TonyCinTX

Buffett and Gates Discuss Potential Succession Plan

Thanks, that was great.

Tilson Explains the Increase in Berkshire Hathaway's Intrinsic Value Estimate

I own a LOT of BRK-B, and I would buy more (and did recently) but I hate to have more than 50% of my net in one stock no matter what it is. Anyway I agree with Tilson; BRK-B is at 75% or 80% and is worth $4200 to $4500. It is trading at $3400. The market is insane, instead of betting on working companies it is speculating on getting rich off of bailouts and health care "reform" and Ponzi schemes. That might work for them, but I'm afraid I'll just have to hold on to companies actually earning a profit by making customers happy, and leave the political and financial criminal profiteers to their own ways.

Warren Buffett and Brett Favre's Big Mistake

With half my total invested portfolio in BRK-B, I don't buy this analysis. Buffett's moves are still admirable and seem like the right moves. C'mon, those Goldman Sachs warrants are Gold, Man, Sacks of it.

Should Warren die I imagine Berkshire will decline temporarily but I will not divest one share. I am in BRK-B because Berkshire holds truly valuable stuff and has been able to go where no normal investor could tread. I am betting on Warren's past accomplishments: Who else could have gotten that GS deal? Who else could have gotten the Mars Candy deal? I would not be betting on MORE deals like that, I am betting that the deals already made are worth much more than the stock reflects right now.

Now if Warren dies or steps down, I am willing to wait and see if he was telling the truth about his successor; but he shall be judged (like Warren) on his actions and the deals made. If the new leadership makes a bunch of "me too" deals I will get out of Berkshire, but if they use the unique leverage of Berkshire to make those unique big-money deals no other investor on the planet can swing, then I am still in.

The current decline of BRK is no worse than the decline of the market as a whole, and in my opinion it is undeserved; Buffett's moves during the meltdown have been just fine by me. Stars of any field should retire when they no longer have comparative game.

I have quite a bit of money riding on my belief, backed up by evidence, that Buffett still has comparative game.

Buffett's Recent Portfolio Changes: What's the Message?

A public option isn't reform? It certainly has the potential to massively reform the health insurance industry, it will bomb them back to the stone age (for them, about the 1960's). Personally I find this a good thing.

Because insurance and the health industry are in the same economic whirlpool, there are quite a few floated options that would also reform the health industry specifically, those that prevent insurers from controlling treatments or countermanding doctor's orders by refusing to pay or capping lifetime payments or rejecting people based on existing conditions. I don't know about "reform" but these portend some massive changes to health care per se, putting the white coats back in charge over the gray suits.

In Defense of the Oracle of Omaha

The Fortune 1000 would hardly be described as "ethical" on average, or on balance. Ethics cost money and require managers to forego economic opportunity at every scale: Not exploiting workers, not exploiting off-shore foreigners, not exploiting paying customers, not exploiting suppliers, not exploiting investors, not exploiting taxpayers.

It is the nature of large companies that make it to the stock markets that, to some extent, they drift into unethical practices. With only about 2000 companies big enough for Buffett to invest in, it isn't like he has a lot of choices. He can avoid the boards and CEO's that would make a pirate blush or a vulture cringe, but beyond the several hundred bottom feeders, the reality is that Buffett must choose the least of evils that ALSO produce good profits.

Personally I find Buffett's skin in the game a comfort; not a detraction. Who cares if the bailout benefited Berkshire? It benefited all kinds of people, and if it really prevented a financial meltdown, all of us and all of the world. (I don't know that is true, I don't have enough information.)

BRK.B is the only individual stock I own. I will sell it, one share at a time, as I need the money for retirement.

Reviewing Munger's The Psychology of Human Misjudgment - Part II

As a statistician, let me point out that it is entirely possible that 90% of Swedish drivers are better than average; if the other 10% are particularly bad.

Similarly; in the USA we have 42 murders per 100,000 people every year. So our average murders per capita is non-zero, but about 99.9% of us are "better than average," having committed exactly zero murders.

As far as Swedish drivers are concerned; it is entirely possible that 90% have never been in an accident that was legally their fault. No matter how you define "good driver," I imagine "not causing accidents" is a necessary characteristic.

Yet, we know of accidents and hear of them frequently; so we all know the average number of accidents caused per capita is non-zero; and if I have exactly zero to my credit (and I do), I am justifiably better than the average driver.

To be even more critical of this idiotic study, when one asks whether somebody is a "better than average driver" they implicitly claim two things; that driving ability can quantified and thus averaged, and that it can be sorted in a spectrum from bad to good.

