Very nice article in The Washington Times today. (Edited to the best bits)

The Fading of the Mirage Economy By Steven Pearlstein
The global economy is purging itself of unsustainable imbalances. Most of us understand that an overabundance of cheap credit created a housing bubble that produced too many homeowners supporting a lifestyle they could not sustain. We are now coming to accept the reality of lower prices and the wisdom that a house is not a substitute for a retirement fund.

The reality is that for too many years, airlines have sold too many tickets at prices that failed to reflect the real cost of providing the service passengers want and expect. But they also include costs that may be less obvious, like keeping up with preventive maintenance, hedging fuel costs, paying a decent wage to front-line employees, investing in modern air traffic control systems, and paying a price that reflects the true value of scarce air space and landing rights.
Airline executives will say that if they were to charge enough to reflect all these costs, they would have many fewer passengers. That's the point: A sustainable equilibrium will inevitably involve a smaller industry with fewer planes, fewer flights, fewer passengers and fewer employees.

Enjoying new job immensely. Fervently hope that can do the job to everyone's satisfaction, scared that I won't be able to. Anyway hope to try my very best.

Some good stuff from Emerson on Fate :

• The Turk, Arab and Persian accepts the foreordained fate :

"On two days, it steads not to run from thy grave,

The appointed, and the unappointed day.

On the first, neither balm nor physician can save,

Nor thee, on the second, can the Universe slay."

• Great men, great nations, have not been boasters or buffoons, but perceivers of the terror of life, and have manned themselves to face it.The Spartan, embodying his religion in his country, dies before its majesty without a question.
• The bill of a bird, the skull of a snake, determines tyrannically its limits. So is the scale of races, temperaments, sex, climate and the reaction of talents imprisoning the vital power in certain directions.
• Let him value his hands and feet, he has but one pair. So he has but one future, and that is already predetermined in his lobes and described in that little fatty face, pig-eye , and squat form. All the privilege and legislation in the world cannot help to make a poet or a prince of him.

Don't sweat the small stuff.

• Do something nice, don't tell anyone about it.
• Remember that when you die, your in-basket won't be empty.
• Lower your tolerance to stress : What you want to do is notice your stress early. When you feel your mind moving too quickly, its time to back off and regain your bearings. When your schedule is getting out of hand, its a signal to slow down and reevaluate what's important rather than power through everything on the list. When you're feeling out of control and resentful of all you have to do, rather than roll up your sleeves and "get to it", a better strategy is to relax, take a few deep breaths and go for a short walk. When its small, its manageable and easy to control. As you lower your tolerance to stress you will also see things as they are and come up with creative ways to handle the work. (E.g. ask someone to help, talk to manager)
• Repeat to yourself : "Life isn't an Emergency". We take our own goals so seriously that we forget to have fun along the way and we forget to cut ourselves some slack. We beat ourselves up because we cannot meet self-imposed or arbitrary deadlines. The first step to becoming more peaceful is to admit that in most cases you're creating your own emergencies.
• Set aside Quiet Time, Every Day. : Mornings, its absolutely silent outside and I am in complete solitude. There is something rejuvenating and peaceful about being alone and having time to reflect, work or simply enjoy the quiet.
• Breathing from the Belly : Breathe before your Speak. Increased patience and remarkable results for virtually everyone who has tried it. Pause and breathe after the person to whom you are speaking is finished. You will get used to the beauty and power of breathing. We will overreact less, misinterpret meanings less, will not impute false motives or form opinions before our fellow communicator is finished.
• Praise and Blame are All the Same. : One of the most unavoidable life lessons is having to deal with the disapproval of others. The sooner we accept the inevitable dilemma of not being able to win the approval of everyone, the easier our lives will become. "Here is is again. That's okay"
• Quiet the Mind. "All of humanity's problems stem from man's inability to sit quietly in a room alone". Train your mind for 5-10 mins a day. Close your eyes and focus your attention on your breath- As thoughts enter your mind, gently let them go and bring your attention back to your breath. This isn't easy, beginners can only do it for seconds at a time.
• Cut yourself some slack. There will be many times when you lose it, get used to it. When you do it, its okay. Just start again.As long as your doing your best and moving in the right direction, that's okay.
• Become an early riser. An hour or two that is reserved just for you-before your day begins-is an incredible way to improve your life. Sometimes I'll just sit and do nothing. The phone never rings, no one is asking me to do something for them., and there is nothing that I have to absolutely do. By the time everyone wakes up, I feel like I've had a full day of enjoyment.. All of a sudden, the books are getting read, the meditation gets done, the sunrise appreciated. Turn off the TV at night and get to sleep and hour or two early.
• Listen to your feelings : You have at your disposal a foolproof guidance system to navigate you through life. You can think of your negative feelings in the same way you think of warning lights on the dashboard. Don't pretend that negative feelings don't exist. Instead of rolling up your sleeves and fighting, back off, take a deep breath and relax. Remember life isn't an emergency unless you make it so.
• IF Someone throws you the Ball, You don't have to catch it. Developing a more tranquil outlook on life requires that we know our own limits and take responsibility for our part. By simply not answering the phone, or on being insulted or criticised, if you choose to drop the ball, means some more peace of mind. You can either catch it or drop it and go on with your day.

