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Here's the #1# thing most people don't know about Warren Buffett: There is nothing special about Buffett’s stock picking. That doesn’t mean that Buffett wasn’t a great investor. He was! Buffett was, by far, the greatest investor in history, by a huge margin. Over 486 months between October 1976 and March 2017 –— 41 years –— Berkshire Hathaway’s Class A stock earned an average excess return of 18.6% per year above U.S. Tbills. Annualized volatility was 23.5%. Sharpe ratio: 0.79. Berkshire’s Sharpe ratio of (0.79) is roughly 1.6x times the broad U.S. stock market’s Sharpe ratio of 0.49 over the same period. Among all large-cap U.S. stocks and mutual funds with 30-plus-year continuous track records, those are unmatched numbers. A dollar invested in Berkshire on October 31, 1976, was worth more than $3,685 by March 31, 2017. A dollar invested in the S&P 500 with dividends reinvested over the same period was worth approximately $76. Buffett beat a passive index by a multiple of 48. But he didn’t do it with stock picking! Three researchers at AQR Capital Management –— Andrea Frazzini, David Kabiller, and Lasse Heje Pedersen –— dissected Berkshire’s 50 years of investments through 2013. They expanded and republished their findings in 2018 in the Financial Analysts Journal, which is the most highly respected industry financial journal. Their work won the Graham and Dodd Award for the best published paper of the year. The paper is called Buffett’s Alpha. They found, after accounting for cheap leverage (from the insurance float) and exposure to a handful of publicly documented factor premiums, Buffett’s investment skill –— the portion of his returns that cannot be explained by any mechanical strategy –— is 0.3% per year. That's statistically indistinguishable from zero. In other words, the alpha that Berkshire enjoyed for 50 years (as it compounded capital at 24% a year!) wasn’t due to Buffett’s stock picking. So, how did he do it? He did it by gaining access to a huge amount of investment capital that he did not own, for free. Buffett’s track record was built on leverage. That’s a dirty word for most investors, but it's the secret behind Berkshire. The AQR researchers had access to something most Buffett commentators do not: 40 years of Berkshire’s audited financial statements and the full quarterly history of the public 13F stock portfolio. The researchers asked a specific question: If I take Berkshire’s monthly stock returns from October 1976 through March 2017, and I run a linear regression against a set of well-documented risk factors –— market beta, size, value, momentum, and two newer factors called Betting-Against-Beta and Quality-Minus-Junk (detailed below) –— how much of Buffett’s performance can the factors explain? And after the factors have been stripped out, how much excess return remains? The data show clearly there are a few qualities that drove Berkshire’s results. First, Buffett has always preferred large-cap stocks, contrary to the popular image of him as a small-cap value investor. He buys elephants. Second, no surprise, Buffett buys cheap. Berkshire is almost six standard deviations away from neutral on the value axis. So far the picture is ordinary. Every large- cap value manager in America loads positively on size and on value. Buffett’s genius lies in the last two factors. These last two factors are a little complicated, but please stick with me. There’s a new factor, that, like value and size, characterizes Buffett’s strategy. It’s called Betting-Against-Beta (“BAB”). What it means is intentionally investing in stocks with very low volatility. The BAB factor captures the excess return that accrues to investors who own low-beta stocks. Low-beta stocks have historically earned higher risk-adjusted returns than high-beta stocks. Financial theory teaches that higher beta (higher risk) should mean higher return. But it doesn’t. The opposite occurs, in fact. And Buffett was one of the very first people to figure this out. Why does this factor persist? In an efficient market, once that factor is known to investors, then they should bid the price up on low- beta stocks until it no longer provides an edge. The explanation, per the theory of AQR’s Frazzini and Pedersen’s theory, is that because ordinary investors do not use leverage and seek high returns, they create persistent excess demand for more volatile stocks. (Having worked with retail investors for 30 years, I can assure you that is true.) But, an investor with access to cheap leverage –— Warren Buffett, for instance –— can exploit the mispricing by owning the low-beta names and levering them up to produce market-beating returns. And the last factor that matters to Buffett is quality. Buffett buys companies with high returns on invested capital. Quality-Minus-Junk (“QMJ”) is a factor described by Cliff Asness, also at AQR with Frazzini, and Pedersen, in a 2019 paper in Review of Accounting Studies. The QMJ factor captures the return to owning stocks of high-quality companies –— profitable, growing, safe, with high payout ratios –— against stocks lacking those characteristics. QMJ has been positive and statistically significant in every major developed equity market for which it has been measured. Berkshire’s loading is 0.37, with a t-statistic of 4.6. –– meaning it is highly significant to Berkshire’s results. In plain English: Buffett only buys large, high- quality, low-volatility stocks of the highest quality. But, Berkshire’s results were not, in any way, unusual. Any investor buying these same kinds of stocks would have earned those same returns –– about 16% a year over time. So how did Berkshire compound at 23% a year? To figure that out, AQR’s researchers built a Berkshire replica. They constructed a simple, rules-based, publicly investable portfolio that mechanically tilts toward large-cap, cheap, low-beta, high-quality stocks, and levers it 1.6- to- 1 to match Berkshire’s insurance float leverage. The correlation between their replica’s returns and Berkshire’s were virtually identical. The authors’ conclusion is unambiguous. “In summary, we find that Buffett has developed a unique access to leverage that he has invested in safe, high-quality, cheap stocks and that these key characteristics can largely explain his impressive performance.” Berkshire’s cost of insurance float has averaged almost three percentage points below the Treasury bill rate across 50fifty years of data. In roughly two-thirds of all years, Berkshire has been paid to hold other people’s money. That is not an investment strategy. That is a financing miracle. It is also the living, breathing heart of Berkshire Hathaway. It’s what Buffett built, starting in 1967 when he paid $8.6 million for National Indemnity’s $19.4 million of float. And it is the factor every retail investor admiring Berkshire’s returns has never paid any attention to. The 1.6-to-1 leverage that AQR measured over the full period, financed at this negative cost, explains the dollar magnitude of Berkshire’s returns. How do we know? An unleveraged version of the same stock portfolio –— which you can approximate by looking at the 13F holdings alone –— has earned an average excess return of 12% percent per year. It’s Berkshire’s leverage that magnifies this excess return to 18.6 %percent. How does this square with Berkshire’s reported gains? Berkshire’s 18.6% excess return, plus the T-bill rate that averaged roughly 4.7% over 1976–2017, gives you a total nominal return of roughly 23% per year, which is the figure you usually see quoted for Berkshire’s historical performance. The 23% tells you what Berkshire returned. The 18.6% tells you how much of that return was compensation for taking investment risk, as opposed to the baseline yield every lender to the U.S. government was earning anyway. With both of Berkshire’s “edges” –— systematic factor exposures to cheap, high-quality, low-volatility stocks and roughly 1.6-to-1 leverage delivered with insurance float –— you get Berkshire Hathaway’s 23% annual gains over 60 years. It’s the structure that’s genius, not the stock picking. And that's very important because it means the original Berkshire formula can work for any investor. I show you exactly how, in my new book.

