Words of Wisdom from the Oracle of Omaha

On the eve of a charity lunch tomorrow that someone will likely pay $2 million to attend, Warren Buffett did a short interview with Becky Quick over on CNBC (see video & summary here). As always, Buffett threw out some great soundbites and displayed his folksy wit (as folksy as guy worth over $40 billion can be).

I personally don’t know how any investor worth their salt couldn’t spend a few hours each year listening to whatever the man has to say. Whether you subscribe to his investment philosophy or not (I’m a veteran Kool-Aid drinker), 50 years of outperformance doesn’t lie. I highly recommend sitting down with a big cup of coffee and reading (or re-reading) his annual shareholders letters as a matter of habit.

A summary of walking points from today’s interview:

#1 - Buffett gave high praise to Ben Bernanke for his handling of the financial crisis. As to whether he should be kept on for another term, Buffett replied, “I don’t know who would be better”. Buffett may not be on Obama’s speed dial these days, but you can bet the President is listening.

#2 - On Cap & Trade, Healthcare Reform: Both are “extremely important”, but the economy must remain the #1 focus of the administration. Buffett feels that C&T in its current form will inevitably become a “regressive tax” passed on from the utility companies who purchase emission credits to generally low-income taxpayers via higher monthly bills.

#3 - Buffett sees “no real improvement” in the underlying economy, but feels that the financial sector has staved off implosion. Banks should start seeing big benefits from the steepening yield curve, but the rest of industry is still flatlined, and will likely remain there for “quite some time”

#4 - On stocks vs. bonds: Over the next decade, stocks should outperform over fixed-dollar investments. Buffett is a big believer in a weaker dollar and pending inflation. Deflation is “not a concern in my lifetime, and probably not in our future”

And finally, no Buffett interview is complete without a few memorable quotes. There were some true classics today:

On the actions of the Fed & Administrations (past & current) during the financial crisis:

“Overall they did a fine job. They didn’t get everything perfect, but nobody could. Our economy was not unlike a fellow drowning in quicksand, up to his shoulders. Now if you throw him a rope tied to a truck to pull him out, you may dislocate a shoulder or two, but you’ve still got to get him out”

On whether he sees “green shoots” in the economy:

“You know, I had cataract surgery in my left eye last month, and I thought that might help me see the green shoots. But I still don’t really see any”

And finally, my personal favorite, on when or whether we’ll see positive effects from the government stimulus:

“We’ll see the benefits eventually, but not yet. You can’t make a baby in a month by getting 9 women pregnant”

A true classic.

Comments

[Mad Hedge F...:]

You mean the Emperor has no clothes? A lot of people like to follow Warren Buffet’s Berkshire Hathaway (BRK/A) as a leading indicator for the market. What better guide than a portfolio of the best of the best, run by the world’s great investor? Recently the news has not been good. If you wonder what a stock looks like when it is rolling over on diminishing volume, this is it. The only question is how big, how fast. As much as I worship the avuncular, chocolate milkshake loving, Sees Candy eating Oracle of Omaha, memorizing his annual letter to investors and hanging on his every spoken word, he hasn’t been doing that well lately. Since March, his main investing vehicle has only managed a 35% gain, compared to a 40% pop for the S&P 500; despite heavy weightings in such best of breed financials like Goldman Sachs (GS). Better keep his ticker on your desk top, because what BRK/A does, the world will follow.

Jun 25 08:33 AM

[Glen L.:]

I hope I'm not the only investor in the world who doesn't worship the old fool you call an Oracle. Buffett is, if anything, living proof that anyone can make a fortune if they are fortunate. He made a lot of lucky guesses in his career, but his track record since 2006 is abysmal. Follow him over the cliff if you like, I'll take my chances following my own guesses.

The sad part is his praise of Bernanke, the Fed, and the socialist policies of the federal government. Capitalism has made many a Lefty rich over the years, ironically enough, but the notion that we should be taking macoeconomic advice from them is just crazy.

Jun 25 10:10 AM

[Ferdinand E...:]

Groovy, wonderful. I wasn't certain that I was right about Mr Ben, but if Warren Buffet says that he is OK, then he is A-OK.

When I began studying economics, the main man was Paul Samuelson (at MIT). I remember when I began to teach (in Stockholm), and Samuelson was a guest at something or other. Just the sight of him was comparable to the sight of Albert Einstein in a Princeton seminar room. And when he told us how things would be, that was it.

Buffet is in the same class. The class of Albert Einstein, Joe Louis and Franklin D. Roosevelt. He can't miss.

