Bruce Berkowitz Conference Call

Bruce Berkowitz, from Fairholme Funds, participates in a public Q&A conference call. He gives insight into his holdings, what the future holds, and some of his theories on investing. A great call from one of the best value investors recently. It's good insight into value investing theory in these troubled time, especially because not many value investors talk about their holdings this openly.

Focus (Part 2)

(Source: markrekers.files.wordpress.com)

As a follow up to my previous post "Focus", this post is derived from a book I have recently been reading called The Snowball - Warren Buffett and the Business of Life by Alice Schroeder.

While having dinner with some very successful people, the story tells how Warren Buffett (Biography) met Bill Gates and described what is meant by "focus", their key to success.

Excerpt from The Snowball:

"Then at dinner, Bill Gates Sr. posed the question to the table: What factor did people feel was the most important in getting to where they'd gotten in life? And I (Warren) said 'Focus'. And Bill (Gates) said the same thing."

It is unclear how many people at the table (Katherine Graham, Tom Foley, Jerry Grinstein) understood "focus" as Buffett lived that word. This kind of innate focus couldn't be emulated. It meant the intensity that is the price of excellence. It meant the discipline and passionate perfectionism that made Thomas Edison the quintessential American investor, Walt Disney the king of family entertainment, and James Brown the Godfather of Soul. It meant the depth of commitment and mental independence that led Jeannette Rankin to stand alone as the only representative in Congress to vote against U.S. entry into both World Wars in the face of widespread ridicule. It meant single-minded obsession with an ideal. "Focus" meant the kind of person who could earn billions by allocation capital (referring to Buffett), yet to be baffled by a sign that said "No TP."

"TP" refers to a note on the door of a bathroom which Buffett had not understood what it meant when he saw it.

It is clear what they mean. Focus is putting all of your efforts mainly into one thing. Something that you are extremely good at, something that you have unlimited motivation for, something that you are or could be the best at in the world. Gates is undoubtedly one of the best businessmen in the world, Buffett is the best capital allocator and they both achieved these heights because of one word - Focus.

Intense focus on something will likely achieve you insurmountable results, and the above two heroes are proof of that.

The Tipping Point by Malcolm Gladwell (Book Review)

(Source: Userkind.com)

Here's a brief summary of what a Tipping Point is, as defined by the book, from Wikipedia:

Tipping points are "the levels at which the momentum for change becomes unstoppable."[1] Gladwell defines a tipping point as a sociological term: "the moment of critical mass, the threshold, the boiling point."[2] The book seeks to explain and describe the "mysterious" sociological changes that mark everyday life. As Gladwell states, "Ideas and products and messages and behaviors spread like viruses do."[3] The examples of such changes in his book include the rise in popularity and sales of Hush Puppies shoes in the mid-1990s and the dramatic drop in the New York City crime rate in the late 1990s.

The Tipping Point was a great book. The book examined certain epidemics and events and the impact that they had on entire societies, in many cases.

The most influential story to me involved one of these epidemics that occurred in the New York subway system where crime was out of control. One event changed the crime dramatically when what people thought was a normal, everyday guy shot 3 gang members and killed them. Although tragic, the point is that this specific event changed crime there. Criminals were now scared of getting killed or hurt now by normal everyday people and the crimes dropped off dramatically. It was incredible to me that an event such as this could ring all across the city and change something as bad as crime in the subway system.

I would highly recommend the read and I don't want to spoil the book any further.

10 Traits of a Successful Human Being

(Source: Persistantillusion.wordpress.com)

Taken from "10 Traits of az Successful Human Being" on Pick the Brain.

1. An Independent Nature

If we rely too much on those around us for assistance and/or support we will be setting ourselves up for disappointment in the future. This is not to say that we shouldn’t look to others for help when the time is right, but crafting our pursuits in such a way that requires the intervention of another is like handing over the keys and getting in the back seat. Our friends and colleagues may help open the doors of opportunity, but it is our own responsibility to take the wheel.

