Warren Buffett 01 (May 08 - Jan 10)

[winston]

Why I Won't Invest in Berkshire Hathaway
By Tom Dyson
May 8, 2008

The young man sitting next to me applauded so loudly, it must have stung his palms...

Warren Buffett had just given his opinion on ethanol. "Turning American corn into motor fuel is one of the dumbest ideas I've ever seen," Buffett said. The crowd went berserk. When the room settled down again, someone else asked a question. This one was about mass transportation. "Americans seem to like driving in their own in cars too much for mass transit to work," said Buffett. "It seems to be human nature."

The young man dropped his pen and slammed his hands together again. A big grin crossed his face and he whispered something approving to the guy sitting next to him.

The annual Berkshire Hathaway meeting is all questions. Someone in the crowd asks a question. Buffett answers. Then Munger answers. This lasts for five hours. The crowd asks anything. One man asked about religion. Another person asked about human rights in China. They discussed ethanol. The environment. Politics. Taxes...
The young man sitting next to me filled up an entire yellow legal pad with notes from the meeting.

Here's the thing about the question-and-answer format. It gives Buffett the green light to opine on any subject he wants to... even if it has nothing to do with investing. The people love this. They go to Omaha to soak up Buffett's wisdom and enjoy the show.

I went to the Berkshire Hathaway meeting to judge Berkshire as an investment. Here's what I found:

On the ground floor of Omaha's Quest Center, below the arena, there was an exhibition hall. It was the size of a Wal-Mart warehouse. Here, all Berkshire Hathaway's portfolio companies – See's Candies, Netjets, Wendy's, etc. – exhibited their products.

The diversification really struck me. Berkshire owns 80 different companies. These companies come from different industries, but they all have one thing in common: They all spew out cash like an oil gusher. As Buffett said, "We like to buy companies that drown in cash."

Most of these companies would give you great protection in a recession because they provide basic services like insurance, sliced cheese, chewing gum, and shaving foam.

And they'd also give you great protection against a weak dollar. Berkshire invests in real assets and companies that can raise prices right along with inflation. As Munger said, "While we don't like inflation – it's bad for our country and our civilization – we will make more money when there is inflation."

Here's the thing, if you enjoy researching companies, you should not invest in Berkshire Hathaway. That's because Buffett can only invest in companies with market caps above $50 billion. His universe of possible investments is so small, he doesn't have access to many easy profit opportunities.

Berkshire stock has grown about 21% a year since 1965. But Buffett said it himself... "Anyone who expects us to replicate the past should sell their stock. We won't be able to."

Instead, you should copy Buffett's investing technique and do it yourself. His method is simple. Any of the hundreds of books about Buffett will explain it. And you'll make much higher returns than Buffett. This is because you can choose from the whole market.

If you don't know how to invest – or if you have no interest in the stock market – Berkshire Hathaway is the best stock investment you could ever make. You get a great portfolio of safe companies... protected from inflation and recession... and Buffett takes care of your investment. You'll make 8%-10% annual returns. You should buy today and never sell.

If you're looking for a safe place to stash your savings and compound interest, Berkshire is the only stock you should consider. But if you love researching investments – as I do – you should avoid it. We can do better than 8%-10%

Source: Daily Wealth

[kennynah]

<<The young man sitting next to me applauded so loudly, it must have stung his palms...

Warren Buffett had just given his opinion on ethanol. "Turning American corn into motor fuel is one of the dumbest ideas I've ever seen," Buffett said. The crowd went berserk. When the room settled down again, someone else asked a question. This one was about mass transportation. "Americans seem to like driving in their own in cars too much for mass transit to work," said Buffett. "It seems to be human nature."

The young man dropped his pen and slammed his hands together again. A big grin crossed his face and he whispered something approving to the guy sitting next to him.>>


hahaha...i find this very funny... and i see so many around even here in singapore who would probably do just the same...kiss on the floor where the great investor steps on... this is not to say, i disrespect this old man for his successes...

[millionairemind]

WB is one of the greatest investors in the world. Too many ppe. tried to emulate him but failed..

I think it is his thinking that sets him apart from the wanne-be crowds.

As small individual investors, we are giving up our biggest advantage when we try to invest like him or a mutual fund - that is BUY AND HOLD.

Our ability to get in during an uptrend and out at the start of a correction is what will help us compound our money easiy at 30% or higher a year. Just talking about cash investments, not leveraged futures or anything like that.

Too many ppe cite academic studies on if you miss the biggest up days blah blah blah, you will be behind the S&P 500 yadah yadah yadah.

