Common sense & Warren E. Buffett

[Dragonlipz]

I was prepared to offer some sound advice on investment strategies as well as re-investment of dividends but after reading this thread and the near imbecilic grasp of finance exposed and expressed by those posting here.....I decided to relate some details of my personal life:

As many of you may not know, the love of my life and muse, the buxom, blonde, bodacious, brassy, bitchy, bikini barista (she who wears the isty-bitsy-teeny-weenie-yellow-polka-dot-bikini) has renounced her infatuation with the corporate tea-baggers. She rang my doorbell last night after a long trip west from the latest Tea-bagger nonsense.
She wonders how many of the Tea-baggers finished grade-school, much less ninth grade. "They don't even know how long the President's term is....." She observed. "They rant all the time about the Constitution, but none of them know anything about the checks and balances, and even less about the 'founders' who wisely did not get too involved in the new enterprise. They wanted the republic to succeed on it's own."
She's quite a girl and gives a great blow-job.........
Perhaps sometime I'll describe her technique which was not employed nor exploited by the 'Tea-Partiers' - She thinks most of them are gay, which is ok by her, but why would they persecute others like themselves? She was glad to 'come' back to liberal and intense sex.........
"Those conservatives can't fuck worth a shit!" (her words - not mine)

 

[trysail]

Charlie Munger has had an enormous ( but generally overlooked or unrecognized ) influence on Warren Buffett's investment approach. He has played a more important role in Buffett/Berkshire Hathaway's success than is commonly understood. Those who follow Buffett closely are aware of it; the general public is not.


http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aOC0M7zl7HBg


Munger Says Costco Beats Charity
By Andrew Frye

Sept. 17 (Bloomberg) -- Charles Munger, the business partner of billionaire philanthropist Warren Buffett, said private investment may advance society more than charity.

“I believe Costco does more for civilization than the Rockefeller Foundation,” Munger, 86, told students in a discussion at the University of Michigan on Sept. 14, according to a video posted on the Internet. “I think it’s a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.”

Munger is a director at Costco Wholesale Corp., the largest U.S. warehouse-club chain, and has served as vice chairman of Buffett’s Berkshire Hathaway Inc. for more than three decades. Munger’s stake in Omaha, Nebraska-based Berkshire’s Class A shares is valued at more than $1.6 billion.

Buffett, the world’s third-richest person, has committed more than 99 percent of his wealth to charity and in June publicly challenged billionaires to give away half their fortunes. The Rockefeller Foundation, founded in 1913, supports agriculture in Africa, flood-protection in New Orleans and universal health initiatives, according to its website.

Charitable donations by Munger have aided California institutions including Stanford University, the Harvard-Westlake School and the Huntington Library. He is chairman of Good Samaritan Hospital of Los Angeles and gave $3 million to the University of Michigan’s law school to improve lighting.

In the discussion at Michigan’s Stephen M. Ross School of Business, Munger criticized the World Bank, the international lending institution that focuses on fighting poverty.

‘Folly and Stupidity’
“I’ve seen so much folly and stupidity on the part of our major philanthropic groups, including the World Bank,” Munger said. “I really have more confidence in building up the more capitalistic ventures like Costco.” A spokesman for the World Bank declined to comment. Costco’s Bob Nelson didn’t immediately return a call.

Costco shoppers pay an annual fee for discounts on groceries and other basics, as well as on pricier goods such as designer handbags and home furnishings. The Issaquah, Washington-based company has reported three straight profit increases, including net income of $306 million in the fiscal third quarter. The company has more than 140,000 employees, including part-time staff, according to its annual report.

Munger has previously touted charitable giving. In “Poor Charlie’s Almanack,” a collection of Munger’s speeches and remarks, the investor urges successful capitalists to make donations. Munger gave about $2.4 million in Berkshire stock to charities on Dec. 18.

