Priceless!
Topic Comment: (Topic level)
Comment: I've seen this review go back and forth for weeks for silly editorial comments about spacing, bla bla. This is not progress that shareholders pay you for.
Enough already with the editorials.
Please stick to actual bugs you find or shut up.
Sorry about the language. Here it is again in better language:
Readability is good, but maintainability is paramount. Haggling over small syntactic issues is unreasonable.
Did it make the slightest difference that she published the Philosophical Review? She put the thought out of her mind, it was simply wrong as undermining doubts so often are.
Tuesday, October 27, 2009
Monday, October 26, 2009
Walter schloss principles
Warren Buffett on Schloss:
He knows how to identify securities that sell at considerably less than their value to a private owner: And that's all he does. He owns many more stocks than I do and is far less interested in the underlying nature of the business; I don't seem to have very much influence on Walter. That is one of his strengths; no one has much influence on him.
Here are 16 golden rules for investing from Walter Schloss. Thanks to Todd Sullivan for the finding:
2. Try to establish the value of the company.
3. Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity.
4. Have patience. Stocks don’t go up immediately.
5. Don’t buy on tips or for a quick move. Let the professionals do that, if they can. Don’t sell on bad news.
6. Don’t be afraid to be a loner but be sure that you are correct in your judgment. You can’t be 100% certain but try to look for the weaknesses in your thinking. Buy on a scale down and sell on a scale up.
9. Don’t be in too much of a hurry to sell. If the stock reaches a price that you think is fair, then you can sell. Before selling reevaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P-E ratios high. Are people very optimistic etc?
10. When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it attractive. 3 years before the stock sold at 20 which shows that there is some vulnerability in it.
11. Try to buy assets at a discount than to buy earnings. Earning can change dramatically in a short time. Usually assets change slowly. One has to know much more about a company if one buys earnings.
12. Listen to suggestions from people you respect. This doesn’t mean you have to accept them.
15. Prefer stock over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
16. Be careful of leverage. It can go against you.
Don't lose money !
He knows how to identify securities that sell at considerably less than their value to a private owner: And that's all he does. He owns many more stocks than I do and is far less interested in the underlying nature of the business; I don't seem to have very much influence on Walter. That is one of his strengths; no one has much influence on him.
Here are 16 golden rules for investing from Walter Schloss. Thanks to Todd Sullivan for the finding:
2. Try to establish the value of the company.
3. Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100% of the equity.
4. Have patience. Stocks don’t go up immediately.
5. Don’t buy on tips or for a quick move. Let the professionals do that, if they can. Don’t sell on bad news.
6. Don’t be afraid to be a loner but be sure that you are correct in your judgment. You can’t be 100% certain but try to look for the weaknesses in your thinking. Buy on a scale down and sell on a scale up.
9. Don’t be in too much of a hurry to sell. If the stock reaches a price that you think is fair, then you can sell. Before selling reevaluate the company again and see where the stock sells in relation to its book value. Be aware of the level of the stock market. Are yields low and P-E ratios high. Are people very optimistic etc?
10. When buying a stock, I find it helpful to buy near the low of the past few years. A stock may go as high as 125 and then decline to 60 and you think it attractive. 3 years before the stock sold at 20 which shows that there is some vulnerability in it.
11. Try to buy assets at a discount than to buy earnings. Earning can change dramatically in a short time. Usually assets change slowly. One has to know much more about a company if one buys earnings.
12. Listen to suggestions from people you respect. This doesn’t mean you have to accept them.
15. Prefer stock over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
16. Be careful of leverage. It can go against you.
Don't lose money !
Saturday, September 26, 2009
If you are doing your best, you will not have time to worry about failure.
- Robert Hillyer
Will any man despise me? Let him see to it. But I will see to it that I may not be found doing or saying anything that deserves to be despised.
-Marcus Aurelius
I who have never wilfully pained another, have no business to pain myself.
Is one doing me wrong? Let himself look to that; his humors and actions are his own. As for me, Iam only acting as my own nature wills me to act.
- Robert Hillyer
Will any man despise me? Let him see to it. But I will see to it that I may not be found doing or saying anything that deserves to be despised.
-Marcus Aurelius
I who have never wilfully pained another, have no business to pain myself.
Is one doing me wrong? Let himself look to that; his humors and actions are his own. As for me, Iam only acting as my own nature wills me to act.
