Two Weeks In The US

I walk past a line-up of well-to-do, middle-aged women, decked out in puffy coats and Gucci handbags — camping out on the sidewalk. They’ve been here all night in the freezing cold, lining up to secure the best seats. It’s worth it. By the time the sun rises, the line behind them will stretch literally as far as the eye can see.

As the gates to the arena open, the diehards sprint inside, past the ‘merch’ stalls selling T-shirts, themed underwear and posters, and make a beeline for the stage. Here they will capture the first glimpse of their idols: an 84-year-old who has trouble hearing, and a 91-year-old who can’t see without his thick Coke bottle glasses. Together they’re a good team.

Greetings from Omaha, Nebraska.

I’ve flown across the other side of the world to attend Warren Buffett’s Berkshire Hathaway annual shareholders meeting, dubbed ‘Woodstock for Capitalists’. Actually, my wife has dubbed it a ‘footy trip for finance geeks’.

So, first question: why were the old birds acting like they were going to a Rolling Stones concert?

Well, Buffett (the 84-year-old) and his partner Charlie Munger (the 91-year-old) have famously compounded $1,000 into $132 million over his career. So it’s not surprising there are plenty of people who come hoping that a bit of his money magic will rub off on them. It’s not such a silly idea.

At the 2011 meeting, Buffett suggested to his ‘partners’ (as he calls his shareholders) that Berkshire Hathaway was cheap. Those who listened to him were well rewarded — since then the stock has more than doubled.

Personally, I’ve made a lot of money from owning Berkshire Hathaway stock, yet, unlike the ladies, I don’t have to line up with my fellow shareholders. Instead I get to sit in the press box.

There’s about seventy of us, drawn from the four corners of the globe: the Wall Street Journal, the New York Times, the Financial Times in London, Reuters Japan. After years of coming, I’ve got to know a lot of them. A few years ago, a hack told me: ‘Seriously I could write this story on the plane trip here – he never changes – always says the same thing.’

So, second question: why is the media here?

That’s easy – because Buffett is the Don Bradman of finance. The audience loves hearing the billionaire’s folksy wisdom: stay out of debt, always have savings, invest for the long term, do the opposite of Wall Street, and avoid hotshot fund managers who will rip you off with high fees.

It’s awesome advice for the audience, but you couldn’t run a 24-hour news network on it. Whenever he’s asked for a prediction about the future, he declines with a chuckle and says that he believes the best days are ahead of us. Reassuring stuff. No need to panic. Just stick to time-honoured wisdom and you’ll compound your way to wealth.

That’s also why, for the other 364 days of the year, the world’s financial media focuses on dire predictions, investment fads and noise. Here’s how it works: Billy Bloggs, a middle-aged white guy from an I-charge-too-much-in-fees fund, makes a bold, attention-grabbing call that he sees a crash coming and that he’s liquidating his portfolio.

The finance news outlets give him lots of airtime. It scares the pants off the audience — and makes them sit up and watch the ads. Billy lifts his profile, and hopefully gets investors into his expensive fund. After 24 hours the media moves on to the next middle-aged white dude in a suit with a fearful prediction.

But they almost never go back and check on how Billy’s prediction panned out. (In fact, I did it once, when I pitted my golden retriever against Australia’s top bank economists to see who could accurately pick where the share market would be in 12 months’ time. A year later my pooch – aptly named Buffett – won by an incredibly wide margin.)

Here’s the thing: the financial media is promoted as ‘news you can use’. And by that rationale, if information is power, then you need to know what Billy Bloggs is thinking, as well as all the round-the-clock analysis of the latest investment fads, to get an investment edge.

However, given that the majority of fund managers fail to beat a simple index each year, you can argue that most of what is produced in the financial media doesn’t help these managers one bit. In fact, just the opposite. Buffett famously moved away from New York City, back to sleepy old Omaha, to escape the ‘noise’ so it wouldn’t affect his investment thinking. It worked.

So, third question: why am I here?

I see it as my annual investment inoculation.

The principles that Buffett and Munger have lived their lives by work astoundingly well.

In fact, they’re so simple that many pros dismiss them. Yet as I get older, I’ve seen that living these principles is simple, but not easy. Take the simple act of building up Mojo money. Saving aggressively is a behavioural characteristic that sometimes involves saying no to your kids, your husband, and yourself.

However, there are huge long-term payoffs. First, you’ll never stress about money again, and, second, you’ll be able to be greedy when other people are fearful (as Buffett always says). In Australia it’s been 24 years since we were last fearful, but eventually it’ll happen — and those who are cashed up when it does will be ready to make a fortune.