‘Duty to Give Back’
“Those of us who have been very fortunate have a duty to give back,” Munger is quoted as saying in the almanac. “Whether one gives a lot as one goes along as I do, or a little and then a lot (when one dies) as Warren does, is a matter of personal preference.”

Buffett, 80, is depleting his fortune, estimated by Forbes Magazine in March at $47 billion, through donations. He has pledged the bulk of his wealth to the Bill & Melinda Gates Foundation and makes annual gifts to charities seeking to ease hunger, boost education in the U.S. and promote access to abortions. He joined with Bill Gates, the Microsoft Corp. co- founder, to start the Giving Pledge initiative to elicit greater gifts from billionaires.

The Gates Foundation has worked with the Rockefeller Foundation to increase the productivity of small farms in Africa. A spokeswoman for the Rockefeller Foundation had no immediate comment.

Buffett didn’t respond to a request for comment e-mailed to an assistant. Jason Maier, a spokesman for the Giving Pledge, didn’t return a call. Munger, through an assistant, declined to be interviewed. A spokesman for the University of Michigan confirmed Munger’s appearance this week.

 

[trysail]

Rose Gorelick Blumkin came to Omaha from the tiny village of Shchedrin, in the region of Minsk. Born in 1893, she and her seven brothers slept on straw on the bare floor of a two-room log house because her rabbi father couldn't afford to buy them a mattress.


'I dreamed all my life, since I was six years old,' she said. 'The first dream of mine was to go to America.'


'In Russia, they used to have pogroms against the Jews. They'd cut up the pregnant women and take out their kids. They'd tear up the fathers and then have a dance in the main market. I was six years old when I found out about that. I said, I'm going to America when I grow up.'


At thirteen, Rose walked barefoot for eighteen miles to the nearest train station to save the leather soles of her brand-new shoes. She had the equivalent of four cents in her pocket and hid under a train seat for three hundred miles to save her money, until she reached the closest town, Gomel. There she knocked on twenty-six doors until the owner of a dry-goods store responded to her proposition. 'I'm not a beggar,' the four-foot-ten-inch girl said. 'I've got four cents in my pocket. Let me sleep in your house and I'll show you how good I am.' The next morning, 'When I came to work I waited on a customer. I rolled out the material and I added it up before anybody picked up a pencil. And at twelve o'clock he asked me if I was going to stay.'


By age sixteen, she was a manager, supervising six married men. 'Don't worry about the men, Mamma!' she wrote her mother. 'They all mind me!' Four years later she married Isadore Blumkin, a shoe salesman in Gomel. That same year, World War I broke out, vigilantes ran amok in Russia, and Rose made up her mind. They had money for only one passage to America, so she sent her husband and started saving to go herself. Two years later, the czarist monk Rasputin was killed by revolutionaries in December 1916. Fearing the chaos that would ensue even more than the cruelties of the czarist regime, Rose began her journey to America two weeks later, boarding the Trans-Siberian Railway on a train headed for China.


For seven days she rode the train until, at the border town of Zabaykai'sk, a Russian guard stopped her before she could enter China. She told the man she was buying leather for the army and promised him a bottle of slivovitz on her return. Either naive or lenient, he let her through the border. She rode through Harbin, Manchuria, to Tientsin, China, on another train. By then Rose had journeyed over nine thousand miles across almost the entire continent of Asia. From Tientsin she used her small stock of money to take a boat to Japan, with stops at Hiroshima and Kobe along the way, until she finally arrived in Yokohama. There she waited for another two weeks until finding the Ava Maru, a cargo boat carrying peanuts that gave her steerage passage to the United States. As the Ava Maru crossed the Pacific for six leisurely weeks on its way to Seattle, 'I never saw so many peanuts,' she said later. 'I thought I'd never get here.' She had carried black bread on board but was too sick for most of the journey to eat.


