Financial Success

Dear Reader,

HERE'S MY PHILOSOPHY ON HOW TO ATTRACT FINANCIAL SUCCESS... 

Let's begin with an updated revision from my book The Power of Creative Genius that illustrates Warren Buffett's investing philosophy and rules for success.

“Now is the time to come to the aid of
yourself.”

Only you can do it for yourself.  Life is not a dress rehearsal.  I and others may be able to help, guide or support you, but you make the decision of when to swing the bat.

Creative geniuses focus on what is before them today and screen out yesterday’s accomplishments or failures.  That doesn’t mean they ignore past results; what it does mean is that they separate the wheat from the chaff and bring into today the best of what they can be now to accomplish what they seek today.  Sometimes it’s silence.  Sometimes it’s instant action.  Let me give you an example from an unlikely source—stock investing.

Warren Buffett, CEO of Berkshire Hathaway, the second wealthiest person in the world according to the 2017 Forbes 500 list, is a creative genius.  From him you can learn how to accumulate, preserve and allocate wealth, while living your life with integrity, harmony, joy, well-being, love and traditional family values in accordance with Universal Principles.  Note that he has stated that the power of unconditional love is the most powerful force on earth.  

I have been a long-time buyer of his company’s Berkshire Hathaway B shares and own 1 A share.  I began buying the stock when it was priced at $1,100 per share and purchased the stock all the way up to a price in 1999 when it was $2,750 per share, almost the high for the year.  

Then the stock plummeted, fueled by the Internet stock bubble of 1999-2001, when technology stocks were driven to outrageous prices. Negative publicity from pundits alleged that Warren was past his prime and ready for the rocking chair.  I could have listened to the hype and sold my shares, but my creative genius told me to ignore it in favor of reading the company annual reports, books on Warren’s investment style and his comments about Berkshire and the economy.   

 In 1999, he had written an article for Fortune about the Internet stocks whose share prices were far in excess of their true value.  He stated this was an example of history repeating itself from the 1920’s and 1930’s when hundreds of automobile and airplane industry companies vied for market share and 98% of them were eliminated within 15 years after the stock market crash of 1929.  

How did I feel in 2000 when my investment was a negative 40%?  I had a choice.  Listen to the hype from the critics who said Internet stocks were going to the moon or to listen to Warren who quoted   Winston   Churchill’s  famous  saying  that those who fail to understand history are doomed to repeat it.

I listened to Warren and waited.  Why? The pitch and the price of Internet stocks made no sense, so each day I went to bat and let the pitches go by.  Hundreds of people playing the Internet stocks claimed they were minting 100% or more returns on companies that had no profitability.  To   them I looked like a dummy standing there bat in hand.  

By being focused in the present, my option was to follow the crowd or take a pass.  For a creative genius, an investing decision needs to be made on the strength of a company, not irrational exuberance.  

It’s what you know within your circle of competence and it’s what you also know that is balderdash.  That means doing one’s homework each day by absorbing financial news, annual reports and due diligence analysis to determine the company’s intrinsic value.  Does the share price afford value by providing a reasonable margin of safety, i.e. can you purchase shares that are worth $1.00 for 50-60 cents?  

Berkshire Hathaway’s businesses and investments were solid, there were no adverse reports, the shares were fairly priced, and there was little or no margin of safety.  At the end of the day, my accomplishment was no purchase, no sale. 

Tomorrow, I would go to bat again, ready for the pitch.  

Each day I put a few more dollars into my bank account, so to say I was doing nothing would be a misnomer.  My action was to build resources for a purchase upon the arrival of a fat pitch.

Each quarter when I looked at the increased savings in my bank account, Berkshire Hathaway was producing a profit and Warren Buffett was investing the profits in buying fuddy-duddy companies that made nuts and bolts or consumer staples, and avoiding Internet companies like the plague.  The reaction of the stock market to this approach was “phooey”.  

His track record and philosophy was always focused on “being in the now”, knowing that investment opportunities change each day.  To be successful, you must wait for the fat pitch, the one that comes down the middle in your strike zone.   Warren only invests in companies he understands and that are within his circle of competence.  That’s distinguishing between knowing what works for you and what doesn’t, while maintaining a comfortable margin of safety in the event of temporary setbacks. 

The so-called smart money at the time said the future was in high-tech start-ups run by MBA’s fresh from the major business schools.  The so-called dumb money was buying companies that produced stuff we all use – like food, clothing and shelter.  Warren was from the dumb school—he bought bonds in Fruit of the Loom® underwear at a time when there were probably some high flyers shorting Berkshire Hathaway.  No pun intended.  Later on he bought the company.

I kept going up to bat every day patiently waiting for a pitch in my Berkshire strike zone.  I remained silent for over 18 months until the fat pitch arrived in March, 2000, when B shares sold for less than $1,400, almost 100% less than my share purchase at $2,750.     

Here was the fat pitch, because the value of Berkshire was some 40% below its intrinsic worth and there was a comfortable margin of safety.  My research indicated that at that price, a smart company would be a buyer, so I backed up the truck and bought at prices anywhere from $1,350 through $1,800 over a period of the next six months.

Confirming my analysis was Berkshire Hathaway’s offer in the 2000 Annual Report to buy back anyone’s A shares or equivalent 30 B shares for $45,000 directly, without a commission.

Bingo!  Berkshire B shares closed on March 9, 2007 at $3,646 per share, a 270% increase or 15.25% increase per year, while the NASDAQ composite was down over 211% for that same period of time.

As of August 4, 2017, ten years later, Berkshire B shares adjusted for the split that occurred in 20? were worth

It’s obvious that Warren Buffett pays no attention to newspaper articles critiquing his capital allocation strategies.  Neither should you let others dissuade you from following the inner guidance from your developed Power of Creative Genius, combined with doing your daily homework.

Being Money Mindful is developing your mind to receive your positive conscious thoughts for abundance so vividly and spontaneously as to become ingrained in your entire physical, mental, emotional and spiritual being.

Lee V. Bakunin

Copyright 2014 THE POWER OF CREATIVE GENIUS

The millennial generation also has its investing geniuses who are changing the ways we look at creating wealth and success in the same moral and ethical vein as Warren Buffett.  Study Elon Musk, Jeff Bezos, or Mark Zuckerberg.  Hopefully, you will see the common threads that link them to the entrepreneurs and innovators of previous generations.  (Note: link Musk, Buffett, Edison, Ford, and Carnegie)

Lee V. Bakunin, Copyright July 2, 2017