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Snowball BOOYAH!

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I don’t want to drop names or anything but last weekend Warren Buffett sent me a long letter.

He’s very thoughtful. Warren does this every year at this time. Has for 50 years now. It feels like a grandfather’s warm, reassuring hug.

OK, it’s not only me that Warren loves.

The letter is actually his annual missive to Berkshire Hathaway shareholders, freely available to anyone, even non-shareholders like myself.

In its entirety, it’s an encyclopedic message of knowledge and hope to anyone who wants to invest, live, and retire comfortably, spoken in a folksy, left-wing, socialistic kind of way.

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Buffett… Graham… Fisher… Lynch… Cramer… Green????

A world of great 20th (and 21st) century investors. You might want to remember and study the ideas and words of those names (except the last one!) if you crave a life of lessened financial worries.

I was loitering in my former lab workplace this past week while dropping by to pick up a lab buddy to go for a sweat session at the gym.

While waiting and listening to haematology analysers counting red and white blood cells happily in the background, another young former co-worker Trina, shook her head and smiled and said incredulously to me:

Larry, how did you manage to work part-time for 25 years, raise 3 kids, help them out with university costs, retire at 57, and go travelling around the world?”. 

A rush of warm blood flooded my face and I felt the sensation of my head swelling. Doesn’t everyone love a compliment, well deserved or not?

Thoughts rushed through my mind. This was the perfect smartass moment. I latched on for one pleasing drag off the cigarette.

Looking down and thumbing the rough calluses on my fingertips, I mentioned our most recent trip to India. Tongue in cheek, I spoke of how we journeyed to the jungle of humanity that is Mumbai, to try out life in a location where we would actually be raising our standard of living.

Lots of other thoughts flashed through my head. I wanted to smile and gloat about a huge inheritance from my Grandma who owned Bloomingdales, or a monster lottery win, or maybe a clever Bonnie and Clyde-style bank heist… bang bang, but unfortunately (or you might say fortunately) I had none of those stories to offer Trina.

No fake news today!

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I soberly reflected back on the years of preparation and planning that had brought me to this point in time.

I admitted to Trina that, for sure, I’d had some lucky tailwinds that blew warm fortune my way, but the brutal reality is far more boring. Boring, but I think instructive as well.

Remarkably, she still looked interested so I pushed forward and… blah blah blahed.

First of all, while I’m wealthy in all sorts of non-financial ways, I’m truly not a financially rich man by current North American standards.

I worked in a part-time lab tech job that would have paid a full-time worker somewhere in the $65- 70,000 area with medical and retirement benefits layered on top. My wife did much the same so we finished with a combined income in the $70,000 neighbourhood.

We own a modest home in tiny Summerland, British Columbia’s Okanagan Valley where typical homes sell in the $400,000- $600,000 range, not Vancouver or Toronto’s $1 million plus real estate market.

I reflected that long before The Wealthy Barber made his millions by peddling the notion of saving 10% of each paycheque, we were on board.

The early years… before kids… were the golden opportunity to lay a foundation of savings, a sturdy structure to build the rest of the rise-to-the-heavens skyscraper of hoped-for financial fortune.

money-skyscraper

And this is that time I already mentioned where the “luck” tailwinds were gusting firmly at our backs.

As Jim Cramer says on his wacky CNBC TV show…. “there is always a bull market somewhere“. This is true yesterday, today, and tomorrow.

Opportunity will exist forever, or as it was said to Virginia about Santa: “… A thousand years from now, Virginia, nay, ten times ten thousand years from now, he will continue to make glad the heart of childhood”

Our “tailwind”? Ridiculously high mortgage rates of 20+% were terrible for those buying real estate in the early 1980’s. Monthly mortgage payments were absurd based solely on the almost usurious interest rate charged by banks.

But conversely, ridiculously high interest rates of 19.5% paid on Canada Savings Bonds were a crazy incentive to save and invest in bonds. Now there’s a low risk tailwind!

We avoided real estate and plowed our dollars into savings bonds. Cha-ching!

Time passed along and kids mysteriously insinuated their way into our world (I’m better at numbers than I am the birds and the bees). Changing the locks to the house that we finally purchased never seemed to keep them out. The little Olivers and Artful Dodgers always managed to pickpocket us and leave us bordering penniless… foolishly with our seal of approval.

