Owner Earnings vs Free Cash Flow

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Owner earnings represent the true cash flow available to a business owner after accounting for essential reinvestments, popularized by Warren Buffett as a superior measure to reported net income for valuing companies.

Definition

Owner earnings adjust net income by adding back non-cash charges like depreciation and amortization, then subtracting maintenance capital expenditures and changes in working capital. The core formula is: Owner Earnings = Net Income + Depreciation/Amortization – Maintenance CapEx ± Working Capital Changes. This metric reveals cash that could fund dividends, growth, or debt reduction, ignoring accounting distortions.

Owner earnings and free cash flow both measure a company’s cash generation but differ in focus, adjustments, and application for investors.

Core Definitions

Owner earnings, from Warren Buffett, start with net income, add back depreciation/amortization, subtract maintenance capital expenditures (not total CapEx), and adjust for working capital changes to reflect cash truly available to owners.

Free cash flow (FCF) typically equals operating cash flow minus total capital expenditures, capturing cash after all CapEx but without distinguishing maintenance from growth spending.

Calculation Challenges

Precise computation requires estimating maintenance CapEx, as companies rarely disclose it separately from growth spending, leading to subjective judgments. Variations exist, such as starting from operating cash flow or excluding working capital, but all aim to approximate sustainable cash profits.

Pros for Long-Term Investment

Owner earnings excels for value investors by focusing on cash generation over accounting profits, enabling better intrinsic value assessments via comparisons to market cap. Consistent growth signals operational efficiency and sustainability, outperforming peers in cash conversion. It prioritizes businesses with durable competitive advantages, aligning with long-term holding strategies.

Cons for Long-Term Investment

Estimates introduce imprecision, especially for capital-intensive or cyclical firms where CapEx fluctuates. It overlooks growth CapEx benefits, potentially undervaluing expanding companies, and demands deep financial analysis not suited for all investors. Volatile earnings or seasonal patterns further undermine reliability compared to standardized metrics like free cash flow.

Companies with high owner earnings (often proxied by free cash flow or earnings growth tied to cash generation) and high ROIC (Return on Invested Capital, typically above 20-30%) indicate efficient capital allocation and strong economic moats.

These metrics appeal to value investors seeking sustainable profitability. Recent screens highlight US-listed firms excelling in both areas.

Source:  https://strawman.com/member/uploads/objects/de/d778df06286d71562539ae921cd296c6827ef3.pdf

Addition through Subtraction

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A man asked his gardener, “How do you make your plants grow so beautifully?”

The gardener replied, “I don’t force them to grow. I simply remove what stops them.”

Michelangelo said something similar…

When asked how he carved the statue of David, he said: “It’s simple. I just remove everything that is NOT David.”

This is called: Addition through Subtraction.

Often, on your quest to unlock inner-greatness, you begin by looking in all the wrong places.

You look to introduce fancy new habits like cold plunges, red light therapy, or gratitude journals because you believe the reason you are not where you want to be is because there’s something you’re not doing.

And ya know what? Sometimes you do need to introduce new habits.

But…

The thing really holding you back are the things you need to STOP doing.

Imagine you’re a car.

Great habits are the accelerator.
Bad habits are the emergency break.

You could press harder on the accelerator, and sure, you’ll go quicker…

But do you smell that?

Yeah, that’s the smell of burn out.

So, before pressing the pedal all the way to the metal, let’s first make sure we’ve disengaged the emergency break.

That is, let’s eliminate those habits holding you back before worrying about the ones that’ll propel you forward.

Here are 3 of the most common bad habits that can hold you back:

1. The Scarcity Mindset

Many are haunted by the specter of scarcity, fearing there’s never enough of whatever we seek (money, love, attention, security, joy, time, etc…)

The paradox here is that when you worry about not having enough, you close ourselves off to the opportunities around you.

And therefore your reality mirrors your beliefs.

Here’s the thing…

Any belief held strongly enough will inevitably become true.

So be careful what you choose to believe…

Because in a very real way, it’ll become your reality.

2. Prioritizing Urgency Over Impact

We live in a noisy world filled with “loud” tasks vying for our attention.

And unfortunately, the loudest tasks tend to be the most urgent (and rarely the most important).

When you’re trapped in the cycle of urgency, it’s easy to confuse being busy with being productive.

But not everything that demands your attention deserves your attention.

3. Collecting Dots Instead of Connecting Dots

This third habit is subtle (and often mistaken for a virtue)…

It’s the excessive collection of dots, or in layman’s terms, the relentless pursuit of knowledge.

The problem?

It’s very hard to get paid for collecting dots.

Surprisingly easy, however, to get paid for connecting them.

**Dots = Information

Remember, the acquisition of knowlege is valuable, but it’s the APPLICATIONS of knowledge that creates real impact in the world.

Truly, life gets good when you stop collecitng more dots…

…and just start connecting the ones you already have.

Or, put another way:

Consume Less. Create More.

