Tom Mills
Common Cents

“Is there anyone anywhere who has more nicknames than Warren Buffett? Vanity Fair calls him the Forest Gump of finance.

He’s been dubbed the Oracle of Omaha, Omaha’s plain dealer, the corn-fed capitalist, St. Warren and the financial world’s Will Rogers,” says Janet Lowe in the introduction to her book “Warren Buffett speaks: Wit and Wisdom from the World’s Greatest Investor.”

Needless to say, I like Warren Buffett.

He’s as much of an enigma as he is a financial genius. Buffett was born August 30, 1930, in Omaha. He attended grade school there, but attended junior high and high school in Washington after his father was elected to Congress.

Buffett dropped out of the University of Pennsylvania’s Wharton School and finished his degree at the University of Nebraska. He was rejected by Harvard’s graduate school and was accepted at Columbia where he met and was mentored by Benjamin Graham, the investment fundamentalist.

Buffett’s current company Berkshire Hathaway, is an investment holding company where stock has traded for as little as $7.50 in 1965 to as much as $115,000 per share.

The investment world doesn’t necessarily hang on every word from the mouth of Warren Buffett, but it does listen. Here are a few excerpts of Mr. Buffett’s wit and wisdom: “Rule No. 1: never lose money. Rule No. 2: never forget Rule No. 1.”

Buffett often uses the advice of Ben Graham and quotes from Graham’s book, “The Intelligent Investor.” “I consider there to be three basic ideas, ideas that if they are really ground into your intellectual framework, I don’t see how you could help but do reasonably well in stocks. None of them are complicated. None of them take mathematical talent or anything of the sort.

“Graham said you should look at stocks as small pieces of the business. (Market) Fluctuations are your friend rather than your enemy — profit from folly rather than participate in it … the three most important words of investing — ‘margin of safety.’

“I think those ideas, 100 years from now, will be regarded as the three cornerstones of sound investing.”

I love the “profit from folly” idea.

Most investors panic when the market drops. The pros hang in there. They invest on the downturn. They make money when others are losing, but always having a “margin of safety.”

Buffett’s advice is to ignore the market moods. He said, “The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stock, we invest in businesses.”

“If we find a company we like, the level of the market will not impact our decisions. We will decide company by company. We spend essentially no time thinking about macroeconomics factors … We simply try to focus on businesses that we think we understand and where we like the price and management.

“For some reason, people like their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.”

From this brief glimpse at a few of Mr. Buffett’s statements I get a clearer understanding of why he is the “Billionaire from Nebraska.”

Notable Quote: “It’s an old principle. You don’t have to make it back the way you lost it.” — Warren Buffett.

Tom is a Registered Investment Adviser and Certified Financial Planner. If you have questions or topics, you may call or write Tom at 1030 Seminary St. Suite D Napa CA 94559, 254-0155, fax 254-0158 or e-mail suntrm@aol.com