Landing in Seattle on the Jewish holiday Purim after almost three months of travel with a face swollen from illness, Rose was met at the dock by the Hebrew Immigrant Aid Society, fed a kosher dinner, and given a hotel room. 'When I came to this country,' she said, 'I thought I am the luckiest one in the whole world.' The HIAS put a tag around her neck with her name and 'Ft. Dodge, Iowa,' where her husband had settled and was working as a junk peddler. They sent her on a train through Minneapolis to Fort Dodge, where the American Red Cross met her and reunited her with Isadore. Rose got pregnant right away and gave birth to a daughter, Frances. She didn't know a word of English.


Two years later, she still spoke hardly any English. Feeling isolated, the Blumkins decided they had to live in a place where Rose could converse in Russian and Yiddish, so they moved to Omaha, a town filled with 32,000 immigrants drawn by the railroads and packinghouses.


Isadore rented a pawnshop. 'You never hear of a pawnshop going broke,' he said. Rose stayed home and had three more children, Louis, Cynthia, and Sylvia. Sending fifty dollars at a time back to Russia, she brought ten of her relatives to America. Unlike her husband, she still didn't speak much English. 'I was too dumb,' she said. 'They couldn't drill it in me with a nail. The kids teached me. When my Frances started kindergarten, she says, 'I'll show you what an apple is, what a tablecloth, what a knife.' But the store struggled and the family almost did go broke during the Depression. Then Rose took charge. I know what to do, undersell the big shots, she told her husband. 'You buy an item for three dollars and sell it for $3.30. Ten percent over cost!' When the old-fashioned suits they carried weren't selling, Rose handed out ten thousand circulars all over Omaha, saying their store would outfit a man for five dollars from head to toe— underwear, suit, tie, shoes, and straw hat. They took in $800 in a single day, more than they had made the entire year before. The store branched into jewelry, used fur coats, and furniture. Then Rose drove the department stores crazy when she started underselling them on new fur coats on consignment. But she had a philosophy: it's better to have them hate you than to feel sorry for you.'


Soon customers started asking her for more furniture. At first she accompanied them to wholesalers and bought for them at ten percent over her cost. She noticed that, unlike pawnbroking, selling furniture was a 'happy business,' so in 1937 she borrowed $500 from a brother to open a store called Blumkin's in a basement near her husband's pawnshop. But the furniture wholesalers didn't want her as a customer, because their dealers complained that she was underselling them. So Rose went to Chicago, found one sympathetic man, and ordered $2,000 worth of merchandise from him on thirty days' credit. The time came due and she was short, so she sold her own home furnishings cheap to pay off the debt. 'When my kids came home, they cried like somebody will die,' she recalled. 'Why I took away the beds and the refrigerator? The whole house, an empty house? I told them, they were so nice to me I can't stand it not to keep my promise.' That night she took a couple of mattresses from the store for the family to sleep on. 'The next day I brought in a refrigerator and stove,' she said, 'and the kids quit crying.'


In school the other children picked on her son, Louie, for having a pawnbroker as a father. He found it painful but ignored their taunts, worked in the store after school, remained a good student, and became an all-American diver at Tech High while delivering sofas until midnight. His mother by now had established the Nebraska Furniture Mart and moved to larger quarters. In a side business, she sold and rented out Browning automatic shotguns during hunting season. Louie's favorite job was testing the guns by firing them into cinder blocks in the family's basement.


By the time the United States entered World War II in 1941, Louie had enrolled at the University of Nebraska, but he dropped out to enlist in the service after only a few semesters, still just a teenager. During the war, he and his mother wrote every day. His mother was discouraged, and he urged her not to quit. Because the big wholesalers refused to sell to Nebraska Furniture Mart, Rose had become a furniture 'bootlegger,' traveling on trains all over the Midwest to buy overstock merchandise at five percent over wholesale from stores like Macy's and Marshall Field's. 'They could see she knew what she was doing,' says Louie. 'They were fond of her and would say, here's this dining room set that just came in. It wasn't easy or cheap, but she got it.' Rose said, 'The more [the wholesalers] boycotted me, the harder I worked.' You don't own the country, the country belongs to everyone, was her attitude. She developed a lasting hatred of big shots. 'When you're down they spit on you,' she said. 'When you start making some dollars they start paying attention. Phooey. Who needs them? Give me the middle class and I'll be happy.' Her slogan was "Sell cheap and tell the truth, don't cheat nobody, and don't take no kickbacks.' When she made a sale, she also told the employees, 'Deliver it before they change their minds!'


