Buffett Buffet

[Bylo Selhi]

Warren Buffett sings a different tune in his advice to investors [Globe&Mail, 07Dec09]

In short, Mr. Buffett's one best idea for most investors is to invest in index funds via dollar-cost averaging – this is the best way to tap into the dynamism and growth potential of free-market economies. Then focus on your career, your family, and enjoying life: that is where your time is best allocated. Some good advice from the Oracle of Omaha.

[Taggart]

For those who have never read it, a classic from the archives of Forbes circa 1979. Warren Buffett's:

You Pay A Very High Price In The Stock Market For A Cheery Consensus

[Taggart]

Enjoyed this article about Buffett's investing during the dark days of the recession. To see the full article, copy and paste the title into Google.

Wall Street Journal

DECEMBER 14, 2009

In Year of Investing Dangerously, Buffett Looked 'Into the Abyss'

[Peculiar_Investor]

Enjoyed this article about Buffett's investing during the dark days of the recession. To see the full article, copy and paste the title into Google.

Wall Street Journal

DECEMBER 14, 2009

In Year of Investing Dangerously, Buffett Looked 'Into the Abyss'

A worth while read for everyone. Some key messages that I don't think people don't typically appreciate about Buffett.

"I bought my first stock in 1942, and this roller coaster surpassed anything that I've seen," says the 79-year-old investor. "We didn't do all the smartest things. We didn't do anything really dumb."

"I don't think Buffett gets enough credit for all the pitches he doesn't swing at," says Paul Howard, an analyst at Janney Montgomery Scott. "And he gets a lot of pitches."

Sounds a bit like tortoise and the hare investing, Rule #1, don't lose money. Rule #2, see Rule #1.

I found this one very humourous and a reminder for those that need to be in constant communication.

The next day, Mr. Buffett flew to Edmonton, Canada, for a charity concert, headlined by Seal and Paul Anka, for families with children who need organ transplants. At about 6 p.m., he got a call at his hotel from Barclays PLC President Robert Diamond Jr. and an adviser, former Citigroup Inc. banker Michael Klein. The bankers were trying to broker a last-minute deal for Barclays to buy Lehman, which was facing bankruptcy.

U.K. regulators wouldn't approve such a large deal without shareholder approval, they told Mr. Buffett, which could take several days or even weeks. Regulators were worried that Lehman's trading partners would panic, refusing to do any more business with the bank. Would Mr. Buffett, for a fee, guarantee Lehman's trading positions until a shareholder vote?

Mr. Buffett needed to leave for the concert. He asked the bankers to send him a fax laying out deal terms. When he returned to his hotel around midnight, he didn't find any fax, so the deal went nowhere.

Mr. Klein had left a message on Mr. Buffett's cellphone. But Mr. Buffett says he doesn't use cellphones much, so he didn't even realize the message was there. He says he didn't get it until 10 months later, when his daughter, Susan Buffett, discovered it.

[Taggart]

Enjoyed this article about Buffett's investing during the dark days of the recession. To see the full article, copy and paste the title into Google.

Wall Street Journal

DECEMBER 14, 2009

In Year of Investing Dangerously, Buffett Looked 'Into the Abyss'

A worth while read for everyone. Some key messages that I don't think people don't typically appreciate about Buffett.

"I bought my first stock in 1942, and this roller coaster surpassed anything that I've seen," says the 79-year-old investor. "We didn't do all the smartest things. We didn't do anything really dumb."

"I don't think Buffett gets enough credit for all the pitches he doesn't swing at," says Paul Howard, an analyst at Janney Montgomery Scott. "And he gets a lot of pitches."

Sounds a bit like tortoise and the hare investing, Rule #1, don't lose money. Rule #2, see Rule #1.

I found this one very humourous and a reminder for those that need to be in constant communication.

