Special Situations II OR How avoiding mistakes makes you money

A few days ago I posted on a blog that talks about special situations (special situations are best described in this book




I got an email from George over at http://www.fatpitchfinancials.com/ regarding the recent post about his blog, in part George says:

"I noticed you mentioned 10 percent returns from special situations in your article. I wouldn't underestimate special situations. My real money port has a 23.5% APY since inception. See today's post at http://www.fatpitchfinancials.com/283/special-situations-real-money-port-update-2/"

I just wanted everyone to know that in using my 10% number I was merely trying to make the point that for those people who need help in leaving their long term investments alone...special situations might provide a way to to that. And that even if you only got 10% a year...if special situaitons stopped you from doing something stupid that cost you money (and by preventing that increased your return on a long term investment by 5, 15, or 25%) than special situations pay for themsleves even earning 10% more or less...

obviously George is doing way better than that...and if by doing so George has avoided messing with his long term investments...special situaitons have probably made him more than 24%.

as I learn to invest...I am thinking more and more about how you make more money by not doing something stupid than you do by doing something right (I think Buffett often mentions that early in his career he put 25% of his net worth in a local gas station...which did not turn out as good as other investments...and if he had not done that..and instead held on to that money for other things...the money would have compounded to $800 million)...

so I guess I am just saying that avoiding mistakes makes you money...and whatever helps you avoid mistakes..is acutally making you money...(if I pay someone $100 to tell me not to invest in XYZ..and that advice saves me $10,000....was the advice worth $100...what I paid...or $10,000...what I saved...well to me the advice was an "investment" that returned a net of $9,900...and lets say i at the same time took the $9,900 and put it in an investment (whic had nothing to do with the advice form the ther guy) that at the end of one year was worth $15,000....was the orginal advice worth $100, $9,900, or $14,900

well to me it was worth $14,900...it saved me $9,900 I would have lost...and I was able to take the money saved and grow it...

so my point is...when you lose $1 you have not lost a dollar...you have lost several hundreds of dollars 10 years or 20 years form now as compounded each year...

Buffett is quoted (I did not mean to post this much so I did not have my cites handy...will follow up one day with more) as once being sorta upset when his late wife speant 10k-15k on new fuirnishings..not becaus ehe is so cheap that he did not want new furniture...but because he knew what he could do with 10k over the next 10-20 years...compound it at 20-50% and grow it into several hundreds if not millions of dollars...

so whether it is special situations...or anything else...thinking in terms of how much something might save you money is as imporatant as how much something might make you money...

it is funny how I can statrt out on one thing and just flow into something else...

Here at Valueblogreview (speaking in the third person is so cool...as if Valueblogreview is soemthing more than my brain and a keyboard...lol...) our goal (mine and the mouse in my pocket....lol) is to simply learn...and help others to learn while we learn...so if I ever write anything about your blog, a book you have read, or anything...and you feel that you can add to the discussion, by clarificaiton, correction, or comment, please do so.

I am humble enough to know that mine is not the last word on any subject...and while I take pride in what I write .....my pride is not more important than being right. So feel free to add you thoughts whenever you have them, either by emailing them to me or leaving a comment on the blog.

Take care.

Steven