Daily Intent

Santa Barbara, CA
Last MSR I wrote on the topic of The Quarterlife Crisis.  The responses were phenomenal.  I heard from people in their early twenties to their mid-eighties.  I thank each and everyone of you for taking the time to reply back and look forward to sharing in the coming weeks, with your permission of course, some of these learnings and perspectives.

To further divulge into this intriguing topic, it seems appropriate to focus in on the very American desire and emotional need to be different and unique.

To be different and unique in business, most particularly.  What does this mean?

Does this mean our profession has to be something new, innovative, and never been tried before?  Do we have to have this genius idea to revolutionize the world?  Or are there alternatives to maintain a level of independence and uniqueness amidst a more standard platform or business model.

As you will see in the following two examples, there is greatness found in long standing traditions and models.  One should not shy away from shining within these contexts.

Example 1: Apple pie.
Apple pie is not new.  The ingredients are pretty standard.  We all know what one is suppose to look like, smell like, taste like.  And we all have the ability to bake a pie, given the tools and ingredients.

However, this doesn’t change the importance of the creator.   Nor does it mean one cannot still profit in making apple pies.

Take a competition between me and Mama Faulding.  We both may have the same apple pie recipe, the same ingredients, the same kitchenware, but there is no doubt in my mind, or in the community of Faulding sweet lovers, that Mama Faulding is going to dominate the apple pie space of baking.  Her success would surely lead into other baked goods, leaving me to flounder and ultimately take up a new venture.

There are two lessons to be learned here:  Should you ever have the chance to eat Mama Faulding’s delights, you should.  And second, you don’t need to have a unique, one-of-a-kind technology or product to be a huge success.  It is the flare, perspective and culture you infuse into a traditional product that makes it a success.  Mama Faulding has all three down within the Santa Barbara quarter-century community.

Example 2: Value Investing
A more exemplary business example is Warren Buffett’s style of investing.  He is a man that manages money from a long-term perspective.  He cares very little about short-term changes in his investments.  He invests in companies that he knows.  He invests in markets that he knows and understands.  He buys ownership in businesses led by management in which he believes.  He buys companies on the cheap that have intrinsic long-term value.  And long ago when getting his partnership up and running, he managed investments based off the the principle of not charging a management fee nor taking performance fees until 6% return on investment was reached.

His model wasn’t necessarily new.  It definitely isn’t sexy, but he managed to pave the way for “Value-Investing”.  His billions in success popularized the model.  He’s created thousands, if not, millions of followers.

A couple of my business associates are no different. Morris Amiri at Dash Acquisitions and Scott Dinsmore at Cumbre Capital Partners, LLC are walking, talking, believing, and investing disciples of The Warren Buffett Way.  They have set out to follow Mr. Buffett’s value investing model.  In a time of hedge funds and popular investing tools, they are staying the course of tried and true.  Along the way, they are creating great value for their customers in ways in line with the original model but unique to their personalities and interests.

As we see in these examples, it is not always having to venture so far off the path as to create an entirely new model in order to be different, but to venture off the path just enough to create uniqueness.  John Greathouse would call this operating from “The Fringe”.  What we witness in the marketplace is the buyer, and public for that matter, want something they can understand and relate to while at the same time feel special about.

It starts with your mindset within this space.

Scott Dinsmore shared a few insights learned at Berkshire Hathaway shareholders meeting in Omaha (Warren Buffett’s company).  He offers 13 lessons and a description on his website http://readingforyoursuccess.com.  I offer my 10 favorite.

May you mull over these principles that stemmed from a consistent mind-set and model.  May you be empowered to see the world of opportunities in models already proven and set in place.