Stress !

Stress is caused by two things and two things only :

1. Any time we believe we "have to do something".
2. Any time there is a conflict between our actions and beliefs.

When you pretend not to like do something, pretending to enjoy something you don;'t really like, or any time of pretending whatsoever, you are "coping". Coping causes physiological havoc inside your body. The answer or alternative to coping, is complete honesty - especially with yourself. This puts realness back into your life and eliminates feeling out of control. As you honest with yourself, you are living life as it really is and the result is true joy rather than pretended happiness. Self-honesty fosters good health.

In a nutshell, the way to avoid coping is to be completely honest with yourself. Coping is just surviving. Self honesty gives vigor to life and fosters strength. When hurting words are spoken, damaging deeds are done, or discouraging events take place, you can focus on your feelings and not try to hide them. This gives your hypothalamus some rest. The only message that is stored is the truth- that your feelings were hurt, you struggled to get by, or you felt sad. All this does is reinforce to the mind that your ability to feel and to recognize feelings is still functioning and a series of 1400 chemical reactions which constitute survival or coping mode will never be initiated.

Blowing up and getting angry, giving up, or gritting your teeth and going at it again all allow the survival mode to keep on going which is bad for the body.

Re-energizing is simply doing things that you really enjoy. As soon as you begin to experience stress, you lose sight of who you really are and what you enjoy doing. You begin to ignore your dreams and aspirations and put them aside.

You have been taught to ignore your feelings because the only thing that is important is being successful. Unfortunately, this system also teaches you to pay less and less attention to the child within you that does understand what you want. Along the way, creativity, originality, fun and individualism become lost. The child in you wants to crate new things, to play and laugh, climb mountains, sail around the world, give a big hug, splash in the puddle, explore the wilderness, fight the bad guys and win, find a Cinderella or Handsome Prince, collect pretty things , and let the wind blow your hair wherever it wants.

For most people the end point is feeling worthless and/or depressed. I would rather go to work than be depressed. I don't end up being guilty, frustrated or worthless. So "I want to go to work". Reality then is that "I want to go to work" not that I have to go to work.

Each of us already knows what the ideal "Big Picture" is for us. It is in our heart, we can feel it. So, taking your time to feel what is most important to you is important.. Your feelings are very close to the truth. Trust them. A good person is loving, honest, kind , courageous, gentle, industrious, financially independent, compassionate, giving and forgiving.

The result of being free from stress is that the body can operate in the efficiency mode as it was designed to do.

Prevention :

• Exercise : 5 days 20-60 mins exercise.
• Water : Liquid Gold. Drink water when you feel you're hungry
• Low fat food.

Sir John Templeton also tells us: "Before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century."

Read a bit about Lincoln today. Interesting to read his comments on liberty for slaves, yet acknowledge social disparities. Found some of his quotes :