Monday, August 31, 2009
- Nearly everything you do is of no importance, but it is important that you do it. -Mahatma Gandhi
- I have always found that mercy bears richer fruits than strict justice. -Abraham Lincoln
- It is not wealth one asks for, but just enough to preserve one's dignity, to work unhampered, to be generous, frank and independent. -Somerset Maugham
Sunday, August 09, 2009
Link to : Muriel Barbery: An Elegant Quill
Had a great time at the jazz festival and drinks last evening.
Here's a very nice review of "Elegance of The Hedgehog"
As the two characters' lives overlap, Paloma comes to discover Renée's secret gifts, and to appreciate her self-effacing elder as having "the elegance of a hedgehog: a real fortress, bristling with quills on the outside . . . deceptively sluggish, ferociously independent, yet terribly elegant."
Here's a very nice review of "Elegance of The Hedgehog"
As the two characters' lives overlap, Paloma comes to discover Renée's secret gifts, and to appreciate her self-effacing elder as having "the elegance of a hedgehog: a real fortress, bristling with quills on the outside . . . deceptively sluggish, ferociously independent, yet terribly elegant."
Saturday, August 08, 2009
From "Elegance of the Hedgehog"
- Thus the television in the front room, guardian of my clandestine activities, could bleat away and I was no longer forced to listen inane nonsense fit for the brain of a clam
- With the exception of love, friendship and the beauty of Art, I don't see much else that can nurture human life.
- I have read so many books.... and yet , like most autodidacts, Iam never quite sure of what I've gained from them. There are days when I feel I have been able to grasp all there to know in one single gaze, as if invisible branches suddenly spring out of nowhere, waving together all the disparate strands of my reading - and then suddenly the meaning escapes, the essence evaporates, they seem to flee further with each subsequent reading.
- Nothing is harder or more unfair than human reality: humans live in a world where its words and not deeds that have power, where the ultimate skill is the mastery of language. This is a terrible thing because basically we are primates who've been programmed to eat, sleep, reproduce , conquer and make our territory safe, and the ones who are most gifted at that, always get screwed by the others, the fine talkers. This is a terrible insult to our animal nature, a sort of perversion or a deep contradiction.
- Because in town it is the dogs who have their masters on a leash. though no one seems to have caught on to thew fact.If you have voluntarily saddled yourself with a dog that you'll have to walk twice a day, come rain wind or snow, that is as good as as having a leash around your own neck.
- From the very start Colombe and I have been at war because as far as Colombe is concerned, life is a permanent battle where you can win only by destroying the other guy. She cannot feel safe if she hasn;t crushed her adversaries and reduced their territory to the meanest share. For some obscure reason Colombe, who most of the time is totally insensitive to what's going on with other people, has figured out that what I dread more than anything else in life is noise. That silence helps you to go inward, that anyone who is interested in something more than just life outside actually needs silence: this is something she is not capable of understanding, because her inner space is as chaotic and noisy as the street outside. But in any case she figured it out so all day long she makes noise. Since she can't invade anything else, she invades my personal auditory space, and ruins my life from morning to night.
- and then, for the price of sixty-three euros, I had some fillets of mullet in curry and then for thirty-four euros, the least evil thing I could find on the menu: a bitter chocolate fondant. Let me tell you: at that price, I would have preferred a year';s subscription to McDonald's. At least its in bad taste without being pretentious.
- Teas and mangas: something elegant and enchanting, instead of adult power struggles and their sad aggressiveness.
- But never again will I see those I love, and if that is what dying is all about, then it really is the tragedy they say it is.
- I understood I was suffering because I couldn't make anyone else around me feel better. I understood that I have a grudge against Papa, Maman and above all Colombe because I'm incapable of being useful to them.
- I was having breakfast and looking at the bouquet on the kitchen counter.I don't believe I was thinking of anything.I was alone, and calm, and empty. So I was able to take it in. There was a little sound, a sort of quivering in the air that went "shhh" very very very quietly: a tiny rosebud on a little broken stem that dropped onto he counter. The moment it touched the surface it went "puff", a "puff" of the ultrasonic variety, for the ears of mice alone, or for human ears when everything is very very very silent. .. and I have been lucky because this morning all the conditions were ripe: an empty mind, a calm house, lovely roses, a rosebud dropping. Because beauty consists of its own passing, just as we reach for it. Its the ephemeral configuration of things in the moment when you can see both their beauty and their death.
- What is the purpose of intelligence if not to serve others? And I'm not referring to the false servitude that high-ranking state - employed flunkeys exhibit so proudly, as if it were a badge of virtue: The facade of humility they wear is nothing more than vanity or disdain.
