Showing posts with label warren buffett. Show all posts
Showing posts with label warren buffett. Show all posts

Sunday, February 27, 2011

2010 Berkshire Hathaway Annual Letter

It is fitting that my 1000th post on the Share Investor Blog is about one of my favourite topics in terms of business, finance and investing.

Warren Buffett!

He has his 2010 Berkshire Hathaway Letter just out a few hours ago and it is essential reading for all investors, especially nutty Buffett fans like me.

Here is a taster to get you interested:

"Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War–remains alive and effective. We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead."

Apposite advice from an 80 year old at this time given the recent tragedy in Christchurch and the fact that a company that he is the largest shareholder in, Munich Re, will be underwriting the bulk of the losses from the massive Christchurch Earthquake via reinsurance.

My favourite part of the letter though is about debt and its influence on all of us. It is funny but also very wise.

The last word:

"The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire.


Unquestionably, some people have become very rich through the use of borrowed money. However, that’s also been a way to get very poor. When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive.

Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade – and some relearned in 2008 – any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people."


More About Warren Buffett

Everything Warren Buffett
Download the 2010 Berkshire Hathaway Annual Shareholders Letter
Download the 1977 - 2010 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon


The Essays of Warren Buffett: Lessons for Corporate America, Second EditionThe Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $24.85 / Used from: $19.17
Usually ships in 24 hours
Buffett's Bites: The Essential Investor's Guide to Warren Buffett's Shareholder LettersBuffett's Bites: The Essential Investor's Guide to Warren Buffett's Shareholder Letters by L.J. Rittenhouse
Buy new: $13.57 / Used from: $7.95
Usually ships in 24 hours


c Share Investor 2011

Sunday, June 6, 2010

Moodys Corp: Warren Buffett Defends the Indefensible




I am a big fan of Warren Buffett and his investing prowess - I run a blog called Everything Warren Buffett - and long-term approach to the stockmarket that he has built up over generations but recent comments and actions from the man have left me wondering whether my admiration for him has been rather blinded by his image as a folksy, no nonsense kind of guy who wont put up with, and dispense, to put it bluntly, bullshit.

Much of that has changed for me over his comments on the Moody's ratings fiasco.

With that in mind I just have to join the chorus of commentators who have roundly criticized Warren Buffett over his recent testimony to the Financial Crisis Inquiry Commission (FCIC) over the defense of rating Agency Moodys Corp [MCO.NYSE], a company in which the once great man is the largest shareholder in.

While Moodys isn't completely to blame for the 2008 financial meltdown (the lenders, borrowers politicians - principally Bill Clinton's administration - mortgage back securities businesses and a whole host of other characters in this drama share the ignominy) and what has happened subsequently, it did rate subprime mortgages as good loans and a prize moron could figure out even before the September meltdown these loans were always in danger of defaulting, it was just a matter of when not if.

Warren Buffett's defense of Moody's part, is ,well, indefensible. Buffett, known for his principled stance on matters of business, investing and commentary on such things has ruined his reputation by not coming out and roundly criticizing Moodys, which he would have been expected to do given his past history on such matters of business ethics and the like. Moodys business practices have effectively endorsed short term risky derivatives and short term gain over a long-term outlook for business, something that Mr Buffett has been yelling from the rooftops for the last 60 years.

In Buffett's testimony to the FCIC he gave a lame excuse for Moody's part in the 2008 crash:

On Wednesday, though, Mr. Buffett testified that he did not know all that much about the credit rating market, even though the holding company he controls, Berkshire Hathaway, is the largest shareholder in Moody’s Investors Service, one of the three companies that dominate the business.
“I’ve never been to Moody’s,” he said at a hearing of the Financial Crisis Inquiry Commission, which is investigating the causes of the global crisis that led to the government bailout of big banks. “I don’t even know where they’re located. I just know that their business model is extraordinary.” New York Times
Feigning ignorance of a company that Buffett has such a large stake in just doesn't stack up. We know he doesn't have "intimate" knowledge of every minutia of the way businesses he has shareholdings in do business, he has a vast portfolio and little time to spread around, but he is however aware of the basic way all his businesses run. His solid reputation as an investor has been built on knowing the businesses he invests in. it is part of his investment mantra that comes out of his mouth to any investor or business interviewer who will listen or ask questions of him.
The past would have seen Buffett own up and take responsibility for mistakes that he has made and he has owned up to plenty. The inconsistency of his approach over the Moody's fiasco has dented a reputation that he has built up over a very long time .
"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently". Warren Buffett
Personally, I will find it difficult now to take what Warren Buffet says seriously. He has time to redeem himself but he is 80 years old this year and probably doesn't have another 20 years.
Related

Watch Buffett's full testimony


Recent Share Investor Reading

Discuss this topic @ Share Investor Forum



Related Amazon Reading

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
Buy new: $14.95 / Used from: $9.73
Usually ships in 24 hours

Security Analysis: The Classic 1934 Edition
Security Analysis: The Classic 1934 Edition by GRAHAM
Buy new: $37.80 / Used from: $29.48
Usually ships in 24 hours






c Share Investor 2010

Sunday, February 28, 2010

2009 Warren Buffett Letter to Berkshire Hathaway Shareholders

It is time again for investors the world over to lap up the sage words from Warren Buffett and his letter to Berkshire Hathaway shareholders.

