Sell The Newspapers Now!
The Dynamic Wealth Report
May 4, 2009
Warren Buffett Says Sell This Industry NOW!
Let me ask you a quick question… When was the last time you watched the
Sport of Kings? When was the last time you went to watch the ponies run?
As you know, my girlfriend Linda’s a big horse lover.
She recently rescued a horse off the race track. Slew A Soldier is a
beautiful and sleek grey horse. He loves to run, which probably comes
from his pedigree. He's a descendant of Seattle Slew, one of
the greatest racing horses of all time.
We love to watch the horses run. It’s hard to beat the excitement of
the race, especially the breathtaking finishes. I’ve been known to duck out
of the office early and head to the track with friends. Beautiful
weather, cold beer, hot dogs, and watching the ponies run. It’s a great
day.
Now, I’m far from a racing expert, but I’m learning.
This week I learned a big lesson. Every horse has a chance to be a
winner… even the long shots.
This weekend was the running of the Kentucky Derby… the biggest race in
the world. And this year the excitement of the race didn’t disappoint. A
50 to 1 underdog came around the final turn. Mine That Bird (Yes, that’s
the name of the horse) hit the final turn and flipped on the
afterburners. The rest of the field seemed to stand still as he sprinted
up the rail. He crossed the finish line so far ahead of everyone else,
some observers wondered if he was the only horse running.
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It was like watching an Olympic sprinter compete against a bunch of high
school students.
The Derby wasn’t the only excitement this weekend.
This weekend was also the famed Woodstock for Capitalists. It’s the
annual meeting for Berkshire Hathaway. The carnival-like business
meeting attracts investors from all over the world.
Warren Buffett of course played the grand maestro. He played in the
bridge tournament with Bill Gates (you know him as the founder of
Microsoft and one of the richest men in the world). Buffett drank Coke
by the case, and of course, hyped the products his companies make.
He was his usual jovial self. He kept a smile even though he reported a
fall in corporate earnings this year.
But, I doubt anyone cared.
Today, I don’t want to discuss new Buffet investments. I don’t want to
spit out facts and figures about the meeting. I’m not even going to peer
into Berkshire’s results or financial statements.
What I want to do is focus on one small comment.
It was buried in the busy day. It didn’t attract a lot of attention.
I’d bet most of the Buffett faithful didn’t catch onto the significance
of the comment.
But to me, it was one of the most important points that Buffett made. And
I believe you should listen to Warren and take immediate action in your
portfolio.
As you know, I’m a fan of Warren. However, I don’t always agree with
him. This is one instance where our thinking aligns perfectly. What am I
talking about?
Warren’s comment about the newspapers. He said, “For most newspapers in
the United States, we would not buy them at any price.”
Think about that for a moment. Buffett wouldn’t buy them at any price.
Not for a million dollars, not for a dollar. Buffet’s comment is
profound. But I bet most people ignored his statement.
As a matter of fact, I know most people ignored it. Two of the top three
newspaper stocks are trading higher today.
Investors are always salivating like hungry dogs over every Buffett
investment. They ride his coat tails trying to profit from his
investments. It’s not a bad idea, but too many focus on what to buy. They ignore the more important aspect of what to sell.
You now possess the knowledge to save yourself serious money. Buffett
isn’t telling you to buy a stock… read between the lines. He’s telling
us to sell the newspapers. Get them out of your portfolio. Strip them
from your investing universe.
The potential for losses is too great.
I know he’s right. And I agree. Let me tell you an anecdotal story.
A few weeks back, I went to brunch with a group of friends, and friends
of friends. I didn’t know many people at the table. I quickly realized I
was surrounded by friends working for one of the largest papers in the
nation.
They were all in dire straits. They were suffering from bone cutting
layoffs, forced vacation, and unpaid furlough. They talked openly about
the destruction of their very business. Every one of them, to a person,
was looking for a new job.
Newspapers are struggling. Circulation is down. Advertisement revenue is
down. And the only thing increasing is the losses.
So, what should we do? If you hold companies like the Washington Post
(WPO), Gannett (GCI), or The New York Times (NYT), now’s the time to be
selling… not buying. Do it now, don’t wait. Get these dogs out of your
portfolio. Focus on other areas that can make you money… don’t waste
your time with a dead industry. For once, Buffett and I agree on this
one.
• Gambling Industry (Up 40%)
In the last three months, we’ve seen a number of industries rally,
including the casinos. Companies like MGM and Las Vegas Sands fell hard
as customers stayed home. With the dip in travel and tourism, their
profit margins were crushed. Now the market is looking ahead and
signaling a recovery in some of these companies.
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