“Pasadena Secret Investment Society”

By Travis Johnson, Stock Gumshoe, October 3, 2007

I’ve gotten a lot of email about Porter Stansberry’s latest ad campaign, the one that teases the existence of “secret societies” that you can participate in and significantly outperform the market.

Of course, the mystique sells the newsletters … but are these “secret societies” for real? Let’s take a look.

This “Pasadena Secret Society” … what is it?

The ‘Pasadena Society’ — he’s also calling it Pasadena’s Secret Investing Syndicate — was started in 1957 by an aspiring money manager in his early 20s.

OK, so who knows this one so far?

There are a few quotes, too, which the Gumshoe loves:

“better by a mile than any mutual fund,” according to Kiplinger’s.

The NY Times chips in, “if anyone can beat the market, it’s [the Society].”

There are a few clues given about the investments of the “society:”

“Two years ago, the ‘Society’ received a 2-page letter from the chairman of a small, family-owned tool-manufacturing company based overseas. The family wanted to sell their profitable enterprise to a group of competent investors… They had heard of the ‘Society’s’ reputation from other wealthy investors, and decided it was a perfect home for their company.”

“Imagine, a wealthy foreign family literally gifting you a profitable cash-machine! You and I would never dream of getting a letter like that in the mail. The ‘Society’ bought the entire company for $4 billion. And shareholders have made twice as much money as the stock market since then.”

And several other acquisitions/investments by the Pasadena Society are teased as well:

“In 2000 and 2002, the ‘Society’ saw a trend in the commodities sector, and acquired preferred stock in an international energy company based in Iowa.”

In the 1970s, the ‘Society’ saw an opportunity in the newspaper business. They decided to acquire a small 10% stake in a national newspaper that had a near-monopoly in the city it covered. “

That’s probably enough to figure out what this “Pasadena Society” is, though Stansberry also teases a few other investments that are built around similar “secret societies.”

And this society has a special meeting for its members every summer.

So what are we dealing with here?

Believe it or not, it’s Warren Buffett’s Berkshire Hathaway (BRK-A or BRK-B), which I think we can agree is the most famous holding company in the world.

The Kiplinger’s quote was clearly about Warren Buffett’s Berkshire Hathaway, though it’s a bit old (from 2003) … the NY Times quote is fresher, from a 2007 article also about the Sage of Omaha.

The “special meeting” that only society members may attend refers, of course, to the pilgrimage to Omaha for the Berkshire annual meeting, often referred to as “Woodstock for Capitalists.”

The specific investments that I noted above are Mid American Energy, the Washington Post, and Iscar, Buffett’s latest relatively large acquisition. A few other Buffett acquisitions were teased, too, but my fingers got lazy.

There are a few relatively unimportant factual discrepancies with the clues — I think when Buffett got the letter and invitation to buy Iscar, the Israeli metal tool and cutting company, he bought 80% of the company, not the “entire company.”

And I think Warren Buffett’s investment partnership, which predated the Berkshire Hathaway acquisition by a few years, actually started in 1956, after Ben Graham’s partnership folded and Buffett set out on his own … but no need to quibble.

And what’s up with that Pasadena part of the clue? I assume that this must be a clue about Charlie Munger, who I think still lives in Pasadena and has based his own, smaller holding company, Wesco, in that LA suburb/neighborhood. Munger is the frick to Buffett’s frack, his sounding board and investing partner for Warren for decades, though I don’t know that they were even acquaintances yet in 1957 — their tight business relationship began a bit later on, I think, in the 1960s.

So this is a first for me — I’ve seen probably dozens of teasers that purport to share with you the secrets of Warren Buffett, or to find the next Warren Buffett for you … but this is the first one I’ve seen that actually teases Berkshire Hathaway. Not exactly an unknown company, though many people consider it out of reach at close to $4,000 a share for the B shares and well over 100,000 for the A shares, but as a Berkshire Hathaway shareholder myself I certainly can’t argue with the logic.