If the metric is not defined by the question, it is left up to the subject to define their own metric. Given this freedom, every subject is free to choose any measurement they want, guess at the average based on experience, and conclude CORRECTLY their own measure is better than the average! It is surprising that 100% of the respondents did not claim they were better than the average. This doesn't measure objectivity, this measures creativity or depression or humility. It tells us that 10% of Swedish drivers could not imagine a metric in which they were above average, or were prevented by personal ideology from claiming it.

Why You Don't Need an Informational Advantage, Just an Emotional One

As a statistician, let me say I don't know any mathematician or statistician that has worked on the market that thinks the market is efficient. For a while the idea was that it is long-term efficient but not short-term, but if the bubbles last more than five years and your averaging has to be over decades long periods, this is an empty assertion too. You can't do anything with it.

The latest (July 2009) Scientific American has a great, lengthy article on this topic. It has always been *economists* making the efficiency claim, based on their idiotic insistence on rational players and simpleton math. The same mentally retarded crowd that believes in the magical powers of free markets to set prices. For thirty years I have read study after study after study (all peer reviewed) disproving the foundational premises of economics, one after another, and still they persist in using them because presumably, that is all they have.

Hopefully, the alternative (behavioral economics) outlined in Scientific American will take root and take over, once these bozos are discredited by their failures. Or maybe not -- Economics is a non-science good at insulating itself from ugly facts.

Good article, Mr. Kenyon. One of the few I have read on this site.

On a different topic, I am long BRK-B and unconcerned by the decline. The question is whether it outperforms the **market** in the long term, I never had ANY expectation it would hold price like an island unto itself. All stocks are affected by the climate; even if their fundamentals are fine, they can be subject to selling pressure because some of the big fish incurred debts elsewhere in the market. When you are leveraged to 200% invested and there is a 25% market decline, you have to cover your margins somehow. This is just ONE of the reasons the market is not efficient. Read the Scientific American article.

Warren Buffett Getting No Respect

Rail is not dead, and will prosper as gas prices rise. High speed rail plans between cities are a reality.

Freight (including people) gets 10 times the gas mileage of eighteen-wheelers, and is far more amenable to alternative fuel conversion as well. Just as old trains used to carry wood or coal, a train can carry any number of cars of batteries or alternative fuel. Trucks and cars cannot do that. Change one locomotive to alternative fuel and you can have the impact of changing a thousand private cars.

Fuel efficiency will drive increased use of both diesel trains and electric trains (metros and/or street cars). The country needs to move freight and people to sustain the economy. Trains are no-brainer, ten times as fuel efficient and requiring zero new technology and frankly not much besides a track. Plus they can run 50% to 100% faster than private vehicles, both in town and between towns.

Book Review: The Four Filters Invention of Warren Buffett and Charlie Munger (Two Friends Transformed Behavioral Finance)

Well Bud, as a published author (for pay, multiple times) and owner of Berkshire stock (down 25% over last year), I disagree with your philosophy of writing. The point is not to listen to Buffett and Munger, the point and your promise is to elucidate their method, and quotes you can gather is hardly the way to do that. Also, people buy non-fiction books to listen to the authors; not the subjects.

I'd be far more interested in an analysis of Buffett's failed investments (and he admits to many) than in an after-the-fact list of his what-makes-me-great quotes. We read those ad infinitum; "make sure there's a moat", blah blah blah.

You need to add something new; and if you don't have access to WB to do it, it will have to be analysis and your own voice. I've been following Buffett for years. I'm a fan. He's got a big chunk of my investment money. I'm not selling. Nevertheless, I am pretty sure his investing advice can be condensed to a series of six articles, maybe ten, complete with examples. If you don't add something new to that, you don't have a book.

Buffett Gets 'Comeuppance' After Gold Outperforms

Gold beats inflation; at least if you invest in something that tracks real gold prices.

I own both BRK-B and Gold in approximately equal dollar values. I think Gold does better when the economy sucks; BRK-B does better when the economy rocks.

Buffett's problem of the day is that his companies are earning slower, and not beating inflation. When inflation is tame, he gives us great companies that beat inflation and deliver real returns. But that is not the situation now, and probably won't be for the next six years or so. It doesn't have anything to do with Obama either; it is just the natural outcome after deregulation allowed speculation to destroy the financial system. Until we get over that, BRK isn't going to do that great because nothing is going to do that great.

What's Buffett's Ideology?

Buffett's ideology is pretty simple; he invests in many things that he believes have a high probability of success. Over the decades, two things have happened.

