Stock Market Investing
Warren Buffett Teaches How to Look at the Stock Market
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The Twelve-Million-Dollar Interview
Warren Buffett makes 12 million dollars in 3 hours. Once you finish listening to the entire audio compilation, Buffett has also finished making another 12 million dollars.
This video discussed various topics about Buffett's successes and secrets. They titles of the topics are:
The early 90's until 2000's are periods when financial assets are great. Businesses are totally going full born into commodities, but Buffett is just not comfortable doing that. He still prefers old common stocks than fixed dollar investments.
Investment is looking for something where the money will return even more money overtime. The two types of assets to buy are the asset itself delivers a return and the asset where the investor hopes somebody else pays him more later. Buffett likes the first. He wants something that delivers his expectations over time.
Buffett never stops on investing on small companies with big opportunities hiding behind the curtain. He loves his elephant gun being reloaded as his trigger finger is itching a lot. This trigger finger has been teaching some investors about his appetite for acquisitions. Buffett always looks for elephants that aren’t out there a lot. Some businesses want to join with Berkshire, but they aren't the cheap ones, so when the price makes the deal feasible, Buffett goes for it.
Even though Berkshire Hathaway looks worry-free, it’s tough for them to find appropriate acquisitions. Even before Buffett was born, the Dow has depreciated 94% - 16 for 1 in terms of inflation. Despite this, they were able to get good investments. They own bonds from a German insurance subsidiary for a long time already. Adding to that, Berkshire also bought the entire Burlington Northern Santa Fe equity for a 43-billion total purchase.
Berkshire bought newspapers companies. The trend of the newspaper is down, but there are primary readers who are still interested. Metropolitan papers are a much tougher problem, because the bigger the scope, the harder it is to know what the community feels. The bigger the newspaper, the wider the scope of the readers' interests are. The smaller the newspaper, the more narrow the scope of the readers' interests are.
Berkshire owns stocks at IBM, Wells Fargo, American Express, Coca Cola and a lot more companies. They are even increasing their ownerships in all 4 of their largest investments without laying out a penny. The lower the stocks, the more amount of dollars are good. It’s significant overtime.
Berkshire puts money in companies that are going to be a real boost of confidence. It's not about buying a hundred shares!
Despite the positive outcome of many businesses like Berkshire, most people still think that America is going back to recession, but Buffett says America is coming out. The ATP numbers are stronger than expected. There were recessions, but the citizens tried to find their way to do things better than yesterday. Americans are goal-oriented and success-driven people.
America has been through recessions and world wars, but there is a resiliency in the American system. There are bad crop occasionally, but good crops will sprout after all. Despite the set back, America is recovering already at a dramatic pace.
Problems are bigger and longer lasting than how they look like, but they are also solvable. It takes time and effort, though. Having a wonderful underlying business is the key to getting a good result.
The best thing to do with a business is run it well, because stocks behave fine overtime. Berkshire Hathaway's stock price goes from low to high, but they still focused on running the business. If the business still doesn't reach its dream value, just keep working on building it!
Investments in Europe are probably a great deal now because of the crisis they have. Even if there are managers on one or two counties, there are 17 countries heading towards the same general direction. Buffett said, "If you're going to have a common monetary unit, you need to have common fiscal policies as you go on."
10 or 20 years from now, Europe will have recovered and will have been producing more good capita though, because they are generally a good market with skilled workers, modern factories, great companies. It is unlikely the end of the world, but it can be a very messy process for them.
Coming along the crisis of Europe is the recovery of USA from the recession, and USA has some couple of locomotives now in the business. The railroads are experimenting to natural gas which costs 3.5 million dollars. Jack Welsh said oil and gas is going to be the next renaissance of America and there will be more jobs down the road.
On the other side, the battery technology is an evolving game. There are lots of people who are working on battery technology wherever it's made. There are problems involved, but there's significant progress made in the future.
Again, buying consistently overtime averages overtime. Buffett has been buying all his life, but this doesn't mean everyone should be buying also. The idea that news about stocks would cause an owner or investor to sell their properties is not always an excellent and advisable thing for those who dream of success in the investing world.
The best way to speed up developing countries is to get rid of graft and corruption. The economy is still growing and improving steadily since the fall of 2009.
Overall, investment is never an overnight fortune. Over the years, the businesses are going to perform very well and they will give the investors a good return. Buffett advises the worriers to instead look at the fun they're about to experience. Buy worthwhile investments and all the efforts with eventually pay off.
