Here are Buffett's most famous quotes on Investing:
1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
2. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
3. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
4. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
5. “Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”
Sunday, June 14, 2009
Friday, May 8, 2009
Berkshire Hathaway 2009 Annual Shareholder meeting
Warren E. Buffett says investing isn’t about being a genius — it’s about keeping it simple.
And after spending a weekend at Berkshire Hathaway’s annual meeting in Omaha with the world’s most famous value investor, Andrew Ross Sorkin writes in his latest DealBook column that this kind of wisdom might have saved a lot of heartache had investors heeded it over the last decade. Instead, it was roundly ignored in the period leading up to the financial crisis.
Omaha — “If you have a 150 I.Q., sell 30 points to someone else. You need to be smart, but not a genius.”
So said Warren Buffett, the world’s most famous value investor, at Berkshire Hathaway’s annual meeting here on Saturday, a regular pilgrimage for some 35,000 shareholders that many call Woodstock for capitalists. This year there wasn’t as much free-flowing love, given what a difficult year it’s been for capitalists, Mr. Buffett included.
But shareholders still hung on every word from the 78-year-old investor’s lips. Between sips of Cherry Coke and bites of peanut brittle, he served up some wisdom that might have saved a lot of heartache (not to mention jobs and untold financial losses) had investors heeded it over the last decade: keep it simple.
During the boom, the country became too enamored with the idea that the best and brightest could predict the future; too dependent on complicated financial models developed by quant jocks; and too reactive to every uptick or slight drop in the market. It still may be today.
“If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it,” he said. Given that the stress tests for the banking system — developed with complex spreadsheets and using sophisticated formulas predicting the next two years’ worth of earnings and write-downs — are being released this week, it was timely advice. (He still likes his investment in Wells Fargo, by the way, and suggests it has enough capital already. Though, it’s worth noting, he seemed less optimistic about the economy than officials in Washington.)
Charlie Munger, Mr. Buffett’s 85-year-old business partner, added his two cents: “Some of the worst business decisions I’ve ever seen are those with future projections and discounts back. It seems like the higher mathematics with more false precision should help you, but it doesn’t. They teach that in business schools because, well, they’ve got to do something.”
I had traveled to Omaha to sit on stage, along with two other journalists, to pepper Mr. Buffett and Mr. Munger with questions — some quite tough — for more than five hours. Shareholders had sent in thousands of them by e-mail before I left. Even while I was on stage, they kept arriving, stuffing my BlackBerry.
Some questions I received showed flashes of real anger. Mr. Buffett, who had earned the nickname “the Oracle of Omaha” for his long-term performance, had let some of these shareholders down, they said. This last year was his worst ever. Like everyone else, he missed the credit crisis and subprime debacle.
Not surprisingly, however, his fan club is still strong, dismissing his bad year as part of the “markets go up and markets go down” inevitability of value investing. Even so, Mr. Buffett himself acknowledged, “I didn’t cover myself in glory” in 2008.
Others, though, wanted to know why Mr. Buffett was still invested in Moody’s, whose credibility took a huge hit in the bust along with other credit rating agencies after it doled out Triple-A ratings the way McDonald’s sells hamburgers (a shareholder’s analogy, not mine). There were plenty of questions about Mr. Buffett’s succession plan (or lack thereof, to the dismay of many investors). And if it was not about Mr. Buffett’s successor, it was about his reinsurance guru, Ajit Jain, who runs Berkshire’s wildly profitable reinsurance business. “The Titanic-like ending of A.I.G., after Greenberg left, has me spooked,” wrote Ben Knoll, in reference to Maurice Greenberg, A.I.G.’s former chief. He wanted to know who was next in line to take over a job that requires assessing risk.
Mr. Buffett sometimes meandered, but he did not skirt the questions. It “would be impossible” to replace Mr. Jain, he said, saying that “we won’t find a substitute for him.” He suggested that if Mr. Jain were ever to leave, Berkshire didn’t have anyone it would allow to write the same size insurance policies. Most chief executives I know would have said they had a succession plan even if they didn’t.
