Buffett Buffet

[augustabound]

Wow, I should hope it's an exaggeration on the part of the writer of the article. I don't think even Warren Buffett himself has the ability to make a decision on a company based on half of one paragraph of the letter to shareholders.

[AltaRed]

Wow, I should hope it's an exaggeration on the part of the writer of the article. I don't think even Warren Buffett himself has the ability to make a decision on a company based on half of one paragraph of the letter to shareholders.

If the quote is precisely accurate, it doesn't say BH didn't look at the financials prior to the event. He may have just made the decision once he read the letter. It is sometimes what is not said that is sometimes most important....just like posters on this forum.

[Nemo2]

it appears to be a well-established, well-run, internationally located, company.

[augustabound]

Wow, I should hope it's an exaggeration on the part of the writer of the article. I don't think even Warren Buffett himself has the ability to make a decision on a company based on half of one paragraph of the letter to shareholders.

If the quote is precisely accurate, it doesn't say BH didn't look at the financials prior to the event. He may have just made the decision once he read the letter. It is sometimes what is not said that is sometimes most important....just like posters on this forum.

Good point

[bubbalouie]

If the quote is precisely accurate,...

Yeah, like I have a reason to lie.

Instead of your mindless innuendo, maybe you can click a few buttons to confirm it for yourself, or better yet, buy a Post for a $1.

[AltaRed]

If the quote is precisely accurate,...

Yeah, like I have a reason to lie.

Instead of your mindless innuendo, maybe you can click a few buttons to confirm it for yourself, or better yet, buy a Post for a $1.

Who said anything about you? I was referring to the writer of the article quoting WB himself.

[kcowan]

On average, 73 percent of Berkshire's equity portfolio was in five stocks during the past 31 years, the professors found.

Following Buffett to profit - International Herald Tribune

So much for diversification/rebalancing...

[Bylo Selhi]

So much for diversification/rebalancing...

Not so fast young man

Berkshire's "equity portfolio" is a small part of BRK's total assets so the contention that an ordinary investor, even one as talented as Buffett, doesn't need to own more than 5 stocks is tenuous at best.

Perhaps a better "take home" is "long-term returns show the easiest way to mimic Buffett is to invest in Berkshire."

[George$]

A while back some of you enjoyed the Warren Buffett Q&A session via the You-Tube video.

Here is a similar link of a video recording featuring a local (Toronto) investor, Francis Chou, on Aug 1, 2007. (It's a 47 MB download so you need to do it via a fast link.)

Chou also has a pretty remarkable investment record and follows the Graham-Buffett school of value investing. He has operated two of the country's most successful funds, Chou Associates Fund and Chou RRSP fund, for the last 18 years. With much better returns than his peers and the indexes - and with a lower standard deviation than his peers and the indexes.

I found this link courtesy Norm's Stingy Investor

[George$]

An academic paper (44-page pdf) I just came across (dated October 2007)
Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway

Abstract:

We analyze the performance of Berkshire Hathaway’s equity portfolio and explore potential explanations for its superior performance. Contrary to popular belief we show Berkshire’s investment style is best characterized as a large-cap growth. We examine whether Berkshire’s investment performance is due to luck and find that beating the market in 28 out of 31 years places it in the 99.99 percentile; however, incorporating the magnitude by which Berkshire beats the market makes the “luck” explanation unlikely even after taking into account ex-post selection bias. After adjusting for risk we find that Berkshire’s performance cannot be explained by assuming high risk. From 1976 to 2006 Berkshire’s stock portfolio beats the S&P 500 Index by 14.65%, the value-weighted index of all stocks by 10.91%, and the Fama and French characteristic portfolio by 8.56% per year. The market also appears to under-react to the news of a Berkshire stock investment since a hypothetical portfolio that mimics Berkshire’s investments created the month after they are publicly disclosed earns positive abnormal returns of 14.26% per year. Overall, the Berkshire Hathaway triumvirates of Warren Buffett, Charles Munger, and Lou Simpson posses’ investment skill consistent with a number of recent papers that argue investment skill is more prevalent than earlier papers suggest.

[WishingWealth]

Hillary and Buffett on MarketWatch.


http://link.brightcove.com/services/lin ... 1341032702
(Video)

With so much money...., why are you a democrat?

WW

[Bylo Selhi]

With so much money...., why are you a democrat?