2. Self Confidence

Every decision we make in life will have some kind of effect on future outcomes. If our choices our filtered through fear and doubt, we can be assured of the life we are trying to avoid. Trust your instincts and listen to your heart. When you make a mistake, don’t look at it as reason for doubt, but instead, realize the opportunity for wisdom as you continue to push ahead.

3. Persistence

It’s been 5 years since I started my consulting business. 5 years of long hours and hard work. Many times did I consider throwing in the towel when things didn’t go my way. But every year that’s gone by, every road block I’ve pushed through, my business has grown as my resolve to make it a success has strengthened. Persistence is not an optional trait for those who desire success, but an essential attitude that must be embraced!

4. A Big Imagination

When I think of some of the greatest ‘achievers’ in American history I see great innovators and people of purpose. Names like Henry Ford, Walt Disney and Bill Gates come to mind. From cars to cartoons to computers, their personalities were as diverse as their pursuits. But one thing they share is the wonderful ability to see what’s not yet visible to the naked eye. It was the imagination of Henry Ford that first painted the picture of a car in every garage, and Bill Gates, a computer in every home. And it was Walt Disney who continues to inspire millions with the idea that ‘anything is possible’.

Those with inevitable success can see the unseen. They’ve become successful in their minds before they laid their first brick.

5. A Thick Skin

I’m a people pleaser at heart and can be devastated by disappointment. But as a necessity in business, I’ve grown a thick skin that allows me to deflect defeat while maintaining my focus. Whether in corporate conflict or the liabilities of life, it is those with a strong armor who will maintain their momentum.

6. Clarity Of Self Understanding

If you don’t know who you are, you will never truly know what you’re capable of. It is in our daily pursuits that we need accurate information on our strengths and weaknesses to succeed. Because being blind sided by your own inability or missing out on your true talents will bring nothing more than failure and frustration.

7. Clarity Of Intent

Continuing with the analogy of Ford, Disney and Gates, we can see three individuals with very clear intentions. No one ever questioned Ford’s intentions of filling the roads with his Model T’s. Disney was never far from his pursuits of capturing our imaginations. And even when no one believed in his dream of populating every home with a PC, there was never a question of Gates greatest goal.

8. Focus

There’s a lot of talk about multi-tasking and single tasking when it comes to getting things done. But however you go about accomplishing your goals, focus must be at the core of your character. Successful people have the knack for deflecting distraction and keeping their nose to the grindstone. It is our drive that pushes us forward and keeps our momentum, but without focus we will just be moving for the sake of motion.

9. Optimism

Many of the traits mentioned thus far would not be possible without this key ingredient. Without being able to constantly see the cup as half full, we would never be able to stay focused. Being blind to that silver lining would paralyze our persistence. So it is absolutely crucial that our minds maintain a positive outlook on life and never give in to the destruction of defeat. Optimism is at the heart of a successful human being!

10. Passion

Success can be obtained by many, but maintaining the drive to reach our goals requires a passion for pursuit and a lust for life. We can create a to-do list and set our goals with the best of them, but without this necessary habitual hunger, we will most certainly fail to bring to the table the results we imagined.

All ten of these traits are very important in being a good person, being liked by others, and being successful at anything you do.

Focus

Source: Photobucket.com

Focus (definition):

• concentrate: direct one's attention on something;
  

• maximum clarity or distinctness of an idea; "the controversy brought clearly into focus an important difference of opinion"

The Most Important Ingredient to Success

When asked what the most important thing that led to their success, Warren Buffett and Bill Gates replied "focus".

I have always been told to do well on everything and if I become really good at something I would be successful. I have been told to find something I have a relentless interest for and success will eventually follow. I think the secret to success breaks down to "focus". To be the best at something in the world, you have to have the physical and mental capacity first. If you want to be the best business man/woman, you aren't born with the knowledge of business. You may have the attributes to be a great business person as you grow up, but the knowledge has to be learned. I feel the more you learn on the topic the better off you will be.

My goal is to be a great investor and businessman. How do I get there? I have determined that I have the physical and mental capacity to be one of the best. Step 1, complete. Step 2, obtain and gain knowledge in those areas. My knowledge comes from experiences in investing and business (both success and failures), talking to others and getting their opinions, building scenarios and possible outcomes, joining clubs and associations, and reading on the subject (books, blogs, audiobooks, podcasts, internet sites, seminars, studying for certifications, news stories, and following the advice of others who are great in the field or fields).