- Instead privilege brings with it true obligations. If you belong to the closed inner sanctum of the elite, you must serve in equal proportion to the glory and ease of material existence you derive from belonging to that inner sanctum.
- I have always been fascinated by the abnegation with which we human beings are capable of devoting a great deal of energy to the quest for nothing and to the rehashing of useless and absurd ideas. I spoke with a young doctoral candidate in Greek patristics and wondered how so much youth could be squandered in the service of nothingness. When you consider that a primate's major preoccupations are sex, territory and hierarchy, spending one's time reflecting on the meaning of prayer for Augustine of Hippo seems a relatively futile exercise.
- Literature for instance serves a pragmatic purpose. Like any for of Art, literature's mission is to make the fulfillment of our essential duties more bearable.
- Truth loves nothing better than simplicity of Truth: that is the lesson Colombe Josse ought to have learned from her medieval readings, but all she seems to have gleaned from her studies is how to make a conceptual fuss in the service of nothing. The fact that the middle classes are working themselves to the bone, using their sweat and taxes to finance such pointless and pretentious research leaves me speechless. Every gray morning, day and after gloomy day, secretaries, craftsmen employees , petty civil servants , taxi drivers and concierges shoulder their burden so that the flower of French youth, duly housed and subsidized, can squander the fruit of all that dreariness upon the altar of ridiculous endeavours.
Wednesday, August 05, 2009
Every instinct..
By Nathalie Thomas
But last week the stock hit $165.45, prompting speculation that Buffett would exercise his right to increase his stake. Under the terms of the deal, he has until 1 October 2013 to buy a further $5bn of common shares at $115 each but he told a US television channel that he intends to delay even though the warrants are currently valued in excess of $2bn.
"Every instinct in my body tells me that we will want to hold those warrants until they're very close to their expiration date," he told Fox Business Network.
BILLIONAIRE US investor Warren Buffett has said he intends to bide his time before taking up his option to buy a further $5 billion worth of Goldman Sachs shares, despite calculations that he stands to make a significant profit from the transaction. Buffett secured warrants to buy more Goldman stock last September when his investment vehicle Berkshire Hathaway snapped up $5bn worth of preferred shares in the banking giant.
Although the move helped to inject some confidence in the sector at a time, analysts later questioned its wisdom after Goldman's shares fell below $48 in November.But last week the stock hit $165.45, prompting speculation that Buffett would exercise his right to increase his stake. Under the terms of the deal, he has until 1 October 2013 to buy a further $5bn of common shares at $115 each but he told a US television channel that he intends to delay even though the warrants are currently valued in excess of $2bn.
"Every instinct in my body tells me that we will want to hold those warrants until they're very close to their expiration date," he told Fox Business Network.
Saturday, August 01, 2009
Points from Klarman's "The Value Of Not Being Sure"
- Financial markets are manic and best thought of as an erratic counterparty rather than as an arbiter of the accuracy of one's investment judgements.
- Historically, little volume transacts at the bottom or on the way back up and competition from other buyers will be much greater when the markets settle down and the economy begins to recover. Moreover the price recovery from a bottom can be very swift. Therefore, an investor should put money to work amidst the throes of a bear market, appreciating that things will likely get worse before they get better.
- Process, Not Outcome :The only things one can really control are investment philosophy, investment process and the nature of clients. Controlling your process is absolutely crucial to long-term success in any market environment/.
- James Montier, recently pointed out that when athletes were asked what went through their minds just before competing, the consistent response was a focus on process, not outcome.
- Success virtually requires that a process be in place that enables intellectual honesty, rigor, creativity and integrity.
Friday, July 17, 2009
Buffett: The Master of Simplicity
From http://www.gurufocus.com/news.php?id=5816
Buffett’s answers were like always, straight to the point, simple and stunningly brilliant.
In business schools, students are taught complicated is smart and simple is not. Students adept at solving equations with Greek letters are more highly sought after. As Buffet says:“If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspapers.”
Buffett is successful by being simple.
Munger reportedly wears mostly Brooks Brothers clothing, a line known for its proper and classic look, for a fair price. Likewise, up until recently, Buffett wore whatever he could find. He still buys his Zegna suits off the rack. They'd be less successful if :
1) They both sat at computers all day, they would stop thinking nearly as much as they do now. A computer would give them a temptation to listen to others and they would lose logic and rational thought.
