The Three Things Rich People Do All Day Long

Johann Sebastian Bach (1685-1750) taught me something about
picking stocks.

I studied music in college. I was a classical guitarist.
When I first started studying, I was familiar with Bach’s
work, but I thought it was terribly boring. For me, the
music of Bach was like an infallible sleeping pill. When
they played Bach in my music classes, I would begin to nod
off in a few short minutes, almost without fail.

But one day – I remember it vividly – I was in the hallway
of the music building. That day in the hall, I decided
that, if all these experts and music teachers thought Bach
was great, I’d just keep listening to the music, and try to
stay awake. I’d try to hear what they heard. I consciously
decided to expand my horizons.

And it worked.

Today, I am a huge fan of Bach’s music. When I hear it, it
doesn’t put me to sleep. On the contrary, it actually
energizes me. I have recommended Bach’s works as energizing
background music to several people.

It’s hard to say what caused me to go from bored student to
passionate advocate on the subject of Bach. All I know for
sure is that I willingly suspended judgment and immersed
myself in the music. I just played it day after day after
day. One day, I realized that I loved it. I was bored at
first. But then I just couldn’t get enough of it. The music
did all the work. It got me.

I’ve done something similar with investing.

There is possibly no piece of writing more sleep-inducing
than a form 10-K, the financial report that every public
company must file with the SEC once a year. There are no
stories. No pictures (except the odd graph here and there).
Nothing visually stimulating in the least… and everything
reads like it was written by lawyers and accountants.

When I started reading these documents about ten years ago,
I couldn’t make it through them. I’d literally fall dead
asleep, with my head on my desk. But I decided that there
must be something to reading them, since that’s how
investors with real money spent their time. So I’d wake up
and keep reading. Sometimes, I’d fall asleep again. Then
I’d wake up again and keep reading. No kidding. That really
happened. Every once in awhile, you can still find me
nodding off in my chair at around 3 or 4 in the afternoon,
with some boring piece of SEC filing in front of me.

Part of the reason I persisted is because I had read
somewhere that people who are going through something
emotionally frustrating or difficult will often say, "I’m
tired," as a kind of defense mechanism, an excuse for not
being up to the task at hand. I took my boredom with SEC
filings as a sign of my ignorance. I didn’t want to be
ignorant, so I pressed on.

With Bach, I submitted to the apparent wisdom of my
teachers, and I learned to love that which I had previously
disliked. With investing, I have submitted to the proven
wisdom of the great investors, especially Warren Buffett.

As usual, I’d suggest you don’t take it from me, but from
someone with more money and brains than I may ever have. On
page 217 of J. Pardoe’s collection of quotations titled,
"Warren Buffett Has Spoken," Buffett says, "I spend an
inordinate amount of time reading. I probably read at least
six hours a day, maybe more."

Next time anyone criticizes you for having your nose stuck
in a book, just tell him you’ll never get rich if he
doesn’t stop talking.

Plenty of time spent reading is all well and good, but
surely the chairman and CEO of a company that produces $100
million a week (no typo) in free cash flow doesn’t just
read all day. He must spend plenty of time in meetings. All
corporations have lots of meetings…right? Yes, they do,
but not Buffett’s corporation, Berkshire Hathaway. None of
his time is spent that way. Buffett says, "We have no
meetings at Berkshire. I hate meetings."

So…what does he do besides read? The quote from the
Pardoe book continues, "I spend an hour or two on the
telephone…"

If Buffett were talking to Elvis, perhaps you could
broadcast the conversation over TV, radio and Internet, and
most people would be interested in listening in. But it’s
probably just the CEOs of the companies he owns, maybe his
partner Charlie Munger, and a bunch of folks in the
financial world. I doubt most people would understand as
much as half the conversation, given that Buffett’s largest
money-making venture is the somewhat esoteric world of
insurance, with a focus on the even more esoteric world of
reinsurance. Again, nothing to watch. Just one side of a
boring conversation about statistics and money.