Assets and Commodities in Buffett's Eyes
There are periods where financial assets are great – early 80’s to 2000s. With that, many different commodities arise. Businesses are totally going full born into commodities, but Buffett is just not comfortable doing that. He neither likes fixed dollar investments at all nor short-term bonds. The alternative, in his view, is income producing assets of one sort or another that are not fixed-dollar type investments.
Buffett has been very vocal about this. He vastly prefers old common stocks than fixed dollar investments for 5 or 10-year period. Investment is looking for something where the money spent and assets purchased today will return more money overtime.
The problem with commodities is that the investor is betting on what somebody else will pay for in 6 months. The commodity itself isn’t going to do anything at all.
There are two types of assets to buy. One, the asset itself delivers a return, such as rental properties, stocks, or farms. Two, the asset where the investor hopes somebody else pays him more later on plus the asset itself doesn't even produce anything. Those are the two different games. Buffett regards the second as the game of speculation.
There’s nothing immoral in speculation, but it is an entirely different game. To buy a lump of something and hope that somebody else pays for that lump two years from now than to buy something that will produce income overtime is a game, a risk, and a speculation.
Buffett bought a farm 30 years ago. Throughout his ownership period, he looks at what it produces every year - a very satisfactory amount of what he paid for. If ever the stock market closed for ten years, it wouldn’t bother Buffett, because he's looking at what the business produces.
The kind of assets that Buffett likes to own is something that will deliver him his expectations over time. It's like art. A piece of art may go from a thousand dollars to 50 million dollars, but it’s depending on how much the next guy is willing to pay for it. The art itself, the painting, is not going to dispense cash. Someone has to find somebody who’s going to like it more.
For example, an asset like gold is a way of stirring fear. It’s been pretty good from time to time. The more people get afraid, the more money the gold investors get. The less afraid the people are, the less money the gold investors get. In the end, the gold itself doesn’t produce anything.
Even if gold is an increasing value, Buffett doesn't know where the gold business is going to. He compared it to cotton and copper. The world uses a lot of cotton. Buffett has seen gold go from $.80 to $1.90 and copper go from $2 to $4. There are all kinds of things in this world that go up and down in price, and even though Buffett is the World's richest investor, he couldn't judge the earning power of some businesses. The real test whether to invest or not in a business would be to know whether the investor would be happy if it never got courted again or not in terms of what the asset did for him.
Buffett computed it to be a 67-feet cube if all of the world's gold were combined which amounts to 7 trillion dollars. 7 trillion dollars could buy about 1/3 of all the stocks in the United States or the entire billion acres of farm land in the United Sates. What else could a giant cube do, but stand there and look pretty? The better and wiser alternative is to acquire all the farmland in the country.
Charlie Munger quoted, "Civilized people don’t buy gold."
The Elephant Gun and the Trigger Finger
In one of Buffett's annual shareholders meeting, he said he loves his elephant gun being reloaded as his trigger finger is itching a lot. This trigger finger has been teaching some investors about his appetite for acquisitions. One of the immediate follow ups for a lot of investors is what's holding Buffett back If he's already ready. With the cash level he has, he can buy any stock he wants, but he still waits for them to go on sale. Buying cheap stocks makes things easier.
Buffett always looks for elephants, and for one thing, there aren’t a lot out there. All the elephants don’t want to go in his zoo either! It’s going to be rare that Berkshire is going to find something selling into tens of billions of dollars. There are businesses wanting to join with them, so when the price makes the deal feasible, Buffett goes for it. It happens more often when stocks are depressed. Even though stocks went double 2 years ago, they were really stuck back then. They're not as cheap now as they were then, but compared to most assets, they look attractive.
When asked about firing on something right now with his trigger finger, Buffett said Berkshire has iron and fire that was just out a few days ago as to the recording of this interview, and somebody else beat them out on it. Buffett compared the experience as a girl he always looks at but might not be looking at him at all. Berkshire always has something that's at least of very low possibilities.
Somebody talked to him to see what the board thinks, but certainly know nothing at a high probability at the moment. The stocks that they were firing at was not as big as Burlington, but it caused Buffett's heart to beat faster.
Facts about Berkshire's Investments
It is not the level of the stock market that's scary. It’s tough for Berkshire to find appropriate acquisitions. Investors get paid back in their investments in dollars, which will be much less in the future.