Warren answers on (gasp!) Faux Nooz. Go here, then click on Part I (Tue 7:12pm) and Part II (Tue 7:42pm).

[svt]

Buffett interview from the Post.

[patriot1]

Interestingly, Buffett's father, a Republican congressman, said:

Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns.

Prophetic.

[Peculiar_Investor]

Was thinking the same this morning when I first read about Buffett's bailout offer. Buffett's bond insurer 'bailout' shows ruthless genius

[Bylo Selhi]

Snow White killed the 'triple-A'

Bogle: Let me just ask you one question on these bond insurers. About 25 to 30 percent of their portfolio's outside of the municipal areas, isn't that correct?

Buffett: That's probably correct. They, it's kinda interesting what happened, Jack. It would fit in with some of your theories. They originally started out being pure, municipal bond insurers. And then they sort of did what Mae West said, 'I was Snow White but I drifted.' (Laughter.) And what happened was that the prices for municipal bond insurance went down and these companies, probably to satisfy Wall Street's desire for increasing earnings when the price of their product, their basic product, went down, and what they knew best, they went out to get into riskier products which paid higher premiums and it made their earnings look better for a while. But, they, you know, it created this mess. It's interesting, even the rating agencies in rating these companies would ask them to give them projections that showed ever-increasing earnings to get their triple-A. So you had the wrong incentives and you know better than anybody else, Jack, that wrong incentives produce wrong results.

Bogle: Well, yeah, and I think the rating agencies have an awful lot to answer for here. You could say they're in cooperation with the issuers. I would say they're in collusion with the issuers.

Buffett: Well, when a company issues a 14 per cent bond when US Treasuries are below 4 percent and it's rated triple-A, we've now seen the cow jumping over the moon.

Bogle: Exactly.

[George$]

Came across the following link to Buffet Articles today (apologies if it has been posted already ).
Buffett on Various Topics

[Peculiar_Investor]

The 2007 Letter to the Shareholders in out, http://www.berkshirehathaway.com/letters/2007ltr.pdf

Guess I'll have to set aside some time this weekend for some reading.

[mudLark]

The 2007 Letter to the Shareholders in out, http://www.berkshirehathaway.com/letters/2007ltr.pdf

Guess I'll have to set aside some time this weekend for some reading.

Doubtless this will add fuel to a fire somewhere...

...the Canadian dollar averaged 64¢ in 2002 and 93¢ in 2007. Yet our trade deficit with Canada rose as well, from $50 billion in 2002 to $64 billion in 2007. So far, at least, a plunging dollar has not done much to bring our trade activity into balance.

<snip>

Our legislators should recognize, however, that the current imbalances are unsustainable and should therefore adopt policies that will materially reduce them sooner rather than later. Otherwise our $2 billion daily of force-fed dollars to the rest of the world may produce global indigestion of an unpleasant sort. (For other comments about the unsustainability of our trade deficits, see Alan Greenspan’s comments on November 19, 2004, the Federal Open Market Committee’s minutes of June 29, 2004, and Ben Bernanke’s statement on September 11, 2007.)

[biker]

Buffett still positive on the USA.

“At Berkshire, we will attempt to further increase our stream of direct and indirect foreign earnings. Even if we are successful, however, our assets and earnings will always be concentrated in the U.S. Despite our country’s many imperfections and unrelenting problems of one sort or another, America’s rule of law, market-responsive economic system, and belief in meritocracy are almost certain to produce ever-growing prosperity for its citizens.”

[Bylo Selhi]

His criticism of other companies was based on the fact that many assume their pension funds will earn 8 percent a year from investments, a return he deems unlikely given the low level of interest rates, but one that lets them report higher profits now.(*)

He compared money managers who promise double-digit returns to the queen in “Alice in Wonderland,” who proclaimed, “Why, sometimes I’ve believed as many as six impossible things before breakfast.” Mr. Buffett added, “Beware the glib helper who fills your head with fantasies while he fills his pockets with fees.”

Mr. Buffett pointed out that some companies with pension plans in both Europe and the United States assume better returns on the American plans than the European ones. “This discrepancy is puzzling,” he said. “Why should these companies not put their U.S. managers in charge of the non-U.S. pension assets and let them work their magic on these assets as well? I’ve never seen this puzzle explained. But the auditors and actuaries who are charged with vetting the return assumptions seem to have no problem with it.”