Jun 25 10:13 AM

[Steve Soden:]

I guess more Derivitives are good for The Economy now.
Buffet is going with the flow.
He knows Government is in the drivers seat and he is doing and saying what's best for Him and His Shareholders.
Not so long ago He was Blowing the Whistle on our entire system but after doing that and losing several Billions of Dollars of his own money he decided this was not working.
I guess 460 Trillion in Derivitives are no longer "Toxic" but part of the solution for Warren Buffet.

Jun 25 12:32 PM

[effiiciency:]

The bulk of his 50 years of his out performance occured between 1956 and 1969 via the Buffett partnership and...........a secular bull market. His
first billion didn't occur until 1983. Since 1999, net net, performance pales to cash.

Yes, I fully realize the time origin can slant results, but.............he's an adovcate of "buy and hold". As such, the last DECADE has been nil.

I detest groupies but I will concede you can spell Buffett (so he's not confused with an all-you-can-eat diner in a northern suburb of Detroit).

Jun 25 01:31 PM

[notsosmart:]

this site is better than sat night live.very amusing & sometimes you learn something.

Jun 25 03:04 PM

[Old Trader:]

Don't forget that it becomes a matter of scale. If one is good and/or lucky (or some combination of both), its not that hard to turn $10k into $20k, $100k into $200K, or $2m into $4m in a relatively short time frame....turning $20B into $40B is considerably harder. Its pretty tough to move the needle on something as big as Berkshire, meaning he's pretty much "stuck" with buying whole companies, or taking stakes in the largest of the large caps.


On Jun 25 01:31 PM effiiciency wrote:

> The bulk of his 50 years of his out performance occured between 1956
> and 1969 via the Buffett partnership and...........a secular bull
> market. His
> first billion didn't occur until 1983. Since 1999, net net, performance
> pales to cash.
>
> Yes, I fully realize the time origin can slant results, but.............he's
> an adovcate of "buy and hold". As such, the last DECADE has been
> nil.
>
> I detest groupies but I will concede you can spell Buffett (so he's
> not confused with an all-you-can-eat diner in a northern suburb of
> Detroit).

Jun 25 07:17 PM

[Ryan Barnes:]

As I read your first paragraph I was perfectly content to give you the benefit of the doubt on your opinions. Everyone is entitled. But then I get to the 2nd half only to read "the socialist policies of the....."

Sorry, you lost your objectivity there. This piece wasn't meant to be a discourse on politics. Buffett has been criticized for not just months, but years, in the past. It is his burden to bear for being a long-term investor; the man rarely changes his mind. You either like that or you don't, but could we please leave socialism talk at the doorstep?

Buffett was called a fool, idiot, over-the-hill, you name it for almost an entire decade in the 1990's. "the old fart refuses to invest in technology because he doesn't see their long-term competitive advantage...what an idiot! Look how much money he's missing out on!!" It wasn't until the Fall of 2002 that people came back around and realized that while everyone else was down 40% over the past two years, he was up. Steady, staid, and always adding a little bit of value.

I say the man deserves a statue just for his very vocal callout of the burgeoning derivatives business, going as far back as 2001. If you read his shareholder letters from that period, it will shock you. He knew exactly what he was talking about, and he was exactly right.

And finally, to Glen, if your loathing of our government continues, you could always move to Europe. That's one of the favorite arguments of the uber-conservative. "When taxes go up in such-a-such place, the people will RESPOND. They will move their money, or find a new place to live." I hear Spain is nice.

Best of luck to all in your investing efforts; at the end of the day we're all just trying to learn a bit more, become a little more prepared for the future challenges and opportunities we know are just around the corner.


On Jun 25 10:10 AM Glen L. wrote:

> I hope I'm not the only investor in the world who doesn't worship
> the old fool you call an Oracle. Buffett is, if anything, living
> proof that anyone can make a fortune if they are fortunate. He made
> a lot of lucky guesses in his career, but his track record since
> 2006 is abysmal. Follow him over the cliff if you like, I'll take
> my chances following my own guesses.
>
> The sad part is his praise of Bernanke, the Fed, and the socialist
> policies of the federal government. Capitalism has made many a Lefty
> rich over the years, ironically enough, but the notion that we should
> be taking macoeconomic advice from them is just crazy.

Jun 26 01:42 PM

[granger:]

Best analysis yet. Smart to the point, Thank You.


On Jun 25 07:17 PM Old Trader wrote:

> Don't forget that it becomes a matter of scale. If one is good and/or
> lucky (or some combination of both), its not that hard to turn $10k
> into $20k, $100k into $200K, or $2m into $4m in a relatively short
> time frame....turning $20B into $40B is considerably harder. Its
> pretty tough to move the needle on something as big as Berkshire,
> meaning he's pretty much "stuck" with buying whole companies, or
> taking stakes in the largest of the large caps.

Jun 27 05:55 AM