In the years since Buffett was born, the Dow has depreciated 94%. It's 16 for 1 in terms of inflation. The owners of coke in 1930 had still done pretty well compared to lots of businesses in the 1930s. They had the ability to extract real earnings than what they delivered to people.
The doctors were able to charge extremely high in the 1930s, because the services were valuable. Currency gets worth less. It does not penalize the service or the good that is really needed by other people. Businesses or earning powers are the best assets in the time of inflation; they can't be taken away.
Berkshire owns German bonds. A German insurance subsidiary has been bonded for a long time. Aside from owning German bonds, they also have spent 3.7 billion dollars in a year to improve one part of their businesses. A large margin of more than what they spend. They actually had 6 bridges built in connection because of the flood that took place. Matt Rose knows how Charlie reacts when he hears capital exposure. One of the bridges is even named under Charles.
Berkshire bought the entire Burlington Northern Santa Fe equity for a 43-billion total purchase. For that, they got 32,000 miles of truck. 6,000 motors, and 13,000 bridges. In California, the numbers are up to 90 billion for 800 miles of tracts.
Making an investment in preferred shares doesn't necessarily mean shareholders should buy and rush. They can but using different styles. For Buffett, he buys a different share in several ways. He was buying something for 5 billion dollars where they weren't allowed to resell it for 5 years.They put money in companies that are going to be good - a real boost of confidence. It's not about buying a hundred shares!
Is America Going Back to Recession?
The only time to do buybacks in when you're stuck into selling below intrinsic business values. Buffett has discussed that in many annual reports over the years, and they have had many opportunities to do it. In fact, they have already started buying cheaper, yet aggressively in general.
Most people say that America is going back to recession, but Buffett says America is coming out. A great majority of businesses are earning more money that the previous year. Americans shouldn't worry too much about what will happen in the country, because most businesses are looking good and seem like they're going to survive 10 years from now.
The ATP numbers are stronger than expected. What will the FED do next with the monetary policy? Monetary and fiscal policy are taught in schools which is why the most important factor is just an underlying regenerative capacity of capitals. Years ago, there were recessions and they cured themselves because millions of Americans were trying to figure out how to do things better than yesterday. Capitalism works. In the latest recession, it was enormously important to defend the treasury immediately.
Being Optimistic about America
America gets off the track from time to time, particularly in 2008, but it is almost unstoppable when it comes to innovation. America has been through recessions and world wars, but there is a resiliency in the American system. It does work and it sputters from time to time in the future. There are bad crop occasionally, but good crops will sprout after all. America has good soil metaphorically speaking from time to time.
Some businesses are inching, but with regards to residential construction, it’s not inching. It’s not going at all. There are booming businesses, and there are also fields that are stuck. Despite the set back, America is recovering already at a dramatic pace.
The housing business of Berkshire is starting to pick up. The excess housing supply is being sucked up at an incredible rate and they are building 2 million houses. People create 2 million families a year, so the only way to solve that is to under produce household formation which they have been doing for a couple of years already.The real thing to do is clean the excess.
Fixing the Future Ahead
Investors shouldn't necessarily follow Buffett in common shares. Brian Moynihan is doing a terrific job in going back to basics. The Bank of America went off in a hundred different directions and that’s got nothing to do with the present management. Brian has a job of cleaning up some of the problems of the past and not of the Chinese bank.
In terms of getting the capital in line with the total assets, Brian is solving a problem. One way to do it is to sell extreme assets to bring down the liabilities to some degree.You can bring up the capital while bring down the liabilities. He is doing it quite properly.
Problems are bigger and longer lasting than how they look like, but they also are solvable. It takes time and effort, though. Having a wonderful underlying business is the key to getting a good result.
Is Oil to Spoil?
Oil prices seem to be dictating, but Warren Buffett does not worry about it as long as it doesn’t have anything to do with what Coca Cola will be 5 years from now.
Someone credible said that the market is over reacting. When asked if this is something to be concerned about already, Buffett isn't sure yet, because it depends on the future. If they get short and people need the money and if there isn’t enough cotton around, people buy it eventually regardless of price. Oil is the same way. The demand is pretty inelastic. There’s excess capacity around even though international says the stock is running out.