2) They lived in New York and worked on Wall Street. The “buzz” would likely interfere with their thoughts. Both men have said again and again that isolated rational thought is the key to successful investing.
3) They spent time shopping for the newest fashionable clothing, they would lose focus on what they are doing. When asked in a recent CNBC interview what one word would describe his success, Buffett answered, “focus”. Spending time on frivolous accessories would make his extreme focus much harder.
The annual meeting made me wonder: why does our society appear to be increasingly embracing the complex way of life, when “the simple life” clearly can lead to happiness?
Buffett’s answers were like always, straight to the point, simple and stunningly brilliant.
In business schools, students are taught complicated is smart and simple is not. Students adept at solving equations with Greek letters are more highly sought after. As Buffet says:“If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspapers.”
Buffett is successful by being simple.
Munger reportedly wears mostly Brooks Brothers clothing, a line known for its proper and classic look, for a fair price. Likewise, up until recently, Buffett wore whatever he could find. He still buys his Zegna suits off the rack. They'd be less successful if :
1) They both sat at computers all day, they would stop thinking nearly as much as they do now. A computer would give them a temptation to listen to others and they would lose logic and rational thought.
2) They lived in New York and worked on Wall Street. The “buzz” would likely interfere with their thoughts. Both men have said again and again that isolated rational thought is the key to successful investing.
3) They spent time shopping for the newest fashionable clothing, they would lose focus on what they are doing. When asked in a recent CNBC interview what one word would describe his success, Buffett answered, “focus”. Spending time on frivolous accessories would make his extreme focus much harder.
The annual meeting made me wonder: why does our society appear to be increasingly embracing the complex way of life, when “the simple life” clearly can lead to happiness?
Monday, May 25, 2009
Sunday, May 24, 2009
Friday, May 22, 2009
- Freedom is not worth having if it does not include the freedom to make mistakes. -Mahatma Gandhi
- A man is rich in proportion to the number of things he can afford to let alone. -Henry David Thoreau
- Do what you feel in your heart to be right - for you'll be criticized anyway. You'll be damned if you do, and damned if you don't. -Eleanor Roosevelt
- Having the fewest wants, I am nearest to the gods.
-Socrates from Diogenes Laertius, Lives of Eminent Philosophers - To understand the heart and mind of a person, look not at what he has already achieved, but at what he aspires to do. -Kahlil Gibran
Thursday, May 21, 2009
In my financial counseling practice, I use the rule of thumb that a reasonable amount to spend on clothing without overspending is 4% to 6% of your take-home pay per month. Just take the number that your paychecks actually add up to in a month, and multiply that by .06 Just remember that this amount is for the entire family, not just one person unless you are single and no one else is depending upon your income.
To start with I don't think $500 is enough for what you listed but, at the same time, I think you're spending too much at once. I believe that clothes shopping should be a regular experience and not a once a year experience.
I would plan to make one purchase at a time. Once or twice a month, depending on what you can afford and your pay schedule, you should go clothes shopping. Each time you shop you should buy one outfit.
Then, I would go for the jeans and the black sweater. Jeans can cost between $25 for basic Levis to $200 for designer jeans. Try to stick to the $60 range. Take your time and search for jeans that really fit you. It's not as easy as it sounds. For the sweater I would buy cashmere. No other sweaters wear better and look great for a longer time than cashmere. If you're thrifty you can find one for under $100 but it will take some shopping. Winter is the time to buy cashmere so don't wait too long because spring clothes will be coming soon. I make a point of buying at least one, if not two, cashmere sweaters each Christmas season.
I always maintain 5 pairs of jeans and just buy a new pair when one of the 5 becomes unwearable for some reason. I always have no more than 5 pair and no less than 5 pair.
Spring - This is a big time to shop. Spring is when fashion colors change again and it's time to buy dress pants with matching or complimentary blouses. It's also time to buy a new purse in a lighter color that compliments your spring clothes.
Summer - It's time to buy play clothes for outdoor activities and be sure to buy a light summer dress. They are a must for light wearability and going out.
every woman needs 10 basic wardrobe pieces as the basis for style. They are:
1. A good fitting pair of jeans
2. A white shirt
3. A blazer
4. A trench coat
5. Dress pants
6. A skirt
7. A basic black cocktail dress
8. A sweatsuit alternative - clothes to be active in that don't look sloppy.
9. A cashmere sweater
10. A dress (I can't remember how he described this dress but it's not too formal, maybe a business dress)
To start with I don't think $500 is enough for what you listed but, at the same time, I think you're spending too much at once. I believe that clothes shopping should be a regular experience and not a once a year experience.
