This is an archive of my monthly email newsletter covering everything interesting I’ve seen in investing and business learning.

The 2013 Berkshire Hathaway Annual Report

As usual, Warren Buffett educates about investing in his Annual Report. The passage below from page 18 explains his simple business-based techniques:

“You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary — you only need to understand the actions you take.

If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.

With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

Forming macro opinions or listening to the macro or market predictions of others is a waste of time.

Indeed, it is dangerous because it may blur your vision of the facts that are truly important. When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”

Former Wells Fargo CEO Dick Kovacevich on The TARP Program

In the mist of the financial crisis this article explains the situation from the point of view of financial companies that did not need bailing out, but were forced to be bailed out anyway. It has re-enforced my views on how government actions even in developed economies can and will affect investments. Kovacevich, Chairman and CEO of Wells Fargo at the time:

“As my comments were heading in that direction in the meeting, Hank Paulson turned to Fed Chairman Ben Benanke sitting next to him and said, ‘Your primary regulator is sitting right here. If you refuse to accept these funds, he will declare you capital deficient by Monday morning.’ Is this America? I asked myself.”

Michael Steinhardt

A very successful investor I haven’t heard of before: Michael Steinhardt — 28 years at 25% per year.

“His insistence on having a ‘variant perception’ (understanding how his point of view differed from most investors) and his use of a clean slate when he felt out of synch are two ideas I find especially compelling.”

Link (

Terry Smith of Fundsmths’ Annual Report

Terry Smith and his new fund Fundsmith have a sensible approach to investing and his shareholders letter is worth a read.—reports-accounts/short-form-report-for-period-ended-31st-dec-2013.pdf?sfvrsn=12

Credit Suisse Global Investment Returns Yearbook 2014

A great read about market returns from a data analysis view. Its findings include that high return on a country basis normally followed periods of low GDP growth, counter to the thinking that investing in already growing strong economies makes sense. A bit like valuing a country as I would a business, on a intrinsic basis.


The Psychology of Intelligence Analysis by Richard J. Heuer

The first chapter is a bit tough going, but once you are through it and have picked up the language, the rest of the book is very enlightening. One point I learnt was the only robust way of proving an outcome thesis is work out all the alternative outcomes and try to disprove them. This builds, or destroys, a conviction for the one you have already favourited. Once we have mentally framed on a certain outcome thesis, the brain tends to find evidence to support it, even if that evidence can also equally support the other potential outcomes.

This is a bit of fun from the book:

Why can’t we see what is there to be seen? Look at the image, what do you see?


The answer is: Paris in the the spring, Once in a a lifetime (double articles).

We tend to perceive what we expect to perceive, not what is actually there.

The Fed – The Largest Hedge Fund In History

Warren’s view on how the Fed is now behaving.

Tax Planning Deadline: ISA Allowance 2013

Don’t forget to use your stocks and shares ISA allowance before April 2014. Once the year end is gone you can no longer use the 2013 contribution. Remember, one annual allowance of £11,520 growing at 15% is worth £762,760 in 30 years — tax free! Use it or lose it.

Quote of the Month

“In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables — like the discount warehouses of Costco.” — Charlie Munger

December 2013

Seth Klarman returns money to investors.

I take note when Seth Klarman, one of the greatest investors of our time, returns money to his investors.

Howard Marks Memo: The Race To the Bottom

“I repeat Warren’s injunction for the simple reason that you just can’t put it any better. When others are acting imprudently, making the world a riskier place, our caution level should rise in response. (It’s equally true that when others become overly cautious and run from risk, assets get so cheap that we should turn aggressive.)”

Reading List

Biography of a Bank – The Story of the Bank of America by James, Marquis & Bessie R James

This is an enlightening story about how one great leader, A.P. Giannini, built the Bank of America for the benefit of the Californian people, not himself. Many of the issues banking faces today have already occurred up in the early 1900s including:

  • Leadership is key
  • Over-loaning on real assets leads to real estate bubbles
  • Good business banking at sensible lending rates is the lifeblood of economic success
  • Government institutions are swayed (by people and businesses) to good/bad effect but ultimately their rules underwrite businesses success
  • Share speculation is not good for any of the stakeholders in a business long term
  • Good Banks mentor and coach new and struggling businesses
  • Only work with the good guys

It left me thinking — we are in the age of the internet, but old books contain so much lost information, so how do we unlock the lessons of history documented in books like this?

Biography of a Bank can currently found through Amazon:

Biography of a Bank – The Story of the Bank of America by James, Marquis & Bessie R James


What Type of Leader are You?

Complete the Cranfield University questionnaire to find out if you are a Strategist, a Hero a Meddler or simply an Artisan when it comes to managing your business.

How The Economic Machine Works by Ray Dalio

This is an excellent entertaining video on how the economy works presented in a way all can understand.

Other launched in November

It’s a blog to bring together the EU tech news and is co-founded up by the ex-Techcrunch editor Robin Wauters.

Quote of the Month

WB – You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.

Disclaimer: The above does not constitute investment advice. The author has invested in the companies mentioned at the time of writing.

Tim O'Shea
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Tim O'Shea

Fund Manager with 15 years' experience as a successful business owner-manager. Passionate about helping people benefit from the power of long-term investing.
Tim O'Shea
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