Never stop learning about your topic, to be the best you have to have the best, most accurate information from the past and present. The better your information, the better assessments you can make now and for the future. Focus on what you want to be and how you are going to get there and what you have to do. Constantly focus on the topic and dream about where you will be in the future. Don't get lazy, put time, effort and focus into it. Think about what you are doing and build a scenario on what someone else in the world is doing and compete against them. If you are not thinking about it at least once a day or at minimum most days out of the week, you probably will never be the best, because chances are someone else is thinking about it on a daily basis and acting on how to be the best.

The Stock Market is the Worst in 80 Years

Source: Cleveland Blog

The stock market is going crazy. What am I doing about it? Standing strong and adding to my positions.

From CrossingWallStreet.com - The Worst Decade since the 1930s.

Bespoke points out that this decade has been one of the worst in history for stock returns:

Unless we get a major rally to close out the year (15%+), this will only be the third time since 1900 that the Dow Jones posted negative returns in the first nine years of a decade (excluding dividends).

I am adding to some of my positions and have put about 20% more money in the market, than I had previously, in the last few weeks. The US is in trouble, banks are failing, there is not very much credit available. People are scared and pulling their money out.

A bear market doesn't come around very often and this has been a big one so far. Big enough to be compared to the crash in the 1930s. I keep buying, my emotions are turned off and I am buying great companies on the cheap. The stocks I own are pretty risky but have solid balance sheets. They can hold on for a while and if and when we come out of this I hope to make a bundle. I am still young and can afford to lose some if it doesn't work out. I am not financing my investments by debt or by betting payments that I owe and have a cash reserve to cover me for a while in case things get really bad.

"Be greedy when others are fearful and be fearful when others are greedy". - W. Buffett

10 Ways to Get Rich by Warren Buffett

(Source: BusinessWeek.com)

In Parade Magazine, Warren Buffett listed ten ways to get rich.  Here is the list and my comments are below.

1. Reinvest your profits.
2. Be willing to be different. 
   
3. Never suck your thumb.
   
4. Spell out the deal before you start.
   
5. Watch small expenses.
   
6. Limit what you borrow. 
   
7. Be persistant.
   
8. Know when to quit.
   
9. Assess the risks.
   
10. Know what success really means. 
    

Reinvest your profits.

• If you make a little money, refrain from spending it on unnecessary things.  Instead, reinvest your profits in the asset or other investments.  Typically the more you invest, the better off you will be.  Compounding interest as quoted by Albert Einstein is "the most powerful force in the universe."

Be willing to be different. 

• Don't always follow the crowd, be a contrarian.  This is where you will make your money.  Place bets on what the crowd doesn't like and the calculate the risks in doing so.  If the benefits outweigh the risks and you are correct in your assumptions, you will make a bundle when the crowd starts to follow the idea again.

Never suck your thumb.

• Buffett also calls this "unnecessary sitting".  A form of procrastination, determine what you need to do, and DO IT.  Action and execcution are really all that matter.  If the task is large, break it up into pieces and set deadlines to get those pieces done.  It will seem like a much smaller task once you break it up.

Spell out the deal before you start.

• The ability to see scenarios of what can happen and planning on your responses is the best way to get what you want out of negotiations.  Always be prepared.  Understand what the other party wants from the deal and both sides can win.

Watch small expenses.

• Sometimes we lost sight of the little things in life, and in this example are the small expenses.  In general, the more we make, the more we lose track of the little expenses because we feel they don't matter.  Managing your little expenses can save you a lot down the road.  This also applies to doing business.

Limit what you borrow. 

• Living on credit cards and loans will not make you rich.  It may appear to other people that you are for a short period of time until all of the debt becomes apparent.  Work on being debt-free and investing the excess.

Be persistant.

• Don't give up what you believe in and stand for.  

Know when to quit.

• Know when to walk away from a loss.  If the business is a failing business, leave emotional ties behind.  The ability to think clearly and knowing when to cut your losses is crucial to being successful.