• "If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business. I do the very best I know how - the very best I can; and I mean to keep doing so until the end. If the end brings me out all right, what's said against me won't amount to anything. If the end brings me out wrong, ten angels swearing I was right would make no difference." The Inner Life of Abraham Lincoln: Six Months at the White House by Francis B. Carpenter
• "Those who deny freedom to others, deserve it not for themselves; and, under a just God, can not long retain it."
• "My paramount object in this struggle is to save the Union, and is not either to save or to destroy slavery. If I could save the Union without freeing any slave I would do it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that. "
• "Common looking people are the best in the world: that is the reason the Lord makes so many of them."
• "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."
• "With malice toward none, with charity for all, with firmness in the right as God gives us to see the right, let us strive on to finish the work we are in; - to do all which may achieve and cherish a just and lasting peace, among ourselves, and with all nations."
• "I am rather inclined to silence, and whether that be wise or not, it is at least more unusual nowadays to find a man who can hold his tongue than to find one who cannot."
• "I have not permitted myself, gentlemen, to conclude that I am the best man in the country; but I am reminded, in this connection, of a story of an old Dutch farmer who remarked to a companion once that 'it was not best to swap horses while crossing streams'."
• "Whenever I hear any one arguing for slavery I feel a strong impulse to see it tried on him personally."
• "The probability that we may fall in the struggle ought not to deter us from the support of a cause we believe to be just; it shall not deter me."
• "Leave nothing for tomorrow which can be done today."
• "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser - in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough."
  
• "I will say then that I am not, nor ever have been in favor of bringing about in anyway the social and political equality of the white and black races - that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races which I believe will forever forbid the two races living together on terms of social and political equality. And inasmuch as they cannot so live, while they do remain together there must be the position of superior and inferior, and I as much as any other man am in favor of having the superior position assigned to the white race. I say upon this occasion I do not perceive that because the white man is to have the superior position the negro should be denied everything."
  
• "I have never said anything to the contrary, but I hold that notwithstanding all this, there is no reason in the world why the negro is not entitled to all the natural rights enumerated in the Declaration of Independence, the right to life, liberty and the pursuit of happiness. I hold that he is as much entitled to these as the white man. I agree with Judge Douglas he is not my equal in many respects---certainly not in color, perhaps not in moral or intellectual endowment. But in the right to eat the bread, without leave of anybody else, which his own hand earns, he is my equal and the equal of Judge Douglas, and the equal of every living man. "
  
• "With some the word liberty may mean for each man to do as he pleases with himself, and the product of his labor; while with others, the same word may mean for some men to do as they please with other men, and the product of other men's labor. Here are two, not only different, but incompatible things, called by the same name - liberty. And it follows that each of the things is, by the respective parties, called by two different and incompatible names - liberty and tyranny."
• "It is said an Eastern monarch charged his wise men to invent him a sentence to be ever in view, and which should be true and appropriate in all times and situations. They presented : 'And this, too, shall pass away.' How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction!"
• "I am not a Know-Nothing. That is certain. How could I be? How can any one who abhors the oppression of negroes, be in favor of degrading classes of white people? Our progress in degeneracy appears to me to be pretty rapid. As a nation, we began by declaring that "all men are created equal." We now practically read it "all men are created equal, except Negroes." When the Know-Nothings get control, it will read "all men are created equal, except Negroes and foreigners and Catholics." When it comes to this, I shall prefer emigrating to some country where they make no pretense of loving liberty - to Russia, for instance, where despotism can be taken pure and without the base alloy of hypocrisy."
  
• "Stand with anybody that stands RIGHT. Stand with him while he is right and PART with him when he goes wrong."