The Government, the Taxes, the GDP, the Market
Extra jobs in the market have been a huge concern. Businesses were better in 2009 and 2010 especially for Berkshire. They only got 3,000 jobs from 260,000 roughly on case and had a 1% jobs net. There were real games and productivity on the down side. People always had a tight in the belt. The gains in business will be much more reflected in games in appointment than they have in the first year and a half. Good news today doesn't necessarily mean good news next year. It may take years.
Buffett doesn’t like short-term and long-term bonds. It’s a terrible mistake to buy a fixed-dollar at this kind of rates. When people run out of cash, because they’re afraid of everything, they’re going to get the worst investments possible and the treasure market might suffer.
Good thing there's a monetary policy already. The idea of overdosing the patient two years ago was a terrific idea, because the patient needed every bit of it. What people don’t realize about fiscal policy is you can call any bill in Washington. Stimulus Bill was saving more money, but the government was taking it. We are going to do that to the 10% of GDP this year. We have massive stimulus going out that hasn’t been seen since World War 2.
The government spending more money than what they can take in. 10% of GDP means massive stimulus means massive monetary activity. The most important factor coming out of the recessions is the natural regenerative capacity of capitals. They are psychologically important because they expect the government to do that. Thinking of what makes the economy come back is 300 million people trying to figure out how to live better tomorrow than today.
For Buffett, the United States doesn't need as much either monetary or fiscal stimulus going out. The government needs the American public to cooperate and save the federal government big time. The government really did a job there in the fall of 2008. They ruined everything. In terms of the recovery going on now, that recovery is going on because there were got managers. Berkshire is trying to find out how to do more businesses tomorrow that yesterday. Apple and Amazon are thinking all times how to get their customers up all times.
Buffett expects Bank of America to be worth more significant that it is now. They are making progress in adjustments which came from country acquisition countrywide. Overtime, they will do well and no one knows when a stock will go up, down or sideways in the next months.
The middle classes are getting more decimated over the years. A lot of the cheap laborers are found in the rest of the world where, obviously, the standard of living is high and it's just been a natural progression to send a lot of jobs overseas. As a result, the middle class has to borrow to fund a lifestyle.
Despite the seemingly obvious negative change, the market system is working well for 200 years. It has doubled from three years ago. People own big companies like Apple and Microsoft. These businesses are figuring out how to serve customers better today tomorrow. American capitalism is just dynamic. At a static basis, it looks pessimistic, but bad things happen and they eventually go away. Actually, anyone can sit down and write 20 reasons why things are terrible, but the truth is this economy works wonderfully now. It has bounced back high from the fall in 2008. It is a terrible mistake to get pessimistic on America.
Buffett's Opinion on Other Businesses and Investments
With regards to Apple, he doesn’t know much about its stocks. However, Buffett talked to Steve Jobs a few years ago with what they did with cash. The best thing to do with a business is run it well. Stocks behave fine overtime. Like Berkshire, it goes from low to high. There were times when it went down to 50%, but they still focused on running the business. Apple has faced massive fluctuations and stocks have become more volatile, but they keep on managing it no matter what.
If the business still doesn't reach its dream value, just keep working on building it! Apple has done a pretty good job in building values, and they don’t want to bring it in because they don’t want to pay the tax.
P&G took a story on Wallstreet journal. Buffett, however, did not comment too much on it. He only talked more about their shares and investments on the said company. Berkshire owns more shares of P&G in the past, because they sold the others. Frankly, the earnings have been disappointing now for a few years. The CEO is a terrific person, but the mistakes and the plans are not tolerable enough anymore. Right now, the board is actively engaged in coming up with a strategy that they think makes sense to take the earning forward.
Tod and Ted have both put money in the business of Berkshire. They don’t include the pension fund money that they manage. There would be more direct TV, because they have that in pension. They concentrate in their investments the way Buffett does, so he only looks at the reports to make sure that everything is coordinated.
The stocks in the S&P are undervalued relative to their assets. With that, Buffett said he'd rather own equities than own fixed dollars, long-term bonds, junk bonds, and farm lands. These investments will be affected if interest rates go up dramatically. All assets will go down and die. Interest rates in investments are like gravity.
The dumbest investment is a long-term government bond. Single family houses are a good investment for people living with a pattern. Favorably, that makes sense.
For those who are worrying to much, Buffett advises them to instead look at the fun they're going to experience. Buy a farmland, a house apartment, set up a business, purchase stocks, collect rare stamps, or stick in many market accounts. These are all investment efforts!
