Investment Advice from a Millionaire Barber

[Louie Piro, my barber when I lived in Mountain View CA shortly before Google arrived, became a multimillionaire with a simple investment strategy. I thought of him the other day when a Rick’s Picks subscriber wondered aloud in the chat room which investments are most likely to prosper in the recessionary hard times that Americans will soon face. The subscriber evidently favors the shares of gold companies that pay dividends. My own choice comes straight from Louie’s playbook: Invest in utility companies that serve growing populations and that have good dividend histories. Thus did Louie’s initial, $100 stake in a Nevada purveyor of water and power seed the wealth the haircutter was to amass over the next 50 years. Following is his story, as told in a column I wrote for The San Francisco Sunday Examiner 25 years ago. I have published it here before, but it seems more relevant than ever now, as investors try to figure out which stocks will be favored by the flight to safety that could come at any time. Louie’s remarkable saga holds promising investment implications as we watch Californians, New Yorkers and other blue-state refugees flee economically doomed regions of the country for better lives in Florida, Texas, Utah, Tennessee and a few other states that are not so heavy-handed in the way they regulate businesses, schools, commerce and free speech . RA

If there is a single word to sum up the success of investor Louis Piro, that word is “dull.” Piro has never made a killing on a stock. He doesn’t play hunches and he runs from hot tips. He says he passed up Pfizer not long ago because its shares were too pricey even before impotent men started flocking to their Viagra pill for a cure. Nor will Piro sell anything from his portfolio. He just keeps buying — and then only with money he knows he won’t need any time soon. He adds stock whenever the price drops substantially. Piro shuns companies that sell products or services he can’t understand, and he has never even owned a share of a Silicon Valley upstart. His favorite word — “dividend” — could be the mantra of a successful hypnotist. Zzzzzzzz. Finally there is this pearl, the cliché that underlies nearly every investment decision that Louis Piro has made in the last 45 years: “Buy shares in companies that will grow with America.”

A Modest Retirement Dream

That Piro, 63, could have amassed considerable riches by following such homely rules is probably not unusual. What is striking, however, is the remarkable degree of his success, and the singular details of his journey. He is a wealthy man by any measure, with a sizable portfolio of stocks, bonds and, until recently, real estate. But he was not thinking about getting rich when he began to funnel his spare cash into the stock market 45 years ago. At the time, he was 18 and just starting a lifelong career at Al’s Barber Shop on Main Street here. His goal was simply to build a little nest egg. “I knew then that when I retired, all I would be taking with me was my clippers,” says Piro. “There were no IRAs or tax-sheltered savings back then, so it was a question of creating some security for myself.”

Early on, the barber was literally investing all of his spare change, about $5 a week. “Every time it grew to a hundred dollars, I bought some more stock,” he says. The first was Pacific Enterprises, a natural gas company. Piro didn’t find that one himself — he learned about it from a customer whose seemingly cushy retirement was well supported by Pacific’s generous dividends. Three shares of Pacific was all Piro could afford, but he took the customer’s advice and held onto them, always reinvesting the dividends. It has since grown to 2,000 shares.

A Bulging Portfolio

He has repeated this pattern in dozens of stocks and funds. His portfolio bulges with shares of Lucent, Coca Cola, Pacific Enterprises, Wisconsin Energy, AirTouch Communications, Pacific Gas & Electric, Bank of America and California Water Services, to name a few. There are also sizable blocks of Southern California Edison, USX/Marathon, GT&E, AT&T and Sierra Pacific, as well as a slew of bond- and growth-oriented mutual funds offered by Vanguard, Prudential, Franklin and Benham. Tax-free bonds and annuities round out the list.

Piro, who everyone on Main Street calls Louie, doesn’t gloat about his net worth, nor is he eager to tell the world exactly how much stock he owns. About all he’ll say is that he’s not worried about retirement, which is coming up soon. The building that houses Al’s Barber Shop is scheduled to be razed in a year, and that’s when Piro plans to trade in his scissors, shears and comb for a set of golf clubs and tickets to exotic ports and destinations around the world. He says that, God willing, he and his wife Ann will be able to do as they please for the next 30 years — without having to sell a single share or bond from his portfolio.

Louie’s Rules

To anyone who dreams of retiring well on interest and dividends, he would offer the following advice:

* Don’t fear bear markets. They come and they go, but if you buy stock in good companies, their shares will always recover.

* Don’t ever sell any stock. If your reasons for buying are sound to begin with, the shares can only go higher over time.

* Buy more stock whenever the price drops substantially.

* Look for companies whose growth reflects the growth of America as a whole. Water, gas and electric companies will always be winners in states with healthy economies.

* Favor stocks with generous dividends, and plow every penny of it back into those stocks.

* Don’t be too conservative. Life is a gamble, and you’ll never win if you settle for the meager returns of CDs or passbook accounts.

* Never go for the quick profit, and be patient enough to hold onto good stocks when they hit the inevitable rough patch.

* Invest with money you don’t need so that you are not pressured by financial adversity or bear markets to pull out of stocks.

* Buy confidently when fearmongers flout common sense. In the depths of the 1990-91 recession, when Bank of America was trading at $7 a share, Piro says he bought heavily because he was so sure the bank wouldn’t go under. This may seem obvious now, with the stock’s value up almost fifteen-fold, Piro notes, but it surely wasn’t then.