The 2009 letter should be a good pointer to where Warren is going and has been and is essential reading for all investors.

Warren Buffett's 2009 annual letter to shareholders of Berkshire Hathaway Inc. will be posted online about 8 a.m. EST Saturday (2.00am Sunday Feb 28 NZ time) on the company's Web site before being mailed around March 12 to shareholders as part of the company's 2009 annual financial report.

The annual letters (1977 -2008) of CEO and Chairman Buffett generate wide interest because of his comments about the economy and other topics, and the billionaire investor's easily understood explanations of financial matters.

In addition to the letter, EWB will have stories from a wide variety of sources about the letter's most captivating sections.


More About Warren Buffett

Everything Warren Buffett
Download the 2010 Berkshire Hathaway Annual Shareholders Letter
Download the 2009 Warren Buffett Letter & 2009 Annual Report to Berkshire Hathaway Shareholders
Download the 1977 - 2010 Warren Buffett Letter's to Berkshire Hathaway Shareholders

From Amazon


The Essays of Warren Buffett: Lessons for Corporate America, Second EditionThe Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $24.85 / Used from: $19.17
Usually ships in 24 hours
Buffett's Bites: The Essential Investor's Guide to Warren Buffett's Shareholder LettersBuffett's Bites: The Essential Investor's Guide to Warren Buffett's Shareholder Letters by L.J. Rittenhouse
Buy new: $13.57 / Used from: $7.95
Usually ships in 24 hours



c Share Investor 2010

Thursday, January 21, 2010

Cadbury Acquisition a good deal for Kraft

I am still following the Kraft Inc [KFT.NYSE] acquisition of Cadbury PLC [CBRY.LSE] . A conditional deal for sale of Cadbury to Kraft has been approved by Cadbury management but it still needs the approval of both Kraft and Cadbury shareholders.

Nearly 10% shareholder of Kraft, Warren Buffett, publicly came out against a deal on Jan 5 and today on CNBC indicated that he would have voted against the acquisition.

The latest comment, if it isn't just being made to blow off some steam, appears to suggest that Kraft is paying too much for the maker of Dairy Milk, Jaffas, Chrunchie , Moro and other well known brands but this is where Buffett and myself part company.



Cadbury is a global brand and has dominance in the majority of the markets that it operates in, New Zealand is no exception.

Because of its strong brand position globally, its potential to grow in all its markets - especially in Asia - and the largely untapped market for Cadbury in the United States -where Cadbury is a minor player - the price to be paid for full control of the company must show a healthy premium to its recent trading activity. Cadbury has a strong economic moat - good brands, with high cashflow with a reasonable barrier to entry by competitors.

Warren Buffett seems to be ignoring this fact and it seems contrary to previous indications by him that in order to gain control of a company during an acquisition a premium is more often than not paid.

The price being paid by Kraft for Cadbury isn't the deal of the century but it is approaching fair price - on Kraft's part - considering what Kraft are getting for their shareholders moola.

Locally, New Zealand media have been speculating that Cadbury's Dunedin factory maybe the subject of staff cuts and that local brands maybe for the cut. While this is of course possible because of Kraft's high debt levels due to the acquisition and pre-deal debt levels, it would be folly on Kraft's part to repeat the recent mistakes of Cadbury in New Zealand and in other global markets.

I am having sugar overload over this deal. The Kraft acquisition of Kraft is not yet a fait a compli however, so there is still room for a diabetic attack. There is still time for other Cadbury tyre kickers like Hershey to make a higher bid for some of the sweet brown stuff.


Cadbury @ Share Investor

Bitter - Sweet Chocolate Business
Cadbury could learn a thing or two from 1980's Coca Cola Experiment

Discuss this topic @ Share Investor Forum - Register free




c Share Investor 2010


Friday, November 6, 2009

Has Warren Buffett Gone Nuts?

Make no mistake, I am a big fan of Warren Buffett. I follow his investment style in my own Share Investor Portfolio as faithfully as I can given my individual circumstances and background and have followed his fortunes closely in the years that I have known about him but I think he has gone a little nuts over the last year or so.

