Trust Me

Who do you trust? Who can you trust these days?

Who will give you the honest truth?  Who has good advice?

Are they the same person in your case?

Well, in this case, if you trusted this guy, you could have gone to the bank on his advice.

Banking Billions on his advice.

You wouldn’t have suspected it given the circumstances he was born into.  He was born in the Dust Bowl of America during the Great Depression. However, he came to represent American business, done the right way.  Invest in America. Slow and steady.

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I cannot promise results to partners. – Warren Buffet

Warren Buffet lives in Omaha Nebraska, in the same house he bought in 1958 for $31,500.  Far, far from Wall Street. Consider part of the portrait of the Inspector Guardian:

These hard-nosed and silent Guardians have a distaste for, and distrust of, fanciness in speech, dress, and place. Their words tend to be simple and down home, not showy or high-flown; and their home and work environments are usually neat, their clothes often homespun and conservative rather than of the latest fashion; … price and durability are of primary concern, comfort and appearance given small consideration. … Inspectors prefer the old-fashioned to the new fangled every time. [Please Understand Me II, page 108]

Buffet is considered a “value” investor. In fact, he is the poster child for value investing — making more money investing in old, established mundane businesses rather than high-flying new technology companies. He has said he doesn’t invest in companies he doesn’t understand. But his investment style is much more complicated, and he defies categorization when it comes to investing, having a unique (and wildly successful) style.

Forecasts may tell you a great deal about the forecaster, they tell you nothing about the future.

Warren Buffet.

What he does understand is business. He started making money at the age of five. As he started out on his investment career, he invested, among others, in textiles and newspapers. He knew the newspaper business from experience: he was a paper boy as a teenager. When he was investing in these businesses, the associated industries were in major decline or consolidation. The textile business is an industry left over from the industrial revolution. As manufacturing moved to low-cost labor countries, American textile manufacturers shrunk. Newspapers were a growth industry in the 19th and early 20^th centuries.  However, competition from television and radio for news turned a vibrant and competitive market of several newspapers in major towns and cities into consolidations of one major “monopoly” newspaper in most areas. Wall Street was not interested in investing in these businesses, so they were value bargains that attracted Buffet. By investing in these businesses, Buffet got discounted assets and cash flows which he could use to invest in other businesses.

One biased and negative view of Buffet is as a scavenger of American business: getting fat on the misfortunes of asset rich, but stolid, declining, and boring businesses. However, in reality, he stands by businesses in which he invests, and he makes sure that the business is a well run business. He typically rarely sells the businesse that he buys.  If one bought a share of Berkshire Hathaway around the time Buffet did, at about $8, and held it, it’s worth today is about fifteen thousand times its value of 1965: over $120,000.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Warren Buffet

Buffet was innovative in the realm of effectively using capital. Before the crowd, Buffet realized the businesses of insurance and reinsurance as having great value of cash flow. Berkshire’s favored business is reinsurance. Reinsurance is the wholesale end of the insurance business, requiring large reservoirs of relatively liquid assets. Buffet knew what to do with that cash pool – invest it.

Investments in securities are likely to interest this type, particularly investments in blue chips securities. ISTJs [Inspector Guardians] are not likely to take chances either with their own or other’s money. [Please Understand Me, page 190]

Efficient and effective use of capital have been Buffet’s watch words all his life. When playing golf with his buddies and fellow billionaires, a wager was proposed by Jack Byrne, president of GEICO. For a ‘premium’ of $11, Byrne would pay $10,000 to anybody who made a hole-in-one that weekend. When others reached for their wallets, Buffet didn’t. Razzed by his colleagues for his cheapness, Buffet grinned. Warren Buffet said the premium was too high – he measured a $11 wager the same as he did $11 million.

Trust me.

Knowing Temperament we should have known.  If I had to trust my retirement money to anybody else, but myself, I would bank on Warren Buffett.  Trust him, and trust his Temperament.