The INDISPENSIBLE history of building a business from one store with zero sales to a $100 BILLION company. , January 17, 2007 It never ceases to amaze me in what it takes to satisfy a reader. When I read a book like this, I am basically asking myself several questions. How on earth did these guys do it? How did they come through the funnel and get it done. What was at stake? What were the major premises of the concept? Could it have failed, if so how? How close did it come to failing? Could some one else have done this, or replicated it, or perhaps have done it better.
A lot of life is pure fantasy. You have your own template of how things works, and you look at the world and you see that template everywhere. If you go out and try to apply this system and superimpose it onto the real world, it either fails or it succeeds. Sometimes the template is a good one, but the execution gets screwed up.
When I look at Home Depot, a story that I have an intimacy with, I found this particular book to be fabulous. There is nothing boring about it; in fact I found every page worthwhile. Having spent 35 years in Wall Street running money, and figuring out how does a company make a buck, I found this book even more worthwhile. If you are involved in the investment business, this becomes a particularly worthwhile read.
If you run a company or have aspirations towards a career in management, you better read this book, because there is something in it for everyone. For most of us, there is more than one thing in it. Peter Drucker the ultimate management mind of the 20th century probably said it best when he talked about the corporation as a living, breathing organism that required nourishment on a daily basis. You just can't assume that corporations will continue to exist simply because they exist now.
Every day a company fights for its corporate life, for its right to continue to exist. Those corporate entities that assume that they will always be around - NEVER LAST. Other entities out there either eat them up, or they suffer the slow final death of arrogance, and go out of business without even knowing why they went out.
Home Depot is the story of two guys that got up in the morning every morning, fighting for the right to keep doing it a better way. They lived by the credo that you have to keep moving or they will throw dirt on you. Some of the lessons and ideas you will learn from this book include the following:
· CUSTOMER SERVICE - You have to take care of good people, and constantly be on the lookout for them. If necessary hire them, even when you don't have the jobs for them because you may not get a second shot at them.
· DOING THE RIGHT THING ALL THE TIME - It can cost you money doing the right thing, but it comes back in spades. Something else happens when you do the right thing. People realize your efforts, and some will take advantage of you, but that will be more than offset by the multitude of others who will become loyal customers for life.
· NOBODY LOVES A COMPANY- They may love what you do, and what you do for them as customers, but there is no real loyalty to companies, at least in this generation. Home Depot always tried to make as many of their employees stockholders as possible, so that they could align the employee (associates at HD) goals with the corporate goals.
· THIS IS A TOUGH PLACE TO WORK IF YOU ARE INFLEXIBLE - This lesson was lost on the current Chairman, CEO Nardelli who was fired by the Board for his IMPERIAL management style. He also possessed no understanding of the Home Depot culture as he tried to superimpose his General Electric template on the company. He failed miserably but that's another book.
· IF YOU CAN SAVE THE CUSTOMER MONEY, DO IT - Always do the right thing by the customer, and you will have a customer for life. Go the extra mile for the customer. CULTIVATE the customer.
· THE FOUNDERS WERE LIVING ON THE FUMES OF DREAMS - I loved these stories. These guys Marcus and Blank were honest about what they faced, and several times this company was touching or facing bankruptcy. This is an important lesson. The way around it is to have twice as much capital as you think you need. This by itself was worth reading the entire book. This is priceless knowledge.
· IT'S ABOUT PRICE, SELECTION, AND CUSTOMER SERVICE - Never lose sight of this statement and act on it in your own business goals. Give people the best price you can, and the finest selection of merchandise. If you back it up with the industry's best customer service you have found for yourself a business model for success. It may sound simple, but try executing on it.
So let me let you in on a secret. I spent years with Bear Stearns well over 20 years ago as a limited partner. When I read the early financial stories of Home Depot on Wall Street, I knew that what the founders in this book were saying was the complete unvarnished truth.
The story of how Ross Perot, one of America's wealthiest men in the early 1980's blew having dominant control of this company is now the stuff of myths. Nevertheless it's a true story. The founders ultimately turned down Ross Perot as a shareholder. They believe Perot to be a control freak. Yes, Perot didn't want the founders driving around in a Cadillac. Perot was a Chevy man. Well, the Chevy man blew a $60 billion dollar fortune by not investing a couple of million in Home Depot.
Then there's Ken Langone, the financial guy behind this phenomenal story. Langone may be the only guy in America to be the IPO maven behind two all time American success stories. He successfully brought public both Ross Perot's EDS, and the Home Depot. Who else can say that? He also made a billion dollars in the process. Langone is a unique, fabulous, walk to the well with you kind of guy. Among Wall Street types, he is unique, and the Street needs many more like him.