If you missed the BIGGEST 10 day falls and the BIGGEST 10 day rise, you will still come up ahead.. Y?? Cos market falls much faster than it rises.

Just look at STI... beginning of the year it was around 3500... On follow thro day March 24 (1 day after US follow thro' on March 20), it was around 2800. Now it is still around 3150.. about 6 weeks after follow thro'.. yet. it took STI only 2 weeks from Jan 7 at the start of the correction to crash to around 2800 on Jan 22.

The bulls climb the stairs but the bears jump out of the window

This will probably ruffle some feathers for those buy and hold investors... my apologies

Hi.. this is not a value or a buy and hold forum.. we are here to discuss various investment styles so as to make money.

[blid2def]

Hi.. this is not a value or a buy and hold forum.. we are here to discuss various investment styles so as to make money.

Winning statement.

A bit OT, quick one: at the same time though, I'd really like to see no "poh beh" (report horse race) threads in this forum. You know, where you have serial postings reporting on the market movement...

I will not hesitate to slap a posting rights revocation for that sort of posts here.

Okay, back to Wahlao Pomfret. Yah lah, I always find it funny to read people talking about "emulating him". Yeah, learn and understand his insights, but shit - emulate? How many Wahlao Pomfrets are there in this world? End up eyes high, arms short.

[futuresasia]

Actually I believe a lot of people misread Warren Buffett's message. He say buy and hold because now he is so big that he is often forced to do so. However, at heart he is a trader and trades frequently.

Just this shareholder meeting he was describing how he traded auction rate securities. I believe the last meeting he mentioned trading distressed debt. At heart he is really a trader lah. The only one who is really the buy and hold sort is Charlie Munger. It was this guy that preached buy and holding actually and egged Warren Buffett to buy Coke and See's candies.

[blid2def]

Welcome, futuresasia! That is all. All right; back to the scheduled program. Sorry for the commercial break. I'm the forum jester.

[winston]

Buffett, Seeking Deals, Meets German Business Owners (Update1)

By Josh P. Hamilton

May 19 (Bloomberg) -- Billionaire Warren Buffett meets today with business owners in Frankfurt as he looks outside the U.S. for acquisitions to spur profit growth at his $200 billion Berkshire Hathaway Inc.

The world's wealthiest person, starting a four-city European tour in Germany's financial capital, is seeking to form relationships that may lead to purchases by his Omaha, Nebraska- based investment and holding company.

``I want us to be on radar screen of private companies,'' Buffett said at a press conference in Frankfurt today. He declined to identify any possible targets.

Berkshire has $35 billion in cash and Buffett, 77, has been looking for places to put it. He's invested in China, Israel and the U.K., complaining that there's a dearth of U.S. investment opportunities for a company as large as Berkshire.

Buffett's trip includes meetings in Lausanne tomorrow and Madrid on May 21, finishing in Milan on May 22. The visit was arranged by Eitan Wertheimer, president of Israel's Iscar Metalworking Cos. -- acquired by Berkshire in 2006 in Buffett's first non-U.S. purchase -- and Angelo Moratti of the family-run Italian energy company Saras SpA.

Buffett owns about a third of Berkshire, which he built over four decades from a failing maker of men's suit linings into a company with businesses that range from candy-making to insurance and a $72.6 billion stock portfolio.

Not a Meddler

He's known for buying well-run, privately held companies with high barriers to would-be rivals, cutting deals on a handshake and not meddling in management. In exchange, he typically pays less than companies could receive in an auction.

Germany is fertile ground for Buffett's investment style because about three-quarters of companies there are family-run. Many were founded as the nation rebuilt after World War II and are now grappling with succession issues as their founders age.

``Many families go through certain stages of strategic decision-making and they need to know their options,'' said Iscar's Wertheimer, 56, whose company was founded in 1951 by his father. ``From Warren you get much more than money. You're part of something that's unique.''

Expectations for a weak U.S. currency add to the allure of earnings in other denominations. Since at least 2002, Buffett has made investments with the assumption the dollar will decline, first with direct bets against the currency, and then with the Iscar purchase. The euro fetched less than a dollar when Buffett first enlisted Moratti in 2001 to advise him on potential European purchases. It closed Friday at $1.5577.

$2 Billion IOU's

``The U.S. is going to continue to follow policies that make the dollar weaker,'' Buffett told reporters at the Berkshire annual meeting in Omaha earlier this month. Americans' preference for foreign goods causes the country to send about $2 billion in ``IOUs'' and assets abroad every day, pressuring the dollar, he said.

