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Warren Buffett


rotuma

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There was a one hour interview on CNBC with Warren Buffet, the second richest man who has donated $31 billion to charity. Here are some very interesting aspects of his life:

 

1) He bought his first share at age 11 and he now regrets that he started too late!

 

2) He bought a small farm at age 14 with savings from delivering newspapers.

 

3) He still lives in the same small 3 bedroom house in mid-town Omaha , that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.

 

4) He drives his own car everywhere and does not have a driver or security people around him.

 

5) He never travels by private jet, although he owns the world's largest private jet company.

 

6) His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis.

 

7) He has given his CEO's only two rules. Rule #1: do not lose any of your shareholder' s money. Rule #2: Do not forget rule number 1.

 

8) He does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch television.

 

9) Bill Gates, the world's richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.

 

10) Warren Buffet does not carry a cell phone, nor has a computer on his desk.

 

11) His advice to young people: Stay away from credit cards and invest in yourself.

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Just came across this discussion involving Warren Buffett.

 

The first thing that comes to mind is just as money cannot buy class (which I suspect WB has heaps of anyway) it surprisingly seems that money also cannot buy a properly fitted business shirt. http://www.sharescene.com/html/emoticons/rolleyes.gif

 

You just need to click on the link down at the bottom of the article.

 

http://www.investmentpostcards.com/

 

I'll also put the link on the AAC thread. This week the boss of FCL justified effectively sacking the CEO and chairman of AAC because the latter was "too passionate" about AAC. That's just shows how clueless, IMO, the boss of FCL is: Buffett says he invested US$4 into the Israeli company sight unseen because of the passion its management has for the businss. One is a wealth creator and the other is a wealth destroyer.

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Over the last couple of years I have started learning alot about investing and Buffet in particular is someone to learn from. However there is one thing that I don't quite get about buffet's strategy, that someone here may be able to help me understand....

 

* From my understanding Buffet's time frame for investments is forever, buy and hold, in quality companies.

 

* And he quite openly expresses the view that he likes his berkshire stockholders to be long term as well.

 

* he believes that retaining company earnings is better than paying out dividends, because he can get high returns

 

* Berkshire doesn't pay out dividends

 

So hows does someone holding this stock actually make money or get a return, without constantly selling down his share holdings, which is opposite to the philosophy of the company?

 

How does Buffet get access to his billions with out selling down his own share holding.

 

Have a billion dollars worth of stock that you never sell, you might as well not have it, we all have daily bills to pay and expenses.

 

Does anyone have any ideas?

 

thanks for the help

 

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In reply to: Maazel on Sunday 22/06/08 01:38pm

buffet has to be as to lowest paid CEO in the world, his pay is $100.000 per year.

 

When you run a company, the amount of tax free benefits can run into huge amounts, your company can pay for your house [in the company or trust name], cars phone, power ect.

 

also there is nothing to stop him trading on his own behalf outside of berkshire.

 

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In reply to: Maazel on Sunday 22/06/08 01:38pm

WB is a very simple, humble, generous man.

 

Yes, approx 99% of his wealth lies in his Berkshire stock, but he doesn't need the money & thats why he won't pay himself a dividend or sell any stock.

 

Warren donates vast sums to the Bill Gates Foundation each year & wants the world's most needy to benefit from his vast wealth when he passes on.

 

His "modest" salary reflects his old school philisophy that Management/Directors aren't just there to line there own pockets.

 

He does genuinely align his interests with Berkshire's shareholders, & what kind of signal would it give if he started selling his stock, after telling shareholders he likes to "buy & hold".

 

His virtues, values & beliefs just like the books about him, are timeless.

 

It would be nearly impossible to recreate the wealth WB has, but he has a very simple approach to investing, & yet to this day Sharebrokers, Universities & the general investment community subscribe to the "buy & sell/trade often" philisophy, that only makes the Brokers rich.

 

You have to understand had WB taken money out over the years, the loss of the compound effect would have negated alot of the growth in his capital.

 

WB is ALL about the allocation of capital.

 

Understanding this concept is key to success IMO.

 

Why pay a dividend out, that would be the last resort to use shareholders capital for!

 

Share buybacks, & using cash for acquistions (that are earnings accreditive) are far better methods over paying a dividend.

 

This is why Berkshire shareholders tend to follow WB's lead & buy & hold the stock.

 

 

 

 

 

 

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In reply to: shasta on Sunday 22/06/08 06:38pm

I appreciate your responseÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s however IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m still wondering about how money can be released by buffet and his shareholders in Berkshire stock, if everyone follows his lead and never sell the stock.

 

As I understand things there is only 3 ways you can actually get money in your pocket,

 

1) borrow against the asset ( in this case the shares )

2) sell the asset

3) from distributions (dividends, special dividends, capital returns ectÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¦)

 

I do not for one moment doubt that Buffet is an exceptional businessman and has a extremely high sense of integrity.

 

I understand the reason he has been able to maintain such extraordinary high returns in Berkshire is the that he re-invests the profits

 

 

ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“You have to understand had WB taken money out over the years, the loss of the compound effect would have negated alot of the growth in his capital.

 

WB is ALL about the allocation of capital.

 

Understanding this concept is key to success IMO.

 

Why pay a dividend out, that would be the last resort to use shareholders capital for!ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ

 

This is why Berkshire shareholders tend to follow WB's lead & buy & hold the stock.[/b][/b]

 

This is fine but what is the point of having an investment that you donÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t get real cash in your pocket for. ItÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s like have thousands of ounceÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s of gold buried in your backyard, nice to look at and tell people your worth a lot of money, and make you feel secure. But ultimately itÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s worthless to yourself unless you do something with it.

 

The billions he has give to charity, is that in the form of cash or shares, if they are shares they will have to be sold down to release the equity to fund the projects of the charitable mission.

 

Also how does one of the world richest man do what he does on his salary of $100k US ( I earn close to $70k Aus ) and IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m sure he does more flying and travel and the like than me. IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m not saying he is as flashy and extravagant than most billionaires or even millionaires. But the question still vexÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s me, how does he maintain his standard of living with out getting some money in his pocket from Berkshire.

 

The things that keeps popping into my head is the Pharaohs of ancient Egypt that where buried with all there gold when they died, sure they where worth a fortune, but surely that wealth could have been better spend, rather than hording it into one huge pile.

 

 

The reason IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m trying to understand this is that I really like and understand and respect buffetÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s philosophy and am trying to apply them to my stock investment. IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m building a portfolio of high quality stocks that increase there earnings year by year, and that pay out a % of there profit in dividends (not too much, because they have to have cash to re-invest them selves)

 

The reason IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m doing this is IÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢m trying to earn a passive income for my family in the years to come. Which I believe is the goal of all investments. I will reinvest all income to start with. But ultimately it would be the goal to live of the returns and quit my job. So this no distrubutions is something I'm trying hard to understand.

 

 

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In reply to: Maazel on Tuesday 24/06/08 01:19pm

Maazel

 

The basic difference is that Warren does not need the cash, (BTW, he has his own private jet company, so i'd imagine he flies using that!). He leads a very simple life with few luxuries, he must earn decent royalties through his various books & perhaps some money via public speaking (though i doubt he'd charge!)

 

As far as i know, Warren donates his personal stock to the Bill Gates Foundation, so yes they will have to be sold eventually to release the cash.

 

If you are wanting passive income & reasonable capital growth, then it seems you are going about this the right way by selecting high quality companies.

 

Ok, so you receive dividends (hopefully fully franked, if in Australia?).

 

You have two options really, either take the cash/dividends, or reinvest them, via DRP's?

 

The fact you have chosen to reinvest the income at this early stage (thru either buying more stock, or DRP's) shows you have followed Warren's "Allocation of Capital" principle.

 

The compound effect over time, will increase your capital base, & ultimately income.

 

Pretty simple really, you grow your capital base until such time as the dividends are sufficient for you to take them & not have to work (when capital growth becomes secondary to income).

 

By doing this you are largely following Warren's main principles!

 

 

 

 

 

 

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In reply to: shasta on Tuesday 24/06/08 06:21pm

24 SEP 2008 02:25:13

 

* Asian stocks mixed

* Concern that U.S. Congress may stall bailout plan

* Buffett to invest $5 billion in Goldman Sachs

* Oil steady at close to $107 a barrel

 

By Alex Richardson

SINGAPORE, Sept 24 (Reuters) - Asian stocks were mostly

easier on Wednesday as fears that U.S. lawmakers will stall a

proposed $700 billion bailout of the battered financial sector

haunted investors and a firmer yen hurt Japanese exporters.