From Berkshire Annual Meeting 2008

• Munger : The key is not to be seduced by crazy ideas, but instead just stick to the fundamentals year after year. Academia doesn't get too interested in us -- we're too simple. What would the professors do? A great many of the formulas [they use to analyze securities and markets] are dead wrong. They exist purely to give the intellectual class something to do. We don't do anything just exercise our intellectual proclivity for mathematical formulas."
• Then Buffet said one of the most remarkable things I've ever heard him say: "There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month."
• Q: You said before that one of the things you look for in businesses you're buying is good managers. To me, that's a hard judgment to make if you haven't known him for long on a personal level. How do you go about figuring that out about somebody?
  WB: We're buying businesses where the managers come with it, so I do have a record [I can judge]. If I had to pick out the five people in this group here who would be the best managers, I wouldn't know how to do it. I mean, you all have great IQs, great academic records. You've all shown the energy to get into school.
• Can I pick out the five best? I don't think I can do it. What I can do, when I've seen somebody run a business for 20 years, is decide whether they're going to keep behaving in the future as they have in the past. So when I buy a business - it's the biggest question I ask - "Do they love the money, or do they love the business?" [One giveaway is] if they auction the business. We've never bought a business at an auction.
  I got a fax from a fellow named Peter Liegl from Forest River. I said, "Pete, send me the last few audits and I'll call you tomorrow" Never met him, never heard of the company. (It's a RV company.) So I called him that afternoon. I said, "Pete, here's what I'll do. And if it works for you, fine." I'd never met the guy, but I could still tell by just the way he presented it and his thinking on it.
  I said to him, "Pete, what kind of salary would you like"; this is a company that did a billion seven last year. That's not the way they teach you to do it in business school, but I don't want anybody working for me that has a compensation system they're unhappy with. And he said, "I don't know." And I said, "Well, just tell me because I want you to be happy. You have to run this thing." "Well," he took a little while, "Well," he said, "I looked at the proxy statement, you make $100,000. I wouldn't want to make more than you do." So that became his salary.
  I said, "I want you to have a percentage interest in future earnings above this level," which we worked out. But he offered $100,000 and I offered the percentage above that. I've never seen this place. I hope it's there. [Laughter] Pete may have some 11-year-old kid in there that says, "What figure shall we send Warren?" [Laughter]
  He doesn't need the job. As long as that thing is a lot of fun for him, he's going to keep running it. [I get offered all] kinds of deals from LBO operators. I would just love to bet against the projections of every one that they give me. They hand me these books, which I don't even want to look at, and of course they always just project like that [points upward like a graph that only increases]. I would just love to make a career out of betting against the figures presented in those books, but I don't get a chance to do that. If you ever get a chance to short investment banker books, that would be a great activity.
  
• We don't think about cost of capital or risk-adjusted. I mean, we don't want to take any risk, and we don't. That doesn't mean we don't do things that are wrong, but we are not doing anything that risks real losses.
  
  And as I said earlier [regarding stock holdings], we would have sold the thing to do something that offered even better opportunity. If it's going to permanently lose money, I reserve the right to sell it, and if it has labor problems, I reserve the right to sell it. They've been there for 20-plus years, those principles. But we believe in them. We follow through on them.
  The smaller capital expenditures, or even fairly large ones at the subsidiaries, they just do them themselves. They don't need me, because if some guy comes in to me and talks about something in the yarn plant or something in Georgia, what the hell do I know about it? If I say the internal rate of return we demand is 15.83, it'll be 15.84. I mean, you just can bet on it. We don't go through those charades. And it saves my time, saves their time.
  
• There isn't one security that I've got in the portfolio that I look at as-in terms of risky - in the sense of permanent capital loss. They can go down 50%.
  Berkshire Hathaway (BRKA, Fortune 500) stock itself has gone down 50% three times since I bought the first stock in at 7 3/8. In 1974 it got cut in half. In 1987 it got cut in half. In 1998, 2000 or so it got cut in half. So that doesn't make any difference. I mean, I just don't worry about it. I worry about permanent loss of capital. I worry about making the right businesses. I worry about keeping the managers happy. Everything else pretty much takes care of itself.
• Berkshire Hathaway Inc. says its first-quarter profit fell 64%, because it recorded an unrealized $1.6 billion loss on its derivative contracts. BRK.A reported net income of $940 million, or $607 per share, in the quarter ended March 31. That's down significantly from the net income of $2.6 billion Berkshire generated a year ago.
  Warren Buffett, warned shareholders in his annual letter that the derivatives could make the company's earnings volatile. But Buffett predicted the derivatives will ultimately be profitable.
  The four analysts surveyed by Thomson Financial expected earnings per share of $1,476.99 on average.

From Charles Hugh Smith : Where is the bottom in housing ?

What's a sound business proposition? making a profit from day one. At the real bottom in real estate cycles, you can buy a house or apartment and rent it out at market rates--and make a profit on day one in cash-accounting terms.

1. down payment. The down payment isn't "free": you could be earning 3% or so in a money market/T-bill. As pathetic as that is, it's not zero. If the down payment isn't earning more than 3%, then why bother buying real estate?

2. mortgage/borrowed money. This is self-evident. But wait--there's more!

3. property management. Even if you do it yourself, it's not "free"; nobody's time is free. The standard fee is abour 5-6% to handle the rental and collect the rent. This does not cover gardening, upkeep, repairs, etc.--those are extra. Plus somebody has to respond to tenant complaints. That's not free, either.

