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The Success Of Warren Buffett

  
  Education
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Singular focus – Since Warren Buffett was a young boy, he had almost a singular focus to accumulate wealth. He also believed his way to wealth would be through the stock market. At a very early age, he knew what he wanted and where he wanted to go. Successful people always have long-term visions of their life. This is a lesson especially for younger folks. You will only really succeed in life once you know what you want to accomplish. As Yogi Berra said, “If you don’t know where you are going, you may end up some place else.”

Dedication – Mr. Buffett spends about 18 hours every day dedicated to investing capital. This is the type of dedication needed to succeed at his level. I doubt he wastes anytime in front of the television or shopping at the mall. Almost all his time is spent thinking and working on Berkshire Hathaway. This type of dedication can have its drawbacks as well. The book does not portray his family life in a very positive manner. He was separated from his first wife (it appears they did not divorce for P.R. reasons) and did not spend much time with his children as they grew up. There is only so much time in a day, and he spent it mostly on business-related activities.

Independent thinking – Buffett has come up with his criteria for investing in companies. These criteria have been developed over years of studying and reading about his craft. He will only invest in companies that meet these criteria. He does not feel pressured when things do not go his way nor when outside sources suggest new rules for investing. The most telling story of this was back in 1999 during the “technology stock bubble”. Many people were saying he was too old and out of touch. They said he did not understand the “new economy”. Buffett continued to plot his course using the rules he knew and understood. He has been vindicated as the technology market crashed and Berkshire Hathaway has continued to thrive.

Alliances – Mr. Buffett has developed partners and allies to help him attain his goals. He uses these partners to manage his businesses, help find new investments, and to obtain access to capital. Mr. Buffett will be the first to tell you that his wealth would be a small fraction of what it is today without these business associates. (more…)

A Brief History Of Silver Manipulation

  
  Education
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A Brief History of Silver Manipulation

The silver fairy tale of the brothers Hunt
 
In the early 80’s the attempt of the Brothers Hunt, Nelson Bunker and William Herbert Hunt, to fully clamp down the silver market was one of the most spectacular but at  the same time also one of the most unsuccessful financials plans within the then fair world. Despite that the brothers failed in their attempt to clamp the silver market, they have succeeded to make a outright mess of the precious metals market and lose one of the largest fortunes in the world in no time.
 
The expansion of the Hunt Empire
 
Nelson Bunker Hunt and William Herbert Hunt were born in one of the richest American families. Their father Haroldson Lafayette (also known as H.L. or Arizona Slim), had acquired a fortune during the 20s and the 30s in the Texan oil industry. By investing these oil revenues in successful companies, the Hunt family grew into one of the most prosperous families from all over America. When H.L. died in 1974, he left his next of kin therefore an immense capital. H.L. Hunt had 14 children at three different women, 6 with his legal wife, 4 from a bigamist marriage and another 4 at one of his mistresses. Bunker and Herbert were two full-fledged brothers, namely the second and the third son of H.L. Hunt and his first wife Lyda Bunker Hunt. When Bunker and Herbert just started to get a grip on the silver market the 70’s, their capital was estimated around 13 billion dollars. H.I. Hunt’s logical successor and next boss of the Hunt Empire was originally his eldest son Hassie. However, his plans were thwarted when the same Hassie during his twenties had to do to with psychiatric problems and underwent various treatments without success. H.L. therefore had no choice but to name his second son as successor to lead. In the beginning, however, Bunker showed not the gift of his father in order to locate new oil fields. Bunker lost in his early years millions of dollars by error self-rated and fruitless attempts to find new oil fields for the Hunt Empire Carlo. But once Bunker learned how to do it after a few year, he did it immediately with verve and with style. He found an immense Libyan oil field, Sarir Field, which turned out to be one of the largest oil fields in the world. The discovery of this oil field swept into a seesaw the losses which he had piled up in the previous years from the table. In the early 70’s, he and his brother Herbert took over the Empire forever on.
 
