Friday, September 19, 2008

Bull Riders, Bear Wrestlers, John Galt, and the Sage of Omaha

I love it! There are so many internecine topics crying out for coverage right now. There are just so many new data points to connect, and so many old ones to scrub. Would that I could just pause time for a few days and pound out blog after blog after blog.

So you may find it strange that I choose the following softServ topic for today's blog rather than join the cacophony decrying the end of the world as we know it. And I feel fine.

Most recent days, I've felt like my investment strategy has been bull riding: think of nothing but holding on tight enough to stay in the saddle for the next 8 seconds. How many 60-year-old bull riders do you know? I didn't think so ... although at least they outlive the suicidal bear wrestlers. At least bulls don't have fangs, claws, or a taste for human fillet. I keep asking myself ... isn't there a better way?

As Rome burned this week, I continued my slow read of Atlas Shrugged, pretty convinced that John Galt is again among us. Cracks me up thinking of the demise Kerry Killinger's titanium comb-over should he have to roll up his sleeves and chop wood for a living in "the Gulch." (PS: what perfect casting to pick Jolie as Dagny in the upcoming flick.)

What with all the panic and gloom, however, I felt a deep need for some tranquility. I took time, therefore, from my slow read for a quick one. The Tao of Warren Buffett. I thought it would be wise to temper the urge to get caught up in every wave of hype and panic in our schizophrenic markets (and likely real economy) with a little refresher on value investing.

So, here are a few of Warren's Rules. Decide for yourself how well you (and we) are following them.

Rule No. 1: Never Lose Money.

Rule No. 7: It's easier to stay out of trouble than to get out of trouble.

Rule No. 11: It takes 20 years to build a reputation and 5 minutes to lose it.

Rule No. 12: The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know no what they do.

Rule No. 18: My idea of a group decision is to look in the mirror.

Rule No. 20: You should invest in a business that even a fool can run, because someday a fool will.

Rule No. 39: I am a better investor because I am a businessman and a better businessman because I am an investor.

Rule No. 43: You have to think for yourself. It always amazes me how high-IQ people mindlessly imitate.

Rule No. 49: It's only when the tide goes out that you learn who's been swimming naked.

Rule No. 60: The business schools reward difficult, complex behavior ... but simple behavior is more effective.

Rule No. 76: When proper temperament joins with the proper intellectual framework, then you get rational behavior.

Rule No. 79: When you combine ignorance and borrowed money, the consequences can get interesting.

Rule No. 81: We attempt be be fearful when others are greedy and greedy only when others are fearful.

Rule No. 82: The mot important thing to do if you find yourself in a hole is to stop digging.

Rule No.84: I buy stocks when the lemmings are headed the other way.

Rule No. 87: Risk comes from not knowing what you are doing.

Rule No. 93: I want to be able to explain my mistakes. This means I do only the things I completely understand.

Rule No. 99: If we can't find things within our circle of competence, we don't expand the circle. We wait.

Rule No. 103: It won't be the economy that will do in investors; it will be investors themselves.

Rule No. 104: For some reason people take the cues from price action rather than from values. Price is what you pay. Value is what you get.

Rule No. 107: At the beginning, prices are driven by fundamentals, and at some pint, speculation drives them. It's that old story: What the wise man does in the beginning, the fool does in the end.

Rule No. 109: A pin lies in wait for every bubble, and when the two eventually meet, a new wave of investors learn some very old lessons.

Rule No. 113: Look at stock market fluctuations as your friend rather than your enemy--profit from folly rather than participate in it.

Rule No. 114: Great investment opportunities com around when excellent companies re surrounded by unusual circumstances that cause the stock to be misappraised.

Rule No. 115: Uncertainty actually is the friend of the buyer of long-term values.

Rule No. 119: Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

Source: The Tao of Warren Buffett by Mary Buffett and David Clark

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