The nice thing about businesses is anyone who has the money can buy all the next businesses in the United States virtually. He isn't required to buy Company XYZ if he doesn’t understand it. Company ABC is just around the corner. A company's attractiveness depends on the relativeness of the assets to the investors.
However, investment is never an overnight fortune. Over the years, the businesses are going to perform very well and they will give the investors a good return.
Buffett on Taxes
It was astounding to have minority leader in the senate who would attach a 1.2-trillion-dollar result deficit by asking for voluntary contribution. Since he did, Buffett even offered to triple the amount. The real problem with everyone is they have little money, but use too much. There is a need for a tax policy.
The tax for those who make less than $100,000 is bigger than those who make billions of dollars a year. Warren Buffett and other rich Americans who contribute greatly to the economy pay a lower tax rate. The difference in tax rates is not going to solve the fiscal problem of the United States, but to make other people sacrifice is not acceptable. You can't fix the deficit by just going after anyone's expenditures of revenue nor by asking for voluntary contributions!
It is important to incorporate revenue and expenditure onto a revision. There are 130,000 people who are filing a return of 15% or less.
Will Europe Go away?
Obviously, people have been looking at the happenings today for a long time already. Europe's future is going to be difficult. Not only are there problems of having 17 countries, but also getting the constituencies of those countries behind and coordinating it in some way. It's a tough problem. Even if there are managers on one or two counties, there are 17 countries that are going in the same general direction. Buffett said, "If you're going to have a common monetary unit, you need to have common fiscal policies as you go on."
What America has to do now is watch and learn from what Europe is experiencing. This is a trouble that’s coming along the way, and nobody knows when. It's hard to predict what will happen to Europe next, to America, and even in other parts of the world.
How is America compared to Europe? 10 or 20 years from now, Europe will produce more good capita. They are a good market with lots of skilled workers, modern factories, great companies. It is unlikely the end of the world, but it can be a very messy process. The USA looks like a stronger place and it will continue for a long time. The country is in a different path and the problems have been addressed very decisily. Lots of capitals are in the bank and being retained.
Being able to issue to your own debt in your own currency is an entirely different game. America has its own currency.
If America had Europe's structure, who knows what would happen? But since USA has a structure where the FED, the treasury, and the government make a good sense, policies are followed and there's no stimulus from the fall in 2008. We've had continues stimulus Anytime the country spends 7-9 percent more of GDP is a huge stimulus. It'd be nicer if GDPs are galloping at 5%. Month by month, things are improving, there are better returns, and there are more employed people.
It's not yet on the road to recovery, because there's a real banking problem. The banks are coming up with the sovereigns, and the sovereigns are coming up with banks. Anything anyone does will have consequences and those consequences are different from each other.
Newspapers and Bernanke
Berkshire bought newspapers companies. Newspapers that are indispensable over the communities are performing reasonably well. The trend of the newspaper is down, but there are primary readers who are still interested. Metropolitan papers are a much tougher problem.
The small newspapers of Berkshire have 20,000 operating the entire year and the revenue is down by 1%. The larger newspapers are down in a bigger percentage. The bigger the community, the harder it is to understand what the community is feeling. The bigger the newspaper, the wider the scope of the readers' interests are. The smaller the newspaper, the more narrow the scope of the readers' interests are.
Buffett is a fan of ben Bernanke, but there is a growing concern with what the FED is doing. America has 3.6 billion dollars worth of expenditures. Bernanke said that America doesn't have taxes, but everyone is well aware that it's not like that for a long time. He's terrific and talented, but what will happen is totally predictable already.
America hasn't worked out a sustainable system for the year, but Berkanke said he would do whatever it takes when the central bank prints money. The inconsistency of the fiscal policy needs to be solved. There are a lot to work through.
Will there come a time when the country doesn't need raise taxes from the middle classes anymore? Buffett said there's a way out of it. America overcame The Great Depression and the World Wars. The country goes in all kinds of problems, but it's too good and civilized that they can eventually find a way out.
The size of the government shouldn't be 22.5 GDP. It should be lower, so the citizens an be served more. Despite, this, Americans are very optimistic are there are millions of people trying to figure out how their lives would be better tomorrow. The dynamism of America is not lost!
Is USA at the Age of Battery and Gas?
USA has some couple of locomotives. The railroads are experimenting to natural gas. Getting natural gas costs 3.5 million dollars. Jack Welsh said oil and gas is going to be the next renaissance of America and there will be more jobs down the road.