It was a perpetual challenge to squirrel away 10% of our earnings, but it was a priority and when it was taken out automatically, the pain was fairly mild. Thank god I love Kraft Dinner and Friskies cat food…

And, sure as shootin’, the foundation of savings mixed together with decent returns on investing began the SNOWBALL effect.

Perhaps learning as much as I could about investing in quality stocks à la the investors I named at the top of this post helped. I’ve never scored huge gains, but a consistent annual return in the 12% range has made the snowball grow bit-by-bit.

Every snowball by necessity begins as a few grains of sticky white flakes.

But give the tiny snowball some time, and fresh snow to roll it in, and it begins growing larger and larger so that every turn of the snowball collects an ever-increasing amount of momentum-snow…. growing and growing and growing…

I’m not telling you anything you don’t already know. I’m never the smartest guy in the room, or on the web.

I’m not telling you to give up all the moments of enjoyment or pleasure you can garner, by squirrelling away every penny. This isn’t intended as a tribute to Scrooge.

Every era has its financial challenges and opportunities.

I’ve spoken with Trina about money matters before. She knows the path to her Money Valhalla. She’s doing the right things that will one day give her flexibility and financial freedom.

In the meantime, hopefully she’ll be receptive and spend a few minutes reading Warren’s wise and cozy letters each year.

Her $$ snowball merely needs some more time and patience.

BOOYAH!!

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Become Your Own Financial Gardener …

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goofy investing

You may already know this, but I love investing in the stock market. I’m a Market Nerd.

But be careful reading this. I like to invest, not speculate.

I’m not loading my ass up to join in any Klondike Gold Rushes for untold wealth.

There’s a lot of fool’s gold out there, and I’ve bought my fair share over the years. Like the $25,000 I “invested” in YBM Magnex (a rare earth magnets company with wonderful financial statements) that turned out to be a front for Russian money launderers… the toilet got to eat those dollars.

Now, I bite into every piece of gold before I plunk my devalued Canadian dollars down.

At the age of 10, I knew I wanted to be a millionaire.

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For an average guy with an average intellect, I’ve been able to make a reasonable return (12.2% annually over 10 years) on a consistent basis with a modicum of knowledge in reading balance sheets and income statements. It takes a steady hand on the tiller and confidence in the decisions I’ve made.

When so many others bailed out of stock markets in 2008 during the financial crisis and lost a huge whack of $$, I had no hesitation in staying the course.

WHY?

Because I did my own research and analysis of each company and stock that I owned a tiny piece of.

Warren Buffett, the world’s most famous investor taught me well.

A year or two later I was back above where I was prior to the “crash”.

It didn’t matter to me that markets tumbled precipitously day after day after day (OK, I’m human, it hurt a bit… nobody likes to see wealth appear to evaporate like a cloud of steam arising from a kettle).

  • I looked around and I could see that the lineups at Tim Hortons Drive-Thru lanes remained as long as ever.
  • People still stopped at Shell stations to put gas in their car tanks on the way to work.
  • I heard of no one cutting their Shaw cable or Bell phone connections because markets dropped.

Granted, home sales dropped off the cliff and there were small cutbacks in family budgets for fine dining and car purchases.

But in the real world, very little changed other than perception.

Markets are all about perception.

In the stock market world, on any given day, everything is super amazingly fabulous … or … everything is catastrophically terrible. In the short term, rational thought doesn’t find a place on this rollercoaster. It’s screaming fun or vomiting your guts out over the sides.

This is one great thing about experience and aging. For the long term, I’ve learned to just shrug and remain calm. No bull.

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I began investing in the stock market in the 1970’s in my 20’s.

Hot Tips” and broker recommendations were the way I made my investment choices. “This baby will double in 3 months!“… “You can get in on the ground level now, but it will be too late next week“.

When you hear those words anywhere in your life, I suggest you turn and run away as fast as you can. Those guys have stinky armpits and bad breath, but their seductive smile blinds you to the underlying stench.

The good thing about such tutorials at this point in your young life is that the hurt you can inflict on yourself is generally pretty small. These are just small razor nicks, not a nasty slice through the main financial artery.

Once you’ve accumulated a nest egg of a decent size, hopefully you’ve learned sufficient lessons to protect yourself from yourself and irrational decisions.