4. property taxes. Like weeds, these just grow constantly. Don't forget the special assessments.

5. advertising/marketing. Sure, craigslist is free--but somebody has to meet prospective tenants, process their rental applications, check their credit, etc. Maybe that's included in your property management fee, maybe not.

6. auto/truck expenses. hauling stuff to the dump and driving to Lowes/Home Cheepo isn't free.

7. cleaning and maintenance. When the tenant moves out, the place isn't perfect, no matter what you hope/what the lease says. (And how good is that lease, anyway? Better add a couple hundred bucks for attorney's fees if you're smart.)

Ah, maintenance. That covers quite a few costly items: appliances that die, carpets that wear out, hardwood floors stained by cat pee/soggy house plants, furnace filters, paint that gets grimy, etc. Many pros figure 10% of the rent goes (eventually) to repairs/maintenance.

8. Insurance. It's nice if you could get homeowner's coverage, but you can't--your rental is a commercial property. Now you need liability coverage, too, not just fire insurance. Nothing like a tenant "tripping on the broken concrete" to remind you of that.

9. repairs. A building is a living thing which breaks down over time--expecially if it's a cheaply built, poorly constructed McMansion/condo. Windows break, paint peels, roofing leaks, flashing rusts, stairs rot, crummy veneer flooring delaminates, the list is endless.

10. utilities. Many landlords pay for water, but maybe you won't.

11. fees and licenses. Your city or county probably wants some business license fees from your landlording business. One way or another, there's sure to be some fees or licensing costs somewhere. Maybe the city inspects the property for safety--and bills you. Some agency or municipality is sure to assess you something beyond property tax.

12. Vacancies. Yes, some premium properties are rarely empty, but don't fool yourself--the pros know vacancies are a fact of rental real estate life. Most figure 5% (for premium properties) to 10% (for less than premium).

OK, so let's say a rental property rents for $1,500/month in the real world. In my neck of the woods, this would be a small 2-bedroom, 1-bath bungalow.

To keep things simple. let's say the rental costs $300,000 and the owner bought it with no down payment. According to zillow.com's mortgage estimation tool, a $300K mortgage at 6% (30-year fixed-rate) costs $2,124/month or $25,500 a year.

A rough guesstimate of all the non-mortgage expenses listed above for a $300K property comes to between $8,000 and $9,000, so let's take the lower number. (Insurance and other costs vary widely, too.) $8K + $25K = $33K in expenses against $18K in annual income. A $15,000 per year loss is not a good business proposition.

So let's drop the price down to $150,000. The mortgage drops to $1,224/month or $14,600 annually. Let's shave another $1,000 off the property tax (too bad for the city/ county depending onrising property tax revenues) and assume all non-mortgage expenses can be reduced to $6,000 per year. $14.5K + $6K = $20.5K versus $18,000 rental income: we're down to a $2,500 annual loss.

So let's ratchet the pruchase price down to $130,000. Now the mortgage is only $13,000 a year and the non-mortgage expenses, well let's say they're down to $5,500 a year. $13K + $5.5K = $18.5K against $18K in rental income. Hey, we're finally getting close to breakeven here. An actual, honest profit is just around the corner.

So let's assume a purchase price of $126,000 for the house which rents for $1,500 per month ($18,000 a year). Now at long last we can anticipate a modest profit--unless of course the property sits vacant more than a few weeks out of the year.

Real estate investment pros have a rule of thumb for establishing fair value of rental property. Multiply the annual gross rental by between 6 and 10; that gives you a "business" estimate of the value of the rental. In not-so-great neighborhoods, a multiple of 6 is standard; a house that rents for $18,000 a year would thus be worth $108,000. A moderate neighborhood would fetch a multiple of 7--magically, our $126,000 number. Premium neighborhoods (where it is presumed you can raise the rents) may be worth 8 to 10 times gross annual rents.

So even in a wonderful neighborhood with terrific schools and other assets, a house renting for $18,000 a year is worth no more than $175,000--as a business proposition. Of course you can pay more, but you're paying for "blue sky," not an asset that can be sold on the open market as a business proposition.

It's easy to multiply a number by 7. That big house down the street that rents for $3,000 a month/$36,000 a year? At the real "bottom," that house will sell for about $250,000 (or less). That condo which rents for $1,200/month/$14,000 a year? $100,000, tops. And so on.

