedictEvans Hearing rumours that the only man in history to lose money running a casino is not very good at running anything else, either." – Twitter

Diversion: "Google is turning a key technology into a weapon in its cloud war with Amazon and Microsoft" – Business Insider

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