Just as you should feel more comfortable eating a meal you’ve prepared with ingredients you know, you can swim in warm comfort when you have a bit of understanding and know the reasons and rationale for making an investment.

You read your own financial cookbook if you want the best result.

financial cookbook

Nowadays, I can assess within about a minute and a half if a company has any interest to me whatsoever in terms of investing in it.

9 out of 10 prospectives get tossed quickly, then I can delve more deeply into that 1 possible gem and decide if it has long term potential. Potential and a sensible price to make the purchase.

I love DISNEY as a company, but I can’t make myself buy it right now because it’s selling for a crazy high price. I love APPLE as a company, and it’s selling for a modicum of its true worth (in my evaluation). BUY BUY BUY!!

Once I’ve made the decision to invest, it’s important to be out in the financial garden daily or at least with a regular frequency.

The very best investments occasionally turn south for a myriad of reasons (eg. new management (General Electric), changing technologies (Blackberry)).

Beautiful investment flowers can sadly become unexpectedly infected with a virus or fungus.

My investments are like bonsai trees. I trim a little deadwood here, I let other healthy branches grow.

Mistakes will always happen and need to be pruned.

Other times, a FACEBOOK takes the world by storm, and you just sit back and watch that branch grow and grow. Ka-Ching! Ka-Ching!

Pssst! Here’s my HOT TIP for you if you want to be your own financial gardener.

Start by reading and absorbing what’s worked for the ORACLE of OMAHA… Warren Buffett.

The Warren Buffett Way by Robert G. Hagstrom

Let’s go outside and smell the roses divine.

financial garden

The Non-Oprah Business Boys Book Club …

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Do you follow Oprah’s Book List?

She is HUGE in the book club world.

If I wanted to increase my tiny blog readership by millions overnight, I would just kidnap and drug Oprah and have her make a woozy public statement on Twitter or Facebook about how wonderful my blog is.

Then I could buy a Caribbean island and share evening cocktails with Richard Branson and Kate Upton, ” … I just love the saltiness of this Russian beluga caviar, don’t you Sir Richard?“… “Kate, you were fabulous in that Bartender video with Lady Antebellum!

Just FYI … Oprah’s latest book choice is called RUBY by Cynthia Bond. I haven’t read it so I can’t comment.

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I don’t follow Oprah’s list closely, but I do pay attention to another book list of someone I admire.

But first …

I’m an investor. Not a superstar investor  à la Carl Icahn or Warren Buffett or George Soros, but I do alright.

My largest stock market holdings are Apple and Microsoft, with that daffy featherbrained AFLAC duck holding down 3rd spot in the portfolio.

I have a great deal of respect for the thinking of business/investment leaders like Bill Gates (Microsoft), Steve Jobs (Apple), and Warren Buffett (Berkshire Hathaway).

Whether you hate or love business types, they’ve been creative in finding ways to enrich their personal bank accounts while simultaneously helping to create a HUGE group of others who can include themselves in the Millionaire’s Club.

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My own retirement “package” is in no small part thanks to their creative abilities … creation of products that people – myself included – want to buy, and creation of my personal wealth. Every billion iPads you buy means I get an all-expenses paid trip south.

Today though, I’m more interested in talking about how these business boys invest their “spare” time. Reading.

To my advantage over the years, I’ve read a number of investing and business books that Warren Buffett has recommended. Of course I didn’t read or learn enough to avoid losing $25,000 on YBM Magnex, a Canadian company that was actually Russian mob controlled. For real …

If you’re at all interested in stock market investing, you could do far worse than read Buffett’s recommendation of The Intelligent Investor by Benjamin Graham.

And just lately, I’ve begun looking over the annual reading list of Bill Gates … yup, the God of Microsoft… the Master of Mister Softy… the King of … well, you get my point.

Bill Gates is a consummate nerd, a ruthless, but savvy businessman who is now doing some incredibly amazing stuff in Third World countries as a philanthropist.

And because of his financial resources and connections to other wealthy individuals, he’s having as much or more of an impact on the health and welfare of millions than entire governments, including that of Barack Obama.

Somehow, somewhere along the line, Bill has assimilated the skills of time management. He finds a way to read a book each week, mostly non-fiction, with the occasional fiction novel slipping in from time to time.