First, although at core he remains a "value" investor, experience, losses, and successes which he had avoided have refined his ability to judge value, and see what is important. He summarizes this in every annual letter to shareholders.

Second, with wealth and backing, he has found new opportunities unavailable to him as a younger man, simply because a guy with billions can solve thorny problems which cannot be solved by a guy with a few million.

I don't understand this obsession with Buffett's "ideology." How many times must he elucidate it? He says he often knows within ten minutes whether he is interested in an investment or not. What can he possibly be looking at in ten minutes?

I will tell you: Who is buying the product and why? What are the margins? Where is the protection? Who is the competition? Why *this* company instead of them? What makes this company special, protected, or the most certain to succeed?

It isn't rocket science. If anything, I'd say the one thing Buffett has that other investors do not is self-discipline. Buffett can sit on forty billion dollars for a *year* without feeling compelled to *do* something with it. What Buffett has is the ability to wait, and wait, and wait, and still recognize and execute quickly when he sees an insanely low risk/reward ratio.

99.9% of investment managers are not willing to tell their clients, "We didn't see anything worth doing this year. Not one darn thing. So we sat on your money. Maybe next year!"

Buffett is so willing, and quite explicitly.

Why Is Everybody Selling as Buffett Is Loading Up?

birder: BRK-B is $4650 a share. Plebian shareholders can get such a good deal. Half my portfolio is BRK-B, and it is on track or ahead of schedule for a compounded 10.7% annual return for the last five years.

Buffett takes a mere $100,000 annual salary and no stock options or anything else. 99.99999% of his billions comes from his share of Berkshire. BRK-B is directly tied to the price of BRK-A (1/30th of a share of BRK-A). That means his interests are directly aligned with those of his shareholders, he doesn't make any money unless you do.

So the average shareholder can indeed get exactly the same deal as Buffett, he uses the power of bulk buying and big deals to benefit all of us. I think it is hilarious how many pundits out there are constantly telling us how to invest like Buffett, or what the next Berkshire Hathaway is, when the original is still available and still delivering exactly what he has always delivered; the best business analysis, investment and negotiation brain on the planet.

Did Buffett Kill the (First) Wells Fargo-Wachovia Deal?

I own BRK-B, and it is a safe haven. Currently half my entire holdings! Yes, WB invests in the stock market, but in solid companies that will prosper in recession or not.

As for Wachovia, if we could get it for 60 cents on the dollar, I presume WB would okay it; if it isn't a good deal I expect him to advise against it.

I see no conflict of interest; what is a bad deal for a 9% investor is probably a bad deal for the other 91%. I don't want to attribute any super human powers to Buffett and he has made mistakes in the past, but let us recall that he is in his current position of influence (and in my portfolio) because he is provably the best stock and business analyst on the planet. IF he advised against the Wachovia deal, maybe this is just a chairman listening to the opinion of a proven expert with skin in the game, in a time of uncertainty, when prudence is the better part of investing.

There is no conflict of interest in telling somebody using YOUR money that in your opinion he is about to make a bad mistake. A conflict of interest is when somebody abuses official power. WB has no official power in WFargo. Should chairmen ignore their stockholders concerns altogether? Of course not, especially if they have relevant expertise.

Buffett's Battery Buy

Like Clueless Wonder, my commute is 6 miles each way, with grocery about 4 miles from my house. About once a month I visit family across town (22 miles). That works out to 316 miles per month, which in my Honda is a tank a month; and that matches my fillup schedule. It costs $55 for gas, where 9c/KWH for electric would cost about $28.44, about half as much with less emissions and greater price stability.

If I can get 50 miles on a charge, I can be completely electric. If only 25 miles, 93% electric. I am glad to own BRK.B.

Buffett's Big Bet: The Real Value of the Berkshire Investment in Goldman Sachs

Half my portfolio is BRK.B. It has been on a 10.7% annualized, compounded growth rate for the last 5 years, and that is what I and other holders are looking for. Sloppy math like this overstates the case, but there is no question in my mind that Goldman Sachs, Constellation Energy, and Buffett's recent $500M in many "smaller" real estate buys are all great investments that fit his model. If BRK.B does better than 10.7% I am of course happy, but I am not disappointed if it does not. As for buying like Buffett: Why not just buy BRK-B? At $4400 it isn't terrible, and you get 100% of the benefit of Buffett's leverage and negotiating power. Remember, Buffett's salary is only $100K, he has engineered Berkshire so he doesn't make money unless the stock price goes up. That's how it should be.