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Warren Buffet and Asset Protection

By John Dietz - Email Editor

Date: Nov 28, 2006

Dear Subscriber:

Warren Buffet was once just like you and me, looking to expand an entrepreneurial idea into wealth through his energy, integrity and diligence. Under Buffet's command, the stock price of Berkshire Hathaway has soared from its original $7 a share in 1962 to over $100,000 a share today. No matter how many times you hear these numbers, it is still mind numbing. Take 500 shares and do the math. Buffet's investing system looks simple, but simple does not mean easy. The value system developed by Buffet and his company gurus allows for interpretation. He is often referred to as "The Oracle of Omaha."

What is his secret?

Warren Buffet still claims to be an ordinary individual. He continues his modest lifestyle, and has a record of accomplishments to show that his philosophy will be solid for generations. And yet he has had to survive just like every other investor and entrepreneur: lawsuits, scandals, returns short of goals, and weathering the changing storms. His most recent storm is the $3 billion dollar insurance loss from Hurricane Katrina. His motto has served him well: "always have a margin of safety."

Warren Buffet is literally a poster child for Asset Protection.

Warren Buffet, in 2005, speaking about the importance of looking through the windshield and not in the rear view mirror: "Investors are always looking for the Holy Grail, the next great idea that will carry performance and pension returns for several years. Right now it's 'alternative investments' - private equity and hedge funds, these assets have outperformed public equities for the past five years since the tech bubble burst."

So why is Warren Buffet a poster child for Asset Protection?

On the surface he lives like a common person; teaching us people are people. He lives in the same house he bought in 1958, and has worked in the same office for the last 42 years. His grandchildren go to the same high school as his father. To date there have been over 20 books written about this sage of investing and his basic precepts of life. After his first meeting with Warren Buffet, Bill Gates commented, "Warren has a model of the world that is very complete."

Warren Buffet's "Two Biggest Rules of Investing."

Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.

If you want more Buffet wisdom, read his letters to shareholders , or the annual reports to shareholders . Some of them read like a 1960's Haight-Ashbury District sing-a-long. When you tack on Buffet's lifetime accomplishments and averages, it is not hard to imagine the shareholder appreciation for Buffet's laissez-faire leadership.

In the end, Warren Buffet's philosophy is not a stand-alone story. Many people have similar philosophies. Warren is a patient leader who will stand on the sidelines with investments until he has determined the right scenario.

Today, after all the company operations are complete, Berkshire Hathaway receives $100 to $150 million U.S. dollars a week. His investments and his story are a pillar of stability. Mr. Buffet goes into his office everyday to paint his canvas just like the giddy schoolboy he has been for 76 years. He claims he feels like Michelangelo painting the Sistine Chapel. There are no committees or meetings. Warren invests the money like he always has, using his core tenants of value investing. He admits that today it is harder to find companies with what he coins as having "a durable competitive advantage."

The common denominator for me is that Warren invests in quality people, management and the building blocks of Asset Protection.

Here is my favorite Buffet quote:
"In evaluating people, you look for three qualities: integrity, intelligence and energy. If you don't have the first, the other two will kill you." - Warren Buffet

Until next time,

John

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