Financial wisdom

Final "Gift"

2010-02-12T19:10:00.000-08:00

I suggest that you begin the preparation of a “Final Gift”.

The thought of making or receiving a “Final gift” is not pleasant, but it really is important and meaningful. Each of us need to get our affairs in order, help our loved ones as best we can, and try to leave as much of a legacy as possible. The “Final Gift” concept can accomplish all of that.

The gift should include the following:

Instruction letter-
What to do, who you want to do, who don’t you trust
Important contact info
Who is your attorney, CPA, broker, insurance agent, your website login info
Final letters for each loved one, at least for your spouse and each child
This is your last chance to impart some wisdom to them

While you are working on your estate you should also:
Read your will- does it still do what you want?
Beneficiary designations- is the money going where you want it to?
Do you have a valid power of attorney?
Do you have a living will?

I am the process of working on my “Final Gift”, I suggest that you do the same.

2010 Resolutions

2010-01-06T21:50:00.000-08:00

Like most of you, I have been considering my 2010 resolutions. You know the routine...shed a few pounds, be consistent with an exercise program, and work on my spirituality...

But I also have financial resolutions and they apply to all of us:

Begin taking control of your finances
Spend less than you make
Buy at least 1 asset in 2010
Manage your investment costs
Develop and implement a tax plan

I will be blogging on these in the next few weeks. I hope you will learn and implement them in 2010. They are a good start on achieving financial independence for you!

Lindsey

Holidays-Christmas or “Stress-mas” ?

2009-12-21T19:40:00.000-08:00

This is an exciting and hectic time of the year. Sometimes it can be fun, but the shopping, events, and business issues of wrapping up the year, analyzing any investement decisions to make before year-end, and the last chance for 2009 tax planning, etc., make it hard even if the rest of your life is going great.

I also feel a little sad. Christmas was so wonderful when I was a kid: lists for Santa, helping mom make candy, seeing what Santa brought, etc. Now I'm older and I really have everything I need and most of what I want. The kids are grown, so no last minute assembly tasks, frantic shopping for the hot sold out gift on their Santa list...and it is all pretty mundane.

Oh well, back to work:

I have been considering selling some of my stock positions, the prices look pretty high.

On the tax planning front:

How does 2009 compare to 2008?
Will you need to make or adjust 4th quarter estimates?
Should all of your bonus go to withholding?
Make any last minute contributions?
Set up an SEP, 401K plan?
Defer or accelerate income and/or deductions?
Buy any fixed assets?

Most of all, my hope and prayer is that each of us is able to take the time to enjoy the holiday season. To experience wonderful moments with family and friends and not worry about buying so much stuff.

Happy Holidays!

Lindsey

Warren Buffet and Charlie Munger Basics

2007-05-22T09:31:00.000-07:00

On May 5^th, I attended the 2007 Berkshire Hathaway (BRK) shareholder meeting (a.k.a. “Woodstock for Capitalists”) with 27,000 attendees in Omaha, Nebraska. Warren Buffett and Charlie Munger, (Buffett’s “partner” and Vice-chairman) shared their wisdom and advice on investment success in a 6 hour Q&A session.
While admittedly Buffett has been getting a lot of press and fanfare in the media lately, I have been on his bandwagon for years. However, I continue to be amazed by how deep Buffett and Munger’s simple, plain-spoken answers really are!

Their teachings are not complex -- some even trite; but they are tested and true. Over the years I have been more successful in my investments because of them. Here is a summary of the Buffett / Munger wisdom that has helped me:

Become a learning machine

Read everything possible, annual reports, biographies, papers, etc.

Have a “Circle of Competence”

Make sure you understand the business and industry.
Have a “too tough file.” (A place for decisions that are too hard)

Invest as if buying entire business (even if you are just buying 1 share)

Does the business have a “sustainable competitive advantage”-a “moat”?
How good is management? Do they think like owners?
“A great business at a fair price is superior to a fair company at a great price.”

Understand Ben Graham’s “Mr. Market” analogy: Market Price may not be equal to value

Don’t pay attention to market unless it is to your advantage.
“Berkshire buys when the lemmings are headed the other way.”