The past 12 months of financial turmoil has seen saturation coverage of the billionaire as he professes to be "Buying American", doing very large deals to buy stakes or debt in Harley Davision, Mars/Wrigley, Goldman Sachs, Tiffany, a whole host of other stocks and his latest coup de grace, the full takeover of Burlington Northern Santa Fe, the large North American railroad freight mover.

His media over-exposure on its own seems a little desperate but the move on Burlington seems a little over the top considering he seems to be paying full price for the company, something he usually tries to avoid.

This deal will be Buffett's Berkshire Hathaway largest deal ever to take full control of the 77% of the company it doesn't already own and comes on top of news that his company will do a 50:1 share split of its "B" listed shares, something that Buffett has talked against for as long as he has run Berkshire.

None of these things on their own -with the exception of the Burlington purchase - indicate anything else other than looking to buy a "bargain" during the current economic downturn but the latest large purchase just seems to smack of putting it "all in" in an attempt to score the big one. Something he has done many times successfully in the past.

I know alot less than Buffett about the rail freight business, it may be a great long term purchase and there could be an ulterior motive to the move apart from the freight business but if you pay too much for an asset, well that is something Buffett has written books about. He normally wouldnt do it.

He really has me a little worried about the real state of affairs of the current financial turmoil. It is worse than what most would have us believe but Warren's actions smack of a man who knows that things could be alot worse.

Warren Buffett @ Share Investor

Buffett wrote us a letter
Short-sighted critics of Warren Buffett wrong
10 Basic Buffett questions to ask before investing
Warren Buffett is No1 one with a bullett


Related Amazon Reading


The Snowball: Warren Buffett and the Business of Life
The Snowball: Warren Buffett and the Business of Life by Alice Schroeder
Buy new: $14.00 / Used from: $8.87
Usually ships in 24 hours

c Share Investor 2009

Wednesday, April 29, 2009

Warren Buffett faithful ready for big Weekend in Omaha

A big thanks to those of you who contacted me over a doco to be made of Warren Buffett by the BBC around Berkshire Hathaway shareholders and the Berkshire 2009 Annual Meeting in Omaha Nebraska that kicks off this weekend.

I have had many replies, and none more so than the following one encapsulates the deep feeling and respect this great investor and thoroughly interesting man seems to capture from his many millions of followers, including myself:

"I understand you are looking for Berkshire shareholders. I have been a Berkshire shareholder since 2001.

I can say with some confidence that Warren Buffett and Charlie Munger are more important in my life than God! I am a university graduate and a Chartered Accountant. I have worked in businesses for over 25 years but any knowledge I have acquired from these experiences is like a pebble in ocean in comparison to what I have learned from Warren and Charlie.

If you study Berkshire and the people behind it you are tapping into a rich reservoir of knowledge and wisdom that has proved incredibly useful in the real world of business over a long period of time. The Berkshire values are very old fashioned and very simple. It is about taking the long term view, common sense, humility, rationality, hard work and prudence.

Much of what goes on in the world of business and politics looks absurd and grotesque when viewed through the Warren Buffett lens. Why are people so loyal to Warren Buffett and Berkshire? It is just pure Disney. Failing textile mill, Berkshire Hathaway, taken over by young investor Warren Buffett. Investment is a terrible mistake. Buffett uses the company as his investment vehicle choosing not to take a management fee from his fellow shareholders. Over time the company evolves into one of the largest and most respected companies in the world. Warren Buffett turns out to be the greatest investor ever and becomes the richest man on the planet. In the end it’s not about the money and Warren gives the bulk of his fortune to the children of Africa. Who would not want to be part of this?

Good luck with your documentary. It will be easy to make the shareholders look like crazy America cult members. I know the BBC will go deeper than that." Gareth, Northern Ireland.

What Buffett has to say this weekend will be covered by media from around the world and more than 35,000 people will be attending in person to get his pearls of investing wisdom sieved through a down home style of old fashioned hokiness and a wonderful sense of black humour.

The world will be watching closely for some explanation of his frenzied buying activities over the last year and also his view of economic conditions over the following 12 months and of course the years to come.

I will be watching closely and you can keep up to date on what is more commonly known as the "Woodstock for Berkshire Hathaway Shareholders" at Everything Warren Buffett.

Until then I highly recommend reading his 2008 Annual letter to Berkshire Hathaway Shareholders published in February of this year. It will change your way of thinking about investing .

Recent Share Investor Reading
Discuss this topic @ Shareinvestor.net.nz

Recommended Amazon Reading

Pilgrimage to Warren <span class=
Pilgrimage to Warren Buffett's Omaha: A Hedge Fund Manager's Dispatches from Inside the Berkshire Hathaway Annual Meeting by Jeff Matthews
Buy new: $16.47 / Used from: $7.44
Usually ships in 24 hours

c Share Investor 2009

Saturday, April 11, 2009

Tortoise VS Hare: Tortoise wins again

Long VS short, there just aint no contest!