Louie won a Purple Heart at the Battle of the Bulge. After the war, he came straight home to Omaha in 1946 and went back to work. He learned everything about merchandising: buying, pricing, inventories, accounting, delivery, display. To Rose, nobody was as good as Louie. Ruthless with her employees, she screamed at them at the top of her lungs; 'You worthless golem! You dummy!' But after his mother fired them, Louie would hire them back.


Four years later the store was prospering, but then the Korean War began, and sales started to sink. Rose decided to give the business a boost by adding carpet to her line. She went to Marshall Field's in Chicago and told them she was buying carpet for $3.00 a yard. She retailed it for $3.95, half the standard price, although the fact that she had lied to Marshall Field's seemed to bother her for years afterward.


Rose had managed to launch a successful carpet business by giving her customers a better price than the other carpet dealers. But carpet maker Mohawk filed a lawsuit to enforce their minimum-pricing policies— under which manufacturers required all their retailers to charge a minimum price— and sent three lawyers to court. Rose showed up alone. 'I say to the judge: I don't have any money for a lawyer because nobody would sell to me. Judge, I sell everything ten percent above cost, what's wrong? I don't rob my customers.' The trial lasted only an hour before the judge threw the case out. The next day, he went out to the Nebraska Furniture Mart and bought $1,400 worth of carpet.


...By the early 1980s, Rose and Louie Blumkin had built the largest furniture store in North America. Its three acres sold over $100 million of furniture a year under one roof, ten times the volume of stores of similar size. From then on, sales grew every single year, in good economies or bad, whether Omaha grew or shrank.

-Alice Schroeder
The Snowball: Warren Buffett and the Business of Life.
New York, 2008.


A book that illuminates the actual human being behind a person previously known to most of the world as the supreme rationalist-calculating machine: Warren Edward Buffett. Those who think of him as equivalent to "The Marble Man" ( a nickname given to Robert E. Lee by some of his peers for his apparent perfect character ) will be surprised. Here is a brilliant, deeply complex and driven man, here are the forces that shaped his character and enabled his unparalled success as both investor and teacher and here is the story of his career. Some episodes are well-known and already accorded legendary status by investors, others are detailed for the first time. It is the first biography written with Buffett's cooperation.

Buffett's request of the book's author: "Whenever my version is different from somebody else's, Alice, use the less flattering version."

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601110&sid=aM.xr4erRc4E


Buffett Compares Wall Street to Church With Raffle
By Andrew Frye and Natalie Doss

Oct. 5 (Bloomberg) -- Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said Wall Street is like a church that benefits society, then falters by operating a gambling venture on the side.

Wall Street “does a lot of good things and then it’s got this casino,” Buffett said today at Fortune magazine’s Most Powerful Women conference in Washington. “It’s like a church that runs a raffle on the weekend.”

Buffett relies on investment banks to help finance acquisitions such as his $27 billion purchase of railroad Burlington Northern Santa Fe...

... Omaha, Nebraska-based Berkshire invested $5 billion in Goldman Sachs Group Inc. in 2008 at the depths of the credit crisis. Buffett has also faulted Wall Street for excessive bets on U.S. housing.

“People have a propensity to gamble, and it gets made easier and easier for them,” Buffett said. “One of the problems we still have is we have unbalanced incentives for managers of huge financial institutions.”

His remarks echo comments made last year that bankers must face a “downside” on pay to limit risk-taking.

“I don’t look at Wall Street as ‘evil,’” he said last year. “I look at Wall Street as given to huge excess sometimes. I don’t want to get rid of it. We need something to allocate capital and distribute securities.”