I would plan to make one purchase at a time. Once or twice a month, depending on what you can afford and your pay schedule, you should go clothes shopping. Each time you shop you should buy one outfit.
Then, I would go for the jeans and the black sweater. Jeans can cost between $25 for basic Levis to $200 for designer jeans. Try to stick to the $60 range. Take your time and search for jeans that really fit you. It's not as easy as it sounds. For the sweater I would buy cashmere. No other sweaters wear better and look great for a longer time than cashmere. If you're thrifty you can find one for under $100 but it will take some shopping. Winter is the time to buy cashmere so don't wait too long because spring clothes will be coming soon. I make a point of buying at least one, if not two, cashmere sweaters each Christmas season.
I always maintain 5 pairs of jeans and just buy a new pair when one of the 5 becomes unwearable for some reason. I always have no more than 5 pair and no less than 5 pair.
Spring - This is a big time to shop. Spring is when fashion colors change again and it's time to buy dress pants with matching or complimentary blouses. It's also time to buy a new purse in a lighter color that compliments your spring clothes.
Summer - It's time to buy play clothes for outdoor activities and be sure to buy a light summer dress. They are a must for light wearability and going out.
every woman needs 10 basic wardrobe pieces as the basis for style. They are:
1. A good fitting pair of jeans
2. A white shirt
3. A blazer
4. A trench coat
5. Dress pants
6. A skirt
7. A basic black cocktail dress
8. A sweatsuit alternative - clothes to be active in that don't look sloppy.
9. A cashmere sweater
10. A dress (I can't remember how he described this dress but it's not too formal, maybe a business dress)
http://www.guardian.co.uk/books/2008/jul/05/frankoconnoraward
The judges for the Frank O'Connor award have dispensed with the ritual of issuing a shortlist, announcing today that Jhumpa Lahiri has won the world's richest honour for a short story collection. The jurors decided that Unaccustomed Earth was so plainly the best book that they would jump straight from longlist to winner, and have awarded Lahiri the €35,000 (£27,000) prize.
In what will be a shock to writers and publishers, Lahiri's collection of eight stories examining different aspects of the Bengali migrant experience has seen off authors including Booker winners Anne Enright and Roddy Doyle. But the book is already a publishing sensation: published this spring, it went straight into the New York Times's fiction charts at number one. It is an unprecedented feat for a short story writer which the paper compared to "a comet landing", so rarely does a serious writer make this kind of commercial impact. Indeed, unusual success has been the hallmark of her career since she published her first book of stories, Interpreter of Maladies, in 1999, winning the Pulitzer prize and selling 600,000 copies - another very rare feat.
The judges - Granta fiction editor Rosalind Porter, Cork City chief librarian Liam Ronayne and Irish Times Literary correspondent Eileen Battersby - were immediately and unanimously convinced the book should win.
"With a unanimous winner at this early stage we decided it would be a sham to compose a shortlist and put five other writers through unnecessary stress and suspense," explained the award's director, Pat Cotter. "Not only were the jury unanimous in their choice of Lahiri's Unaccustomed Earth as the winner, they were unanimous in their belief that so outstanding was Lahiri's achievement in this book that no other title was a serious contender."
Lahiri will now travel to Cork to be presented with the award at the end of the Frank O'Connor International Short Story festival on September 21 - the day when the prize was originally scheduled to be revealed.
Wednesday, May 20, 2009
Buffett quotes from 1974
"you never have to swing. You stand at the plate,
the pitcher throws you GM at 47 ! X at 39 ! and nobody calls
a strike on you. There's no penalty except opportunity lost.
All day you wait for the pitch you like; then when the
Fielders are asleep, you step up and hit it."
the pitcher throws you GM at 47 ! X at 39 ! and nobody calls
a strike on you. There's no penalty except opportunity lost.
All day you wait for the pitch you like; then when the
Fielders are asleep, you step up and hit it."
Sunday, May 10, 2009
A good objective of leadership is to help those who are doing poorly to do well and to help those who are doing well to do even better. Jim Rohn
Amid economic catastrophe — Oregon has the country’s second-highest unemployment rate — there was a general indifference to wealth. In its place was a dedication to the things that really matter: hearty food and drink, cultural pursuits both high and low, days in the outdoors and evenings out with friends. It’s the good life, and in Portland it still comes cheap.