Silver times glimmer on the horizon
 
By mid 1970s Hunt developed systematically an obsession for silver. When he went looking for a source of stability in a world that was currently very unstable and subject to inflation was and influences was the fear of international communism, he came out on the magic word silver. He saw not only future in silver but he was also convinced that silver was undervalued and that the silver value could not otherwise than rise. Supported by the opinion of their financial advisors locks he joined the investment group Bache investment house and they put their first steps in the silver world. Middle 1970s the brothers Hunt dominated for almost 10% of the entire silver stock and their increasing impact on the silver market made sure that the silver prices within a few years of $ 2 per ounce increased to more than $ 6 per ounce. They invested not only their entire own capital in silver but they tried also others to convince others to do so. In this way, they found support with a group of Arabian investors who where able to buy huge volumes of silver with their endless supplies of money and propel the price of silver into the skies. The Hunts, backed up by the Arabs, increasingly got more influence in the silver market by which their holding grew out of proportion and which supplied them the means to loan more money and buy more silver and increase the price even more. And the plan seemed to be working! At the end of 1979, after years of price increases, the price for silver was 35$/ounce, a unseen price. Other investors where atracked by these price increases and also started to invest in silver what gave the price a even bigger boost. In the 80’s, the plan of the Hunt brothers seemed to have worked and the market was on his head. In less then a decade they where able to inflate the price from 2$ per ounce in the beginning of the 70’s to 50$ per ounce at the beginning of the 80’s. It even seemed realistic by then that silver would go to $200/$300.
 
Bloody Thursday
 
The end was near. The prices of silver stopped rising and started to go down. They weren’t able to attract enough funds anymore to influence the price and the price started to went down. The price of silver and gold started their seemingly endless drop because investors started to invest their money in bankcertificats for higher interests. Not only the value of the precious metals plummeted but also the fortune of the Hunts went up in smoke. The brother took on massive loans to fund their silver quest and couldn’t repay their debts anymore which they made with brokers like Bache, A.G. Edwards, Merrill Lynch en some others who had to be repaid when the silver market crashed. These brokers started to protect themselves against these drops and made fortunes when the silver went down. The Hunts were confronted by margin calls from their brokers to repay them in the next 5 days or there would be a liquidation. (more…)

DENNIS GARTMAN :On Being Wrong

  
  Education
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-Don’t miss to Read…………………..!!

“If I’ve learned one thing in 35 years of doing this. I’ve learned this and I’ve learned it the hardest of all ways. Because I made the decision one time to do the wrong thing. I learned this. Whatever you do don’t ever, ever, ever, not never, not ever, under any circumstance, any time ever. Am I clear? Add to a losing trade. Never, ever, ever. Why would you ever add to a losing trade? The market, which is the sum total of the wisdom, and perhaps the stupidly, but predominately the wisdom the sum total of the wisdom of the market is telling you are wrong. How dare you argue with the market? How dare you stand up? What sense of hubris must that take on your part to tell the rest of the world that you’re wrong and I’m right. Because that’s what you’re doing when you’re adding to a losing position. Don’t do that. I will tell you. I did that one time. I lost my wife [first wife]to a margin call. I did, in fact, that did happen…November 11, 1983.”  Wives get very upset “when you come home and say, ‘Sweetheart, I lost the house today’”.

“I will tell you I am good at trading. I am good at investing. I am good at making decisions. I am good at admitting mistakes and that’s my best trait. I am really, really good at admitting mistakes. And that’s to me the most important attribute that an investor, that a trader, that somebody who’s trying to make a living matching wits in the market can have is the ability to admit that they are wrong. That trumps all other concerns. Education doesn’t seem to have that much viability to me. It’s the ability to say I’m wrong.”

“The great ones, the really great traders, I’m sorry, don’t average down. They average up on winning positions. They average up on winning long side trades. Why? Because the market is telling you that you are right. Why would you not do more of something when the market is telling you that you are right? Why do most of us constantly do the opposite? Why do most of us try to understand some fundamental about some stock that we like, some industry that we like, some corporation that we like and you understand the fundamentals of it and you like the underlying fundamentals of the industry that it’s in. You like the long term fundamentals of the US economy and you buy some of it at 25 and it immediately goes to 20. It’s not a better buy at 20. It’s a worst buy at 20 because somebody knows something that you don’t know. That’s the hardest thing for all of us to learn. I’m good at trading and I’m wrong most of the time.”