In terms of payment, hundreds of billions of dollars annually go in oil and gas. This means for BNSF, it's a big move. Unfortunately, explorers have discovered oil where the railroads of Berkshire are. What they lost in coal, they made up in oil.
Buffett hasn't really bought natural gas or oil in the ground. 5 years from now might be much more dependent on politics whether or not the country is using the best geologists available. In the end, the price depends on the demand and supply.
The battery technology is an evolving and tough game. There are lots of people who are working on battery technology wherever it's made. The important thing is to get a better battery technology. Exploring this industry is not easy. There are problems involved, but there's significant progress made in the future.
What Should People Be Buying Right Now?
Basically, hold first. The idea that news about stocks would cause an owner or investor to sell their properties is not always an excellent and advisable thing.
Just take this example: An owner of a farm has a good tenant who runs his farm very well. Would he sell it? Of course not! He is getting a good return. Therefore, the news should not suddenly change his mind. Not because stock market prices are low now means everyone who has money needs to buy. Why exchange something great for something good? Why repair something that’s not broken?
Another example is an owner of an apartment house. His apartment resides in an accessible location and is managed by a good manager. Should the owner sell it when he hears from the news about stock market prices dropping at 50%? Should he take the risk? No. Again, why exchange something great for something good? Why repair something that’s not broken?
An owner of a good business like a local franchise of McDonalds wouldn’t be thinking of buying or selling it every day when stock market prices go high to low to high. That’s just not the way it is. Buffett said, “When you own stocks, you own pieces of businesses.” To buy or sell on current news is just crazy. An owner with a wonderful business and wise employees running it, it will probably be there 5 or 10 years from now. To try something out that looks like a wonderful game is a terrible mistake.
Buying consistently overtime sort of averages over time. Buffett has been buying all his life. He bought his first stock when he was 11 years old just three months after the bombing of Pearl Harbor and the fall of Corregidor. That was also during the time of the Bataan Death March in the Philippines. News was plainly terrible. The stocks were dropping prices and that was the best time to buy! Buffett admitted that he should've held on to his first set of stocks forever. His mistake was selling it for fear of not getting back to a higher price right after it dropped prices.
If Zuckerburg goes on a lunch meeting and asks Buffett, “Is there any way to explain a business well enough to you where you’d pick a huge stake on Facebook?” There’s probably no chance. That doesn’t mean Buffett is negative. He just doesn’t understand the Facebook business well enough. He’s not one of the billion members of the social media site. Again, Buffett likes to buy things where there’s a reasonable idea that the business is going to be around 5 or 10 years from now – just like buying a farm, an apartment, or a franchise of McDonalds.
Again, hold first. The idea that news about stocks would cause an owner or investor to sell their properties is not always an excellent and advisable thing for those who dream of success in the investing world.
The Big Gets even Bigger
Buffett will deals with things differently at the annual meeting as to the recording of this video. he'll have one analyst for doing a different task and another analyst looking at Berkshire Hathaway specifically.
Buffett is also adding an emphasis on Accounting, because it is the langue of investment of business. To some extent, it's not well explained. He wants to talk more occasionally where accounting falls short so he can help the business and check where it went wrong.It's important that people understand it.
The Dow is going down and up and down at the period of election. When asked about his opinion on this, Warren Buffett said, “The lower the price for the sock, the better!”
Berkshire Hathaway, run by Buffett, owns stocks at IBM, Wells Fargo, American Express, Coca Cola and a lot more companies. They are even increasing their ownerships in all 4 of their largest investments without laying out a penny. The lower the stocks, the more amount of dollars are good. It’s significant overtime.
Berkshire’s ownership of IBM is going significantly well since the end of the year. They are not laying out any money. That happens long enough and it makes a lot of difference. They bought 6.7% of Coca Cola some years ago. Now, it’s already 9% without them laying another dime. American express is the same. They own 13% of its shares and still goes up eventually. Their interest in the company goes up. What’s better than owning more wonderful businesses without laying out any money?
There are thousands of shareholders who attended the annual shareholders meeting. The questions asked by the shareholders reflect what Buffett haven’t communicated well enough to them. However, they have discussed a logical stock repurchase program in the shareholders’ annual report as well as a local evident policy.
Of course, the topic of succession always comes to the discussion. Warren Buffett and the board are on the same page. They did not want to name a name. However, they tell people how they’re dealing with it. They include it in the annual report.