Assess the risks.

• Crucial to Berkshire Hathaway's business, Warren has to constantly evaluate possible risks when owning companies.  Evaluate all possible scenarios so there will be no surprises.

Know what success really means. 

• Buffett doesn't measure success in dollars surprisingly.  He lives an extremely humble live and doesn't own many lavish things.  This is how Warren measures success "When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life." 

Warren Buffett on Charlie Rose - May 2007

Follow the Leader

(connect-world.net)

What ever happens to our heroes and heroines? Most, if not all, kids have heroes that they look up to and want to be when they grow up. Whether it's a superhero, a character on a television show, a sports figure, or someone they know.

As kids grow up, they lose sight of their heroes, probably because most of them mature and wouldn't want to be seen carrying a Batman or Scooby-Doo toy, understandably. But regardless, everyone needs a hero to model for different aspects of their life. It's easy to attempt to be the best at something when you are doing things like the best. If you want to enhance your life, take lessons from the people that are the best at it.

If I want to be a good investor, I look to greats like Warren Buffett, Benjamin Graham, Eddie Lampert, Bruce Berkowitz, Monish Pabrai, etc. If I want to be a more generous person, I look to philanthropists like Bill Gates, Warren Buffett, and John D. Rockefeller. If I want to be a great public speaker I look to Dale Carnegie, Steve Jobs, and Steve Ballmer. If I want a good sense of humor I look to George Carlin, Dennis Miller, and many others. Modeling these people will help you drastically and makes life a lot easier. They have found a way to be excellent at something and can be your teachers as you grow.

Some suggestions I would suggest on how to learn how your heroes did it would be to read their biographies, wikipedia, websites, books that they have stated they have read or are reading, atricles and books they have written, online videos, and DVDs.

It's not really that hard to be good at something. You just need to be passionate and focus and model what the greats are doing or have done.

My Recent Book Readings

I have completed reading a few books over the last few months.

1. Security Analysis (Classic 1940s Edition) by Benjamin Graham and David Dodd
   
2. The 4-Hour Workweek: Escape 9-5, Live Anywhere and Join the New Rich by Timothy Ferriss
   
3. The Intelligent Investor by Benjamin Graham (my second time reading it)
   

Security Analysis (Classic 1940s Edition)
To date, Security Analysis (Classic 1940s Edition) is my most accomplished reading. This 841-page behemoth is a work that any investor would respect. Co-written by the father of value-investing, Benjamin Graham gives in-depth insight to the world of value investing. Reading this book is on par, in terms of technicality, with many of the college textbooks I have used. Written originally over 80 years ago, this book still had amazing validity in the stock market today. The basic premise of value-investing is still intact and the theory remains much the same. It's amazing the knowledge I have learned through reading it and I will definitely apply it to investing. Many great investors have followed Graham-style investing including Warren Buffett, Eddie Lampert, Monish Pabrai, among many others.

The 4-Hour Workweek: Escape 9-5, Live Anywhere and Join the New Rich - My Thoughts
Great book about outsourcing your life. Probably not relevant to many people due to the fact that Tim talks a lot about getting rid of your 9-5 job, starting a successful, non-demanding business, and traveling the world, working 4-hours a week on the business that runs itself. What I really got out of the book was traveling while you're young and not waiting until retirement to start traveling. Tim refers to his travels or vacations as "mini retirements" and details many of the adventures that he has been on. These adventures struck a nerve in me and made me want to act on my ideas for traveling and doing adrenaline-pumping activities.

Other things that I took from the book were the ability for anyone to hire a virtual assistant for $5-$10 an hour from India to assist you if you need anything. They will research a topic, pay your bills, reply to emails, etc. for a minimal charge and most of these virtual assistants have MBA's and are incredible educated. This maybe something worth looking into.

The Intelligent Investor
Referred to as the best investment book written by Warren Buffett, this is a great book for controlling your emotions in the stock market. The theory of Mr. Market in the book depicts that the market is full of people's emotions and prices wander to cheap or expensive levels, in which intelligent investors can capitalize on. The book believes holding great companies for the long-term. If you are truly interested in the stock market and the pschology of human emotions, I highly recommend it.