I pat myself on the back if I can turn away from the absorbing Netflix dramas House of Cards or Orange is the New Black long enough to read one book per month.

So today, let me introduce you to Bill’s Book Club.

Below are 5 of Gates’ favourite reads from 2014, four of them non-fiction and the fifth a quirky, charming fiction novel:

  1. Capital in the Twenty-First Century, by Thomas Piketty.
  2. How Asia Works, by Joe Studwell.
  3. Making the Modern World: Materials and Dematerialization, by Vaclav Smil.
  4. Business Adventures, by John Brooks.

And finally, Bill Gates’ fiction choice and the book that I’ve read most recently. It’s called:

5. The Rosie Project, by Graeme Simsion.

Rosie and Bill Gates

This is one quirky, sometimes confusing, sometimes hilarious novel because of its nerdy main character Don Tillman.

I don’t watch the popular TV show The Big Bang Theory, but I’ve seen enough previews and interviews from the show to gather that Tillman would be a perfect fit if they were ever seeking new cast members.

Everything genetics professor Tillman pursues in life is given a research folder and a name… eg. The Wife Project, The Father Project, and yes, The Rosie Project. 

Professor Don Tillman is unmarried and his social ineptitude has resulted in a track record of bizarre and unsatisfactory dating experiences.

His interpretation of the statistics leads him to conclude he needs a wife, hence The Wife Project, which eventually morphs into The Rosie Project. This is where he decides to vet applicants for his Wife Project with a 16-page (double-sided) questionnaire, in the interests of efficiency. Yup, he really does have potential dates fill out the questionnaire.

Don is wired differently than most of us – he mentally assesses the age and BMI of everyone he meets – but he has integrity, focus, and determination, and it is pretty hard not to feel empathy with him even while laughing at his missteps.

It’s a slightly odd novel that also made me think about what makes relationships work and how we have to keep investing time and energy to make them better.

Don is out to lunch when it comes to subtle social cues. But if you need to secretly collect DNA samples from 117 people at a party (part of The Father Project), there’s nobody in the world who’s going to do a better job.

What Don allowed me to appreciate is that, just because somebody might not be highly literate in the language of emotions doesn’t mean he doesn’t have emotions, deeply felt emotions. He sees the world in terms of logic, but he feels just as deeply about that world as everybody else.

So, if you’re stuck in a nasty first-of-March blizzard, wind howling down your chimney, after the House of Cards episode ends, you can pick up Oprah’s book choice, RUBY.

Or maybe if you want to make your next read a fun “Project”, try a taste of Bill Gates’ choice in THE ROSIE PROJECT.

Invest in a good story.

Rosie Project

 

 

 

 

Become a Billionaire Like Warren Buffett … and ME!

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LARRY SPEC CARRIER TIFF

“BUY BUY BUY!”, I said in my squeaky pre-pubescent voice.

When I was 10 years old, I took my paperboy earnings and ploughed them into stocks.  I was the Warren Buffett of the kiddy investment world.

Actually, in those heady Great Gatsby-like financial days of the 1960’s, my investing guru was Canadian-Jewish-Doctor-Investor Morton Shulman.

I picked stocks with names like Lake Ontario Cement listed on the Toronto Stock Exchange and I made oodles of money hand-over-fist. I smoked Cuban cigars lit with flaming $20 bills during recess on the playground. I became so wealthy that I could have retired before I ever entered the workforce.

If I had been old enough to own a driver’s licence I would have been burning black-rubber smoke pulling into the Glen Brae middle-school parking lot in my hot red Ferrari. I would have OWNED the student parking area.

Kid with ferrari

After all of the accounting was finished up on my trades, I’m pretty sure that I racked up profits exceeding  $100 over a 3 or 4 year period.

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It was actually my mother who picked the stocks that I bought but I thought I was the best investor ever born.

I KNEW I was the best investor ever!

I had attitude in all ways. Some was good, some other not so much.

My Grade 1 teacher Mrs. Putns wrote on my report card,

       Works well with class. Independent. Has leadership qualities”.

You can see how obviously clear it was that I was well on my way to becoming a business and investing mogul, right?

Well, soon the train slid perilously off the tracks. Just one year later my Grade 2 teacher Miss McClurkin said,

       An excellent pupil. Larry’s superior attitude needs improving”.