10 Life Lessons from Warren Buffett and Charlie Munger:
1. Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless. - Warren Buffett

2. The best defense in a tough economy is to add the most you can to society.  Your money can be inflated away but your knowledge and talent cannot.  -Warren Buffett

3. We get worried when people start to agree with us.  - Warren Buffett

4. We celebrate wealth only when it’s been fairly won and wisely used.  - Charlie Munger

5. When you are exceptional, you jump off the page.  There really isn’t that much competition there.  - Warren Buffett

6. Do what you’re passionate about.  If you do this, there will be few people competing or running faster than you. - Warren Buffett

7. I think I developed courage when I learned I could deal with hardship.  You need to get your feet wet and get some failure under your belt.  - Charlie Munger

8. Bad behavior is contagious.  That’s how human nature works.  - Warren Buffett

9.  We’ve done a lot of stupid things but we’ve a small subset of stupidity and that subset is important.  It’s about avoiding the dumb things.  - Charlie Munger

10. Go to bed a little wiser than when you woke up. - Charlie Munger
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Nicole Bochsler-Harding.  My favorite sister in the entire world.  Happy Birthday!
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PLAN
Catalyst for Thought.  MINDS executive lunch.  Next up, May 27th, Yulun Wang - Founder and President of InTouch Health and past founder of Computer Motion.  Both companies are leading the medical industry into the 21st Century.  Register at www.CatalystforThought.org to ensure you receive the registration emails.
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LEARN
Buzzword: Abacus
“A calculation tool used by sliding counters along rods or grooves, used to perform mathematical functions.  In addition to calculating the basic functions of addition, subtraction, multiplication and division, tha abacus can calculate roots up to the cubic degree.

It is believed that the abacus was first used by the Babylonians, as early as 2,400 B.C. Since that time, the physical structure of abaci have changed.  However, the idea has survived almost five millenia, and is still being used today.  The Chinese and Japanses use different finger techniques with their abaci.  The Chinese use three fingers (thumb, index, and middle) to move the beads; while the Japanese only use their thumb and index fingers.”  -Investopedia.com

  Six Points to Ponder:

   1. Markets Bungie Jumping.  The Markets started last week off fearless, but were thrown off a cliff screaming Thursday, only to be bounced back this week.  European troubles  and bailouts were the basis.  The Dow - 10,884. The S&P 500 - 1170.  The Nasdaq - 2419.  Oil: Down - $75/bbl.
   2. Unemployment Up, Payrolls Up.  Though payrolls were up in April, so was unemployment.  Read below on why this is and why it’s actually positive news.
   3. Cautious Consumer.  Large retailers experienced lower than expected April sales leaving economists wondering how strong the recovery truly is.
   4. No Anchovies. Domino’s new pizza recipe paid off for the chain.  Earnings rose 3.2% from a year earlier.
   5. Might They Have to Go Outside? Nintendo’s sales were down on the quarter due to limited sales of the Wii and DS handheld videogame player.   Kids were saddened, but soon realized an entire world outside.
   6. Playoffs.  Lakers, Magic and Suns are all moving on with 4 and out series victories.  Cavs and Celtics are in for a great series.  3-2 Celtics.  Abilene Christian Champions.  My Big Lil Brother and his teammates won the Lone Star Conference Championship in baseball.  Regionals start Thursday.       

Positives:

    * 290,000 new jobs were added to companies’ payrolls in April, but the unemployment figure rose from 9.7% to 9.9%.  Though at first glance, unemployment rising seems to be the more pertinent statistic out of the two.  However, understanding the interplay, we learn that a more optimistic business environment is bringing out those unemployed that weren’t seeking employment before.  Unemployed numbers are based off those actively seeking employment.  As our markets improved people are feeling validity in seeking new jobs.  Thus, the reality of a slightly rising unemployment figure, in the near term, appears to be a good thing, since the payroll numbers support new hires.  Were new hires not happening and unemployment still rising, then we’d see this as a negative.
    * Gold is staging a huge rally as uncertainty continues and the Europeans stare nearly $1 trillion of debt in the face.  Gold has rallied as the US debt levels have mounted.  The European money infusion only gives further support to longer term inflationary concerns.  Gold is up to $1210.
    * 3-D game consoles are expected to be out by next year at this time.  Moreover, Nintendo continues to seek out ways to encourage healthy use of their machines.  A Wii Vitality Sensor, which reads your finger-pulse, will enable the machine to read a player’s “biological information”.  This new feature should promote good health among kids and senior citizens.  Get fit, do Wii Fit.
    * Steve Nash continued proving Santa Clara Broncos are as tough as they come.  He finished the game off with his right eye swollen shut.  Rocky-esque is how the Jesuits teach.  The Celtics look much better than expected, but they are going against an ailing King James.
    * Abilene Christian is doing everything right to ensure their opportunity at winning a Division II National Title.  Go Box!