Piro says he could never have done so well if his wife had not been willing to help shoulder the sacrifice of setting money aside regularly. Luck was in his corner, too. “You’ve got to have a little help from somebody,” he says, “and the Lord has been very good to me.” [Click here for a link to my most recent interview with Howe Street’s Jim Goddard. We talk about, among other things, how the coming deflation will change people’s lives. RA

  • RICHARD CHARLES October 8, 2022, 10:02 am

    Great instructive true story Rick.
    A Buffett Barber.
    Mr Buffett likes his utilities, eg the MidAmerican Energy Company, now Berkshire Hathaway Energy. (BHE),
    a private portfolio of 13 energy companies with geothermal, lithium and wind energy including China EV manufacturer BYD (Build Your Dream) he described as one of Berkshire’s Jewels.
    Mr Buffett described his holding company as owning and operating the largest Infrastructure Assets of any American company.
    What appears essential to BRK/A’s success is recurring cash flow for assets, businesses, energy, insurance and services shown in the holdings of AAPL, AXP, BAC, BHE, BNSF (Burlington Northern Santa Fe Rail), CVX, Insurance with the world’s largest float, KO, Mammon, a holding company of 100 businesses, OXY and KHC.
    with the bankruptcy of America’s largest utility, PCG, it becomes clear even utilities are not without risk.
    BRK/A also keeps $120 B in T Bills which have a risk of inflation exceeding interest.
    From the first public utility in 1880 in Wabash, IN, powered by Edison’s General Electric, public utilities grew to 3000
    in the 1920s. By 1930 they were 1900, showing even utilities are not immune to risk. Government construction of Tennessee Valley Authority Hydroelectric restored utilities that most people take for granted until the utility fails.
    Today, bankruptcies, rolling brownouts and blackouts, particularly facing potential EV demand confirm there is risk as well as reward in all markets, even government regulated.
    We like PCG, Target + 73 % from 14.525 to 25, with Risk to 10.17.

    • RICHARD CHARLES October 8, 2022, 10:41 am

      Edison’s British Secretary, Samuel Insull, began in Chicago and became a defacto natural monopoly utility holding company owner, perhaps the largest.
      After complaints of price gouging, The Federal Trade Commission investigated this for six years.
      FDR ran in 1932 against the Ishmaels and the Insulls, whose hand is against everyman’s.
      The 1933 TVA (Tennessee Valley Authority), 1935 Rural Electrification Administration and 1936 BPA (Bonneville Power Authority) got government into the utilities business, with economy of scale providing more power to more people at lower prices and better reliability at first.
      Government outlawed power pyramids but not holding companies with two levels.
      The 1935 SEC (Securities Exchange Commission) required utilities to register and report subject to government scrutiny of bond and stock offerings to raise capital. Holding companies fell from 216 to 18 from 1938 to 1958, with a quarter of utilities government owned and three quarters privately owned by 1970.
      US Government spending grew 1400 times from $5 B in 1933 to $7 T in 2021, always spending more than taking in, meaning the inflation tax more than quadrupled from 8 % of GDP in 1933 to 33 % in 2021.
      With the potential loss of the dollar as global currency status to export inflation, currency inflation may increase domestically, triggering the deflationary credit collapse we are beginning to see.
      In that event, government may lose monopoly power services from contracting utilities.
      Could be interesting times that account for rising generator and gun sales.

      • RICHARD CHARLES October 9, 2022, 11:19 am

        Confirming your Barber Buffett story Rick,
        We had self-made old-time barbers on University Ave in Palo Alto
        Complete with a Red, White and Blue Barber Pole
        They worked hard, scrimped, saved, invested and owned their own building for retirement
        Gave haircuts, scalp massages and hot wet towel shaves sealed with Bay Rum Barberry, mmm
        Always efficient, parsimonious and quick with the latest local financial news in Silicon Valley
        What a rich memory of monetary mentors

  • John October 3, 2022, 7:41 am

    The main reasons this worked are
    1. population growth of boomers
    2. Bonds bubble and deb binge with Fed free credit and lower interest rate
    3. Free trade agreement and globalization
    4. The brainwashing buy & hold narrative of advisers. Lately theses advisors are spending much time trying to reassure their clients

    But now the never ending growth model is kaput.
    Boomers are retiring and force to sell. China will also face a population decrease as the olders gen die and their 1 child only policy.

    In the next years the vaxx people will die and we will have a major depopulation shock and systems functioning will be destabilize and could fall. Unless people wake up and stop the psychopaths parasites 0.5%
    The debt bubble is unsustainable. Plus, delta & gamma bubble.
    And the most dangerous of all: ETF bubble. If people start selling watch-out. There could be no bid. Average Joe Q have been brainwashed or decade with the buy & hold but now they see their portfolio going down -30% because Stock & Bonds are going down at the same time.
    And with the CBDC wildcard they could force a devaluation for everyone with the conversion.
    So until these shocks have played it will be a roller coaster and timing will become necessary again unless you manage to buy at very cheap prices

    There is a great con being played on humanity right now. There is a Fake NWO and a Real NWO. And right now they are pushing the fake NWO to make it believable, but be advise the trap is more subtle than you think.
    While you are busy watching the kabuki theater of the fake NWO the Real one is being set up and people really need to wake up if humanity wants its Freedom. Learn more: