Money and Finance
- Ruane, Cunniff & Goldfarb Investor Day Transcript
Link to: Ruane, Cunniff & Goldfarb Investor Day Transcript Excerpts: If you are really worried about inflation risk, there are ways to hedge inflation risk where you still get a reasonable yield. You might look at timber, you might look at oil companies....
- Ny Times Op-ed: I Saw The Crisis Coming. Why Didn’t The Fed? - By Michael J. Burry
I have often wondered why nobody in Washington showed any interest in hearing exactly how I arrived at my conclusions that the housing bubble would burst when it did and that it could cripple the big financial institutions. A week ago I learned the answer...
- Warren Buffett On Charlie Rose
Link to: Warren Buffett on Charlie Rose - 11/13/09 Also, be sure to click on the 'Web Exclusive' tab to see part of the interview that didn't air on TV........... Excerpt from the transcript: CHARLIE ROSE: You have also said and been very...
- Warren Buffett On Good Morning America
The interviewer also mentioned (at the end of the video) that she asked Mr. Buffett which one index he follows the most. She said his response was the freight train index because it really shows the movement of raw materials throughout the country. (Will,...
- 2008 Berkshire Hathaway Annual Meeting Notes
For detailed notes on the whole meeting, go HERE. Below are some of my notes. I just wrote down a few things I thought were interesting. Much of it has been said before by Mr. Buffett (WB) and Mr. Munger (CM), but good advice is always worth repeating....
Money and Finance
What Warren thinks...
In early April the megabillionaire hosted 150 students from the University of Pennsylvania's Wharton School (which Buffett attended) and offered Fortune the rare opportunity to sit in as he expounded on everything from the Bear Stearns bailout to the prognosis for the economy to whether he'd rather be CEO of GE - or a paperboy. What follows are edited excerpts from his question-and-answer session with the students, his lunchtime chat with the Whartonites over chicken parmigiana at Piccolo Pete's, and an interview with Fortune in his office.
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I know you had a paper route. Was that your first job?
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Well, I worked for my grandfather, which was really tough, in the [family] grocery store. But if you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do. It might be wonderful to be head of GE, and Jeff Immelt is a friend of mine. And he's a great guy. But think of all the things he has to do whether he wants to do them or not.
Well, I worked for my grandfather, which was really tough, in the [family] grocery store. But if you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do. It might be wonderful to be head of GE, and Jeff Immelt is a friend of mine. And he's a great guy. But think of all the things he has to do whether he wants to do them or not.
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How do you get your ideas?
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I just read. I read all day. I mean, we put $500 million in PetroChina. All I did was read the annual report. [Editor's note: Berkshire purchased the shares five years ago and sold them in 2007 for $4 billion.]
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What advice would you give to someone who is not a professional investor? Where should they put their money?
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Well, if they're not going to be an active investor - and very few should try to do that - then they should just stay with index funds. Any low-cost index fund. And they should buy it over time. They're not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and wrong stock. You just make sure you own a piece of American business, and you don't buy all at one time
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How does the current turmoil stack up against past crises?
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Well, that's hard to say. Every one has so many variables in it. But there's no question that this time there's extreme leveraging and in some cases the extreme prices of residential housing or buyouts. You've got $20 trillion of residential real estate and you've got $11 trillion of mortgages, and a lot of that does not have a problem, but a lot of it does. In 2006 you had $330 billion of cash taken out in mortgage refinancings in the United States. That's a hell of a lot - I mean, we talk about having $150 billion of stimulus now, but that was $330 billion of stimulus. And that's just from prime mortgages. That's not from subprime mortgages. So leveraging up was one hell of a stimulus for the economy.
Well, that's hard to say. Every one has so many variables in it. But there's no question that this time there's extreme leveraging and in some cases the extreme prices of residential housing or buyouts. You've got $20 trillion of residential real estate and you've got $11 trillion of mortgages, and a lot of that does not have a problem, but a lot of it does. In 2006 you had $330 billion of cash taken out in mortgage refinancings in the United States. That's a hell of a lot - I mean, we talk about having $150 billion of stimulus now, but that was $330 billion of stimulus. And that's just from prime mortgages. That's not from subprime mortgages. So leveraging up was one hell of a stimulus for the economy.
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If that was one hell of a stimulus, do you think the $150 billion government stimulus plan will make an impact?
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Well, it's $150 billion more than we'd have otherwise. But it's not like we haven't had stimulus. And then the simultaneous, more or less, LBO boom, which was called private equity this time. The abuses keep coming back - and the terms got terrible and all that. You've got a banking system that's hung up with lots of that. You've got a mortgage industry that's deleveraging, and it's going to be painful.
Well, it's $150 billion more than we'd have otherwise. But it's not like we haven't had stimulus. And then the simultaneous, more or less, LBO boom, which was called private equity this time. The abuses keep coming back - and the terms got terrible and all that. You've got a banking system that's hung up with lots of that. You've got a mortgage industry that's deleveraging, and it's going to be painful.
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The scenario you're describing suggests we're a long way from turning a corner.
The scenario you're describing suggests we're a long way from turning a corner.
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I think so. I mean, it seems everybody says it'll be short and shallow, but it looks like it's just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain. And the consequences kind of roll through in different ways. Now, I don't invest a dime based on macro forecasts, so I don't think people should sell stocks because of that. I also don't think they should buy stocks because of that.
I think so. I mean, it seems everybody says it'll be short and shallow, but it looks like it's just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain. And the consequences kind of roll through in different ways. Now, I don't invest a dime based on macro forecasts, so I don't think people should sell stocks because of that. I also don't think they should buy stocks because of that.
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Your OFHEO example implies you're not too optimistic about regulation.
Your OFHEO example implies you're not too optimistic about regulation.
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Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham's dinner. He would say that you've spread risk throughout the world by all these instruments, and now you didn't have it all concentrated in your banks. But what you've done is you've interconnected the solvency of institutions to a degree that probably nobody anticipated. And it's very hard to evaluate. If Bear Stearns had not had a derivatives book, my guess is the Fed wouldn't have had to do what it did.
Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham's dinner. He would say that you've spread risk throughout the world by all these instruments, and now you didn't have it all concentrated in your banks. But what you've done is you've interconnected the solvency of institutions to a degree that probably nobody anticipated. And it's very hard to evaluate. If Bear Stearns had not had a derivatives book, my guess is the Fed wouldn't have had to do what it did.
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In the above article, it mentions that Mr. Buffett told students, in response to the question on how he gets his ideas, "I just read. I read all day." Along similar lines, take note of the quote from Charlie Munger:
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"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero... You'd be amazed at how much Warren reads -- at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out."
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And the Mark Twain quote:
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“The man who doesn’t read good books has no advantage over the man who can’t read them.”
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So, if you're looking for something good to read, START HERE.
- Ruane, Cunniff & Goldfarb Investor Day Transcript
Link to: Ruane, Cunniff & Goldfarb Investor Day Transcript Excerpts: If you are really worried about inflation risk, there are ways to hedge inflation risk where you still get a reasonable yield. You might look at timber, you might look at oil companies....
- Ny Times Op-ed: I Saw The Crisis Coming. Why Didn’t The Fed? - By Michael J. Burry
I have often wondered why nobody in Washington showed any interest in hearing exactly how I arrived at my conclusions that the housing bubble would burst when it did and that it could cripple the big financial institutions. A week ago I learned the answer...
- Warren Buffett On Charlie Rose
Link to: Warren Buffett on Charlie Rose - 11/13/09 Also, be sure to click on the 'Web Exclusive' tab to see part of the interview that didn't air on TV........... Excerpt from the transcript: CHARLIE ROSE: You have also said and been very...
- Warren Buffett On Good Morning America
The interviewer also mentioned (at the end of the video) that she asked Mr. Buffett which one index he follows the most. She said his response was the freight train index because it really shows the movement of raw materials throughout the country. (Will,...
- 2008 Berkshire Hathaway Annual Meeting Notes
For detailed notes on the whole meeting, go HERE. Below are some of my notes. I just wrote down a few things I thought were interesting. Much of it has been said before by Mr. Buffett (WB) and Mr. Munger (CM), but good advice is always worth repeating....