There is a story in the book where Langone is involved in a stock sale to a very nasty executive who is very prominent in his own right. Every time the executive refuses to give in to Langone's price, Langone just keeps upping the ante on him. This goes on for pages. It is uproariously funny, and is deserving of retelling over and over again. You will love this book, and learn an enormous amount about business in the process. It should probably be required reading for all MBA programs in management.
If you have any desire to understand what it takes to dedicate your entire life to building something, especially in the business world than this book is a read for you. There's one more thing that I must get across that is compelling. Having spent my life involved with companies like Home Depot, and high-powered successful people, I have come to the conclusion that it does not have to work out successfully.
There is no such thing as one must succeed, or it was ordained that this must happen. As an example Home Depot could have gone out of business a half dozen times before becoming so financially solvent that the business model had to work.
Steve Jobs at Apple could have decided 20 years ago, to license that Apple operating system to the PC industry, and Gates and Microsoft would never have happened. GM could have decided to build quality cars 25 years ago, instead of building [...]for decades while the Japanese took the market away.
Al Gore could have concentrated just a little bit more on Florida in 2000, and George W. Bush would have never been. John Kerry could have fought off the challenge of the Swift Boat accusations, and Ohio would have gone his way, and with it the election.
In the end, it's really a question of who comes through the funnel, and that is not always predictable. As I read this wonderful book, I came to the conclusion once again, that yes, you have to go for it, and dedicate all to getting there, but there is no certitude that you are going to make it. Just make sure you follow YOUR PASSION, because no matter where you wind up, a PASSION FILLED LIFE is a life WORTH LIVING. Good luck.
Tuesday, December 14, 2010
Jim Cramer's Mad Money: Watch TV, Get Rich
Forget all the craziness, and loud shrieking voice coming at you. This man is the real thing. He was a hedge fund manager for years, and made BIG MONEY doing it. He simply prefers to cultivate a national image by being in the media. This in no way negates the wealth of fabulous information that he imparts to people on a daily basis. Cramer is a TEACHER too, and that's what you need to know.
If you listen to him, and then take the time to study what he is saying, it is the same as pursuing an MBA in stock picking. The difference is that in this case, the professor is giving it away for FREE. As you know, very few people ever appreciate that which is given away. If you charge for it, people's ears will perk up. They will strain to hear what you are saying, but give it away for free, and what happens? They just sit back, and say ENTERTAIN ME.
Cramer is loud, and frankly has gone Hollywood. He probably feels compelled to act in this manner in order to draw a big crowd to his television show. By doing this however, he may be taken less seriously. It probably also ensures however that he will gather a larger and larger audience, although there will be a lot of people watching that can not appreciate the contribution this man is making to improving the stock picking abilities of hundreds of thousands of people.
The truth of the matter is that anyone who is a real stock investor should be paying money to sit in a room with this man, and listen to what he has to say. If you listen to any great thinker for a long enough period of time, something becomes quite evident. People always have to reveal themselves, and reveal the truth in the process. A person can only put on a false front for so long. The façade has to come off, given enough time.
This is why Jim Cramer is so worthwhile, with a great show, and a fabulous book. Cramer is the REAL THING, and don't you ever doubt it. I run an enormous amount of money, both as the Founder , and the Senior Managing Partner of Rockefeller Capital Partners, LLC. I talk to some of the smartest people in the world. If necessary, I write checks in order to be able to consult with them. I have probably absorbed the contents of over 1000 different books on finance, investments, and money. Cramer's book is the work of a man who has paid the price in money, stress, and brainpower to learn what he has to teach. I know because I have been there.
When all is said and done, I find Cramer to be an absolute joy to listen to. This book Mad Money is even better than listening to him. In this book whether Cramer intended to or not, you have some pearls of investing wisdom that are individually worth a 100 times the price of this book. Here are several of them:
· A stock is only worth what the big institutions are willing to pay for it (p3).
· You can't be sure about research from this or that brokerage house. They've all been tarnished... for colluding with their clients (p3).
· Tips are for waiters (p23).
· Learn in very precise terms how a company makes its money (p25).
· Nothing is more important than the sector a stock lives in...half of what a stock does is totally dependent on the its sector (p27).
· The actual stock price means nothing without context (p32).
· You can't make money until you sell (p55)
· If the stock is growing faster than its competitors but has a lower P/E, then it's a slam-dunk. I'd give it a triple buy - we're done, next caller. (p69)
· I don't like inside information, both because it's illegal, and because it makes you sloppy (p75)
· Almost all analysts have been trained exactly the same way, so they think in lockstep (p75).