Source: Anthony Vicino, on “X”,  https://x.com/anthonyvicino/status/1999856841254130125

 

Steph Curry Brand

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NBA superstar and future Hall of Fame inductee Steph Curry walked away from Under Armour with the entire Curry Brand—logo, name, trademarks, athlete roster—and a mid 9-figure settlement.

This isn’t a brand deal breakup. It’s a founder story.⸻
1. Most signature athletes get paid.

Curry built an empire. And when he left? He didn’t lose it. He took it all with him.

2. According to reports:  Curry’s exit deal from Under Armour includes:

• Full rights to the Curry Brand name
• His personal logo + trademarks
• Control of his athlete roster
• Freedom to operate Curry Brand independently

He didn’t just leave. He liberated the intellectual property (IP).

3. Sources put the breakup fee in the mid 9-figure range—a massive breakup fee for ending what was once pitched as a “lifetime” deal.

That’s generational wealth and generational leverage.

4. Under Armour still gets to release Curry 13s + related apparel through 2026 as part of the wind-down…but the future of Curry Brand?

That belongs to Steph.

5. This makes him one of the only superstar athletes in modern history to exit a major brand, and keep the rights to his own name, logo, and product line.

This is not normal. Michael Jordan didn’t do it. LeBron James didn’t. Kobe Bryant didn’t.

Curry just redefined the playbook.

6. What does this mean?

He can now:
→ Build Curry Brand direct-to-consumer
→ Partner with Nike, Adidas, Puma, etc.
→ Bring in new designers
→ Retain full equity + creative control

7. The closest comparison?

Imagine if Jordan left Nike and took the Jumpman with him.

Curry just pulled that off in real life.

8. And with the right partner?

Curry Brand could become the first truly athlete-owned global performance brand—without being trapped under a corporate giant.

He’s no longer just a face on a billboard. He’s the owner behind the brand.

9. No athlete has made a move this bold since Jordan.

But unlike Jordan in ‘84, Steph now controls:

→ The name
→ The marks
→ The team
→ The roadmap

All before retirement.

10. This isn’t about leaving a shoe deal. It’s about writing a new model for athletes:

Start with sponsorship.
Level up to ownership.
Exit with everything.

Steph didn’t just bounce from Under Armour. He walked out with the blueprints.

Curry Brand is now a free agent.
Distribution deals. Licensing power. Direct-to-consumer dominance. All in play.

And Steph’s calling the shots. This is what owning your narrative looks like

Rule of Ten Best Days

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The rule of ten best days in the market states that the S&P 500 makes most of its annual returns in just ten days which means don’t time the market. 

Since 1928, the S&P 500 has returned a CAGR return of +8% over the decades. If you exclude the 10 best days, the S&P 500 has returned -13%, according to Tom Lee, CIO and Portfolio Manager, Fundstrat Capital.

This strongly supports staying invested, and not trying to time the market.

Studies using long S&P 500 history show that if you stay fully invested, your long‑term annual return is much higher than if you miss just a handful of the very best days.

For example, one analysis from 1980–2022 found $10,000 grew to about $1.1 million if fully invested, but missing only the 10 best days cut the ending value roughly in half.

Similar work over 1990–2024 shows that missing just 15 best days lowered annualized returns from about 10.7% to 7.6%, and missing more of those days nearly erased the equity return advantage. The practical takeaway is that being out of the market at the wrong moments can be extremely costly.

For the typical retail investor, the message is: avoid emotional in‑and‑out decisions, because most people who try to time the market end up missing more good days than bad and underperform simple buy‑and‑hold.

Creating and staying with a financial strategy can help you avoid making rash moves in response to what’s happening in the market.

Source: https://www.morganstanley.com/atwork/employees/learning-center/articles/cant-time-market

Yoga’s Health Benefits

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Yoga offers many health benefits to include:

Sleep, pain, and chronic conditions

• Improves sleep quality and insomnia symptoms, partly through relaxation and breathing techniques.
• Can reduce chronic pain, including back pain, and improve function in people with various pain conditions.
• Assists in managing cardiovascular risk factors such as hypertension and metabolic syndrome, and may support weight maintenance.

Brain and aging-related benefits

• Studies in older adults suggest yoga can improve cognitive function, mood, and resilience, and may help preserve gray matter volume in brain regions important for thinking and memory.
• Some programs combining yoga, breathing, and meditation show changes in inflammatory markers and immune-related gene expression, hinting at anti-inflammatory and immune benefits.

Yoga’s Mental Health and Stress Benefits

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Yoga offers several mental health and stress benefits including:

• Reduces stress, anxiety, and depression, with randomized studies showing significant drops in stress and anxiety scores after several weeks of yoga practice.[
• Improves overall psychological well‑being, mood, and perceived health, and can enhance relaxation and motivation.
• Helps some people with generalized anxiety disorder, performing better than stress‑education programs and somewhat below structured cognitive behavioral therapy in trials.