Yeah, I know, I know, he is going to bang on again about the merits of long term investing over short term.

Absolutely, it is a good subject and important if you want to make money well into the future. Invest in a good business, it will have its highs and lows performance wise regardless of its share price and the odds are better than a short term punt that you will be happier in the end.

I am motivated to write this column because of my sustained interest in Warren Buffett and his investment style; buy a great company for a good price and never sell it.

Recent developments for Buffett have seen his Berkshire Hathaway company lose money, lose share price and Berkshire losing its high credit rating a few days ago.

That has seen his critics lather at the mouth to come out and critique his recent moves to buy stocks and spend money rather than do the opposite I presume.

One virulent critic has been Doug Kass and he has been shorting Berkshire stock over the last year.

But surprize, surprize being the short term thinker he his today he came out and did a complete 180 degree flip flop, Doug is buying Berkshire stock for his long term draw!

This from Doug:

"When conditions change, as they appear to be doing now -- see this morning's Wells Fargo (WFC Quote) news -- opinions must change, and opportunities must be embraced. This is especially true in the case of Berkshire Hathaway as the considerations that led to my shorting of Berkshire Hathaway's shares at around $145,000 a share have now reversed, and, with the shares today trading under $90,000 a share, I have begun to accumulate a long position in Berkshire Hathaway".

Doug could have bought Berkshire at $74,100 in November and again in February 2009 at $73,677.30.

But if you looked at Buffett's move when "his" Wells Fargo bought the basket case Wachovia last year, as a long term investment, you might have had the fortitude to buy Berkshire stock thinking Well's management might know what they were actually doing.

Kass even advocated buying Wells Fargo last November, but not Berkshire Hathaway stock, which owned around a 7% stake in the company according to filings last December. Wells is now one of Americas largest banks.

Berkshire has been the owner or part-owner of many global brands and added more recently.

Kass could have had a stake in all of these cheaply for a long term recovery but only picked one.

The purchase of debt or stock in Harley Davidson, Tiffany, Goldman Sachs, General Electric and a number of other smaller and some larger purchases over the last 12 months also look to pay off as the economy inevitably recovers in the long term.

Oh how the tortoise has taught the hare a lesson, and more to come I would think.

Thanks for your indulgence of my self-indulgence once again.

Recent Share Investor Reading


Related Amazon Reading

The Four Filters Invention of Warren Buffett and Charlie Munger
The Four Filters Invention of Warren Buffett and Charlie Munger by Bud Labitan
Buy new: $29.65 / Used from: $26.48
Usually ships in 24 hours


c Share Investor 2009

Saturday, March 21, 2009

Leftist Economic shell games: A letter to the Editor

The Rant:

The following is from the Mesquite Local News in Nevada, in the letters to the editor page and written by one Richard N. Suter an 80 year old plus retired pilot.

It is well worth a read because it explains the blame for the current global financial mess so well and so fully.

Politicians mostly from the left in American caused this and Wall Street naturally climbed on board.

He rightly fears for his America in the hands of the insane socialists now in power and one wonders how we might expect things to get better because they are now doing what was done to get us in this mess in the first place but to the power of 10.

What is different to Bernie Madoff's shell game and Obamas?

Obama's is much bigger and the mess will be felt for generations.

The Letter:

Defending The Rich

(Letter to the Editor) 03-20-2009


I very much enjoy the Mesquite Local News.


But I have to question your tirade against the rich.


Sam Walton took an idea and built a phenomenal empire.


Bill Gates did the same.


Prior to my retirement in this lovely town, I worked as a corporate pilot for twenty five years.


I rubbed elbows with Warren Buffett in the hangar in Omaha as he deplaned, carried his own bags to a several year old Lincoln and drove to a fairly modest home.


I flew Tom Watson (IBM blue) to Eagle, Colorado.


These folks, and the multi-millionaire that employed me provided quite a few jobs, sir.


I also have carried Senator John McCain, Senator Chuck Hagle and others I can't remember as my personal responsibility.


As a retired USAF fighter pilot, I respect Senator McCain's service.


Several squadron mates and friends were privileged to serve with him in those "difficult times."


But in the course of this discussion, neither of them, nor many others in government have created a real job.


Sure, they have guaranteed pay raises, the very best health care, a short work week/month/year, and very seldom retire in poverty.


Now, if I were to pick on a gang to pillory, I would look to Foggy Bottom.


Let's start with Jimmy "Malaise" Carter, signatory to the CR(a)P, (may have mis-spelled that; could have been the CAP), lowering lending standards, coercing risky loans.