· We don't love stocks -they're just pieces of paper (p81).
· Whenever a CFO is cautious, I'm cautious. If a CFO is negative, I'm negative. You can take that as gospel (p114).
· It's these institutions that set prices, because they do most of the buying and selling (p121).
· Resisting the business cycle is futile.... if you buy a secular growth stock when we're in a cyclical upturn, or a supposedly cyclical stock when we're in an economic slowdown, you will lose (p121)
· You can't trust companies that are coming out of a leveraged buyout. The investment banks favor the LBO firms because they do a lot more business with them than with the average investor (p127).
· Latin America is always a trade. If you hold onto Latin American stocks for long enough, your gains will evaporate (p130).
· Not everything is worth betting on. Don't be afraid to say it's too hard (p133).
· When a stock is cheap, it's usually cheap for a reason (p137).
· Past performance is not an indicator of future success.... it's like black jack; the cards have no memory, especially when shuffled. (p139).
· Never invest on borrowed convictions. Make your own mistakes. You never want to lose money because you borrowed someone else's convictions (p143).
· Usually people have decent reasons for buying and selling stocks, and you should understand those reasons thoroughly before you try to game the supposed "stupidity" of your fellow investors (p150).
You need to read this book because the biggest problem an investor encounters today in the BATTLE for PROFITS is TOO MUCH NOISE. We have too much information coming at us, and we have to be able to sift through that which is pertinent, and that which is extraneous. It can take a lifetime to develop the ability to do this - many never do, and they pay a dear price for it.
You also have to realize that you will never, ever have all the information you want, prior to making the investment decision to buy or to sell. You will always be dealing with an imperfect decision. What you need to know is, that's OKAY. If you have 80% of what you need to know, you are going to more than probably be calling it right.
If you are using Cramer's approach than more than likely, you are a MOMENTUM player. You can make big money very quickly with this approach, and lose it just as quickly. You have to be ahead of the crowd both on the buy side, and sell side to handle this technique correctly. The best I have seen at this approach is Michael Steinberg who founded, and ran Steinberg Partners, the hedge fund for years.
At the time, Steinberg once mentioned to me that he was giving away $50 million a year in commissions to Wall Street. This meant that he was getting everyone's best idea, and his results showed it. Steinberg was the ultimate momentum player, and he always looked 10 or 15 years older than his age whenever I would run into him. In this business the stress ages you.
As an individual investor, you can do very well in the market. I believe you can blow away professional manager results if you are up to it. It takes time. It takes intensity. It probably takes what Sigmund Freud had in abundance. That was the ability to be BRUTALLY HONEST with yourself as to your strong points, and your weaknesses. Very few are capable of such honesty. Only in Wall Street do so many talk a good game, show poor performance and then make millions for themselves in the process.
Those who have been successful like Cramer are the rare individuals that LOVE THIS BUSINESS. They wake up in the morning, and think about stocks. They go to bed at night, and think about stocks. Whenever they are in conversation, fairly quickly, you can bet that the conversation is going to turn towards stocks. They never stop talking about them. They never grow tired of the subject. That's what it takes to make a fortune in Wall Street, and I respectfully suggest to you that Jim Cramer is showing you how to do it. Good Luck.
Richard Stoyeck
richardstoyeck@gmail.com
If you listen to him, and then take the time to study what he is saying, it is the same as pursuing an MBA in stock picking. The difference is that in this case, the professor is giving it away for FREE. As you know, very few people ever appreciate that which is given away. If you charge for it, people's ears will perk up. They will strain to hear what you are saying, but give it away for free, and what happens? They just sit back, and say ENTERTAIN ME.
Cramer is loud, and frankly has gone Hollywood. He probably feels compelled to act in this manner in order to draw a big crowd to his television show. By doing this however, he may be taken less seriously. It probably also ensures however that he will gather a larger and larger audience, although there will be a lot of people watching that can not appreciate the contribution this man is making to improving the stock picking abilities of hundreds of thousands of people.
The truth of the matter is that anyone who is a real stock investor should be paying money to sit in a room with this man, and listen to what he has to say. If you listen to any great thinker for a long enough period of time, something becomes quite evident. People always have to reveal themselves, and reveal the truth in the process. A person can only put on a false front for so long. The façade has to come off, given enough time.