Negatives:

    * Why the market tanked last week:  Many continue to wonder how a country as small as Greece can have such dramatic effects on our U.S. markets.  There are many factors that go into it, but the main ones about which to know are the following.  Greece is more a symbol for what could happen across Europe, most in particular Portugal, Spain and Italy.  If these other countries experience that which Greece is experiencing, the European Union would be in need of a serious bailout.  If the bailout is not executed correctly or timely enough, “someone might crack” and default on their debt.  This reality leaves Europe in a position of tightening their budgets, which ultimately leads to the European currency losing value and overall European demand dropping.  Thus, we’d experience a stronger dollar, look more expensive to the rest of the world, and have one of our major buyers, Europe, pulling back on expenditures.  The end result is the United States’ companies suffering during a time that things are starting to brighten on our own soil.  Moreover, as we’re seeing with Greece, the IMF is being called in to help.  The United States is the major contributor to the IMF.  We’ll be on the hook to help these nations, further pushing up our debt levels.  What did a majority of American CEOs state as their main concern for US progress?  The National Debt levels.  In summation, investors are worrying Greece could be the first domino to fall, as Lehman was in 2008.
    * Why this week it recovered:  The Europeans offered the bailout of nearly $1 Trillion to restore confidence.  This will support European demand of American imports.  Moreover, the United States’ bailout has got much of our economy back to slow recovery.  Investors are now expecting the same out of Europe.  Will this be a silver bullet?  Highly unlikely, but investors feel much better about the governments stepping in and ensuring that the banks and many other sectors don’t run out of fuel. 
    * Productivity grew at a 3.6% seasonally adjusted annual rate in the first quarter of this year.  This is down from 6.3% the previous quarter.  From one perspective productivity gains is a great indicator of success and economic progress.  From the perspective of an economy with high unemployment, the short-term view is rather grim.  Companies are more productive because they have the same or greater work loads being carried out by fewer employees.  If you are a current employee, you are not happy because you are working harder and more than likely not getting paid a dime more, and may even be getting paid less (unit labor costs dropped 1.6% this quarter).  If you are one of the employees out of job, you are obviously unhappy.  And even more unfortunate for those out of work, is the reality of technology taking over many jobs.  We are becoming a GDP growing country without our workforce keeping pace.  The people on the top benefit greatly, whereas the people on the bottom the contrary.
    * Retailers expected a 1.7% same store sales gain, but experienced only a 0.5% gain in April.  The consumer turned cautious with their expenditures this month unlike months past where there was an increase for four previous months.   It appears families are saving up for the next big buying season, late summer as kids go back to school.  One contrary statistic to note is higher-end retailers saw better than expected increases.  Nordstrom’s and Saks were apart of this category.  Might the wealthier Americans have felt confident with their portfolios returning from the grave?
    * Economic slow downs leave Americans with limited cash.  Limited cash leads to limited food budgets.  Limited food budgets leads to the need to be efficient with food purchases.  Efficient food purchases come in the form of cheap calories.  Cheap calories are most often found at fast food chains.  In the end, a Domino’s type company benefits, but a long-term healthy nation doesn’t.

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FEAT
Ms. Judy Horvath completed a 10K last weekend.  This was “quite an accomplishment for [her] and it was a goal that [she] set for [herself]…”  Congratulations, Judy!
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GET INVOLVED
Local:

Team in Training: Bachelor and Bachelorette Auction and Party
Where:  Rooftop of the Canary Hotel
When: Tomorrow, Thursday, 6 - 9pm
Cost: $35.  You will get $20 back in restaurant gift certificates.
Effective Cost: $15
Why:  Because myself and 5 others want to be auctioned off at enormously large dollar amounts ultimately aiding in the fight against blood cancers.  Plan on bringing all your wealthy, single friends.  Whether you bid or not, it will be a grand party.  We’ll “auct”-ually have a great time.
Website:    http://www.sb2bauction.com
For other fun ideas, go to www.lovemikana.com

Live and Be Well,

Jeff Bochsler