Who aided and abetted this foolishness?


Why, non other than B.J. Clinton.


Fast forward to Barney Frank, who assured us less knowledgeable that Fannie and Freddie were in great shape.


And then came the Mad Marxist with his litany of change.


And Biden.


And Pelosi.


This is the best we can do?


Well, change we got.


Hubris, banality, venality, mendacity and plain damn lies.


Almost daily I see the 21st century version of Joseph Goebbels stuttering, er, and, ah, but, stumbling his way through a "press conference."


Now I have my version of penalties for the gang.


You are far too cruel.


Bernie Madoff is going to reside in a 7.5x 8 foot Manhattan government subsidized condominium.


Please take my share of the "bailout" money, construct about 150 more of these, provide free orange jumpsuits for the criminal class in Congress, and I will die a happy old man, devoid of most of my investments, 30 or 40 percent of the value of the home I will pay for every month, and the extra money me and the missus have after groceries, gas, health care and gambling.


On second thought, let's get out the guillotine.


I am sick to death of these pissants.


My very best wishes that you may become wealthy in your endeavors.


I can only be glad, that now well into my 80th decade, I will not be around to see this great country fail.


-Richard N. Suter


Mesquite, Nevada


Related Amazon Reading


"The program for better jobs and income": welfare reform, liberalism, and the failed presidency of Jimmy Carter.: An article from: International Social Science Review by Jeff Bloodworth
Buy new: $9.95
Available for download now


Economic Policy in the Carter Administration: (Contributions in Economics and Economic History)


Bookmark and Share

Sunday, March 15, 2009

Matt McCarten tells a Whopper

We all know the left of the political sphere will do just about anything at all to make a point and Matt McCarten in the Sunday Herald is no exception:

"Warren Buffett...has claimed that capitalism as we know it is over". NZ Herald 15 March 2009

Those of us that know a little about Warren Buffett, and I know a reasonable amount about the great investor, will know that he said nothing of the sort.

In Buffett's 2008 Letter to Berkshire Hathaway Shareholders out two weeks ago he actually endorsed the American capitalist system more strongly than he ever has: 

"America has had no shortage of challenges.

Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead". Page 2, 2008 Berkshire Hathaway Letter.

Buffett is talking about capitalism here, no doubt about it and while acknowledging its drawbacks he also re-enforces his faith that it will bring us out of the mainly Government induced economic mess we now find ourselves in.

What McCarten has said is at best stretching the truth to breaking point and at worst an outright lie.

I lean towards the latter in describing what McCarten has written.

He uses the rest of the article to rant about his usual socialist ideals of Government control and state interference. The rest is misfired commentary on things he knows little about; economics, business, finance and probably life in general.

Steer clear.

Related Links



Related Amazon Reading

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Warren E. Buffett
Buy new: $23.40 / Used from: $21.61
Usually ships in 24 hours

c Political Animal 2009

Bookmark and Share

Tuesday, March 10, 2009

Warren Buffett Week




It has been Warren Buffett tastic over the last week or so.

Just over a week back the veteran investor released the 2008 Berkshire Hathaway Letter, where he waxed lyrical about venereal disease and its comparisons to bankers investing in derivatives, mistakes that he made in getting in too quick last year to buy "cheap stocks" but nonetheless convinced "Americas best days lie ahead".

I agreed with him in a somewhat less that lyrical way when I wrote this wee piece.

Yesterday Buffett was giving a good grilling for 3 hours (less commercials) by the fox from CNBC Becky Quick, and investors who had sent in emails.

On Becky's Squawk Box show Buffett didn't really tell us anything we didn't already know, except to say when he called the economic crises it back in September 2008 he admits he didn't think it was going to as bad as it is right now.

Well, he was taking a big punt back then.

This email question got straight to the point:


BECKY: Which brings us to another question. A lot of people have been trying to figure out is this different from what we saw back in the Great Depression. I'm going to jump ahead to one from Dan from Shohola, Pennsylvania, who asks a question very pointedly about this. "How is the market better off today than when we were in the 1929 to 1933 period?"

BUFFETT: Well, we certainly--it's different. I mean, there's a lot of similarities between all recessions or in this case depressions or call them panics like they did back in the 19th century, and there's always differences. One key similarity is that there was a paralysis of confidence in banks and--which is silly now because of the FDIC. I mean, we--but if you went back, my dad, on August 15th, 1931, worked at a bank and he went there and it was closed and he had no job and he had his savings--small savings in there. I mean, if you don't trust where you have your money, the world stops. And they recognized that, but it was a little belatedly. They didn't put in deposit insurance until it was started in 1934 in the Glass-Steagall Act. We have a system that's far better organized to deal with that.