After paying $4 billion for 80 percent of Iscar, which makes cutting tools for manufacturers in plants around the world, Buffett said he hoped the deal would raise Berkshire's international profile and help him find new candidates in ``the bigger economies.''

An investor who says he buys companies ``for life,'' Buffett looks at businesses he understands and in which he can project performance during the next one or two decades. To familiarize himself with Europe's business culture and issues, Buffett has met Moratti, the Italian energy executive, in Omaha at least four times a year since 2001, Moratti said in an interview last month.

Buffett has a devoted following, particularly in the U.S. About 31,000 shareholders and groupies from every continent except Antarctica filled Omaha's Qwest arena to overflowing earlier this month to hear Buffett answer questions for hours on topics ranging from the economy to his businesses and philosophy of life and marriage.

During the meeting, Buffett said a subsidiary was ``probably close'' to a ``mid-size'' U.K. acquisition.

[winston]

Buffett Interested in Food, Watch, Energy Companies (Update3)
By Warren Giles and Josh P. Hamilton
Enlarge Image/Details

May 20 (Bloomberg) -- Billionaire Warren Buffett said food companies, watchmakers and energy traders are among companies he would consider buying in Switzerland as he scours Europe for opportunities to expand his Berkshire Hathaway Inc.

``We're looking for businesses like Nestle that are quite understandable,'' Buffett, 77, told reporters in Lausanne, Switzerland, today. While Nestle SA, the world's largest food company, isn't on his list, Buffett said Switzerland has ``fine companies'' in which to invest.

Switzerland is the second stop on Buffett's four-city tour of Europe, where he hopes to someday buy family-owned businesses for his $200 billion Omaha, Nebraska-based Berkshire. Almost nine out of ten Swiss companies are family controlled, including Swatch Group AG, the world's biggest watchmaker, and Rolex SA.

Buffett, whom Forbes magazine calls the world's wealthiest man, isn't nearly as well known in Europe as he is in the U.S., where Berkshire's annual meeting drew 31,000 people this year. With just 19 employees at Berkshire headquarters and because he cuts the deals himself without the usual bankers and lawyers, Buffett says he needs potential sellers to call him.

Luxury watchmakers such as Geneva-based Rolex Group ``are great companies,'' Buffett said. ``They know my phone number, but they haven't called.''

Nicolas Hayek Sr., chairman of rival Swatch Group, has said his family, which owns 39.1 percent of the company, would prefer that Swatch not trade on the stock market. The family won't buy the rest of the company because they don't want to take on debt.

Tools, Fragrances

Other family-owned companies include Geneva-based Firmenich International SA, the biggest closely held maker of flavors and fragrances, and trainmaker Stadler-Rail AG. Hilti AG, a toolmaker based in neighboring Liechtenstein, was taken private by its founding family five years ago.

Buffett said he wouldn't be ``reluctant'' to invest in an energy trading company, without giving details. Switzerland is home to a number of trading companies, including closely held Glencore International AG, the world's largest commodity trader.

While Buffett said he would also consider buying a bank if he knows the banker running it, he criticized the large financial institutions caught in the subprime mortgage crisis for delegating risk management.

Shirking Responsibility?

``The head of any bank or financial institution has to be the chief risk officer,'' Buffett said. ``A great many financial institutions have been run by people who haven't taken that responsibility.''

Buffett owns about a third of Berkshire, which he built over four decades from a failing maker of men's suit linings into a company with businesses that range from candy-making to insurance and a $72.6 billion stock portfolio.

He's been looking for places to invest Berkshire's $35 billion in cash, investing in China, Israel and the U.K., because he says there's a dearth of U.S. investment opportunities for a company as large as Berkshire.

[winston]

US already in recession, says Warren Buffet
Posted: 25 May 2008 0209 hrs

BERLIN : While economists quibble, the world's richest man has decided: the United States is already in recession. So Warren Buffett tells German magazine Der Spiegel in an interview to be published on Monday.

"It is perhaps not a recession in the way that economists would understand it... but people are already feeling the effects and it will be deeper and longer than people think," Buffett said on a visit to Frankfurt.

Buffett, the 77-year-old chief of the Berkshire Hathaway holding company, blamed financial institutions for introducing instruments "they can no longer control" and said the "genie can no longer be put back in the bottle."

Buffett, who overtook Bill Gates this year as the world's richest man, said he believed the financial markets should be more tightly regulated.