She underlined the word attitude!

Alright, I have ATTITUDE… so take THIS attitude…

boy-with-attitude

I feel a Rick Mercer Rant coming on…

Today, it amazes me how few people take an interest in investing and looking after their finances. They say, “Money is the root of all evil“.

Well, love it or hate it … money in our pockets and our bank accounts is what gives us the freedom to make choices that are for our benefit and enjoyment. Money that also hopefully allows us to help others who don’t have what we have.

Why would anyone want others to choose their destiny?

CHOOSE YOURSELF, I say.

How can you choose yourself if you have a $400 car payment and a $1500 monthly mortgage obligation?

YOU CAN’T.

The easy availability of credit has made many of us indentured slaves to banks and credit unions and department stores and car dealerships and on and on. When the early morning alarm rings in our ears, we can’t just roll over and tell ourselves that we’ll get up early tomorrow

Nope, there are bills to be paid…

Stay with me here. I don’t want to suggest that we should all become lazy sloths and do only the things we narcissistically want to do every day … as glorious as that existence might seem. Life isn’t meant to be a free ticket to undeserved relaxation and a total lack of responsibility.

Life without any shit is a life without any sugar.

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We become desensitized to joy if we have no contrasting hardships, sorrows, or challenges.

Some people see spending sacrifice as deprivation or punishment. However, even a little self-discipline and forward thinking can allow us to make our time filled with richness and meaning. Live a little today but also peer optimistically towards the future so that you can live a LOT tomorrow.

I’ve always tried to let my money work for me and not the other way around.

I don’t work in a highly paid occupation (medical laboratory technologist) that pays $100,000+ per year. I’ve worked just 3 eight-hour days per week for the past 23 years, since my youngest daughter was born. Laziness was only part of my story!  A big part of my time investment was in being Mr. Mom.

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Someone’s sitting in the shade today because someone planted a tree a long time ago. ” – Warren Buffett

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So … sow some seeds as early as possible and get rich slowly.

Here are my 5 best financial“attitude” tips that will get you on your way to the Billionaire’s Box:

  1.  Learn as much as you can about investing if you’re so inclined. Two books I highly recommend to boost your investing know-how are Peter Lynch’s One Up on Wall Street  and The Warren Buffett Way by Robert G. Hagstrom. Knowledge and confidence in what and why you invest in something (instead of HOT TIPS) will kill the nightmares where you worry about how you’ll pay your bills, and have you floating back to those super sexy dreams … but …
  2.  If you just can’t bring yourself to learn about investments then use ETFs (Exchange Traded Funds), not Mutual Funds. The management costs of about 2% yearly that are attached to mutual funds are way higher than ETF’s (usually less than 1%) and give no added benefit. Buy 3 ETF’s (S&P 500, Dividend, and International) with different focuses and let the growth of good companies pay you to sit and watch your money grow.
  3. Buy used motor vehicles with cash and put at least a 20% downpayment on any house purchase. Let the new car buyer absorb the big depreciation loss when they drive off the lot with their new toy. You can put the few thousand $$ you’ve saved into more ETF’s. I’ve never bought a car on credit (mea culpa… I did buy a new Honda Civic once but paid in cash) and I’ve always made at least a 25% down payment on any house I’ve bought.
  4. Save 10% of your take home pay and have it automatically put into an investment account. I’ve made investing blunders – like the time I lost $25,000 on a company that was laundering money for Russian organized crime – but I’ve made a point of always saving at least 10% of my take home pay and investing it in a way that OVER TIME has made it a force to be contended with.
  5.  Enjoy, just not too much! Life shouldn’t be drudgery. If you’ve put aside 10% of your earnings, you’ve earned the right to participate in the amazing things and experiences our world offers in whatever way pleases and gives you the most pleasure (just keep it off the credit cards AND keep it legal, OK?).

Alright, full disclosure time… I’m NOT a billionaire. YET!

Sorry I lied in the title to this blog post. But I also told you I have attitude, and sometimes that attitude makes me stretch the truth.

Choose yourself and live life for you and not the Don Draper Mad Men advertising world out there that wants you to BUY BUY BUY everything TODAY!

It takes self-discipline, strength of character AND attitude to stand up and not be a minion to those interlopers.

Be Bold … CHOOSE YOURSELF…

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