The next day, Mr. Buffett flew to Edmonton, Canada, for a charity concert, headlined by Seal and Paul Anka, for families with children who need organ transplants. At about 6 p.m., he got a call at his hotel from Barclays PLC President Robert Diamond Jr. and an adviser, former Citigroup Inc. banker Michael Klein. The bankers were trying to broker a last-minute deal for Barclays to buy Lehman, which was facing bankruptcy.

U.K. regulators wouldn't approve such a large deal without shareholder approval, they told Mr. Buffett, which could take several days or even weeks. Regulators were worried that Lehman's trading partners would panic, refusing to do any more business with the bank. Would Mr. Buffett, for a fee, guarantee Lehman's trading positions until a shareholder vote?

Mr. Buffett needed to leave for the concert. He asked the bankers to send him a fax laying out deal terms. When he returned to his hotel around midnight, he didn't find any fax, so the deal went nowhere.

Mr. Klein had left a message on Mr. Buffett's cellphone. But Mr. Buffett says he doesn't use cellphones much, so he didn't even realize the message was there. He says he didn't get it until 10 months later, when his daughter, Susan Buffett, discovered it.

Just to add one more item to Peculiar Investor's fine synopsis of the Buffett article, I'll throw in one small paragraph that "might" tell me I'm on the right track by thinking in terms of investing in sectors in my own portfolio.

"The Burlington railroad deal reduced Berkshire's earnings-growth potential, analysts say, since railroads tend to track overall economic growth. But it also trimmed Berkshire's exposure to risk-prone financial operations, potentially giving it a more solid foundation for when the next crisis hits."

[Peculiar_Investor]

From Barron's, The Buffett Paradox. The article poses an interesting question, "Berkshire won't let Kraft dilute its shares to buy Cadbury. So why is Warren Buffett willing to issue new shares to buy Burlington Northern?"

[Mike Schimek]

From Barron's, The Buffett Paradox. The article poses an interesting question, "Berkshire won't let Kraft dilute its shares to buy Cadbury. So why is Warren Buffett willing to issue new shares to buy Burlington Northern?"

Probably because Buffet thinks Burlington Northern is a good deal at the price he's paying, and Cadbury isn't a good deal at the price Kraft is paying.

-------------------------

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPdhurDmpnhE&pos=1

This is the first time I've seen Buffet speak out against someone. It has a bit of an angry tone to it.

Warren Buffett opposes President Barack Obama’s proposed levy on financial institutions because firms including Goldman Sachs Group Inc. and Wells Fargo & Co. already repaid bailout funds.

“Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

IMO it isn't based on common sense... it's based on an agenda of socialist revolutionary fundamental transformation of the United States, in which excuses, no matter if they are illogical, for big government to take away from private enterprises is justifiable.

“My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people,” Obama said Jan. 14 when he announced the Financial Crisis Responsibility Fee.

Funny, looking at recent profitability reports, I'm not seeing massive profits Obama is referring to. Anyone seeing U.S. banks posting up "massive profits"?

“We want our money back, and we’re going to get it.”

Last time I heard, lots of other banks have paid the money back...


Maybe he needs to tax the private banks (which gets filtered down to the consumers of course) so that he can continue to fund Fannie and Freddie's constant need for bailout money because of their gross incompetence. Makes sense; take money from the good banks and weaken them and give it to the incompetent imbeciles so they can stay in business and take market share from the good banks. IMO only a left leaning socialist would consider this logical.

IMO this guy is driving the country in the wrong direction. His strings are being pulled by various puppetmasters that funded his campaign (most notably Andy Stern). He isn't working in the best interests of the american people and the country is being harmed because of it.

I read somewhere that when the Chinese PM travels abroad he always has a copy of Adam Smith's book in his briefcase. I wonder if Obama has a cherished copy of chairman Mao's in his briefcase when he travels around.

[brucecohen]

I read somewhere that when the Chinese PM travels abroad he always has a copy of Adam Smith's book in his briefcase.

Which explains why the Chinese govt has spent more on post-crash economic stimulus than even Obama has. Details here

Excuse me a minute, there's someone at the door.

What's that?

You say bank bailouts and bonuses are not an issue in China? I guess that's because of Adam Smith.