To the question about Moody’s, he said the company “eagerly sought stupid assumptions that enabled them to do clever mathematics.” As to why he didn’t exert his influence, he said: “I don’t think I’ve ever made a call to Moody’s. We don’t tell Burlington Northern what safety procedures to put in or AmEx who they should lend to. When we own stock, we are not there to try and change people.”
When asked why the conglomerate structure seemed to work so well for him, he remarkably — and surprisingly, to me — explained the structure is efficient and comes in handy around April 15. “We’ve got this ability in terms of moving money around into various opportunities” without tax consequences, he said, describing how he can invest the profits from one business into another without being taxed.
Most of what Mr. Buffett said was basic and obvious — and was roundly ignored during the period leading up to this mess. “Leverage is what causes people real trouble in this world,” Mr. Buffett said. “You don’t want to be in a position where someone can pull the rug out from under you or, emotionally, where you pull it out from under yourself.”
Not that Mr. Buffett doesn’t have a rug or two of his own. For a man who preaches the virtues of simplicity in all things investing, he is wrapped up in a lot of complicated investments, namely the very same derivatives that he has called “weapons of mass destruction.” On Saturday, he acknowledged that he had futures and options contracts on stock indexes and foreign currencies, but added that, in and of themselves, “derivatives aren’t evil.”
Insurance, by the way, is not exactly simple, either. There is a crystal-ball aspect to the industry, papered over with spreadsheets of probability calculations.
On Sunday morning, the day after the meeting, I attended a private brunch for the company’s directors and managers. It was a star-studded affair (for financial types): Bill Gates, Don Graham of The Washington Post, Charlie Rose, Steve Wynn, Mr. Jain and even a movie star, Glenn Close.
It had been a long weekend. Everyone was heading to the airport. One chief executive told me, “If I can just hold on and try to think like Warren for a couple of days when I get home every year after this weekend, it’s a success.”
I shook Mr. Buffett’s hand goodbye and tried to remember his words from the day before: “There is so much that’s false and nutty in modern investing practice and modern investment banking,” he said. “If you just reduced the nonsense, that’s a goal you should reasonably hope for.”
And after spending a weekend at Berkshire Hathaway’s annual meeting in Omaha with the world’s most famous value investor, Andrew Ross Sorkin writes in his latest DealBook column that this kind of wisdom might have saved a lot of heartache had investors heeded it over the last decade. Instead, it was roundly ignored in the period leading up to the financial crisis.
Omaha — “If you have a 150 I.Q., sell 30 points to someone else. You need to be smart, but not a genius.”
So said Warren Buffett, the world’s most famous value investor, at Berkshire Hathaway’s annual meeting here on Saturday, a regular pilgrimage for some 35,000 shareholders that many call Woodstock for capitalists. This year there wasn’t as much free-flowing love, given what a difficult year it’s been for capitalists, Mr. Buffett included.
But shareholders still hung on every word from the 78-year-old investor’s lips. Between sips of Cherry Coke and bites of peanut brittle, he served up some wisdom that might have saved a lot of heartache (not to mention jobs and untold financial losses) had investors heeded it over the last decade: keep it simple.
During the boom, the country became too enamored with the idea that the best and brightest could predict the future; too dependent on complicated financial models developed by quant jocks; and too reactive to every uptick or slight drop in the market. It still may be today.
“If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it,” he said. Given that the stress tests for the banking system — developed with complex spreadsheets and using sophisticated formulas predicting the next two years’ worth of earnings and write-downs — are being released this week, it was timely advice. (He still likes his investment in Wells Fargo, by the way, and suggests it has enough capital already. Though, it’s worth noting, he seemed less optimistic about the economy than officials in Washington.)