I was wondering out loud what depressions/recessions meant last week and the more I read the more I come to the conclusion that depressions/recessions are one in the same but depressions just last much longer and hurt more people. The fear/panic part that Buffett talks about is one common trait.

There are plenty of other pearls of wisdom from the Oracle of Omaha, from answering critics on his investment style and whether it will now change to how he sees President Obama's bailout plans and what negative effects they will have on the global economy.

If you are an investor of any kind(and most of us are one way or the other)it is well worth a look at the full interview to get an overall perspective of what he thinks about the current dire economic situation.

His 2008 Letter to Shareholders is also worth a read in conjunction with that, as is the Annual Report of Berkshire Hathaway.

They might help you put things in perspective.

Along with reading from other sources they do it for me.


Recent Share Investor Reading

Related Amazon Reading

The Essays of Warren Buffett: Lessons for Investors and Managers

The Essays of Warren Buffett: Lessons for Investors and Managers by Lawrence A. Cunningham
Buy new: $17.12 / Used from: $54.38
Usually ships in 2 to 3 weeks


c Share Investor 2009


Monday, March 2, 2009

Buffett Wrote us a Letter

Read the latest Berkshire Letter-

Berkshire Hathaway Annual Letter to Shareholders 2008.

I am a big fan of Warren Buffett, so the following will be boring if you are not in the least bit interested in him.

If you are, please read on.

"Derivatives are dangerous. They have dramatically increased the leverage and risks in our financial system. They have made it almost impossible for investors to understand and analyze our largest commercial banks and investment banks ... Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It's not just whom you sleep with, but also whom they are sleeping with." Warren Buffett 27.2.09

So Warren Buffett's letter to Berkshire Hathaway shareholders came out on Saturday 28 Feb.

It was full of the usual whimsy, jocularity, honesty, fine detail and memorable quotes like the one above.

22 pages of sage advice from the Oracle of Omaha himself.

Certainly comparing derivative investors to slack jawed studs with no morals makes for sometime humorous reading but this particular comparison really sets an overall tone for me.

Nobody, not even the big man himself knows what lies beneath the sub-prime mess and its associated credit, markets, economic and financial upheaval.

Derivatives discussion is best suited to an outlet that allows several million pages to explain how they work, what they do and the consequences of having them-the last one the most important next question in this fast financial train wreck.

Berkshire nonetheless has derivatives contracts but they, like the core Berkshire insurance business is managed by careful risk and covered by actual real cash. A novel idea these days I know.

Interesting enough one contract is betting 15-20 years from now that the US stockmarket will be higher than it is now(cant be hard I am thinking.)

I commented about 16 months ago that business leaders of these perilous financial institutions, most of them now defunct, should come clean about losses to restore faith.

Little did I know at the time nobody really knew how big the losses were and it appears they still don't.

This of course has affected Warren's beloved Berkshire Hathaway, it has had its worst year ever, and this insurance driven beast has been around for 44 years.

Buffett in his characteristic way has fallen on his billionaire sword and owned up to some blame for the carnage on his firm.

As he remarked he has made some "big mistakes" and some "smaller ones" , buying ConocoPhilips at the height of oil and gas prices and getting his hands on two smallish Irish banks that don't really exist anymore-even the great ones have their bad days.

Get this, unlike some of the charlatans, rogues and vagabonds that he skewered in this letter he took the blame fair and square on his wrinkled chin-honesty when it comes to business is usually such a lonely word(thanks for that B.J.)

Berkshire Hathaway has had its worst ever year but Buffett and his life-long investing mate Charlie Munger intend to continue to invest with their typical middle finger approach to investing-their way:

(1) maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of
excess liquidity, near-term obligations that are modest, and dozens of sources of earnings
and cash;

(2) widening the “moats” around our operating businesses that give them durable competitive
advantages;

(3) acquiring and developing new and varied streams of earnings;

(4) expanding and nurturing the cadre of outstanding operating managers who, over the years,
have delivered Berkshire exceptional results.

Those 4 tenants have served Buffett's investment baby Berkshire well over the last 44 years.

Indeed if you were an investor back in 1965 when they took over the then crumbling textile company, along with the transformation of the company towards an investment vehicle they would have transformed a $10000.00 investment into around $ 40 million today.

Buffett has been putting number 1 and 3 into practice like an near- octogenarian on speed over the last 6 months, buying up big brands like Tiffany, Harley Davison, General Electric, Wrigley-Mars, adding to Kraft Foods and a whole host of other billions spent.