Success is Always Challenged

(Photo: bp0)

Are you or someone you may know successful? Do other people recognize this success? Are you or they ever challenged because of your or their success?

It seems as though the more successful you become, the more people will challenge your ideas and thoughts. Does the challenge stem from the personal gratification of the challenger justifying their lack of success? Is the challenger trying to make themselves feel better about their life by challenging others?

I believe the thought stems from one word, jealousy. Humans are jealous by nature, they want more, more, more. People constantly think and look after themselves, and themselves alone. They compare themselves to other people and wonder, why is this girl successful and why am I not? Everything is a competition and they start rationalizing, making lists of that person's negatives; All they care about is themselves. They work too hard. The list is never ending.

I am one to always do my best at everything. I search out the best possible solution to everything and execute. Living this way has done me well and recently attitudes have changes about me from others. I have the same personality but certain success attributes are become more apparent, not in terms of lavish, material items, but underlying things like job experiences, investment opportunities, etc. There is now a constant challenge of my ideas, anger from others for not being included in certain investments, and fierce competition.

It is a constant battle and the resolution is difficult. Do you stop talking about investments with certain people? Do you keep your business to yourself with certain people? Do you not talk about your work life? Do you not talk about your future dreams and goals? It is certainly a challenge worth looking at.

The 4-Hour Workweek by Timothy Ferriss

I have recently starting reading (listening actually from the audiobook) The 4-Hour Workweek by Timothy Ferriss. It's been a thought-changing book so far and he has a lot of great ideas to tackle your fears and your passions in life. He started off working in an office like many Americans and made a dramatic change to alter his life and travel the world, all the while working only 4-hours on his own businesses.

His book is broken out into the following chapters:

Definition means to figure out what a person wants, get over fears, see past society's "expectations", and figure out what it will really cost to get where a person wants to go.

Elimination is about time management, or rather about not managing time. This is achieved applying the 80/20 rule to focus only on those tasks that contribute the majority of benefit. There's a difference, Ferriss says, between efficiency and effectiveness. The books emphasis is on effectiveness.

Automation is about building a sustainable, automatic source of income. This includes techniques such as drop-shipping, automation, Google Adwords and Adsense and outsourcing.

Liberation is dedicated to the successfully automated of one's lifestyle and the liberatation from a geographical location and job. Incidentally, Ferriss notes that if somebody has a regular job, the order of steps will be DELA, not DEAL.

The book asserts that technology such as email, instant messaging and internet-enabled pda's complicate life rather than simplify it. It advocates hiring virtual assistants from developing countries such as India to free up personal time.

Source: Wikipedia

Timothy Ferriss also writes a blog and maintains a website. Check them out! You can also check out my previous post - Timothy Ferriss, American Author and Speaker.

Warren Buffett Rap

This guy made a rap about legendary Warren Buffett.

The Secret to Happiness is No Secret

See The 'secret' to happiness... is no secret at The Financial Philosopher.

The blog post gives some great advice on finding happiness from the following quotes:

• "Health is the greatest possession. Contentment is the greatest treasure. Confidence is the greatest friend. Non-being is the greatest joy." ~ Lau-tzu

• "All truly wise thoughts have been thought already thousands of times; but to make them truly ours, we must think them over again honestly, till they take root in our personal experience." ~ Johann Wolfgang von Goethe

• "My opinion is that you never find happiness until you stop looking for it." ~ Chuang Tzu

• "If thou wilt make a man happy, add not unto his riches but take away from his desires." ~ Epicurus

• "Don't aim at success. The more you aim at it and make it a target, the more you will miss it. For success, like happiness, can not be pursued; and it only does so as the unintended side-effect of one's dedication to a cause greater than oneself or as the by-product of one's surrender to a person other than oneself. Happiness must happen and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on to carry it out to the best of your knowledge. Then you will live to see -- in the long run, I say! -- success will follow you precisely because you had forgotten to think of it." ~ Viktor Frankl

Morningstar Interview with Bruce Berkowitz

Truly an inspirational investor, Bruce Berkowitz discusses his new investments.