A New Focus for The Intelligent Investor

As some of you can probably already tell, The Intelligent Investor has been going through somewhat of a whirlwind since it was started early January.

When I first started I posted everyday about real estate.  Then I got a tip from Jon Morrow (the associate editor of Copyblogger) suggesting that I write one article a week that was at least 1000 words long – again, all real estate focused.  The goal was to write resourceful content that my readers could go back to again, and again.

After leaving my full-time, salaried job (amidst the economic recession) at a private equity firm that built their funds around real estate, I decided to work as a realtor and blog full-time.  I wanted to eat and breathe real estate – and blog about it.  Upon reflection, I realized that I just love making money in general. Whether money is earned through stocks or real estate, it doesn’t matter.  Money doesn’t know its source.

Since Warren Buffett didn’t restrict himself to just Berkshire the textile company (thank heavens), I’m not going to restrict this blog to just real estate topics.

I decided to change gears one day while talking to my pastor’s wife.  She was like, “James, my husband and I have no clue about what to do with our millions savings.  We need like an intro course to investments or something.”  I told her that I’d get back to her and maybe start writing about the basics of investment.

The idea of helping the average person “make money and build wealth” has been on my brain and I haven’t been able to shake it.  It makes sense.  It’s meaningful work.  And I have free range to learn and write about what I love.

So I will continue to be a real estate agent in Washington (all referrals welcome), my focus on this blog will go beyond just real estate, however.  I will likely focus on stocks, fixed income (bonds, treasuries, etc.), real estate and career development. I figure no matter what stage of life you’re in, you’ll likely fit into one of these categories.  If you are working full-time, part-time, unemployed or a stay at home mom (or dad) you should have control and a good understanding of where you are going financially.

As I write, a new design for www.theintelligentinvestor.com is in the works.  It’ll look ten times better and knock your socks off.

Thoughts and feedback are welcome.  Please comment below or email if you prefer.

Every year citizens of America (and the world) live with the risk of nuclear war.  Ahmadinejad of Iran and Kim Jong-il of North Korea are just a couple of the known risks of an atomic warfare.  The Nuclear Non-Proliferation Treaty (NPT) of 1970 has sought to reduce spread (proliferation) of nuclear weapons in which nearly 200 countries have signed on and so far it seems to have worked.

As it stands, the threat of nuclear detonation year-to-year is likely not 100%.  But at the same time it’s definitely not zero.  But let’s say there is 10% chance of a nuclear bomb detonating every year.  That means within 30 years there is a 95.8% chance a nuclear bomb will explode. If the odds were true and you’re fifty or younger, you will likely live to see a nuclear bomb go off in your lifetime at least once.

Now let’s use the same analogy for your investments.  If you were told to put all your net worth in an investment that has a 25% return annually over 30 years, but ran 10% risk of complete loss annually, would you do it, or not?  A 25% annual return equates to an 80,779% compounded return, however, you run a 95.8% chance you will lose your entire principal.  And remember, when you’re back to zero, 25% of zero is zero.

A small risk compounds incredibly over time.  As Warren Buffett says, “Don’t risk what you can’t lose for what you can’t have.”

Warren’s Annual Recital

As you probably know, I have a deep respect for Warren Buffett.  Not just because he’s one of the wealthiest men alive or that he gave all his wealth to society, but because he’s such a great example and teacher.

When asked, “Why do you teach people the principals of your investing strategy when it basically educates your competition?” Warren responds, “I was freely taught by Benjamin Graham and believe I should do the same.”

I feel in many ways that is the spirit of this blog – to teach and to educate.  Saint Matthew said, “Freely you have received, freely give.”

In light of that, this year I make the pilgrimage to Omaha for myself my readers so I can bring back valuable nuggets from the meeting.  It’s a three day ordeal that starts Friday (May 30, 2010) with a cocktail reception at Borsheims; continues Saturday with the annual meeting at Qwest Center Omaha and picnic at the Nebraska Furniture Mart (NFM); and ends Sunday with Borsheims Shopping Day and dinner at Gorat’s Steakhouse (Warren’s favorite).