Charlie Munger, Mr. Buffett’s 85-year-old business partner, added his two cents: “Some of the worst business decisions I’ve ever seen are those with future projections and discounts back. It seems like the higher mathematics with more false precision should help you, but it doesn’t. They teach that in business schools because, well, they’ve got to do something.”
I had traveled to Omaha to sit on stage, along with two other journalists, to pepper Mr. Buffett and Mr. Munger with questions — some quite tough — for more than five hours. Shareholders had sent in thousands of them by e-mail before I left. Even while I was on stage, they kept arriving, stuffing my BlackBerry.
Some questions I received showed flashes of real anger. Mr. Buffett, who had earned the nickname “the Oracle of Omaha” for his long-term performance, had let some of these shareholders down, they said. This last year was his worst ever. Like everyone else, he missed the credit crisis and subprime debacle.
Not surprisingly, however, his fan club is still strong, dismissing his bad year as part of the “markets go up and markets go down” inevitability of value investing. Even so, Mr. Buffett himself acknowledged, “I didn’t cover myself in glory” in 2008.
Others, though, wanted to know why Mr. Buffett was still invested in Moody’s, whose credibility took a huge hit in the bust along with other credit rating agencies after it doled out Triple-A ratings the way McDonald’s sells hamburgers (a shareholder’s analogy, not mine). There were plenty of questions about Mr. Buffett’s succession plan (or lack thereof, to the dismay of many investors). And if it was not about Mr. Buffett’s successor, it was about his reinsurance guru, Ajit Jain, who runs Berkshire’s wildly profitable reinsurance business. “The Titanic-like ending of A.I.G., after Greenberg left, has me spooked,” wrote Ben Knoll, in reference to Maurice Greenberg, A.I.G.’s former chief. He wanted to know who was next in line to take over a job that requires assessing risk.
Mr. Buffett sometimes meandered, but he did not skirt the questions. It “would be impossible” to replace Mr. Jain, he said, saying that “we won’t find a substitute for him.” He suggested that if Mr. Jain were ever to leave, Berkshire didn’t have anyone it would allow to write the same size insurance policies. Most chief executives I know would have said they had a succession plan even if they didn’t.
To the question about Moody’s, he said the company “eagerly sought stupid assumptions that enabled them to do clever mathematics.” As to why he didn’t exert his influence, he said: “I don’t think I’ve ever made a call to Moody’s. We don’t tell Burlington Northern what safety procedures to put in or AmEx who they should lend to. When we own stock, we are not there to try and change people.”
When asked why the conglomerate structure seemed to work so well for him, he remarkably — and surprisingly, to me — explained the structure is efficient and comes in handy around April 15. “We’ve got this ability in terms of moving money around into various opportunities” without tax consequences, he said, describing how he can invest the profits from one business into another without being taxed.
Most of what Mr. Buffett said was basic and obvious — and was roundly ignored during the period leading up to this mess. “Leverage is what causes people real trouble in this world,” Mr. Buffett said. “You don’t want to be in a position where someone can pull the rug out from under you or, emotionally, where you pull it out from under yourself.”
Not that Mr. Buffett doesn’t have a rug or two of his own. For a man who preaches the virtues of simplicity in all things investing, he is wrapped up in a lot of complicated investments, namely the very same derivatives that he has called “weapons of mass destruction.” On Saturday, he acknowledged that he had futures and options contracts on stock indexes and foreign currencies, but added that, in and of themselves, “derivatives aren’t evil.”
Insurance, by the way, is not exactly simple, either. There is a crystal-ball aspect to the industry, papered over with spreadsheets of probability calculations.
On Sunday morning, the day after the meeting, I attended a private brunch for the company’s directors and managers. It was a star-studded affair (for financial types): Bill Gates, Don Graham of The Washington Post, Charlie Rose, Steve Wynn, Mr. Jain and even a movie star, Glenn Close.
It had been a long weekend. Everyone was heading to the airport. One chief executive told me, “If I can just hold on and try to think like Warren for a couple of days when I get home every year after this weekend, it’s a success.”