And what's a time-tested method of figuring that price? Seven times gross annual rental income.

CA SDI questions. Can we deduct from Schedule A itemized state taxes ?

Are you asking about deducting SDI that you paid, or having to report SDI benefits (disability benefits) that you received?Disability benefits that you receive from the state (California) are nontaxable and you do not need to report it.For the SDI insurance contributions you paid through your paycheck as a withholding, you can deduct them against your federal tax (if you itemize) as a state tax deduction if the contribution appears on your W-2 as "SDI" or "CASDI". The alternate, voluntary program that appears as "VDI", "VPDI" or "CA VPDI" is nondeductible.

Intelligence is the capacity to perceive the essential , the "what is". J Krishnamurthi

MUST READ

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

See debt

Should change the name of this blog to foolishcontrarian.blogspot.com based on AMR debacle. If had bought a house would have looked more of a genius than I do now :(

God's sugar daddy
LEAH McLAREN

"His earliest virtues," Lauren Templeton explains, "were thrift, an industrious nature, wild curiosity and a quiet self-assuredness."

The law office overlooked Winchester's main square, so Harvey could see the courthouse where auctions were held when the bank foreclosed on farms. "When the auctions failed to produce a highest bidder," writes Lauren Templeton in Investing the Templeton Way, the book she and her husband, Scott Phillips have just published, "Harvey Sr. would leave his office and bid … usually able to buy farms for a few cents on the dollar.
"Uncle John's observation of this practice as a young boy is likely the very first seed of this most famous investing approach, which he coined, buying at the point of 'maximum pessimism.' "
Of course, "buy low, sell high" is an old stock-market maxim, but it takes courage to follow through. And as Mr. Templeton has wryly put it, "usually God favours the people who try to do good. So, when you find the crowd is desperately trying to sell, help them and buy. When you find that the crowd is desperately trying to buy, help them and sell. It usually works out."
This kind of gutsiness got him his start as an investor. In 1939, he was young and living in a seedy Manhattan walk-up when he took an almost unthinkable risk. He borrowed $10,000 and bought $100 worth of every stock then valued at less than $1 a share on the New York Stock Exchange. It looked like madness, but Germany had just invaded Poland and he felt the looming war would drive up the market. All but four of 104 stocks he bought turned a profit.
His ability to calculate risk and sense a payoff proved uncanny and consistent. Sixty years later, the same man who bought low as conflict loomed sold high just as the tech bubble was about to burst.
It also may have been the seed of his mythic frugality. Despite his vast wealth, he flies economy class and long ago renounced his citizenship and took up residence in the Bahamas, a tax haven with a wonderful climate.
Lauren Templeton says "the accumulation of money was merely a way for him to measure his progress. He wasn't out buying Rolexes, that's for sure. This is a man who made $200-million off Kia automobile stocks, but for many years thought a Kia was too expensive to buy. Bargain-hunting affected every part of his life."
"He's like John D. Rockefeller, who said, 'God gave me my money.' "
Canadian researcher Elizabeth Dunn reported this week that people who spend their money on others feel happier than those who spend it on themselves. According to old friend and finance colleague Foster Friess, this applies to Sir John. "I don't think he went out of his way to accumulate. It's just something that happens to people who are committed to serving others. It's not something he sought, but something that came to him because of his serving attitude.
"His faith dictated that the money wasn't really his anyway but that he was merely a steward of it. So that is probably why he was motivated to spend it in a way he thought would be pleasing to God."
"In general, the problem with our culture is narcissism, solipsism and selfishness," says Steven Post. "Sir John has always said to me, 'Just love and let everything else take care of itself.' He agrees with Abe Lincoln, who said we have to focus not on what we know, but on what we don't know.
"So, what I'm financing is humility. I want people to realize that you shouldn't think you know it all."

Wow, Bear Stearns being bought out for $2 a share. Fucking scary. You never know.. Stay away from what one doesn't understand. Thankfully did not venture into financial shares because of lack of understanding. One exception is CNA, hope they will be ok.

What happens tomorrow, where does AMR go? Did I make a huge mistake with AMR too?
Scared but holding on, think it should still be ok.

I think I may have made a mistake with AMR. Either they go into bankruptcy or should go back to 16-17 if oil falls a bit. Spinoff may yield some positive too. But debt load should have warned me. Bought CNA for retirement acct.