But Australian bank shares gained and U.S. Treasury yields

rose after Warren Buffett surprised the market with a $5 billion

investment in Goldman Sachs .

Japan's third-biggest bank, Sumitomo Mitsui Financial Group

(SMFG) <8316.T> also planned to invest several billion dollars in

Goldman, according to the Kyodo news agency, though SMFG said it

had no plans to do so for now. SMFG shares added 2.7 percent.

Crude oil futures were a little higher, paring Tuesday's

losses of nearly $3 a barrel, ahead of U.S. government inventory

data expected to show declines in crude and gasoline stocks.

Japan's Nikkei <.N225> fell 1.4 percent, with car maker Honda

<7267.T> down 3.4 percent and cameras and copiers firm Canon

<7751.T> losing 4.1 percent. Japanese markets had been closed for

a holiday on Tuesday, when Asian markets mostly fell.

"We now have a delicate situation about whether the U.S.

Congress will approve the bailout plan and this is weighing on

the market," said Takahiko Murai, general manager of equities at

Nozomi Securities.

The MSCI index of Asia-Pacific stocks outside Japan

<.MIAPJ0000PUS>, which slumped to a 2-year low last week, was

down 0.4 percent at 0130 GMT. Korean shares <.KS11> were flat.

U.S. stocks fell on Tuesday, with the Dow Jones industrial

average <.DJI> and S&P 500 <.SPX> both losing around 1.5 percent,

amid congressional wrangling over Treasury Secretary Henry

Paulson's plan to buy up toxic mortgage debt on financial

institutions' balance sheets in an effort to resolve the root

cause of the financial crisis.

But news that Buffett's Berkshire Hathaway

was investing in Wall Street's most powerful firm sent U.S. index

futures surging in extended trading.

"It's clearly a positive when Warren Buffett sees value in a

company," said Richard Sichel, chief investment officer of

Philadelphia Trust Co.

"Buffett is so highly regarded as an intelligent value

investor, if he's putting a lot of money into a company that's

been beaten down, it sends a message to the market that maybe not

every financial company should be ignored at this point."

 

 

 

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I've been following Yahoo finance quite a lot over the last few weeks in particular & what they have been saying is that the banking/finance index has not reached the lows it did in July but in fact were 10%-15% above.

 

So with all the bad news from lehmans collapse, new lows for the dow, s & p, & nasdaq banks actually bottomed in July?? Thats what they have been saying but I don't what chart or what particular variant of an index they have been using.

 

HAS anyone else noticed this? I don't remember reading any comment on sharescene saying the u.s banks have bottomed? But anyway.

 

Buffet obviously thinks Goldman Sachs has bottomed or close enough too & why not??

 

Year on Year profits for goldman sachs dropped 3%. Of Course when that information was released to the market the share price dropped 10% the next day even though their profit was like double analysts forecasts. It was quite crazy price movements imo but thats what happened & it also was a catalyst for Australian Bank share prices to drop , particularily MQG. Once again Crazy. Rumour was GS was going to be taken over or go bankrupt.

 

1.3 Billion profit but all the smart hedges saying short, going the way of Lehman, BROKEN MODEL(same as MQG, lol)ect, ect.

 

So the G.S shareprice was 50% below it's peak even though profits remained the same. Obviously the peak of $240 a share was overdone but now you have the world's 2nd richest man known as a value investor thinking $120 is way to harsh. Also,

 

I don't know if anyone else has been following GS but it was only a few days ago that they hit intra day lows of under $90 a share (sept 18, open $109, close $109). Now with buffet in if that aint a bonafide tradeable bottom I don't know what is???

 

Who's gonna have the courage to try & short buffets opinion???

 

I suppose someone could always start a rumour that buffet has lost his marbles? perhaps dementia? Alchemizers? lol.

 

Maybe Asic really did all the shorters a big favour http://www.sharescene.com/html/emoticons/smile.gif

 

p.s too lazy to spellcheck atm

 

 

 

 

 

 

 

 

 

 

 

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