Buffett built an equity portfolio of about $55 billion by buying and holding stocks of companies that he believes have durable competitive advantages...

...“It’s quite clear that stocks are cheaper than bonds,” Buffett said today. “I can’t imagine anyone having bonds in their portfolio when they can own equities.”

 

[trysail]

I've very much enjoyed and benefited from two biographies:

The Snowball: Warren Buffett and The Business of Life
By Alice Schroeder
N.Y., N.Y. 2008.
( this is the only biography which has had Buffett's cooperation )

This book illuminates the actual human being behind a person previously known to most of the world as the supreme rationalist-calculating machine: Warren Edward Buffett. Those who think of him as equivalent to "The Marble Man" ( a nickname given to Robert E. Lee by some of his peers for his apparent perfect character ) will be surprised. Here is a brilliant, deeply complex and driven man, here are the forces that shaped his character and enabled his unparalled success as both investor and teacher and here is the story of his career. Some episodes are well-known and already accorded legendary status by investors, others are detailed for the first time.

Buffett made but one request of the book's author: "Whenever my version is different from somebody else's, Alice, use the less flattering version."



Buffett: The Making of An American Capitalist
By Roger Lowenstein
N.Y., N.Y. 1995.

Lowenstein was the author of the best-seller When Genius Failed which is about the folly known to history as Long Term Capital Management— an event that should have served as a warning to all the bankers, regulators, Alan Greenspan and the Federal Reserve.

 

[trysail]

Q: “What about gold? Is this a classic bubble or what?”


Warren Buffett: “You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all— not some— all of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walkingaround money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

 

[trysail]

An excerpt from the 2008 Letter To Shareholders of Berkshire Hathaway Corporation
© 2009 by Warren E. Buffett.

... By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.

Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. weaning these entities from the public teat will be a political challenge. They won’t leave willingly. Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.

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 21 1⁄2% 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....

 

[trysail]

"Now the other great invention in the first half of the century was the airplane. In this period from 1919 to 1939, there were about two hundred companies. Imagine if you could have seen the future of the airline industry back there at Kitty Hawk. You would have seen a world undreamed of. But assume you had the insight, and you saw all of those people wishing to fly and to visit their relatives or run away from their relatives or whatever you do in an airplane, and you decided this was the place to be.

As of a couple of years ago, there had been zero money made from the aggregate of all stock investments in the airline industry in history.

So I submit to you: I really like to think that if I had been down there at Kitty Hawk, I would have been farsighted enough and public-spirited enough to have shot Orville down. I owed it to future capitalists."

-Warren E. Buffett
(as quoted by Alice Schroeder)​

-Alice Schroeder
The Snowball: Warren Buffett and the Business of Life.
New York, New York 2008.

 

[trysail]

"Writing a check separates a commitment from a conversation."

-Warren E. Buffett​

-Michael Lewis
The Big Short: Inside the Doomsday Machine.
New York, New York 2010.





commitment
Buffett

 

[trysail]

Brief excerpts from the 2010 Letter To Shareholders of Berkshire Hathaway Corporation
© 2011 by Warren E. Buffett.

...Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income. In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind.

If home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. Our approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income. This policy kept Clayton solvent and also kept buyers in their homes.

Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates. All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks. (The two best investments were wedding rings.) For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories with more to come.

But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford...

...The priority is that all of us continue to zealously guard Berkshire’s reputation. We can’t be perfect but we can try to be. As I’ve said in these memos for more than 25 years: “We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation.” We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.

Sometimes your associates will say “Everybody else is doing it.” This rationale is almost always a bad one if it is the main justification for a business action. It is totally unacceptable when evaluating a moral decision. Whenever somebody offers that phrase as a rationale, in effect they are saying that they can’t come up with a good reason. If anyone gives this explanation, tell them to try using it with a reporter or a judge and see how far it gets them.

If you see anything whose propriety or legality causes you to hesitate, be sure to give me a call. However, it’s very likely that if a given course of action evokes such hesitation, it’s too close to the line and should be abandoned. There’s plenty of money to be made in the center of the court.