Yoga’s Physical benefits

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Yoga’s Physical benefits include:

• Increases flexibility and balance, which can help with mobility, posture, and fall prevention; large surveys find most practitioners report better flexibility and balance.
• Improves muscular strength and endurance, including trunk and upper-body strength, and can reduce low back pain and muscle soreness.
• Supports cardiovascular and respiratory health by improving cardiorespiratory performance, lowering resting heart rate and blood pressure, and enhancing oxygen use.

Health Benefits of Yoga

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Yoga offers a wide range of physical, mental, and even cognitive health benefits, especially when practiced regularly and safely.

Benefits are :

• Helps burn calories and supports healthy weight loss
• Tones core, legs, glutes, and upper body muscles
• Improves flexibility and joint mobility
• Enhances posture and spinal strength
• Reduces stress and relaxes the mind
• Boosts digestion and metabolism
• Increases overall strength and body balance

Regular practice of yoga promotes strength, endurance, flexibility and facilitates characteristics of friendliness, compassion, and greater self-control, while cultivating a sense of calmness and well-being.

Sustained practice also leads to changes in life perspective, self-awareness and an improved sense of energy to live life fully and with genuine enjoyment.[

The practice of yoga produces a physiological state opposite to that of the flight-or-fight stress response and with that interruption in the stress response, a sense of balance and union between the mind and body can be achieved.

Benefits generally increase with consistent practice (for example, 2–5 sessions per week over several weeks).

Source:  https://pmc.ncbi.nlm.nih.gov/articles/PMC3193654/

 

Financial Bubbles

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“Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm” – Robert J. Shiller

A financial bubble is a market phenomenon where an asset or group of assets rapidly inflates in price far beyond their intrinsic value, often driven by excessive speculation, investor psychology of greed, and easy access to capital. This price surge or melt-up becomes unsustainable, leading to a sudden and sharp decline in price or bursting of the bubble, which causes significant financial losses and widespread economic repercussions.

Key characteristics of a financial bubble include rapid price increases not supported by fundamentals, herd behavior fueled by optimism and fear of missing out (FOMO), and eventual panic selling when confidence and asset price collapses.

Financial asset bubbles are like roller coasters – prices soar rapidly and then plunge suddenly, leaving investors feeling disoriented. They occur when the price of assets, like stocks, real estate, or even tulips, shoots up quickly and deviates from its intrinsic value. A trigger, like rapidly increasing earnings or new technology, ignites investor excitement.

FOMO (fear of missing out) kicks in, leading to speculation and further price increases. However, like all roller coasters, the ride eventually ends, sending prices crashing down and leaving those who didn’t get off in time with significant financial losses.

Another unique feature of financial bubbles is its most frustrating: at a bubble’s height, most participants are completely unaware of being caught up in one. It is only in hindsight – after the damage has occurred – that a bubble becomes most clear.

Like bear markets and market corrections, stock market bubbles happen with some frequency, and investors are well served to prepare ahead of time.

The key to surviving a bubble is to not focus on identifying the bubble, but to maintain a diversified portfolio and a disciplined investment approach, which can serve as a steady anchor during a turbulent market.

Unfortunately, bubbles do happen with surprising frequency. As an investor, the important approach is not to avoid them altogether but to learn how to manage through them. In many of past bubbles, it was easy to think that sitting out would equal missing out.

During the Japanese property boom, one may have felt that everyone around them – friends, relatives, neighbors – was getting rich. It can be hard to second-guess the opinions of people we know, but no one is impervious to getting swept up in the excitement – even someone as brilliant as Isaac Newton.

However, it is precisely in these volatile markets that maintaining a diversified and disciplined investment approach becomes crucial.

Source:  https://www.elevatedpwa.com/blog/fundamentals-of-investing-how-to-survive-and-thrive-during-financial-bubbl

The Shiller 10-year PE Ratio

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The Shiller 10-year PE ratio is currently around 39.2 as of November 15, 2025, and the market is the second most expensive in history!  

The Shiller 10-year PE ratio (also known as the CAPE ratio), developed by Robert Shiller, is calculated by dividing the current price of the S&P 500 by the average inflation-adjusted earnings over the past 10 years. It smooths out earnings fluctuations and is used to gauge whether the market is overvalued or undervalued relative to historical levels.

Right now, the CAPE ratio has climbed to around 39-40, making the market extremely expensive compared to historical standards. A higher ratio such as this generally indicates overvaluation and predicts lower future returns, while a lower ratio would suggest undervaluation and higher potential future returns.[lynalden +2].

To put this in perspective, the long term average is closer to 16-18, so today’s levels are more than double historical average. It means that you’re paying a high price in the market

When the Shiller 10-year PE show values around 35.2 to 39.2, thus indicates a relatively high market valuation compared to historical averages. Historical data from Shiller has shown that when this ratio is high, subsequent long-term returns on the stock market tend to be lower than average.