Here’s a new one – received this on my home voicemail:

bq(quote).. Hey John, it’s Rebecca. Listen honey, Frank wanted me to give you a
call. I just put him on a plane and he didn’t have time but he wanted me
to let you know, remember those guys who do the stock promotions, um
they are getting ready to start another one this week. They just did oh
shoot let me look here. Um, ah, The first one was CNDD and the other was
PWRM. um he says that the next one ah that you can get in on is PRAE.
Yes, PRAE. It’s an oil company and ah anyway he said he thinks this is
going to be the best stock promotion this year, it’s at like 30 cents
right now and they think its going to go up to 3 or 4 dollars per share,
something like that.

He already bought. He says you need to get in in the morning before the
price starts going up because he definitely wanted in on this one.

So give him a call later tonight sugar, and I think that’s it.

I’ll talk to you soon, bye.

It’s a pretty common ruse – make the mark think he knows something he shouldn’t know and let him take advantage of it. Only thing I can’t figure out though is why they are pushing a stock, PRAE, which doesn’t seem to exist.

By the way I just had the best tasting meal I’ve ever had at a Denny’s. But I had to go to Tokyo to get it.

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photo credit: hypertypos

If you read my previous article you can imagine that our investment club has been having more than a few discussions on what will be The Next Big Thing that will return the markets back to the boom of the go-go Nineties. While many believe we’ll never get anywhere near that again I believe differently. Trading volumes are way down and people are being much more cautious but I believe that in the end greed will prevail and when things do start turning around in the economy things will start to ramp up in the market, and if the Next Big Thing arrives we could get back to another boom.

So what will be The Next Big Thing? According to Charles Piller in Five Reasons to Hope [ via DUH BLOG] there are five new technologies that could generate the “radical, disruptive business models” that will define the future:

Electro-bio Convergence
Micro-sensors
Nanotechnology Processors
Flexible Electronics
Mining Unstructured Data

All of that adds up to one possibility for The Next Big Thing: Virtual Sex. You heard it hear first.

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Our annual investment class, otherwise known as Warren Buffett’s Letter to the Shareholders of Berkshire Hathaway, Inc. was released yesterday and as usual it is chock full of stories, advice, warnings and above all, a story of spectacular results.

Buffett was routinely dismissed by the investment community in the late nineties, given his disdain for investing in technology stocks which had been fueling the growth of the markets and reached a crescendo in 1999. In that year Buffett’s Berkshire Hathaway returned a .5% annual gain whereas the S&P 500 gained 21%. Poor Warren had lost his touch, they said. He needs to get with the program and invest in tech for the good of his shareholders, they said.

Well, not so fast. As it turns out missing out on the technology bubble was not a bad thing. And 1999 remains the only year since 1980 that Berkshire did not beat the S&P 500. In fact during that time it has beat the S&P 500 by an average of 11% per year. Not 11% annual gains for Berkshire, but 11% over and above that popular benchmark. In 2002 Berkshire Hathaway saw an annual gain of 10% while the S&P 500 returned (not the best word!) an anemic -22.1%, for a 32.1% relative result for Berkshire. No wonder his shareholders are so loyal.

Reading his letter is always an eye-opener for me, especially since I have been doing the same for the investment club I started in 1999. An investment club meant specifically to invest in growth stocks and mostly targeted to high tech investments, or at least it was back then. I’ve had the joy of writing a letter to shareholders (partners, really) every year since then and other than the first year, when making money was so easy, my letter’s have been filled with doom and gloom as I try to explain why we are doing so poorly. Oh how I would like to start a letter like Buffett does, “In all respects, 2002 was a banner year.”

So here is a good example of why our investment club shouldn’t be managing your money, and why we’ve undergone some changes in our investment philosophy:

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Year     Berkshire     S&P 500     Us     Berkshire/Us relative
-----------------------------------------------------------------------
1999         .5          21.0       58.0           (57.5)
2000         6.5        (9.1)      (40.0)          46.5
2001        (6.2)       (11.9)     (40.0)          33.8
2002         10.0       (22.1)     (41.0)          51.0

Now I’m depressed again.

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The Coca-Cola Company will no longer be providing earnings estimates.

This could be huge. Or it could be a temporary response to some tough quarters ahead, who knows. But I’m betting other companies will fall into line.

I’ve worked for a private company that went public and one of the most disheartening aspects of that transition was the new focus on each quarter as a separate entity. When we were private we thought long term. When we were public, and in fact in the year leading up to our IPO, we thought short term. Quarter by quarter. It isn’t a good way to run a business but it seems what the market demands. Perhaps we can trend away from that if we aren’t slaves to hitting earnings estimates.

Additionally this will mean companies are less likely to “tweak” the numbers. Cisco, for example, was famous for quarter after quarter exceeding the earnings estimate by 1 cent. Come on, you can’t do that without some creative accounting. Without the numbers being public they can focus on the important stuff – like improving their Cisco routers!

In a new era of corporate responsibility and openness to shareholders I do not see this as withholding data as some people might – the data was never to be trusted anyway, so I’m hoping more do what Coke is announcing and stop giving earnings estimates, only general guidance.

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