If it’s questionable whether some action is close to the line, just assume it is outside and forget it...

...Somebody is doing something today at Berkshire that you and I would be unhappy about if we knew of it. That’s inevitable: We now employ more than 250,000 people and the chances of that number getting through the day without any bad behavior occurring is nil. But we can have a huge effect in minimizing such activities by jumping on anything immediately when there is the slightest odor of impropriety. Your attitude on such matters, expressed by behavior as well as words, will be the most important factor in how the culture of your business develops. Culture, more than rule books, determines how an organization behaves...

...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...

 

[Stella_Omega]

How Rich Are the Superrich?
A huge share of the nation's economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.
http://assets.motherjones.com/politics/2011/inequality-page25_1.png


http://assets.motherjones.com/politics/2011/inequality-page25_therichest280.png

Note: The 2007 data (the most current) doesn't reflect the impact of the housing market crash. In 2007, the bottom 60% of Americans had 65% of their net worth tied up in their homes. The top 1%, in contrast, had just 10%. The housing crisis has no doubt further swelled the share of total net worth held by the superrich.

http://assets.motherjones.com/politics/2011/inequality-p25_averagehouseholdincom.png

http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

 

[trysail]

A brief excerpt from the 2010 Letter To Shareholders of Berkshire Hathaway Corporation
© 2011 by Warren E. Buffett.

...Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.

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.

 

[Stella_Omega]

Out of Balance
A Harvard business prof and a behavioral economist recently asked more than 5,000 Americans how they thought wealth is distributed in the United States. Most thought that it’s more balanced than it actually is. Asked to choose their ideal distribution of wealth, 92% picked one that was even more equitable.

http://assets.motherjones.com/politics/2011/inequality-page25_actualdistribwithlegend.png

For a healthy few it's getting better all the time.

http://assets.motherjones.com/politics/2011/inequality-who%27swinning_3.png

http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

 

[trysail]

WEB just stated that BRK's normalized earnings are $12 billion which on current shareholder's equity of $157.318 billion translates to a normalized ROE of 7.6%. The price one should pay for a company that pays no dividend and has a normalized ROE of 7.6% as a function of price-to-book value is dependent on the discount rate one wishes to apply. A price of $127,550 for "A" shares ( $85 for "B" shares ) is 1.33× book value and translates to a 6-6½% return on a purchase of the shares at this price.

 

[Stella_Omega]

http://assets.motherjones.com/politics/2011/inequality-taxrate_3.png

 

[ishtat]

WEB just stated that BRK's normalized earnings are $12 billion which on current shareholder's equity of $157.318 billion translates to a normalized ROE of 7.6%. The price one should pay for a company that pays no dividend and has a normalized ROE of 7.6% as a function of price-to-book value is dependent on the discount rate one wishes to apply. A price of $127,550 for "A" shares ( $85 for "B" shares ) is 1.33× book value and translates to a 6-6½% return on a purchase of the shares at this price.

Try, one thing you have not learned from your hero and that is simple communication in English. Just look at this and ask yourself How many people bothered to read this gobbledeegook.

Incidentally you forgot to say whether the return on the investment was net of tax to the investor(or not)

 

[ishtat]

WEB just stated that BRK's normalized earnings are $12 billion which on current shareholder's equity of $157.318 billion translates to a normalized ROE of 7.6%. The price one should pay for a company that pays no dividend and has a normalized ROE of 7.6% as a function of price-to-book value is dependent on the discount rate one wishes to apply. A price of $127,550 for "A" shares ( $85 for "B" shares ) is 1.33× book value and translates to a 6-6½% return on a purchase of the shares at this price.

Try, one thing you have not learned from your hero and that is simple communication in English. Just look at this and ask yourself, How many people bothered to read this gobbledeegook.