No? It's because the Chinese banks are all govt owned?

Entirely govt owned?

Really?

And the bankers are govt employees?

Oh.

What's that?

You say Buffett might well be pissed about a tax on big banks because he has big investments in Goldman and Wells Fargo and Bank of America?

Yeah, now that you mention it, I do recall that.

And you say that, in reality, Buffett has no problem with the too-big-to-fail banks privatizing profits from unduly risky behavior while foisting losses onto the taxpayers? How can you say that?

Oh yeah, now I see it. The very article that Mike linked points out that Buffett said he was making the investment that saved Goldman only because he expected the govt to bail Goldman (and him) out.

Right.

[Mike Schimek]

You say Buffett might well be pissed about a tax on big banks because he has big investments in Goldman and Wells Fargo and Bank of America?

Yeah, now that you mention it, I do recall that.

Makes sense, particularly when the tax is unwarranted, as he points out with a reasonable explanation.

And you say that, in reality,

Perhaps in your perception of reality, which is different than mine.

Buffett has no problem with the too-big-to-fail banks privatizing profits from unduly risky behavior while foisting losses onto the taxpayers? How can you say that?

As far as I know the loans were paid back with interest. Perhaps you could point out which loans were made to Wells Fargo or Goldman Sachs resulting in the losses you refer to.

Oh yeah, now I see it. The very article that Mike linked points out that Buffett said he was making the investment that saved Goldman only because he expected the govt to bail Goldman (and him) out.

Is the point to try to suggest it was immoral for him to invest in Goldman when he knew what the government was going to bail them out, whether he felt the government action was needed or not?

I see nothing wrong or immoral with what he did, but I do so how some people could draw a connection in their mind and view it differently.

[Norbert Schlenker]

Buffett has no problem with the too-big-to-fail banks privatizing profits from unduly risky behavior while foisting losses onto the taxpayers? How can you say that?

As far as I know the loans were paid back with interest. Perhaps you could point out which loans were made to Wells Fargo or Goldman Sachs resulting in the losses you refer to.

Yes, let's look at Goldman for a minute.

There is no way they would have been whole on the CDS they bought from AIG. Their exposure was billions and the Fed paid them 100 cents on the dollar. Goldman would have been bankrupt otherwise. They didn't pay a nickel for this rescue, nor will they ever. It was mere coincidence, of course, that the Secretary of the Treasury at the time was Goldman's ex-CEO.

Goldman also issued FDIC backed bonds, i.e. government guaranteed paper, at low interest rates to fund its operation in 2009. Those bonds remain outstanding. Goldman has paid and will pay nothing for that subsidy.

[Mike Schimek]

There is no way they would have been whole on the CDS they bought from AIG. Their exposure was billions and the Fed paid them 100 cents on the dollar. Goldman would have been bankrupt otherwise. They didn't pay a nickel for this rescue, nor will they ever. It was mere coincidence, of course, that the Secretary of the Treasury at the time was Goldman's ex-CEO.

Was wondering if someone would bring that point up. IMO it's important to think about the nitty gritty details below the surface;

* I'm not 100% familiar with it, but my understanding is that it isn't the fed that paid Goldman Sachs as indicated in the quote, it's AIG; which is an important legal point.
* I don't think the government could "bail out" AIG and dictate which creditors AIG had to honor its commitments to and which it did not. That would be illegal; non secured creditors of a corporation are treated equally by law.
* Goldman Sachs happened to be "fortunate" that AIG got bailed out.

[kcowan]

...
* Goldman Sachs happened to be "fortunate" that AIG got bailed out.

Many insiders knew that Credit Default Swaps were risky. What Obama is getting on about is that the government needs to support the banking system for the good of consumers. But CDSs are what hedge funds use and should not be guaranteed by the government. This all stems from the removal of the four pillars separation in banking. When they removed the separation of the four pillars, they missed the hole that it makes the government responsible for bailing out investment banks. This is bad public policy.

