Login

Wealth Building Strategies

Richard Russell: The Perfect Business

Share on Facebook Tweet on Twitter

Posted by Richard Russell - Dow Theory Letters

on Thursday, 25 February 2016 12:57

AH PERFECTION: Strange, but the most popular, the most widely-requested, and the most widely quoted piece I've ever written was not about the stock market -- it was about business, and specifically about what I call the theoretical "ideal business." I first published this piece in the early-1970s. I repeated it in Letter 881 and then again in Letter 982. I've added a few thoughts in each successive edition. But seldom does a month go by when I don't get requests from subscribers or from some publication or corporation to republish "the ideal business." So here it is again -- with a few added comments.

I once asked a friend, a prominent New York corporate lawyer, "Dave, in all your years of experience, what was the single best business you've ever come across?" Without hesitation, Dave answered, "I have a client whose sole business is manufacturing a chemical that is critical in making synthetic rubber. This chemical is used in very small quantities in rubber manufacturing, but it is absolutely essential and can be used in only super-refined form. 

"My client is the only one who manufactures this chemical. He therefore owns a virtual monopoly since this chemical is extremely difficult to manufacture and not enough of it is used to warrant another company competing with him. Furthermore, since the rubber companies need only small quantities of this chemical, they don't particularly care what they pay for it -- as long as it meets their very demanding specifications. My client is a millionaire many times over, and his business is the best I've ever come across." I was fascinated by the lawyer's story, and I never forgot it.

When I was a young man and just out of college my father gave me a few words of advice. Dad had loads of experience; he had been in the paper manufacturing business; he had been assistant to Mr. Sam Bloomingdale (of Bloomingdale's Department store); he had been in construction (he was a civil engineer); and he was also an expert in real estate management. 

Here's what my dad told me: "Richard, stay out of the retail business. The hours are too long, and you're dealing with every darn variable under the sun. Stay out of real estate; when hard times arrive real estate comes to a dead stop and then it collapses. Furthermore, real estate is illiquid. When the collapse comes, you can't unload. Get into manufacturing; make something people can use. And make something that you can sell to the world. But Richard, my boy, if you're really serious about making money, get into the money business. It's clean, you can use your brains, you can get rid of your inventory and your mistakes in 30 seconds, and your product, money, never goes out of fashion." 

So much for my father's wisdom (which was obviously tainted by the Great Depression). But Dad was a very wise man. For my own part, I've been in a number of businesses -- from textile designing to advertising to book publishing to owning a night club to the investment advisory business.

It's said that every business needs (1) a dreamer, (2) a businessman, and (3) a S.O.B. Well, I don't know about number 3, but most successful businesses do have a number 3 or all too often they seem to have a combined number 2 and number 3. 

Bill Gates is known as "America's richest man." Bully for Billy. But do you know what Gates' biggest coup was? When Gates was dealing with IBM, Big Blue needed an operating system for their computer. Gates didn't have one, but he knew where to find one. A little outfit in Seattle had one. Gates bought the system for a mere $50,000 and presented it to IBM. That was the beginning of Microsoft's rise to power. Lesson: It's not enough to have the product, you have to know and understand your market. Gates didn't have the product, but he knew the market -- and he knew where to acquire the product. 

Apple had by far the best product in the Mac. But Apple made a monumental mistake. They refused to license ALL PC manufacturers to use the Mac operating system. If they had, Apple today could beMicrosoft, and Gates would still be trying to come out with something useful (the fact is Microsoft has been a follower and a great marketer, not an innovator). "Find a need and fill it," runs the old adage. Maybe today they should change that to, "Dream up a need and fill it." That's what has happened in the world of computers. And it will happen again and again.

All right, let's return to that wonderful world of perfection. I spent a lot of time and thought in working up the criteria for what I've termed the IDEAL BUSINESS. Now obviously, the ideal business doesn't exist and probably never will. But if you're about to start a business or join someone else's business or if you want to buy a business, the following list may help you. The more of these criteria that you can apply to your new business or new job, the better off you'll be.

(1) The ideal business sells the world, rather than a single neighborhood or even a single city or state. In other words, it has an unlimited global market (and today this is more important than ever, since world markets have now opened up to an extent unparalleled in my lifetime). By the way, how many times have you seen a retail store that has been doing well for years -- then another bigger and better retail store moves nearby, and it's kaput for the first store. 



Read more...

Banner

Wealth Building Strategies

Is Today's Market More Volatile Than in the Past?

Share on Facebook Tweet on Twitter

Posted by The Motley Fool

on Wednesday, 24 February 2016 11:16

motleyA Motley Fool member asked a great question during a Q&A session at a gathering in San Diego last week:

"With the bigger presence of media talking about the markets and the hyperactivity of trading by computers, do you see this higher volatility as a more permanent reality for the markets?"