Minimize risk: “Be deeply suspicious when it seems to good to be true”

Have a “margin of safety” for every investment.
“Wait for no-brainers.”
“With 5 good ideas, you’ll get very rich.”
Only buy investments that you’re okay with if market closes for 5 years.

Non- investment wisdom:

“Give your kids enough to do whatever they want, but not enough to do nothing.”
“I don’t measure my life by the money I’ve made.”- Warren Buffett
In 2006, Warren Buffett began donating $40 billion+ of BRK stock to 5 foundations.

I have more information if you’re interested. These guys have made themselves and BRK shareholders lots of money. Perhaps utilizing these strategies will benefit you as well.

Lindsey Torbett

May 16, 2007

"Woodstock for Capitalists"

2007-05-10T12:44:00.000-07:00

“Woodstock for Capitalists”

Berkshire Hathaway 2007 annual meeting

Even though I had been before, the 2007 Berkshire annual meeting was awesome. I, along with 27,000 others were educated, entertained and challenged by Warren Buffett and Charlie Munger.

After the film, the initial greeting was by Jimmy Buffett, singing Margaritaville morphed into Berkshire Hathawayaville. Actually the event is a weekend long, and has been described as “Woodstock for capitalists”. It is great business for Omaha; the Berkshire companies (Boorsheims, NFM, etc.) and at the event must generate huge sales.

But my real interest is to listen to Buffett and Munger (rarely, but worth every word). They sit on stage for 6 hours while drinking coke products and eating See’s candy and answer audience questions.

They had great advice; criticized accountants; finance Profs, investment bankers, hedge and private funds, derivatives and compensation consultants and committees; and had wonderful quotes from Aesop, Will Rogers, and Mark Twain.

Many of the questions were about becoming a good investor, my summary of their answers:

Investing

Read lots, books of any and all sorts, annual reports- fill mind with competing thoughts

Be like Munger's description of Buffett “a learning machine”

Don’t make dumb mistakes

Don’t time or trade markets- Munger says “It’s a fool’s game to try and beat the market daily”

Whether buying 1 share or the entire company

Analyze and know the business

Consider all the possible future events

Be deeply suspicious when the situation is too good to be true (Munger)

Consider the “opportunity cost”-(what else can you do with those assets-what is the alternative making)

Have a “too hard file”; lots of possible investments belong in there- look for easy problems

Remember Mark Twain’s saying that history doesn’t repeat but rhymes

Buy good businesses at reasonable values

Valuation

Basis of valuation is Aesop’s fable “bird in the hand is worth 2 in the bush”

Analyze how many birds might be in the bush and when

Company’s intrinsic value isn’t determined by the market price

Have a “margin of safety”- so you’ll be ok if /when market corrects

Make investments comfortable with if interest rates go up 1-2 point or markets closed for year or two

Value businesses the same way you would value a farm, how much return can it generate

Volatility and risk aren’t related- buy at fair prices

Expect Berkshire’s future returns to be more modest

They don’t know (or think about) what market or interest rates will do over the next few years,

Expect over 20 years for equities to outperform (especially against 4.75% bond yields)

Criticisms

Accountants-Much of the accounting profession don’t realize how stupidly they’re acting

Discussing the various values used on either side of hedges and derivatives

Finance Professors-lots of things easy to teach-even if don’t have value

Like to use math skills they have-even though answers may not be right

Smart people- Very smart people do dumb things

Company boards

Members should be Dobermans not lap dogs

3 tasks- pick great CEO, make sure CEO doesn’t overreach, analyze/question deals

Don’t believe investment bankers/management internal rate of return calculations and slide shows- they always are for deal

Watch value of stock swapped on deals

Other thoughts

Importance of personal learning

Considering what can happen in future and avoiding mistakes

Knowing what you know and what you don’t

Plain spoken/common sense

Having a T-bone and hash-browns at Gorat’s wasn’t quite as good as expected, and the 11/2 hour long wait was long, but that was offset by being about 10 feet away from Buffet as he left. Only time will answer the question of whether it was worth the cost and time to go Omaha. But my bet is that what I learned will benefit my life and investments many times over.

I hope this will benefit you as well.

Lindsey Torbett CPA, CFP

May 8, 2007