This smacks of opportunism. I don't think Buffet is immoral for taking advantage of that for his own gain. But he needs to be thanking Uncle Sam for bailing him on his otherwise risky investments.

[brucecohen]

* I don't think the government could "bail out" AIG and dictate which creditors AIG had to honor its commitments to and which it did not. That would be illegal; non secured creditors of a corporation are treated equally by law.

If you read Andrew Sorkin's Too Big to Fail you'll see that Paulson did a number of things that might well have been illegal, including dictating the share price at which one bank bought another. This was, after all, a dire global emergency and nobody had the time or energy to worry about legalisms.

* I'm not 100% familiar with it, but my understanding is that it isn't the fed that paid Goldman Sachs as indicated in the quote, it's AIG; which is an important legal point.

* Goldman Sachs happened to be "fortunate" that AIG got bailed out.

From today's WaPo:

Kurt Bardella, a spokesman for Rep. Darrell Issa (R-Calif.), the ranking Republican on the House oversight committee, said the latest documents, which include e-mails and meeting notes, show how intimately New York Fed officials were involved in AIG's every move. In one e-mail days after the bailout, a New York Fed official writes that AIG's general counsel was told that "future SEC filings, press releases, and other significant communications should be run" first by lawyers for the New York Fed.

"The New York Fed was running the show," Bardella said. "They were giving orders, demanding everything be run through them. They weren't just casual observers here."

The issue of AIG's payouts to trading partners remains one of the most controversial elements of the company's rescue. More than $62 billion flowed from the government through AIG and to its counterparties, which lawmakers have decried as "backdoor bailouts."

Bardella said the documents confirm that there was never a push to persuade AIG's trading partners to accept less than what they were owed. "The New York Fed never made any serious effort to try to obtain any concessions for the counterparties on behalf of the American people who were footing the bill," he said.

Republican and Democratic investigators on the House oversight committee on Thursday interviewed New York Fed general counsel Thomas C. Baxter Jr., who said that AIG's trading partners had quickly rejected taking a discount. Baxter told investigators he wasn't sure "why we even bothered," according to a person familiar with the interview.

That account echoes a report last fall by the special inspector overseeing the government's bailout program, which showed that AIG's top trading partners balked when asked if they would be willing to accept less. The report noted that Geithner "had little hope" that trying to win concessions from counterparties would succeed, as the bailout had removed the threat of bankruptcy and weakened AIG's leverage.

Bottom line: The Fed, which was then integrally involved in AIG's management, provided the money that AIG used to pay Goldman and others in full. WaPo notes this Wednesday there will be another hearing on what happened at AIG. The witness list includes Geithner, then president of the NY Fed, and Neil M. Barofsky, the special inspector general for the bailout program.

BTW, in Too Big to Fail Sorkin says Morgan Stanley was one weekend away from collpase and, due to counterparty relationships, its demise would have brought down GS. It was Geithner who raised the idea to Blankfein of GS reconstituting itself as a bank holding company to qualify for emergency liquidity from the Fed. Geithner has earlier discussed this with Goldman's lawyer, Rodgin Cohen, but I don't remember if it was Geithner's idea or Cohen's. In any event, it was contrary to previous policy that ruled out such status for investment banks and had to be sold Bernanke.

During the weekend before Morgan's feared demise, Paulson told Geithner, "we've got ti find a lifeline for these guys", meaning Morgan and GS. Treasury and Fed tried to engineer several merger designs -- including a GS-Citicorp marriage -- but failed. So, at the very last minute, Bernanke agreed to let both Morgan and GS become bank holding companies. (Morgan had previously appealed for that, but was turned down.) Morgan was then able to run to the Fed and get enough liquidity to keep going, sparing it and GS from becoming the next dominoes.

[WishingWealth]

From some [lite] readings and watching interviews with Volcker/Sorkin, it seems one of the problems that some of the few smart ones had to deal with was that many of the top managers (CEOs in some case(s) in the banking business were clueless as to what was hitting them; just like deer in the headlights.