MY APOLOGIES: In my previous X I quoted futurists Nostradamus’ 1500 and Edgar Caycees 1940 prediction that a global economic crisi would begin in 2026. A friend contacted me. He was upset with me because I stated I was going to richer during the 2026 crisis. His problem was he has never followed my X, as many of you have…. and he did not know you and I planned to get richer in a crash. For those of you who have been following my X you know my plan has always been to buy and hold “assets”the Fed, the US Goverment. and the banks can print… Those who have followed me for years already know I do not invest in stocks such as the S&P 500, US bonds, mutual funds ETFs, or save cash. I do not invest in anything the government, banks, or Wall Street prints. Those who follow me on X already know I KISS, Keep it Super Simple. I sell books I write all over the world, my Cashflow Boardgame available in over 50 languages. I raise and sell Wygu Cattle, I sell oil from my oil wells in Texas and Nortg , and I rent by the month 1500 rental units Purchased with debt, and I save real gold, silver, Bitcoin, and Ethereum. I started with nothing while still flying for the US Marinez and almost never sell. Like many of you, I had no money to start with…. But just bought small assets held for years and almost never sold. Most of you know I bought my first 6 Bitcoin for $ 600, all the money I had and did not eat for days. It did not take much brain power. It Did take plain and simple US Marine Corps stupidity, discipline, and close friends, not with money but with spiritual suppot. I could not believe 1500 Nostradamus called for a crash in 2926 and Edgar Cayce in 1940 called for crash in 2926. I do not know if their 2026 crash comes true…. Yet if it does come true, I am confident You and I will grow richer…. While millions grow poorer. Even Warren Buffer has sold billions in stocks, and sits in $35 Billions in cash waiting for S&P crash , waiting to buy priceless assets on sale. What are you doing? Rich Lesson on investing: investors who can see the future are the investors that get richer. The “Buy, hold, and pray,” crowd will be the biggest LOSERs. I continue to invest in assets the Fed and government and Wall Street cannot print. What are you going to do.? Follow the Buffets plan, go to cash, and prepare to buy real assets at real low prices…and get rich. Me personally. If a bank or Wall Street can print it….i don’t want. But that is just me. I love oil….real estate, golf, silver, Bitcoin, Ethereum, and food production. I like real. I hate fake. What are you going to? Don’t be like millions who will THINK….and do nothing? Trust this X makes a few points clearer.

I AM NOT A FINANCIAl ADVISOR My attorney has sent a “Cease and Decist” notice to someone or group who is using my name to state investments I recommend. Please be aware I will always share with you what I am investing in and why. I do not recommend anyone invest in what I am investing in. Again, I am not a financial advisor. I apologize if this is causing confusion and thank you for following my X posts. I will be more careful of the words I use. To be clear….i invest in gold, silver, Ethereum, Bitcoin, oil and cattle. I have done so for years. I did not have a 401k or IRA and I do not invest in publicly traded stocks or bonds. I will always disclose what and why I invest in but do not recommend you do what I do. What you do is up to you and your financial advisors. Take care and thank you for following my posts.

PSA: There is a Telegram account that is impersonating me. My 𝕏 handle is not my username across all platforms… I do not charge "stars" for messages (anyone can DM me for free) & I'm not selling "POLY early access tokens" — despite how appealing such an offer may sound 🤠

I’ll be running a script and blocking any retards thats talking about wallet flow, tagging me and ruining my X experience. Worst signal to noise ratio, literal vermine that brings nothing of value to this app. I used to come here and have valuable discussions and now I don’t even want to open this app anymore. I never talk about trades, and any wallet that’s supposedly mine is pure speculation.

CRASH ACCELERATES: Private credit funds are panicked as investors withdraw their money. Major big name banks and brand name financial institutions are in trouble. Jim Rickards formally declares the US in the New Depression. What are you going to do? If you have followed my X Posts, podcasts, books, and games, you know I plan on getting richer……not a victim who gets poorer. For example I continye more into oil, silver, gold, Bitcoin, and Ethereum. Always remember the golden rule of bank runs….money always runs somewhere. Your job is to figure out where the money running out of banks, businesses, and jobs….is running to. Is it really that SIMPLE? The simple answer is “yes” if you know who to talk to and listen to. Simply said: “Smart money is getting richer and stupid money is running….like the proverbial chicken with its head chopped off. Now is not the time to be a headless chicken. Booms make smart money richer and so do crashes. Please take care.