For this Buffett has faced a barrage of criticism from the likes of Doug Kass and Jim Cramer who booted him down the field solidly for making "the wrong move too fast" after writing he was "buying American" in a New York Time's piece late last year in February it was disclosed in SEC filings that Warren had been unloading the likes of his Johnson and Johnson, Proctor & Gamble, ConocoPhilips holdings, stocks he likes to "hold forever" and Cramer tore him a new one in his The Oracle sells America piece.

What Cramer et al were missing though is Buffett's rationale for buying cheaper stocks and selling some of his other holdings to 1. keep "huge amounts of liquidity" in the Berkshire machine and 3. get cheap stocks in the process.

Buffett's attitude to the doubting Thomas', Cramer's etc can best be found in this quote from the current letter:

"Additionally, the market value of the bonds and stocks that we continue to hold suffered a significant decline along with the general market. This does not bother Charlie and me. Indeed, we enjoy such price declines if we have funds available to increase our positions. Long ago, Ben Graham taught me that “Price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down".

Of course Buffett's big bets will only be found out long-term and Kass and Cramer may well find out they have bigger mouths than cerebral cortex's.

The reaction of the Obama's, Brown's, and Rudd's of this world to the financial Armageddon that has smothered us with fear has come in for some docile comment by Buffett.

He hasn't been critical of the billions of borrowed dollars poured into every seemingly all the way to China financial holes that have been thus far uncovered and why at all doing the same insane thing that got us here in the first place will work the second, third, forth...

He has of course pointed to one obvious ramification of all this hole filling, inflation.

Lots of sticky, economy crushing inflation.

Without a doubt Warren Buffett's latest letter leaves me with the idea that this man knows more about the current financial situation than almost anyone on the planet and if that anyone is out there I would like to hear from him.

Buffett's analysis isn't perfect but it is the closest we have to getting to understand more fully what we have seen unfolding and why, and what will possibly unfold and why.

The simple fact that he has operated in this single minded fashion through manifold crises of the past and still lived to tell his financial tales is clear evidence that he knows which way to fold a greenback.

If he is wrong on his big long-term bets he could well be history but that very same history would teach us that he has been right far more than he has been wrong.

He remains positive despite slightly negative near-octogenarian output for nearly the full 22 pages.

"Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 211⁄2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.

Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead".

What a great way to finish.


Recent Share Investor Reading



Related Links

Berkshire Hathaway Annual Letter to Shareholders 2008 - Read the latest Berkshire Letter
Berkshire Hathaway 2008 Annual Report - PDF
BerkshireHathaway.com
Shareinvestorforum.com - Discuss this topic further

Recommended Amazon Reading

Pilgrimage to Warren <span class=

Pilgrimage to Warren Buffett's Omaha: A Hedge Fund Manager's Dispatches from Inside the Berkshire Hathaway Annual Meeting by Jeff Matthews
Buy new: $16.47 / Used from: $9.41
Usually ships in 24 hours

Kindle 2: Amazon's New Wireless Reading Device (Latest Generation)


c Share Investor 2009

Monday, February 2, 2009

Short-sighted critics of Warren Buffett wrong

There has been alot of criticism of Warren Buffett and his recent spending spree over the last 4 months or so and how that (so far) hasn't paid off.

One person in particular, Doug Kass, has said that Buffett's strategy is stale and This is the end of Warren .

Now Doug Kass has money riding on this by short-selling. He has bet that stocks will go down from here-and he is probably right-while Buffett has been buying up large for the long-term shot.

Everything from Burlington Northern Railways, BYD Auto, Goldman Sachs , General Electric and many more in between, Warren Buffett has been like a kid in one of his See's candy stores with 90% off the prices.

Now I am probably the wrong person to read if you wanted to read unbiased stuff about Warren Buffetts "buy good stocks for a good price and hold forever" strategy but I happen to agree with the great investor and follow that strategy as well-my portfolio is similarly down, well...duh!

Where I think Kass and other critics of Buffett have been shortsighted-and the word shortsighted is the key here-is that they haven't given Buffett's big bets a time to play out-the fact that Buffett has a long-term view seems to have completely escaped the critics!

Buffett's big spending spree began earlier in 2008 when he made deals related to the Mars/Wrigley Merger, the Anheuser-Busch/Inbev marriage and increases in his Kraft shareholdings, then continued past the September 2008 stockmarket meltdown when he made the quite audacious statement to anyone who would listen, in an Op-ed piece that he wrote in the New York Times, to "buy American" stocks, because he thought they were "cheap".

So far this has affected Buffett's Berkshire Hathaway stock price and his other company holdings in a serious way, he has lost billions in wealth as a result and all in a very short time-frame.

But, and it is a big but, Warren Buffett has faced similar stockmarket and economic meltdowns before, bet huge sums while stocks were affected by these meltdowns and always managed to come out smelling of roses and manifold more times wealthier.