This is known to be the Woodstock of Capitalism where 30,000+ attended in 2009.  My favorite part by far at the annual meeting is the extended 4-5 hour Q&A session with Warren and Charlie Munger (Vice-Chairman). Charlie and Warren answer questions off the fly with no preparation.  With everything going on in the economy, I am sure there will be questions about real estate and the housing market which I will take notes and make available on The Intelligent Investor.  (Note: No recording is allowed at the meeting as Warren wants to incentivize people to come visit him.)

The great thing about listening to Warren discuss economics (and life) is how he takes the big picture view.  He doesn’t waste time discussing the small movements month-to-month or even year-to-year.  He looks at the long-term outlook which tends to be more “predictable” and useful.  Last year, Warren predicted that the markets will correct themselves in due time and according to Charlie, it’s a great time to buy (read more).

My second favorite thing to do, being the bookworm that I am, is to go the Bookworm Omaha.  As a shareholder, you get a discount on Warren’s favorite booklist as well as access to books that are not available on Amazon.com or Barnes & Noble – all this to make me feel even more special.

This is a big year.  Since purchasing Berlington Northern Santa Fe (BNSF), Berkshire has issued stock and cash for the acquisition and added 65,000 shareholders to its current shareholder base of 500,000.  Class B shares also split 50 for 1 this year.  The first split was 30 for 1 which brings the total “gross” split since inception to 1500 for 1.  The price for Class B is $77.81 compared to Class A’s price of $116,735 (as of 4/29/2010).  Both Class A and B get to attend the annual meeting.  At a more accessible price, I assume the future annual meetings will be even more crowded.

So this may be my last year at the annual meeting (although I doubt it), I’ll make sure to take notes and come back to share the love.

After blogging for the last three weeks, I have an important question to ask you.

Do you prefer getting short blog posts everyday or do you prefer one extensive post per week?

Now, before you conclude please hear me out.

Most blogs are shorter and by their nature pack smaller punches.  For real estate however, you might want an all-inclusive article that you can bookmark and even reference.  Let’s take the topic of real estate appraisals.  Instead of just getting a quick snippet (200-300 words) on appraisals you might prefer something that is 1000-3000 words that covers everything you want to know about appraisals.  Again, one you would use as reference material.

I don’t suggest length for length’s sake.  The longer articles will require more thought and research on my part (not to mention reading on your part).  The hope, you get something ultimately better.

I need the blog to spread (I also need to get better, which I will over time so be patient).  Part of the litmus test is: Would you share a shorter article to a friend or would you share an all-inclusive article?

I ask because I care.  There is a whopping thirty readers so you will be heard.    Please leave your comments below.

It’s Friday and I’m at Whistler. Conditions are rough: 78 km/hr, limited visibility, avalanche warning – extreme, and 75% of the mountain is closed. I have a quick post to share.

Last Saturday I watched Julie and Julia, a story about Julia Child’s cooking career and Julie Powell an internet blogger who endeavors to cook all the recipes in Child’s first book. I won’t ruin the story, but at the end of the movie Julie (played by Amy Adams) looks up at a painting of Julia (played by Meryl Streep) and says, “I love you,” to Julia.

For a moment I likened my admiration for Buffett to Julie’s admiration for Julia. Think about what a standard Buffett has set in business, giving, integrity, education, and leadership. Society and the world has so much to learn from leaders like him. I love reading the Wall Street Journal, books, blogs, and annual reports and much of that is inspired by him.

I know what you’re thinking. What a romantic. Grow up and get a life.

But the thing is people in society need more role models – but more importantly, followers. Isaac Newton said, “If I have seen further it is only by standing on the shoulders of giants.” Warren Buffett followed Ben Graham, the father of value investing, before he eventually surpassed him.