This is why Jim Cramer is so worthwhile, with a great show, and a fabulous book. Cramer is the REAL THING, and don't you ever doubt it. I run an enormous amount of money, both as the Founder , and the Senior Managing Partner of Rockefeller Capital Partners, LLC. I talk to some of the smartest people in the world. If necessary, I write checks in order to be able to consult with them. I have probably absorbed the contents of over 1000 different books on finance, investments, and money. Cramer's book is the work of a man who has paid the price in money, stress, and brainpower to learn what he has to teach. I know because I have been there.
When all is said and done, I find Cramer to be an absolute joy to listen to. This book Mad Money is even better than listening to him. In this book whether Cramer intended to or not, you have some pearls of investing wisdom that are individually worth a 100 times the price of this book. Here are several of them:
· A stock is only worth what the big institutions are willing to pay for it (p3).
· You can't be sure about research from this or that brokerage house. They've all been tarnished... for colluding with their clients (p3).
· Tips are for waiters (p23).
· Learn in very precise terms how a company makes its money (p25).
· Nothing is more important than the sector a stock lives in...half of what a stock does is totally dependent on the its sector (p27).
· The actual stock price means nothing without context (p32).
· You can't make money until you sell (p55)
· If the stock is growing faster than its competitors but has a lower P/E, then it's a slam-dunk. I'd give it a triple buy - we're done, next caller. (p69)
· I don't like inside information, both because it's illegal, and because it makes you sloppy (p75)
· Almost all analysts have been trained exactly the same way, so they think in lockstep (p75).
· We don't love stocks -they're just pieces of paper (p81).
· Whenever a CFO is cautious, I'm cautious. If a CFO is negative, I'm negative. You can take that as gospel (p114).
· It's these institutions that set prices, because they do most of the buying and selling (p121).
· Resisting the business cycle is futile.... if you buy a secular growth stock when we're in a cyclical upturn, or a supposedly cyclical stock when we're in an economic slowdown, you will lose (p121)
· You can't trust companies that are coming out of a leveraged buyout. The investment banks favor the LBO firms because they do a lot more business with them than with the average investor (p127).
· Latin America is always a trade. If you hold onto Latin American stocks for long enough, your gains will evaporate (p130).
· Not everything is worth betting on. Don't be afraid to say it's too hard (p133).
· When a stock is cheap, it's usually cheap for a reason (p137).
· Past performance is not an indicator of future success.... it's like black jack; the cards have no memory, especially when shuffled. (p139).
· Never invest on borrowed convictions. Make your own mistakes. You never want to lose money because you borrowed someone else's convictions (p143).
· Usually people have decent reasons for buying and selling stocks, and you should understand those reasons thoroughly before you try to game the supposed "stupidity" of your fellow investors (p150).
You need to read this book because the biggest problem an investor encounters today in the BATTLE for PROFITS is TOO MUCH NOISE. We have too much information coming at us, and we have to be able to sift through that which is pertinent, and that which is extraneous. It can take a lifetime to develop the ability to do this - many never do, and they pay a dear price for it.
You also have to realize that you will never, ever have all the information you want, prior to making the investment decision to buy or to sell. You will always be dealing with an imperfect decision. What you need to know is, that's OKAY. If you have 80% of what you need to know, you are going to more than probably be calling it right.
If you are using Cramer's approach than more than likely, you are a MOMENTUM player. You can make big money very quickly with this approach, and lose it just as quickly. You have to be ahead of the crowd both on the buy side, and sell side to handle this technique correctly. The best I have seen at this approach is Michael Steinberg who founded, and ran Steinberg Partners, the hedge fund for years.
At the time, Steinberg once mentioned to me that he was giving away $50 million a year in commissions to Wall Street. This meant that he was getting everyone's best idea, and his results showed it. Steinberg was the ultimate momentum player, and he always looked 10 or 15 years older than his age whenever I would run into him. In this business the stress ages you.
As an individual investor, you can do very well in the market. I believe you can blow away professional manager results if you are up to it. It takes time. It takes intensity. It probably takes what Sigmund Freud had in abundance. That was the ability to be BRUTALLY HONEST with yourself as to your strong points, and your weaknesses. Very few are capable of such honesty. Only in Wall Street do so many talk a good game, show poor performance and then make millions for themselves in the process.
Those who have been successful like Cramer are the rare individuals that LOVE THIS BUSINESS. They wake up in the morning, and think about stocks. They go to bed at night, and think about stocks. Whenever they are in conversation, fairly quickly, you can bet that the conversation is going to turn towards stocks. They never stop talking about them. They never grow tired of the subject. That's what it takes to make a fortune in Wall Street, and I respectfully suggest to you that Jim Cramer is showing you how to do it. Good Luck.
Richard Stoyeck
richardstoyeck@gmail.com
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