After a 5 year absence from the stockmarket from 1969 because he thought stocks in that period were not cheap, he made a reappearance in 1974 just before the turn of a bear market, when he declared in a Forbes interview:

How do you contemplate the current stock market, we asked Warren Buffett, the sage of Omaha, Neb.

"Like an oversexed guy in a whorehouse," he shot back.

Buffett then proceeded to buy up cheap stocks in good companies like he had some kind of billionaire fever. He did it again after the 1987 crash and after the late 1990s tech meltdown.

To be sure even Buffett himself has said the current economic and market situation is like an economic Pearl Harbour and we haven't witnessed anything like this since WW2, so he hasn't got his head completely up the far reaches of his vast wallet.

The only thing that worries me slightly about his recent behavior is that he has been uncharacteristically vocal, giving lots of interviews and making numerous public comments like he never has before.

In one recent interview with Susie Gharib from PBS Nightly Business Report (which incidentally runs on Auckland's Triangle TV at 4.30pm weekdays and is very good) Buffett answered this question from Susie and I would have to agree:

I mean what is your most important investment lesson?

WB: The most important investment lesson is to look at a stock as a piece of business not just some thing that jiggles up and down or that people recommend or people talk about earnings being up next quarter, something like that, but to look at it as a business and evaluate it as a business. If you don’t know enough to evaluate it as a business you don’t know enough to buy it. And if you do know enough to evaluate it as a business and its selling cheap, you buy it and don’t worry about what its doing next week, next month or next year.

SG: So if we asked for your investment advice back in 1979 back when Nightly Business Report first got started, would it be any different than what you would say today?

WB: Not at all. If you’d ask the same questions, you’ve gotten the same answers.

Indeed, time to be greedy when others are fearful.

I would bet on Buffett's side long-term. Lets see what Doug Kass has to say in 5 years.


Recent Share Investor Reading

Scam Watch: List of helpful Investor tools
Long vs Short: Fisher & Paykel Healthcare
Housekeeping: Google Translate


Related Links

Everything Warren Buffett
2007 letter to Berkshire Hathaway stockholders
10 Basic Buffett questions to ask before investing


Related Amazon Reading

Security Analysis: The Classic 1934 Edition
Security Analysis: The Classic 1934 Edition by
GRAHAM & DODDS
Buy new: $37.80 / Used from: $29.93
Usually ships in 24 hours


c Share Investor 2009

Saturday, September 20, 2008

Follow the Monopoly Board

One question an investor in the stockmarket might be asking themselves right now is just when should one start buying stocks again.

Warren Buffett used his massive multi billions in cash to buy an energy company, Constellation Energy yesterday for a bargain price and he seems to be the only person in the world buying things, except the US federal government buying up private debt to "stop the markets from crashing".

Clearly nobody knows just how long this credit purge is going to continue for but what we do know is that there is more bad news to come.

That would indicate to me that there is more downside risk for stocks to come.

As long as the purchase you make is one that you can afford to hold and not have to sell if you need the money then a good beaten down stock is definitely one worth taking an educated punt on.

If one uses the Monopoly Board type style of investing that Warren Buffett has been using over the last year, buying utilities and more shares in staple producing companies like Coca Cola and Kraft foods an investor would do well to purchase similar shares if they exist on the NZX.

So what would you buy and what is resilient in these times of economic uncertainly and market turmoil?

Any of our energy stocks would be a good buy, Trustpower Ltd [TPW] Contact Energy [CEN] and Vector Ltd [VCT] will all do well in an extended downturn.

A company that I own, Goodman Fielder [
GFF] is an Australasian food giant with great brands and a whole range of staple food items from breakfast to dinner and all the snacks in between that people are still going to buy.

Auckland International Airport [
AIA] which I also have a shareholding in, is another good monopoly that will do OK during a downturn and its shares are currently at multi-year lows.

Even Telecom New Zealand [
TEL] would be worth laying some money down at anything less than $2.50 and it is getting close to that price. Even during a deep recession people will still need to communicate.

While there are plenty of cheap stocks worth looking at, especially in retailing, transport and export sectors and they are worth buying for a long-term investment, these companies are going to find the going tough during the long recession we are going to face.

Look for companies with strong brands, monopoly or near monopoly positions in their markets and the ability to cuts costs without impacting too heavily on their business.

The power companies that I mentioned would probably be some of the best performers over the recession and market sentiment as it currently is, that is, it is crap, like Warren Buffett you might get a relative bargain.


Related Amazon Reading

Everything I Know About Business I Learned From Monopoly
Everything I Know About Business I Learned From Monopoly by Alan Axelrod
Buy new: $11.65 / Used from: $2.00
Usually ships in 24 hours


c Share Investor 2008