I shook Mr. Buffett’s hand goodbye and tried to remember his words from the day before: “There is so much that’s false and nutty in modern investing practice and modern investment banking,” he said. “If you just reduced the nonsense, that’s a goal you should reasonably hope for.”
Monday, April 27, 2009
Ready For The Annual Berskhire Shareholder's Meeting?
Berkshire Hathaway’s Annual Meeting is this coming Saturday 2 May 2009 in Omaha, NE at the Qwest Center. Given the financial turmoil and all of the ruckus over Berkshire’s credit rating, it should be a very interesting affair.
In conjunction with the Annual meeting, Berkshire CEO Warren Buffett’s son Peter is hosting a unique event, a discussion really, where he talks about his life and upbringing. Details are below.
Peter’s ‘Concert and Conversation’ serves as an entertaining and informative look into the life of a man with a very unique upbringing. His open discussion about the lessons he’s learned as the son of one of the most noteworthy investors of our time and its effect on creating the man he’s become, acts as a true testament that life is never a straight road. The evening will include live performances of selections from Peter’s album releases including his latest, Imaginary Kingdom, punctuated with videos from his film/television work and philanthropic activities.
EVENT DETAILS:
An Evening of Concert and Conversation with Peter Buffett
WHEN: Saturday, May 2nd at 7:30 pm
WHERE: The Rose, 2001 Farnam Street, Omaha, NE
TICKETS: $42, with $25 of the cost being tax deductible
http://rosetheater.org/season-events.asp
Monday, April 6, 2009
Learning From Buffets Mistaks
Buffett is the Chairman and CEO of Berkshire Hathaway, and the second- richest man in the world according to the Forbes list of the 400 richest people. He's also known as the world's best investor.
So then, why is he outing his mistakes to millions?
"During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt. Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action," he announced in his latest letter to shareholders.
But it's that very admission of guilt that makes Buffett what every investor should aspire to be. It's what separates Buffett from the stockerati that tries so hard to imitate him.
After all, Buffett's performance could have been much worse for the year. In 2008, Berkshire Hathaway outperformed the S&P 500 by 27.4%, meaning that the Oracle of Omaha's investments held up significantly better than the rest of the stock market.
Others would have touted the year as a success - after all, he performed better than most mutual funds, a plethora of hedge funds, and most individual investors - Buffett didn't.
Three Lessons to Learn from the Oracle's Mistakes
Because those who forget their stock market mistakes are doomed to repeat them:
Don't Seek Approval - Per Buffett, "Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re- examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns."
Understand What You Own - "Recent events demonstrate that certain big- name CEOs (or former CEOs) at major financial institutions were simply incapable of managing a business with a huge, complex book of derivatives. Include Charlie [Munger] and me in this hapless group," he said.
The Market Can Be Wrong - "The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like today's could have been obtained on good-grade municipal or corporate bonds even while risk- free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms."
It's hard to see the market clearly when things look as ominous as they do only three months into 2009. Sellers are overwhelmingly pushing the direction of the market today, but that pace can only be kept up for so long. Keep Warren Buffett's advice in mind, and you'll end this debacle with your head above water.
So then, why is he outing his mistakes to millions?
"During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt. Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action," he announced in his latest letter to shareholders.
But it's that very admission of guilt that makes Buffett what every investor should aspire to be. It's what separates Buffett from the stockerati that tries so hard to imitate him.
After all, Buffett's performance could have been much worse for the year. In 2008, Berkshire Hathaway outperformed the S&P 500 by 27.4%, meaning that the Oracle of Omaha's investments held up significantly better than the rest of the stock market.
Others would have touted the year as a success - after all, he performed better than most mutual funds, a plethora of hedge funds, and most individual investors - Buffett didn't.
Three Lessons to Learn from the Oracle's Mistakes
Because those who forget their stock market mistakes are doomed to repeat them:
Don't Seek Approval - Per Buffett, "Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re- examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns."