I like this question because the amount of media attention and computer trading is unquestionably higher today than the past. It worries a lot of people. 

But the premise of the question — whether there is more volatility today compared to the past — is a separate issue. And the answer might surprise you.

In response to the question I said that I suspected, without looking at the data, that ...

 

  • Hour-to-hour, day-to-day, market volatility is indeed higher now than it was in the past.
  • Month-to-month, year-to-year, I didn't think volatility is higher now than it's been for most of history.

 

But that was a guess. So I crunched the numbers this week and ... CLICK HERE to read the complete article



Banner

Wealth Building Strategies

Advisers not Salesmen

Share on Facebook Tweet on Twitter

Posted by Paul Philip

on Thursday, 18 February 2016 11:32

advisersA big clue that you may not be talking to the right investment professional? If they only talk about money. Counter-intuitive, but what you're really looking for is someone more interested in you and what you’re trying to achieve than they are in your money. So a big test is... CLICK HERE to watch the video

The Evidence-Based Investor Video series is a service provided by Paul Philip and the team at Financial Wealth Builders Securities

 



Banner

Wealth Building Strategies

Hope

Share on Facebook Tweet on Twitter

Posted by Richard Russell - Dow Theory Letterss

on Thursday, 11 February 2016 08:27

UnknownHOPE: It's human nature to be optimistic. It's human nature to hope. Furthermore, hope is a component of a healthy state of mind. Hope is the opposite of negativity. Negativity in life can lead to anger, disappointment and depression. After all, if the world is a negative place, what's the point of living in it? To be negative is to be anti-life.

Ironically, it doesn't work that way in the stock market. In the stock market hope is a hindrence, not a help. Once you take a position in a stock, you obviously want that stock to advance. But if the stock that you bought is a real value, and you bought it right -- you should be content to sit with that stock in the knowledge that over time its value will out without your help, without your hoping.

So in the case of this stock, you have value on your side -- and all you need is patience. In the end, your patience will pay off with a higher price for your stock. Hope shouldn't play any part in this process. You don't need hope, because you bought the stock when it was a great value, and you bought it at the right time.

Any time you find yourself hoping in this business, the odds are that you are on the wrong path -- or that you did something stupid that should be corrected.

Unfortuneately hope is a money-loser in the investment business. This is counter-intuitive but true. Hope will keep you riding a stock that is headed down. Hope will keep you from taking a small loss and instead, allowing that small loss to develop into a large loss.

In the stock market hope get in the way of reality, hope gets in the way of common sense. One of the first rules in investing is "Don't take the big loss." In order to do that, you've got to be willing to take a small loss.

If the stock market turns bearish, and you're staying put with your whole position. and you're HOPING that what you see is not really happening – then welcome to poverty city. In this situation, all your hoping isn't going to save you or make you a penny. In fact, in this situation hoping is the devil that bids you to sit -- while your portfolio of stocks goes down the drain.

In the investing business my suggestion is that you avoid hope. Forget the siren, hope -- instead embrace cold, clear reality.



Banner

Wealth Building Strategies

How to Win the Loser's Game - Part 6

Share on Facebook Tweet on Twitter

Posted by Sensible Investing TV

on Tuesday, 09 February 2016 16:18

So, how can ordinary investors apply the academic evidence - the lessons learned from more than a hundred years of rigorous research? How can they apply that to achieving their financial goals?

Well, this might sound dramatic, but the work of Louis Bachelier, and of Nobel Prize-winners like Samuelson, Sharpe and Fama, should make us question almost everything we thought we knew about investing; and almost everything the financial industry and the media tell us we should be doing. Let’s watch….

“If you are serious about investing and building wealth the video documentary series ‘How To Win The Losers Game” is a must see. It’s excellent. 

After watching the video if you want to learn more about better low-cost, long-term, low-maintenance, diversified investment strategies, download our free guide “12 Essential Ideas For Building Wealth” by clicking on the banner at the top of this page.

Paul Philip, Financial Wealth Builders Securities

passive

 

 

 



Banner

<< Start < Prev 21 22 23 24 25 26 27 28 29 30 Next > End >> Page 27 of 36

Free Subscription Service - sign up today!

Exclusive content sent directly to your Inbox

  • What Mike's Reading

    His top research pick

  • Numbers You Should Know

    Weekly astonishing statistics

  • Quote of the Week

    Wisdom from the World

  • Top 5 Articles

    Most Popular postings

Learn more...



Our Premium Service:
The Inside Edge on Making Money

Latest Update

To BEAT the market, you cannot BE the market.

Recently we attended an investor conference in Toronto. One of the questions we frequently get at these events is how many stocks one should...

- posted by Ryan Irvine

Michael Campbell Robert Zurrer
Tyler Bollhorn Eric Coffin Jack Crooks Patrick Ceresna
Josef Ozzie Jurock Mark Leibovit Greg Weldon Ryan Irvine