“I’m good at trading and I’m wrong alot according to my wife. When we got married, we sat down the first year and she said you know this is really very sad. You had a good year at trading. You made us a very nice living this year but Dennis you were wrong 53% of the time this year. I thought this was terribly harsh. You couldn’t even beat a coin toss. I got out of it by saying, Sweetheart I’m so in love with you that it’s colored my ability to think. She bought it. I got another year. We sat down the second year. She said, my wife the accountant, one plus two equals three. She said this is really very sad. You made more money trading this year then you made the previous year. But this year you were wrong 57% of the time. And people pay you for your ideas. And I’m standing by the notion last year that I told you. You can’t even beat a coin toss. You need to do better. Sweetheart I’m trying.  Third year we sat down. My wife, the accountant, one plus two equals three. She said this is sad. You made more money than you made the previous two years. That’s lovely. I want to stay with you. But Dennis, you were wrong 68% of the time this year. Almost 7 out of 10 of your trades lost money. You have got to do better. I told her Laura I’m trying. I’m gonna try. Fourth year we sat down. My wife, the accountant, one plus two equals three. She said, you know, I get it now. You had the best year you ever had. Made more money this year then you made the previous three years. That’s lovely. This year you were wrong 81% of the time. I think if you can just be wrong 95% of the time. We’re gonna get stinkin’ rich. I think I can do it. I think I have it in my grasp to be wrong.”

“The important notion here being – when you’re wrong, admit it. I try to tell to tell people that in the business of handling money, whether it’s in the business of playing poker, whether it’s in the business of trading, whether it’s in the business of investing, you have two types of capital with which you get to deploy: that which is in your account and mental capital. And I don’t have must mental capital. I’ve lost most of mine. You lose mental capital when you are holding on to losing trades and worst when you’re adding to losing trades. The fact that you are losing money is inconsequential what’s really worst is you are hemorrhaging mental capital. You’re there defending that losing trade. You’re hanging onto that losing position and you’re not going out and deploying what should be excellent mental capital.  You should be using that mental capital to go find other positions. To go put on other trades. To go make other investments. It’s a wonderful experience when you take off that losing trade and get rid of it. It’s liberating. I get liberated 20 times a day. It’s a lovely thing. It’s astonishing how many mistakes I make. So the most important thing I want to get across today, tonight, and for your future and what separates the really great investors from the mediocre and the mediocre from the losers is that the losers always go out in exactly the same way…badly.”

The worst degree a trader can have is in economics and the best one is a liberal arts degree preferably “in psychology” or even religion because  “at any one time, down on the floor the background that seemed to have the most viability was religion. Because there would be 50 people saying ‘Oh good God just let this thing come back and I will never do that again.’ The problem is we are all sinners in the hands of an angry God with a very large margin account and more often than not he’s trying to wreak havoc upon you.”

Gartman’s corollary to “markets can remain irrational longer than you can remain solvent” is “the markets will return to rationality the moment you have been rendered insolvent.”

On Shakespeare:  “You’ll be better trained to deal with the uncertainties that exist in the market and to understand why Hamlet waited so long after finding out that it was his father-in-law that had killed his own father. He had the proof, he knew it was there. And yet the entire play of Hamlet is Hamlet delaying, and delaying and delaying and not acting. That’s what Hamlet is all about. It’s about the inability to make a decision. That’s what trading is all about. It is about the ability to make a decision. Hamlet would have been a terrible trader. Or why did Lear split his kingdom into three parts? What was he thinking? He would have made a terrible trader.”

Here is what the markets are all about:  “The study of human begins dealing with the rational and the irrational. Dealing with rational numbers in an irrational environment. Dealing with irrational numbers in a rational environment. Dealing with irrational numbers in an irrational environment. And trying to make sense out of the chaos. Trying to bring order to the chaos.”

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