The Tao of Warren Buffett (Money Mantras….(16))

Today (3′rd November) is my birthday and I want to begin the day by sharing with you ‘ The Tao of Warren Buffett’.

October’09 has not been a great month for my blogging. I just posted one article. This is my primarily due to 2 reasons.

1) My inconsistent health

2) Yahoo rejecting my bulk mails repeatedly as Spam thereby preventing me to send mails to you. My Wisewealthadvisors domain (from Indiatimes) does not allow me to send to more than 20 mail ids at a time. Considering the volume of people who read my mails, this was also not possible due to the limited energy levels and patience I have. If Yahoo route does not work, I’ll resort to the above model, though it is time consuming because I enjoy immensely sharing the knowledge with you. What I’m today is because of all of you and this is one of the small way of showing my gratitude.

There is a book called ‘The Tao of Warren Buffett’ written by Mary Buffett & David Clark. I read this book recently and wanted to share on my birthday some gems from my master, which I’ve not shared previously. This becomes the Money Mantras series…(16).

As my birthday gift to you all, I’ve given below 20 quotes instead of usual 10, all new ones.

1) You don’t have to make money back the same way you lost it.

2) Someone is sitting in the shade today because someone planted a tree a long time ago.

3) You pay a very high price in the stock market for a cheery consensus.

4) You want to learn from experience, but you want to learn from other people’s experience when you can.

5) We enjoy the processes far more than proceeds, though I have learned to live with those also.

6) If calculus or algebra were required to be a great investor, I would have to go back to delivering newspapers.

7) It’s hard to teach a young dog old tricks.

Can you really explain to a fish what it is like to walk on land? One day on land is worth a thousand years talking about it, and one day running a business has exactly the same kind of value.

9) If you hit a hole in one on every hole, you wouldn’t play golf for very long.

10) A friend of mine spent twenty years looking for the perfect woman; unfortunately when he found her, he discovered that she was looking for the perfect man.

11) Forecasts usually tell us more of the forecaster than of the forecast.

12) The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.

13) In the search of companies to acquire, we adopt the same attitude one might find appropriate in looking for a spouse: It pays to be active, interested and open-minded but it does not pay to be in a hurry.

14) When you combine ignorance and borrowed money, the consequences can get interesting.

15) The most important thing to do if you find yourself in a hole is to stop digging.

16) If you don’t make mistakes, you can’t make decisions.

17) Any business craving of the leader, however foolish, will be quickly supported by studies prepared by his troops.

18) I’m very suspect of the person who is very good at one business-it could also be a good athlete or good entertainer- who starts thinking they should tell the world on how to behave on everything. For us to think that just because we made a lot of money, we’re going to be better at giving advice on every subject- well, that’s just crazy.

19) The smartest side to take in a bidding war is the losing side.

20) No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.

Money Mantras….(15)

It’s good to be back after a gap of 2 weeks. I was down with viral fever for last 2 weeks and hence this gap.

I am pleased to start this month article with Money Mantras, timeless wisdom from Masters.

Please read and enjoy the wit, wisdom and insights.

1) Value investing ideas seem so simple and commonplace. It seems like a waste to go to school and get a Ph.D. in economics. It’s a little like spending eight years in divinity school and having someone tell you the Ten Commandments are all that matter.- Warren Buffett

2) You can’t see the future through a rear view mirror.- Peter Lynch

3) The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price. – Warren Buffett

4) The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. – Warren Buffett

5) In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond – Warren Buffett

6) In a finite world, high growth rates must self-destruct. If the base from which the growth is taking place is tiny, this law may not operate for a time. But when the base balloons, the party ends: A high growth rate eventually forges its own anchor. – Warren Buffett

7) First, beware of companies displaying weak accounting. If a company still does not expense options, or if its pension assumptions are fanciful, watch out. When managements take the low road in aspects that are visible, it is likely they are following a similar path behind the scenes. There is seldom just one cockroach in the kitchen. – Warren Buffett

If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin. – Charles Darwin

9) There are people in the world so hungry, that God cannot appear to them except in the form of bread. -Mahatma Gandhi

10) Fate often puts all the material for happiness and prosperity into a man’s hands just to see how miserable he can make himself with them. -Don Marquis

A Bomb scare of different kind and the ’short’ of the Century

On the eve of the auspicious Vijayadasami day, which is supposed to be good for starting any new initiative or activity, I start this article in an auspicious way I know- by providing a nugget of wisdom from Buffett

“Speculation is most dangerous when it looks easiest.”

All the stock market traders whom I’ve been in touch with regularly are now saying that the time is ripe for speculation and make some quick money. Please read the above quote and ‘let the buyer be beware’!

We’ve been a kind of doom’s day prophet as far as the Financial future of U.S. is concerned. We’ve written in the past how mounting public debts is making U.S., an emperor of debt and how it may end up being a Banana Republic and a Bankrupt country.

However we honestly wish that the above should not happen, U.S. being one of the world’s best liberal democracies which encourage talent from worldwide, a technology leader and has created a great country by encouraging immigration and making it a multi ethnic and multi cultural state. Collapse of U.S. may also mean collapse of various good institutions and collapse of liberal values and Freedom.

Despite our wish, the way U.S. economy and Financial system is moving, it looks like U.S. may end up either disastrously or create enormous problem for world countries (it’s so called enemies with whom it always wages ‘war to end all wars’) through its military might.

I’ve given below opinions from two great brains as to how a bomb scare of different kind is tickling in U.S. and how ultimately its financial system would have a complete break down.

‘Bomb scares from terrorists have unfortunately become ubiquitous in recent times. But according to Russell Napier, strategist at CLSA Asia-Pacific, mankind is now faced with a bomb scare of a different kind – that of the ‘public debt bomb’. He believes that within the timeframe of a decade, the public debt bomb in the US will explode and push the US government into bankruptcy, thus forcing it to impose capital controls to prevent a ‘flight of capital’ to Asia. This is because Asia will be one of the few places in the world where currencies and asset prices will appreciate even during this time.

By flight of capital, he means that private capital may cease to be willing to finance US government debt, and may even stop wanting to hold currencies of the Western countries, rather preferring to hold currencies of Eastern countries like India and China. To put a check on such a flight of capital, he expects the US government to go to the extent of imposing capital controls. While economic forecasts are usually quite unreliable, what does seem plausible in his argument is the unnerving fact that credit in the US is today bigger than what it was when the recession began. Public debt is thus certainly a hazardous bomb set to explode!’

‘The US has launched a massive offensive in Latin America and has bombed its key cities’. Well, this might be a figment of our imagination right now but if veteran investor Marc Faber is to be believed, the event could actually play out in reality in few years. Speaking to a leading daily, Faber, the author of the Gloom, Doom & Boom newsletter believes that the fiscal and monetary responses in the US and elsewhere have solved nothing and postponed everything. And hence, when the moment of truth will finally arrive, there will be a total breakdown of the financial system. But before that, it is highly likely that Governments will continue to print more money, leading to high inflation rates, lowering of standards of living and eventually, wars. Faber heaped further criticism on the US dollar and believes that it is a doomed currency and is in fact, the ’short’ of the century.

However, people staying in Asia especially in countries of China and India have little or no reason to fear as he believes that these countries are living in exciting economic times and these regions could see continued prosperity for years to come. Of course, as he very rightly pointed out, Asians should learn to grow from within the region rather than through exports to sick countries.’

(with inputs from Equitymaster)