Not looking at account anymore due to AMR, did buy more but am on a lot of margin now. :(

Oh well, back to the poorhouse..

Emory's Goizueta Business School and McCombs School of Business at UT Austin w/Mr. Buffett.

• Charlie and I operated mostly with 5 positions. If I were running 50-200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. The position was American Express. In 1951 I put the bulk of my net worth into GEICO.
• Over the past 50-60 years, Charlie and I have never permanently lost more than 2% of our personal worth on a position. We’ve suffered quotational loss, 50% movements. That’s why you should never borrow money.
• Snickers has been the #1 candy bar for the past 40 years. If you gave me $1 billion to knock off Snickers, I can’t do it. That’s the test of a good business.
• To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your own fault.
• If you have a lot of people that would hide you, then you can feel pretty good about how you’ve lived your life. I know people on the Forbes 400 list whose children would not hide them. The most powerful force in the world is unconditional love. The more you try to give it away, the more you get it back. At an individual level, it’s important to make sure that for the people that count to you, you count to them.
• You like people who are generous, go out of their way, straight shooters.
• The philosophy either takes immediately or it doesn’t at all. The reason gets down to temperament. People want to make money fast, but it doesn’t happen that way.
• There is always some introduction of moral hazard when government decides to act in favor of the common good versus letting someone fail. I would be disinclined to second guess the Fed, they have more information and are trying to do what’s right.
• Tell me who your heroes are and I’ll tell you how you’ll turn out to be.
• What we are seeing is a huge repricing and evaluation of risk, correcting for problems of the past. I don’t know of good credit propositions that are going unfulfilled. There’s lots of cheap credit for sensible deals, which I don’t define as anything that happened over the last 12, 18 months. Comparatively, this is not a credit crunch. In 1982 the prime rate was 22%.
• We’ve made lots of mistakes, but they don’t bother me. We are in the business of making many decisions and there are bound to be mistakes.
• It just doesn’t pay to dwell on the bad things. Finding the right spouse is 90% of it. If you are lucky on health and lucky on your spouse, you are a long way home.
• I recommend an index fund for these sovereign wealth funds. It gives them exposure to the US market, but they won’t get taken by salespeople with bad deals.
• I don’t think there is much being overlooked now, but I’m forced to look at big things. In 1951, I used Moody’s and S&P manuals as my sources of information. I went through them page by page.
• It’s also important to avoid managers who use leverage. It’s the reason that investors with 160 IQs flame out.
• Behaving decent is a large part of it. I tried to be useful and visible. I gave him stock tips and kept up with him. Almost always good things come from good behavior. It’s good to have a willingness to pitch in when you aren’t going to get credit for it.
• I just naturally want to do things that make sense. I don’t care what other rich people are doing. I don’t want a 405 foot boat just because someone else has a 400 foot boat.
• My wife was responsible for bringing up the children. In my own life I did virtually no social functions or meetings that I didn’t want to do. I’ve not seen many males having to make tough choices. But women are the ones who have tough situations.

"Managing your career is like investing. The degree of difficulty does not count. So you can save yourself money and pain by getting on the right train."

Short sale Q&A from WSJ

Placing a BidOn a Short Sale
By June Fletcher
Question: We are first-time home buyers and found a beautiful house being sold as a short sale. It seems too good to be true, and our real estate agent referred to short sales as playing a game of roulette. Are the risks involved with a short sale too much to handle?

Notice that I didn't put falling in love on this list, since that's what you shouldn't do with this house. A short sale, which involves buying a house for less than the amount the seller owes the lender, can be time-consuming, frustrating, and --- if the lender refuses your offer -- ultimately unsuccessful. If the agent you've been using doesn't want to get involved, ask him or her to refer you to someone who specializes in this sort of work. You also need to hire an attorney experienced in this kind of transaction.
But when home values are dropping, like they are in many places today, and the owner hasn't built up much equity, that's not an option. So some lenders will accept less than the amount owed to avoid the hassle and expense of auctioning the house, providing the owner proves that he doesn't have other assets to make up what he owes.
Even with experienced people at your side, it pays to arm yourself with facts before you make an offer. Don't assume that the house is a bargain, since the owner may have bought the house at the peak of the housing cycle and may owe so much that he can only discount it to current market prices. Find out what comparable houses are selling for, whether a foreclosure notice has been filed for the property, who owns the loan or loans, and how much is owed -- you'll have to deal with them all.
The seller may eagerly accept your offer, but he isn't the final arbiter of the deal -- the note holders are. So make your offer contingent on the acceptance of the lender or lenders. Since the lenders want to know that you can back up your offer, include as much information as you can on your financial resources, as well as a preapproval letter from a lender.
Although the property may be advertised as-is, make sure the deal gives you the right to have and approve home and pest inspections by qualified professionals. Short sellers usually have given up maintaining their homes; you need to know what other expenses to expect.
Also, place a time limit on your offer -- since lenders will sometimes drag their feet, hoping to get a better deal. Short sales rarely take a short time to complete, but you shouldn't wait forever.