Understand What You Own - "Recent events demonstrate that certain big- name CEOs (or former CEOs) at major financial institutions were simply incapable of managing a business with a huge, complex book of derivatives. Include Charlie [Munger] and me in this hapless group," he said.
The Market Can Be Wrong - "The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like today's could have been obtained on good-grade municipal or corporate bonds even while risk- free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms."
It's hard to see the market clearly when things look as ominous as they do only three months into 2009. Sellers are overwhelmingly pushing the direction of the market today, but that pace can only be kept up for so long. Keep Warren Buffett's advice in mind, and you'll end this debacle with your head above water.
Friday, March 13, 2009
BRK Downgraded!
Fitch Ratings downgraded Berkshire Hathaway's so-called Issuer Default Rating (IDR) and senior unsecured debt ratings to double A+ and double A, respectively. Berkshire's insurance arm maintained its triple A, but all divisions are on negative watch. Fitch also said having Warren Buffett as head of the company is a risk...
Fitch views this risk as unrelated to Mr. Buffett's age, but rather Fitch's belief that Berkshire's record of outstanding long-term investment results and the company's ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett.
And yesterday, Standard & Poor's stripped GE of its triple-A rating. That leaves only five triple-A-rated companies. They are ExxonMobil, Microsoft, Johnson & Johnson, ADP, and Pfizer.
Fitch views this risk as unrelated to Mr. Buffett's age, but rather Fitch's belief that Berkshire's record of outstanding long-term investment results and the company's ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett.
And yesterday, Standard & Poor's stripped GE of its triple-A rating. That leaves only five triple-A-rated companies. They are ExxonMobil, Microsoft, Johnson & Johnson, ADP, and Pfizer.
Saturday, January 10, 2009
Warren Buffett on super SIV 2007-12-11
Check out this great Buffett video on Structured Investments Vehicles.
Saturday, December 27, 2008
Timeless and Time-Tested Warren Buffett Watch Predictions
Timeless and Time-Tested Warren Buffett Watch Predictions
Posted By: Alex Crippen
As a new year approaches, it is customary for journalists to make predictions about the future. This time around, CNBC.com has a collection of prognostications from CNBC bloggers on a special page: Predictions '09. Gerald Herbert / AP
Last year around this time, Warren Buffett Watch offered its Eight Predictions for '08 .. and Beyond.
In keeping with Buffett's long-term way of looking at things, the eight predictions were intentionally on the 'timeless' side of the predicting spectrum.
Here they are again, with a little bit of editing. This could be the start of a new holiday tradition!
-----------------
Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he's forecasting the future.
Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.
Of course, it helps when you can give your predictions plenty of time to come true. That's one reason Buffett's favorite holding period for investments in "outstanding businesses with outstanding managements" is "forever." After all, "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."
With that in mind, here are Warren Buffett Watch's 'timeless' predictions.
1. Recessions can't be avoided forever. As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. "It is the nature of capitalism to periodically have recessions. People overshoot." (He told Becky she's young enough to expect to see 6 or 7 or them.)
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AP The economic downturn takes its toll at the almost-empty Bayshore Town Center Mall in Milwaukee, Wisconsin. |
2. We'll survive current and future recessions just as we've survived past problems. As Buffett told us in August, 2007, (and repeated throughout 2008): "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average... We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."
3. Recessions will create opportunities. "I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap." Fast-forward to October, 2008, and Buffett's Why I'm Buying U.S. Stocks Now.
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4. All stocks won't be cheap. Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"
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5. The crowd will make mistakes. Buffett cites this piece of advice from his mentor Benjamin Graham: "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."
6. Investors will mistakenly think falling stock prices are bad. "If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper."
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Walt Disney (1950) Cinderella rushes for the exit as midnight approaches |
7. Good times will prompt bad decisions. In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."
8. There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don’t learn from history."
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