According to the Forbes annual billionaire's list published in March, Buffett saw his wealth jump from 52 billion dollars last year to 62 billion, pushing Microsoft co-founder Gates into third position after 13 years at the top.

US economic growth has slowed dramatically in recent months and a growing number of economists believe the world's largest economy will experience a recession during 2008 amid a housing slump and related credit crunch.

- AFP /ls

[lioninvestor]

A few days ago, 90 MBA students were at IMD Business School in Lausanne for an interview session by MBA Programme Director Benoît Leleux with his two guests Warren Buffett and Israeli family business ISCAR Chairman Eitan Wertheimer.

You can also watch the 42-minute video of the entire session here:

Warren Buffet in IMD Business School

It’s available online until 19th Jun 2008.

I have also compiled and rephrased some of the questions posed to Warren Buffett and his replies below. Note that this is not the complete interview and a few questions have been left out.

Warren, when you receive that letter (of offer to sell his Iscar business) from Mr Eitan, what was your reaction?

It was a letter that was one and a quarter pages long but it leapt off the page to me that Eitan was talking about a company that I haven’t heard about before but it was a wonderful company. He gave me enough information that clearly this was an extraordinary company. And more importantly, I can’t tell you the exact words that did it, but the quality of the man came across, and I knew that this was someone that I want to be associated with. And it looked to me that we would be associated with. So he said if you were interested, get in touch with him.

He was in Israel, I was in Omaha, and they were not neighbouring cities. He said he would come over, he came over and in person he proved to be everything that I expected in the letter and not long later, we put in $4 billion dollars for 80% of his business. And I did it without even going to his plant or sending in a team of lawyers or doing the customer due diligence. But I knew what I was buying and I knew who I was dealing with and I’ve been happy ever after.

This is really counter-intuitive. We are here in the studio of a business school and we teach our students to do due diligence and to be very careful. Here you are saying for me it doesn’t work.

In the end, the important thing is to buy the right business with the right people and at the right price. We don’t check on every lease and we don’t look at every labour contract. The important thing is to get a fix in my own mind is where the business is likely to be in five, ten and twenty years. And if there’s a little mistake here, and something causes one percent of the purchase price because we didn’t think of it, oh we could benefit sometimes because of the one percent of the purchase price that I didn’t anticipate, but that’s meaningless.

If you look at the businesses we bought twenty years ago, there were a huge success and in a few cases there were failures.

And I don’t think you can send a team out. It’s not my job to send a team out anyway. Berkshire expects me to evaluate the business. They bet on me. I got my own money on it. I got 99% of my networth in Berkshire so I’m going to try to size up those businesses and go to the ones with very long term durable competitive advantage. With a terrific management that I trust. I”m handing people a lot of money and I want them to be as enthusiastic and passionate about the business the next day as they were the day before (I bought them). That’s the key decision. I don’t know anyone in the world who would turn that over to his team of lawyers to figure out.

So you did not have a big team of lawyers and financial analysts doing any due diligence?

We don’t have them. We have nineteen people in the whole of Berkshire. About ten or eleven are in accounting and a couple others are taking care of my mail and we don’t believe in that. We just don’t believe in that. I don’t believe in farming out the responsibility that comes with us making big capital allocation decisions.

How important is this trust issue and the relationship on the possible candidates you are looking?

100%. We don’t have anybody on the premise checking the sites. What I’m trusting is for them do is to run the businesses the same way the cheque cleared as they did before. That’s the key decision.

How do you manage all your companies?

I don’t. The key to management is about getting things done by other people. I can’t run those business as I don’t know a thing about them. I have managers I don’t see for three or four years. On the other hand, there’s one I talk to every day. We have no company meetings.

There’s a 2-page letter they get from me once every two years. I tell them we have all the money we need, but we don’t one ounce of reputation we can afford to lose. Never trade reputation for money. Never do anything that you do not want to appear on the front page of the newspaper. If there’s anything close to the line, you can forget about it.

I also ask them about the succession plan - what I should do if they were no longer around in terms of successors, and I get replies on successors every year. We reinforce and emphasis that message in annual reports, annual meetings and consistent communications. We want them to reflect the culture, embed the culture, and everybody picks up pretty well.

Is there a key management style that you look for?

They have many different styles. A good many of them have MBAs. A couple of them did not go beyond high school. They are leaders in their own way. I’m often amazed in the different shapes and forms they come in. They all have passion for the business. They have qualities that would cause people to want to follow them over the mountain. People believe in them. They have people who believe in them. They do love the businesses.

You buy companies forever?

