Monthly Archives: October 2015

Investment “Secrets” of the Experts

secrets_revealed

October 26, 2015

We all know that past performance does not guarantee future results but what can we learn from those who have consistently done well in the investment markets over long periods?

 Of course the definition of the length of a “long period” depends on your perspective. In the US an investment group that has been dispensing opinion and managing money in the market for greater than thirty years is the exception. By contrast in Europe there are firms that have managed money for not just decades but for centuries.

 A recent visitor to our offices from England left behind a copy of the UK paper “The Daily Telegraph”. It is always good, and sometimes refreshing, to break out of your normal sources of information, and so it was with delight that I found an article written about the smart money minds that manage the Church of England’s assets. The age old (since Henry VIII!) and mature thinking in the article reaffirmed the importance of taking a long term view as the proven way to build real value.

 More specifically the article identified four world class investors who followed key tenets when investing. Here are the investment “secrets” of these four famous investors:

  1.  “Only buy something you would be perfectly happy to hold if the market shut down for 10 years.”
  2.  “Investigate before you invest – study companies to learn what makes them successful.”
  3.  “The right method of investing is to put fairly large sums into enterprises which one knows something about and in the management of which one thoroughly believes.”
  4. “Never invest in any idea you can’t illustrate with a crayon.”

 Of this elite group of investors two are still alive and practicing their craft: Warren Buffett at 85, and Peter Lynch at 71. The other two have passed, Sir John Templeton who died at 95, and John Maynard Keynes who died at the young age of 63. Can you guess who each rule belongs to?

 It is striking that this group’s wisdom can be boiled down to such simple beliefs, and that these beliefs are very consistent with each other.

Rule 1 illustrates Buffett’s distaste for short term investing in the markets. Even Buffett realizes he cannot predict what the market will do day in and day out. Buffet instead invests in companies he understands.

 The approaches of Templeton, Rule 2, and Keynes, Rule 3, are similar – understand the risks you are taking and, once you have studied your options, act on them.

 Lynch is probably my personal hero not least because of his reference to the crayon in Rule 4. My wife will attest that when she hears me say “Give me a piece of paper and a pen”, a mini lesson is about to start on some aspect of the financial world. As Lynch would say if you cannot explain something on a single piece of paper using a pen or a crayon, you probably do not understand it yourself….so don’t invest in it!

 It behooves all investors to remember the four Rules of a group which has thoughtfully and carefully built such substantial wealth.

 Carl Gambrell

 10 26

Make Mine Extra Small

the-miterbox-tiny-house-on-wheels-001October 19, 2015

 Perhaps some of you are as fascinated as I am with a recent movement based on making things smaller. This way of thinking has been popularized on TV shows which feature “tiny homes”.  The idea of extreme downsizing to these very small houses makes for interesting home design discussions.  The show chronicles how homeowners go from having two to three thousand square feet of living space to tiny dwellings of two to four hundred square feet.

 The smaller home is not a new idea. The Airstream Company has been making small homes on wheels with clever designs since the 1930s.  They just happen to be labeled mobile homes instead of what is perhaps a better and hipper marketing term for today’s consumer: “tiny home”.

The tiny home movement is really about affordability.  There seems to be real merit, and maybe even staying power, in the custom design of an inexpensive moveable living space that is tricked out with cool design features.

 In California, Oakland residents are embracing the next evolution of the tiny house.   Rental prices for apartments in the Bay Area are already some of the highest in the country, so community planners must consider more affordable and creative options.

 In an unused warehouse in Oakland called Containertopia, metal shipping containers are being converted to provide living space for young San Francisco workers.  A young entrepreneur has taken the shipping containers and converted them into 160 square foot living spaces for workers who have just started their careers.  With rents at an affordable $600 per month, a waitlist has begun.

 According to the report even smaller residences are becoming popular in the Bay Area.  Artist and charity groups are building rolling homes that measure eight feet by five feet for use by the Bay Area’s large population of homeless.  The boxes are the size of a small U-haul trailer and are being provided free of charge.

 With this growing desire to go smaller and smaller, I should not have been surprised at the Wall Street Journal’s Commercial Real Estate Market update this week which reported that the public storage industry is experiencing a significant shortage.  In almost all parts of the country the demand, as reflected in both occupancy rates and price increase, has never been so good.  It would seem that folks downsizing to smaller living options, either out of choice or economic necessity, are finding it too hard to throw away some of their accumulated stuff.  The desire to get small and keep all our stuff seems be presenting opportunities in more than one real estate sector.  Having currently lived in the same place for 28 years I have no idea where I would even start to go small, let alone tiny.

Carl Gambrell

10-19