Things were getting pretty complicated and few people really understood the ramifications on any actions.
And even the few who somewhat understood were on a: Let's try this or that, and we'll see how it comes out.

WW

[brucecohen]

From some [lite] readings and watching interviews with Volcker/Sorkin, it seems one of the problems that some of the few smart ones had to deal with was that many of the top managers (CEOs in some case(s) in the banking business were clueless as to what was hitting them; just like deer in the headlights.

Yes, according to Sorkin, Lehman CEO Dick Fuld was in total self-denial and blew several opportunities* to see if his firm saved by merger. Lehman's failure literally reduced Fuld to tears and clobbered his personal wealth, much of which was in Lehman stock.

Sorkin's account is a true eyeroller. Nobody wanted Lehman. Paulson and Geithner struggled to keep arranging marriages but Fuld, not comprehending the firm's situation, kept killing the deals by insisting on a higher price.

My recollection -- and I plan to re-read the book because it's hard to absorb the full account -- is that the only Wall Street banker who came out looking good was Jamie Dimon of JP Morgan Chase, whose company was the only one in a strong position because it had not gorged at the CDO-CDS trough. You might recall that he was involved in the first rescue, as JP Morgan took over Bear Stearns with Treasury or the Fed agreeing to cover something like $30 billion of toxic assets against default. Later Paulson pulled out all the stops in pressing Dimon to take over Morgan Stanley, but Dimon insisted that absorbing Bear satisfied his patriotic duty. (Recently Dimon, a lifelong Democrat, was rumored to be in line to succeed -- replace? -- Geithner as Treasury Secretary but that was before Obama launched the new jihad on the banks.)

[Taggart]

To the lucky students at The University of Western Ontario's Richard Ivey School of Business (whom I've never met), all the best on your trip to Omaha. I envy you.

Ivey students visiting investing guru Warren Buffett

By Communications Staff
Wednesday, February 24, 2010

Richard Ivey School of Business students will get a sneak peek into the world of value investing legend Warren Buffett at his company headquarters later this week.

[Peculiar_Investor]

2009 Shareholder Letter. Grab a cup of coffee and enjoy the read.

[ThinkDividends]

Anybody going to the Woodstock of Capitalism this year ???

[Peculiar_Investor]

Rumoured to be for the Geico AGM

advance to about 1:45 and Neil Young Axel Rose you-know-who appears.

[Shakespeare]

advance to about 1:45 and Neil Young Axel Rose you-know-who appears.

I didn't spot Elvis.

[WishingWealth]

What would JesusWarren do?

@ Foreign Policy.

The Sage of Omaha Beach?: What our generals might learn from Buffett
...
That said, he is quick to go on to describe what he sees as his role in risk taking and other leadership tasks: He and his deputy, he writes, "limit ourselves to allocating capital, controlling enterprise risk, choosing managers, and setting their compensation." In military terms, I think that would mean allocating resources and people, deciding where to take strategic risks, and selecting subordinate commanders. Everything else? That stuff "we delegate almost to the point of abdication," he states in his management principles, printed later in the same annual report. Buffett is so serious about limiting himself that in a company with 257,000 employees, his headquarters office numbers just 21. (This is an approach that reminds me of William Slim, the greatest British general of World War II, who insisted that his corps headquarters be able to travel in just a few trucks and jeeps.) Of course, as Buffett notes, he has to be more careful than most to keep his subordinates happy, because they tend to be wealthy people who can walk if they feel micro-managed or mistreated.
...