Yes. We have no exit strategy. We have an entry strategy but there is no end game. We just want to keep on adding more and more good businesses.

What is it that holds Berkshire Hathaday together?

It’s the culture. Something to do with developing in the culture. After a while, it creates its own momemtum. People self select themselves. We pay our directors $900 a year. People buy into the culture and want to be part of it. And they want to see it continue.

Do you consider Berksire as a family business?

Yes, we consider Berkshier a family business. We have our principles laid out for decades and we don’t change them.

What is your succession plan for yourself?

We have three people identified by the board. The person who succeeds me should be relatively young. It helps to have a long run at the job, particularly the culture. I do not want to hand it over to someone who will only be here for three or five years.

How important is money to you?

I have all that I need ever since I was in my mid twenties. I have a job I love, around people I love and they like me, I get to do what I like to do every day. I eat well and have a house that is warm in winter and cold in summer.

The standard of living does not equate with the cost of living. Up to a point it does, and then you leave that point. I want to be around my friends; to be able to do what I love to do. Fortunately, I’m able to do it.

All my Berkshire shares will be going to charity, but it doesn’t involve a single sacrifice on my part. They are just a branch of certificates sitting in a safe deposit box. I have everything that I need in the one percent that is sitting outside of Berkshire. They can take care of me more than a normal human being can ever hope for. The rest can go back to society as society has enabled me to do what I do.

I told my children what my dad told me. “Anything you do (as long as it’s legal), I’m behind you. I’ll back you. You don’t have to be me. You have to be you.” What they do is more important than what I do. They have to follow their own compass – their own passion.

What is your own personal definition of success?

I would measure it by the number of people who love you when you are sixty or seventy. If you have thousands of people who love you, you are successful.

If you don’t have any people who’ll love u, no matter how rich you are; how many honour degrees you’ve been given; what hospitals you are being named after you – you are a failure. I have seen all the ‘trappings of success’ by the world’s measurement.

People who are rich and have their names on paper and they aren’t have a person on earth who love them. They can’t be successful.

Where does that passion and energy come from?

I was lucky in terms of the parents I have and where I was born. I had all kinds of opportunities. I had a good education, and I was wired in a way that made me good in allocating capital. I was lucky that I managed to find out what I liked to do when I was very young.

I was able to play in the game that I wanted to play virtually all my life. I never had to compromise in terms of doing something that I really didn’t want to do because my kids were hungry.

The most important thing (besides your parents) is picking the right spouse. If you have the right spouse, a lot of good things are going to happen. I was very, very lucky in that aspect.

One thing you mentioned is that Berkshire is nowhere near as prominent as it should be in Europe. Why there and why now? With the weak dollar, this might not be a good time.

I should have done it earlier. I haven’t and I’m correcting the mistake now. We should be on the radar screen not only in Europe but also in Asia. We do have something to offer to certain businesses. It might not be important to them today. If you have a great family business, keep it. But there might come a time when a change is necessary. I want to be on that radar screen so that when the time comes, people will think of calling us.

What does Berkshire Hathaway bring to the table that other companies do not?

Freedom to continue doing what they are doing. To be part of something bigger and to prepare for the future. They can get rid of any bankers or wallstreet that they need to please. They have someone who appreciates them. We don’t have many competitors.

Are you looking at Asia?

We are always interested in business as long as they meet our size requirements. Certainly there are some in Asia. In terms of marketable securities, I look all over the world all the time. We bought some in PetroChina a few years ago.

You have a remarkable return of about 21%pa since you started investing. How do you do it?

I try to buy things that I understand. I look at the stock market as a place to buy businesses, not at a place where the prices move up and down. I have a very fundamental approach which I was lucky to learn when I was nineteen years old by reading the right book called “The Intelligent Investor“. Reading that book changed my life in a big way. I learn a few things over the year but I had the right framework from Benjamin Graham.

Do you feel that US policies in place today are still weakening the strength of the US dollar?

We are doing pretty much what we have been doing in recent years. When you do what you have been doing over and over and you expect to get a different result, that’s insanity.

How often do you find yourself being involved in political arena?

It is enormously important who leads the country – it is better to have the best by the significant market.
People should be involved in politics. You should care about what your leaders are. You should work for them if you have a chance and position to raise more money.

End of compilation

Warren Buffett comes across as a very humble person (he certainly is) and is well liked by many people. He’s a great success we all have much to learn from.

Article reproduced from How to Grow Wealth in a Responsible and Sustainable Manner

Credits to San for additional inputs.