After reading and talking on the phone, then the activity
level really kicks into overdrive. "…and then the rest of
the time," says Buffett, "I think."

Reading, conversing with people who know what you’d like to
know, and thinking. Those are the three things rich people
do all day.

If you think there’s a secret out there, one that’s going
to help you hit the jackpot, I wish you luck finding it. As
for me, I’m just going to get back to reading, conversing
with people who know more than I do, and thinking.

Did You Notice…?
By Chris Mayer

"It’s such a fine line between stupid and clever."

– David St. Hubbins (played by Michael McKean) in This Is
Spinal Tap

The following dialogue is from the movie This Is Spinal Tap
(a "rockumentary" about a fictional British band), when
lead guitarist Nigel Tufnel demonstrates the band’s
amplifiers for interviewer Marty DiBergi. The amplifiers
are all fitted with dials that go up to 11, instead of the
usual 10:

DIBERGI: Does that mean it’s louder? Is it any louder?

TUFNEL: Well, it’s one louder, isn’t it? It’s not 10. You
see, most blokes, you know, will be playing at 10. You’re
on 10 here, all the way up, all the way up, all the way up,
you’re on 10 on your guitar. Where can you go from there?
Where?

DIBERGI: I don’t know.

TUFNEL: Nowhere. Exactly. What we do is, if we need that
extra push over the cliff, you know what we do?

DIBERGI: Put it up to 11.

TUFNEL: Eleven. Exactly. One louder.

DIBERGI: Why don’t you just make 10 louder and make 10 be
the top number and make that a little louder?

TUFNEL: [extremely long pause] These go to 11.

Innovations are not always improvements. This is especially
true in investing, in which people are always coming up
with seemingly novel ways to make money in the markets.
Books come out all the time touting some new way of
thinking or some new system. The "newness" is more apparent
than real.

Most of these new ways just die after a while. There is
little that is new in finance. The same principles apply in
nearly all markets.

I visited a local used bookshop the other day, looking to
sell a box of books I no longer wanted. I didn’t care how
much they paid me. I just wanted to get rid of them and
clear some space on my shelves.

Many of the books are about investing, markets or
economics. As the bookseller picked over the lot, he left
many of the investing and economics books in the box and
bought the other books.

"I’m always surprised at what you take and don’t take," I
said to him. "For example, you took a copy of Adam Smith’s
Theory of Moral Sentiments, but you wouldn’t take this
brand-new book about investing."

This bookseller is a crusty fellow, with a face like a dead
squirrel. "Well," he said in a very deliberate manner,
"most of what’s worth reading about money and investing has
already been written."

This is was a fairly wise observation, I thought. He
continued: "People love to come to a used bookstore and
pick up copies of the classics that have been around for a
hundred years or more. The problem with the new stuff is
that we don’t know what will stick. What’s popular today is
forgotten tomorrow."

Yes, that’s exactly it. Most of the new stuff is simply
putting the dial to 11, as Nigel did, and thinking that it
makes a difference.

And the Markets…

Tuesday

Monday

This week

Year-to-Date

DOW

10,372

10,303

81

-3.8%

S&P

1,205

1,194

14

-0.6%

NASDAQ

2,079

2,057

34

-4.4%

10-year Treasury

4.09%

4.07%

0.18

-0.12

30-year Treasury

4.35%

4.33%

0.15

-0.47

Russell 2000

653

643

25

0.3%

Gold

$423.55

$425.85

-$16.45

-3.2%

Silver

$6.89

$6.89

-$0.31

1.2%

CRB

309.76

303.86

-1.61

9.1%

WTI NYMEX CRUDE

$59.59

$58.75

-$0.95

37.1%

Yen (YEN/USD)

JPY 111.62

JPY 111.97

-2.31

-8.8%

Dollar (USD/EUR)

$1.1911

$1.1886

249

12.1%

Dollar (USD/GBP)

$1.7562

$1.7542

727

8.4%