Kahlil Gibran quotes :

• I have learnt silence from the talkative, toleration from the intolerant, and kindness from the unkind; yet strange, Iam ungrateful to these teachers.



• Out of suffering have emerged the strongest souls; the most massive characters are seared with scars.
• Yes, there is a Nirvanah; it is leading your sheep to a green pasture, and in putting your child to sleep, and in writing the last line of your poem.
• An eye for an eye, and the whole world would be blind.
• And ever has it been known that love knows not its own depth until the hour of separation.
• Doubt is a pain too lonely to know that faith is his twin brother.



• Faith is an oasis in the heart which can never be reached by the caravan of thinking.



• Friendship is always a sweet responsibility, never an opportunity



• Hallow the body as a temple to comeliness and sanctify the heart as a sacrifice to love; love recompenses the adorers.



• If the other person injures you, you may forget the injury; but if you injure him you will always remember.



• If you love somebody, let them go, for if they return, they were always yours. And if they don't, they never were.



• Keep me away from the wisdom which does not cry, the philosophy which does not laugh and the greatness which does not bow before children.
• Let there be no purpose in friendship save the deepening of the spirit.
• Nor shall derision prove powerful against those who listen to humanity, for they shall live forever. Forever.
• Of life's two chief prizes, beauty and truth, I found the first in a loving heart and the second in a laborer's hand.
• Perplexity is the beginning of knowledge.
• Safeguarding the rights of others is the most noble and beautiful end of a human being.
• There are those who give with joy, and that joy is their reward.
• What is this world that is hastening me toward I know not what, viewing me with contempt?
• Wisdom ceases to be wisdom when it becomes too proud to weep, too grave to laugh, and too selfish to seek other than itself.
• Work is love made visible. And if you cannot work with love but only with distaste, it is better that you should leave your work and take alms of those who work with joy.
• Your daily life is your temple. When you enter into it take with you your all.
• Your friend is your needs answered.

Another few lines about Templeton

Templeton is described as “one of the handful of true investment greats in a field crowded with mediocrity and bloated reputations.” He believes any investor would be foolish to restrict his investments to his home country. Seek out the world’s best investments, he advises, wherever they reside. In the 1950s, he poured shareholders’ money into the German and Japanese stock markets. With the wounds of WWII still fresh, investing in Japan was about as popular with Americans then as the idea of funding the Taliban today. But as these battered economies were gradually rebuilt, his investment returns were substantial. Today he still favors the investment outlook for emerging markets, particularly China. At the height of the Internet bubble, Templeton sold short dozens of young technology companies just before their shares came out of “lock-up,” the six-month cooling off period following an IPO. He made over $80 million in a matter of weeks. He still calls it “the easiest money I ever made.”
Templeton knows what it means to be a true contrarian. “To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude… and pays the greatest reward.” Wise words for those contemplating what to do in today’s volatile markets.

Templeton quotes social reformer Henry Beecher, “No man can tell whether he is rich or poor by turning to his ledger. It is the heart that makes a man rich. He is rich according to what he is, not according to what he has.” Templeton is a great believer that true wealth doesn’t come from making money, but from fulfilling a purpose outside ourselves, whether that’s exercising our talents, raising our kids to be happy, productive adults, or contributing to our communities in some meaningful way. As Templeton is fond of saying, “Happiness pursued eludes, happiness given returns.” “We’ve made you a few dollars?” I asked.He touched my arm, smiled and said “Oh, I’ve been far too fortunate in this life for money to make much difference.” What a charming answer…