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CARRET & COMPANY'S PHIL CARRET
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A simple way to avoid losing even one fortune....
"Personally, I've never thought it sensible to lose even one fortune. There's a simple way of avoiding such a catastrophe: Never borrow money, at least for speculation."
You don't need a 40-page report.
"One of the most astute investors I've ever known was a remarkable example of long-term investing. He owned several hundred different securities accumulated in small increments over many years. He told me once that his job as a registered representative with a stock exchange firm had never paid him more than $10,000 a year in his life. And he started with little or no inherited money."
"He liked to talk about his successes. One in particular was fascinating. In his 20s, he invested $1,400 in a relatively obscure company. Over the next 60 years, the stock was split repeatedly for a net of 360 shares for one. At that point, his $1,400 had grown to $2,000,000."
"He said at one time he checked the company by talking to the management. 'They seemed to know what they were doing,' he told me."
That is security analysis in a nutshell. If the figures look right and the management knows what it's doing. why does one need a 40-page report?"
Think long-term.
"There use to be a Wall Street school of thought favoring so-called 'one decision stocks'. Buy the right stocks and never sell them. Warren Buffett, who is probably the most astute investor of the 20th Century, buys for Berkshire Hathaway to hold forever."
"Few of us are temperamentally or otherwise equipped to make such decisions. Indeed, there are few companies so strong and well managed that one can safely count on holding them forever. Companies change. Managements change. Industries change. And the prudent investor must react to such changes. His bias should nevertheless be in favor of long-term holdings."
Easily the most depressed industry today - banking.
"Assuming that one has adopted a happy medium between short-term trading and holding forever, what should be done today?"
"Here the contrarian attitude is perhaps most helpful. What is the most depressed industry today? The answer is easy: commercial banking."
If you think domestic banking is tough....
"In the last few years, major banks have suffered the following disasters - most of them self inflicted. First, they incurred horrendous losses by making huge loans to Third World countries - Mexico, Brazil, Argentina, African countries, you name it. One wonders if any streetwise banker ever visited those countries?"
"I remember Genoa, a young American banker in Sao Paolo many years ago. His description of a typical transaction between a Brazilian customer and his friendly Brazilian banker would have turned off any investor with common sense. He described to me how a Brazilian borrowed money."
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