Incidentally you forgot to say whether the return on the investment was net of tax to the investor(or not)

 

[trysail]

WEB just stated that BRK's normalized earnings are $12 billion which on current shareholder's equity of $157.318 billion translates to a normalized ROE of 7.6%. The price one should pay for a company that pays no dividend and has a normalized ROE of 7.6% as a function of price-to-book value is dependent on the discount rate one wishes to apply. A price of $127,550 for "A" shares ( $85 for "B" shares ) is 1.33× book value and translates to a 6-6½% return on a purchase of the shares at this price.

Try, one thing you have not learned from your hero and that is simple communication in English. Just look at this and ask yourself, How many people bothered to read this gobbledeegook.

Incidentally you forgot to say whether the return on the investment was net of tax to the investor(or not)

Ish,
The investing world ( much like the rest of the world ) can be separated into two groups— the numerate and the innumerate. My comment above was addressed to the former who would instantly recognize and comprehend the process by which the conclusion was formed.


After many years of attempting to communicate to innumerate investors, I came to the reluctant conclusion that it was a lost cause. Those who are not trained in the discipline of quantitation of investment analysis are unlikely to comprehend the methodology without lengthy and formal instruction.


Your point respecting my comment is both acknowledged and well-taken; your appreciation of the clarity of Buffett's prose and communication skill is a testament to your good taste and high standards.



_________
P.S., the calculated return is pretax. Today's rise in the quoted price of Berkshire will, of course, reduce the potential return that was calculated!

 

[ishtat]

Ish,

After many years of attempting to communicate to innumerate investors, I came to the reluctant conclusion that it was a lost cause. Those who are not trained in the discipline of quantitation of investment analysis are unlikely to comprehend the methodology without lengthy and formal instruction.

_________
P.S., the calculated return is pretax. Today's rise in the quoted price of Berkshire will, of course, reduce the potential return that was calculated!

Trysail, for a number of years at AGM's I had to get on my feet and answer questions from shareholders, analysts, media etc. I learned that neither the patronising of investors nor bewailing their unfamiliarity with financial jargon was a good idea.

On the whole their common sense served them well and most of them at least did not suffer the chronic short termism of so called professional investors and fund managers. The media with a few notable exceptions were even worse.

Certainly there is always the small minority of investors who have wholly unrealistic expectations, but I grew to have a lot of respect for the canniness and nous of most small direct shareholders.

Sure, they did not even generally understand the detailed financial methodologies but if as executives we managed their expectations as well as the business they didn't need to. It was our job to deliver the message not for them to go to school on it.

 

[Stella_Omega]

We all need pats on the back, even if we have to give them ourselves.

I recommend, Trysail, that you pat yourself on the back as often as possible for your command of financial jargon. No one else will.

You divide the world into the numerate and innumerate, we know this. But you post on a porn forum!

Why? Cowardice? I can tell you you are full of shit, but you can ignore me since I am not as highly numerate as you deem proper. I bet you're afraid to pontificate around real financiers.

Start a blog at salon.com, you'll find conversation there.

 

[stephen55]

Warren Buffet apparently once said that you should never invest in something that you do not understand. Not being financially literate, let alone comprehending, I only invested in land.

I understand that they're not making it any more.

 

[sr71plt]

Warren Buffet apparently once said that you should never invest in something that you do not understand. Not being financially literate, let alone comprehending, I only invested in land.

I understand that they're not making it any more.

When the kids were at home, I invested in groceries. I'm pleased with the return.

 

[stephen55]

When the kids were at home, I invested in groceries. I'm pleased with the return.

I've still got one kid at home. He's a 6' 3'', 215 lb. hockey player. It's a good thing I invested in land because he goes through about three acres worth of spuds a year.

 

[Stella_Omega]

When the kids were at home, I invested in groceries. I'm pleased with the return.

Exactly so.

 

[ishtat]

See posts 47 and 48 Stephen and sr71plt have got the right idea. One's investing in basics (food) and the other shelter (land). Either is a pretty practical start. Beware sophistication in investing!