“What is no puzzle, however, is why C.E.O.s opt for a high investment assumption: It lets them report higher earnings. And if they are wrong, as I believe they are, the chickens won’t come home to roost until long after they retire.”

(*) As I recall he expressed similar thoughts a few years ago in an interview in Fortune, however, at that time the "going rate" was a whopping 10%.

[Westford]

Others may have already heard of this, but I thought I would post this link anyway:

"Gates dethroned; Buffett is richest": http://articles.moneycentral.msn.com/Ne ... ?GT1=33009

[Bylo Selhi]

Buffett, 'Germans Know Something About Business'

I have everything I need. But that's also the way I felt at 25, when I didn't have that much money yet. I have a wonderful family. I have a job that I love and wonderful people who help me with it. It can't get any better than that... I'm happy when I can spend every day doing the things that I like to do. That's my luxury. Things could have gone differently, but I was lucky... I get a lot more fun out of life without all the bells and whistles.

[Taggart]

Buffett, 'Germans Know Something About Business'

From the above interview:

SPIEGEL: Suddenly so optimistic? You yourself have referred to some of the tools of the financial industry as "weapons of mass destruction." It sounds almost like what German President Horst Köhler said about the financial markets, which he described as "a monster."

Buffett: I don't condemn the entire industry. When I mentioned weapons of mass destruction, I was merely referring to the out-of-control trading in derivatives. It doesn't make sense that hundreds of jobs are being eliminated, that entire branches of industry in the real economy are going under because of such financial gambles, even though they are in fact completely healthy. Besides, these types of constructs are so complicated that hardly anyone understands them anymore.

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

and yet from this article in the May 13th Financial Post:

Berkshire Hathaway heading for a downturn?

But would you dare to sell them short? It seems some players are, notably TheStreet. Com's resolute bear, money manager Doug Kass. He says in an explanation on the site that Berkshire's genius, Warren Buffett, continues to get a free pass from the media.

He is right. A blizzard of television, radio and print reports emerged from the recent annual pilgrimage of adoring shareholders to the firm's annual meeting show in Omaha.

Curiously, little attention was paid to Berkshire's rather gloomy first-quarter earnings report, released on the eve of the meeting. Buffett's adventure in derivatives cost the company US$1.6-billion in recognized losses.

Perhaps everybody's favourite multibillionaire's description of derivatives as "time bombs" was prescient.

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

Perhaps this article from the May 3rd article explains it better:

Derivatives Hurt Profit at Berkshire Hathaway

The derivative losses stemmed from Berkshire’s exposure to contracts aimed at making money if junk bonds stayed out of default and stock indexes rose.

In February, Mr. Buffett revealed that Berkshire ended 2007 with $40 billion of exposure to 94 of these contracts.

Berkshire said it had a $1.2 billion unrealized loss on put options it wrote on the Standard & Poor’s 500-stock index and three foreign stock indexes. It also reported a $490 million unrealized loss on contracts that require payouts if some high-yield bonds default from now to 2013. Other contracts brought the net loss in derivatives down to $1.6 billion.

Accounting rules require the company to report unrealized gains and losses in earnings regularly, Berkshire said.

The exposure may at first seem odd given that, in his shareholder letter in 2003, Mr. Buffett called derivatives “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

But in his letter this year, Mr. Buffett said Berkshire had already been paid for its derivatives contracts, giving it cash to invest, and that “there is no counterparty risk.”

He also said shareholders should be prepared for gains and losses that could “easily” top $1 billion in a given quarter.

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

I'm surprised that the Spiegel reporters didn't question Buffett on his own use of derivatives, especially when he condemns a financial instrument and then turns around and uses them himself.

[Bylo Selhi]

I'm surprised that the Spiegel reporters didn't question Buffett on his own use of derivatives, especially when he condemns a financial instrument and then turns around and uses them himself.

And I'm surprised that you (apparently) haven't read Buffett's letters to shareholders for the past several years where he annually explains what happened and repeats his mea culpa mantra

BRK's purchase of GenRe several years ago included 10s of 1,000s of derivatives that GenRe had on its books. Buffett's intention was to unwind these ASAP, however, for various reasons, which he explains and for which he accepts full responsibility, this has taken longer than expected. Buffett didn't enter into those contracts, nor would he have.