WW

[kcowan]

Buffett defends Goldman, joins greed Conspiracy
Uncle Warren has a bad case of denial. Remember, not too long ago Buffett was calling derivatives "weapons of financial mass destruction.":

•Praising Moody's "business mode," and by inference all rating agencies that blindly rubberstamped Wall Street's toxic debt, setting up the last meltdown

•Defending Goldman Sachs bad behavior despite the fraud suit and a possible criminal indictment (while hiding his own conflicts of interest as a big investor in both Moody's and Goldman)

•Praising Goldman's CEO Lloyd Blankfein ... by far Wall Street's greediest fat-cat banker who paid himself $68 million of his stockholders profits last year

•Defending Goldman with a bizarre argument that Goldman is no more guilty than the other Wall Street banks, a tacit approval of the bad behavior of all Wall Street banks in the Goldman Conspiracy

•Worse, ol' Uncle Warren also tried deflecting attention from Wall Street's corrupt business model by blaming government regulators for the meltdown, another example of Uncle Warren's blind denial, ignoring the fact that in the past year Wall Street spent over $400 million on lobbyists and campaign cash to make absolutely certain regulators, Congress and the Obama team all played along with Buffett's songs that guarantee Wall Street controls Washington regulators

•Ironically, all this comes from a man who once lectured Congress on "Moral Integrity: I want employees to ask themselves whether they are willing to have any contemplated act appear on the front page of their local paper the next day, read by their spouses, children, and friends ... Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless

Not the Buffett we all grew up with.

[Mike Schimek]

IMO the reporter isn't objective and goes out of his way to color and present things in a negative way. I appreciated Buffet and Munger's comments on Goldman as honest and straightforward.

•Praising Moody's "business mode," and by inference all rating agencies that blindly rubberstamped Wall Street's toxic debt, setting up the last meltdown

Here it sounds like Buffet says a good thing about Moody's (presumably a company he knows very well since he's owned it so long), and the reporter somehow takes that, twists it around, jumps it through a few hoops and turns it into a blind rubberstamping of wall street first in general causing the meltdown.

•Defending Goldman Sachs bad behavior despite the fraud suit and a possible criminal indictment (while hiding his own conflicts of interest as a big investor in both Moody's and Goldman)

Well, if someone was accused of fraud and "possible criminal indictment" and you felt the charges were baloney, would it be "wrong" to voice your opinion? Sounds like it according to the reporter.

•Praising Goldman's CEO Lloyd Blankfein ... by far Wall Street's greediest fat-cat banker who paid himself $68 million of his stockholders profits last year

The other side to that "argument" is that Goldman outperformed all its peers, many of which went bankrupt. It certainly seems like Blankfein is worth the money to me.

•Defending Goldman with a bizarre argument that Goldman is no more guilty than the other Wall Street banks, a tacit approval of the bad behavior of all Wall Street banks in the Goldman Conspiracy

Well, Buffet sounds about right that Goldman didn't do anything other wall street banks (the few remaining ones that didn't go bankrupt) do not do. He extrapolates on that, does a bit of whirly hurly and turns that into an "approval" of the bad things wall street banks do, and slaps a nifty "Goldman Conspiracy" label to it. Maybe Obama should hire this reporter as his propaganda Czar.

•Worse, ol' Uncle Warren also tried deflecting attention from Wall Street's corrupt business model by blaming government regulators for the meltdown, another example of Uncle Warren's blind denial, ignoring the fact that in the past year Wall Street spent over $400 million on lobbyists and campaign cash to make absolutely certain regulators, Congress and the Obama team all played along with Buffett's songs that guarantee Wall Street controls Washington regulators

... I'll stop at this point. It's so retarded it's not worth commenting on.

[augustabound]

Buffett has two T's.

Not the Buffett we all grew up with.

Nope, I'm 35 and have been reading and studying investing for about 8 years and in that short time in his career he isn't the same person. Five years ago I don't believe he would have bought out BNSF for the high capital requirements of the industry.
But now I guess he's building the Berkshire legacy, like he's said of the deal, he's buying BNSF for the next 100 years.

[zaman]

There have been several "Warren Buffett's";

There was the early Buffett who tried running all sorts of businesses himself, there was the Buffett who discovered Ben Graham and became a cigar butt investor, then there's the one who met Charles Munger and started buying truly great companies at a reasonable prices. ISTM that now we have a Buffett that realizes that his time is short and is trying his very best to prevent the next guy from screwing up his baby (Berkshire) after he dies. Quite a record if you ask me.