And really, Stansberry isn’t teasing Berkshire here, though he does leave those tantalizing clues about it — that’s a buildup to his own effort to find you the next “secret society”, which in effect means that this, again, is a search for the “next Berkshire Hathaway.” So it’s true, some pursuits are genuinely evergreen — I wonder how many years we’ll spend still looking for the “next Berkshire” in the decades after Mr. Buffett passes from this mortal toil?

But … and this is where I slip in my own teaser, I’ve got more to write about and no more time. So I haven’t yet gotten to the meat of this tease — they did tease Berkshire Hathaway as the “Pasadena Secret Investment Society,” but they also noted that, yes, this is a well-known company and the shares are quite expensive — and they’ve got some presumably smaller and less expensive “secret societies” for us to invest in …

So, next time you hear from me, look for the Gumshoe to go under the hood and check out the world of holding companies with “The Five Most Important Secret Investment Societies in America.” Until then, happy investing and I hope you all find success in searching for your inner Buffett.

Update — I’ve finished going through all the Secret Societies now, here are the links to my writeups/solutions:

The Brigham Street Society
The Mt. Kisco Society
The California Club
The Canary Wharf Estate
The Boardwalk Club

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10 Comments on "“Pasadena Secret Investment Society”"

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appreciative
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appreciative
October 27, 2007 10:28 pm

Greetings,
This is the first time I’ve
read your web site. I happened to
be trying to research/find out more
about the ‘Secret Societies’ when
I clicked on the search hit that
said “Sock Gumshoe”.
Thank you VERY much, you are
a grin and a half.
– Newbie

Anonymous
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0
Anonymous
October 30, 2007 11:46 am

Thank you so much for the info. I also clicked here for the first time looking for background on “Secret Societies”. This helps immensely. My Dad had been talking about this “Society” and how you will make a fortune by joining. Great to get the clarification.

Anonymous
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0
Anonymous
October 31, 2007 12:28 am

I’d like to add my thanks to the others. I also clicked here looking for info on the “Secret Societies”. And I see you have information on some of the other ads I’ve received. The information you share is greatly appreciated!

Kathryn
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Kathryn
October 31, 2007 4:47 pm

Thank you Gumshoe! You made my search so much easier…You are truly doing a great service for us desperate (and overly gullible) investors.
Kathryn

Dean Engle
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0
January 19, 2008 6:46 pm

here is some information of a strategy clled the ‘PADDLE STRATEGY” which is slupposed to be an excellent bear market strategy, do you have any information of this program ???????thanks Dean

Bobby Clemons
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Bobby Clemons
January 24, 2008 2:11 am

I too appreciate your information. I get emails from Stansberry’s and yes, they make these investments sound good. But I just can’t see forking over anywhere from $100-$1000 for this information. You provide it at no cost!

Nooruddin
Guest
0
January 24, 2008 3:02 am

Dear Sir,
Read about the acheivement that this society has acheived and made investors bullionairs.

Please send details or invitation for the same,
Looking forward to hear more from your side.
Thanking you,

Nooruddin

Joe Cruz
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0
Joe Cruz
March 24, 2008 10:49 pm

Thanks for the info on secret societies. Do you recommend any?

Hiren K. Patel
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0
April 24, 2008 12:24 pm

This website is wonderful. Many newsletters simply make things sound too good to be true. And after the public ends up buying the information, they usually feel ripped off. I’m glad to see that you are here policing this investment newsletter along with the others like it for free to the public.

Jim Evans
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0
May 11, 2008 7:05 pm
Dear Gumshoe, I have read your comments for sometime now but never could find a way to become a “member” or customer or whatever. I have been highly impressed with your knowledge concerning financial investing……I am so tired of Stansberry…they charge me as much as they can get away with, only to send you an information newsletter that never tells you anything but send us an additional $XXXXX to provide the add’l info that you NEED (Ha- you very seldom need to get add’l info from them if you are willing to take the extra time to research there newsletter… Read more »
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