Like Coke, Well Fargo, and IBM, Buffett neither knows who the next CEO will be nor who picked them. He just knew they had a board of directors who had the job of choosing the best person. The board of Berkshire spends more time in talking about succession. They’re blessed in the sense that there are movable candidates. Those candidates are currently with them and they know them well; they see them perform.
Buffett said that they won’t consider dividend at this point, but they can discuss conditions that make sense today like times when you can’t keep money in the business and generate more than a dollar or present value by using that money.
Steve Jobs mentioned many years ago about the billions of dollars sitting around. It’s very unlikely that Apple will find an acquisition that is in the tens and tens of billions of dollars. There’s no sense sitting with a cash overtime. They either auto pay or repurchase.
Great businesses contribute in the greatness of a country.
The best way to speed up developing countries is to get rid of graft and corruption. If Buffett were a shareholder and looked at all the net benefits and costs, to get that jumpstart in Mexico and to do in Rome as the Romans do, he can almost make a case that as a shareholder, he’ll be really ambiguous about the decisions they make. In the end, when in Rome, you can only do what the romans do as long as it is not against your country.
A great question asked to Buffett in the interview is, “If you were in Subterranean Africa and the government won’t allow you to bring vaccines for children, would you find out the way to do it through bribes? The end justifies the means anyway.”
Buffett answered wisely by saying, “You are at a disadvantage when your own country says you can’t engage in it, while other countries can. In the end, you need to follow the rules of the country and you got to have people who work for you and believe that they follow the rules.”
With Berkshire having 270 people, somebody’s doing something wrong. Of course, Buffett hopes to find out about it. If it’s minor, he wants it corrected. When people are doing what they aren’t supposed to be doing, the problem will never be solved 100%. Someone has to find a way to fix it.
If the management of Berkshire learned within the Walmart issue that somehow it got to the board that there was a cover up of a grander proportion, Buffett said it would depend on who the person is and what the situation is whether or not it will change his view to own it.
If it’s something really terrible and it got to the board without them knowing anything about it, change the board! There won’t be a problem owning the stock afterwards. That is not a reason to throw away a business.
If one of Berkshire’s subsidiaries did something wrong, the answer is not to get rid of the CEO, but to get rid of the person who committed the mistake.
Buffett quoted, “We want people who match our principles and not principles who match our people.”
The Bubbles and Buffett
With the Jobs’s picture, America took the under on the consensus estimate because of the economy. The economy is still growing and improving steadily since the fall of 2009. The projectory has been a very small angle. However, it has not improved in the last few months. The economy is better now but not a lot.
The banks have seen their peeks in terms of earnings in the first quarter. It’s hard to replicate. With Wells Fargo, later quarters of the year are better than before. Most companies cannot earn that much money taking into consideration the stage of recession.
There is a 10% premium in the stock of Berkshire. Buffett is not surprised, though. He took the change and issued a release.
Buffett was in South Korea when the earthquake in Japan happened. According to him, it was extraordinary. It created buying opportunities to buy stocks of Japanese companies. Berkshire was contacted while Buffett was in the plane. They were given a 30-day notice regarding the Berkshire preferred. He decide to take off. He said, "I'm going to be the Bin Laden of capitalism. I’m going to Asia to a place I don't know where. I will be looking for a cave. The US armed forces couldn't find Bin Laden for 10 years and that's how Goldman Sachs isn't going to find me also."
The Canadian dollar did a great job. Canada has not gone through major recessions and set backs like America. Therefore, their currency is a very nice one invest on as well.
Currencies are a fascinating subject. Unless conscious, you will be dominated. Buffett never liked currencies over time. However, he still loves US dollar over any currency, even if Canadian dollars are doing pretty well now.
Buffett Stays with IBM
Berkshire Hathaway has added shares at IBM worth a billion dollars.
Many actually got surprised with the announcement of Buffett staying with IBM, because it is a known fact that he isn't into technology so much. Technology industry is maturing and so he is delighted at being in IBM. It seems that IBM is better abroad than in the US.
After all these, Warren Buffett seems like a walking briefcase with all sorts of money, checks, currencies, investments, bonds, shares, etc. Name it. Buffett is probably the most successful investor so far. With everything he experienced and shared to other investors, the future must look better than the present is today! Buffett had mistakes, and his mistakes also serve as an example to everyone following his footsteps.