Sunday, March 22, 2009
Buffett interview prefer newspaper delivery
Notes from Buffett visit with Emory Students held on February 6, 2009
----
Buffett:
No sector is a good buy unless you understand the business. However, I do believe that there is good value and great opportunity now in the financial sector because it is extremely unpopular. Sector’s themselves don’t make good buys, companies that are undervalued make good buys. You know how to value a business, you project the future cash flows discounted to present and buy with a margin of safety. The earnings prospects need to be greater than the current value. Anything that is unpopular is always great to look at. If I was getting out of school right now, I would take a look.
Buffett:
Risk does not equal beta. Risk comes around because you don’t understand things, not because of beta. There are normally 10 filters or so that I go through when I hear an idea. The first is can I understand the business and understand the downside not just today but five to ten years from now. There have been very few times that I’ve lost 1% of my net worth. I might be risk averse but I am not action adverse. I just stay within my circle of confidence.I need only need to be right a few times and can let thousands of ideas go by.
You have to know your sweet spot. The beautiful thing about investing is that it’s a “No called strike game” where unlike baseball the only strikes in investing are when you swing. I don’t have to swing.
When I do invest, I don’t care if the stock price goes from $10 to $2 but I do care about if the value went from $10 to $2. Avoid debt. I decided early on that I never wanted to owe more than 25% of my net worth, and I haven’t… exept for in the very beginning. I like to play from a position of strength. I always try to have the odds in my favor.
Think about what the asset will produce. Look at the asset, not the beta. Stock price is not that important to me, it just gives you the opportunity to buy at a great price. I care more about the business than I do about events. I care about if there’s price flexibility and whether the company can gain more market share.
If I were running a business school I would only have 2 courses. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility.
Q: Why did you invest in Harley-Davidson?
Buffett: I like the 15%. I measured that 15% against other credits and it looked attractive on both a relative basis and an absolute basis. Also, we have to have a certain amount of the portfolio go to debt. Any company where you can get your customers to tattoo your name on their body has quite a strong brand. For this investment I had to think what is the probability that they will not pay me back and would I want to own the company if they did not, basically that the equity isn’t worth zero.
I bought See’s in 1972 and I think understanding the value of brand helped drive the decision to buy Coca-Cola in 1988.
Buffett: [Showed his blank schedule book]. Bill Gates is overscheduled. I am extremely lucky and I can say no to anything because there isn’t an entity that can use economic pressure to make me do something. A lot of CEOs get into a lot of the rituals that are part of the job. I would rather deliver papers than be the CEO of GE. The 76 or so CEOs that run companies at Berkshire don’t have to deal with bankers or lawyers. At Berkshire, we’ve never had a meeting for all of them anywhere. There are no presentations and no committees. They can be more productive, and it makes it attractive when they can do what they like to do best.
When I took over Solomon I had to pick the best person to run it. I asked myself, “Who would I go into a foxhole with?” I never look at grades or where you went to school. When I picked Deryck Maughan, he never asked me about pay or options or indemnity. He went to work.
----
Buffett:
No sector is a good buy unless you understand the business. However, I do believe that there is good value and great opportunity now in the financial sector because it is extremely unpopular. Sector’s themselves don’t make good buys, companies that are undervalued make good buys. You know how to value a business, you project the future cash flows discounted to present and buy with a margin of safety. The earnings prospects need to be greater than the current value. Anything that is unpopular is always great to look at. If I was getting out of school right now, I would take a look.
Buffett:
Risk does not equal beta. Risk comes around because you don’t understand things, not because of beta. There are normally 10 filters or so that I go through when I hear an idea. The first is can I understand the business and understand the downside not just today but five to ten years from now. There have been very few times that I’ve lost 1% of my net worth. I might be risk averse but I am not action adverse. I just stay within my circle of confidence.I need only need to be right a few times and can let thousands of ideas go by.
You have to know your sweet spot. The beautiful thing about investing is that it’s a “No called strike game” where unlike baseball the only strikes in investing are when you swing. I don’t have to swing.
When I do invest, I don’t care if the stock price goes from $10 to $2 but I do care about if the value went from $10 to $2. Avoid debt. I decided early on that I never wanted to owe more than 25% of my net worth, and I haven’t… exept for in the very beginning. I like to play from a position of strength. I always try to have the odds in my favor.
Think about what the asset will produce. Look at the asset, not the beta. Stock price is not that important to me, it just gives you the opportunity to buy at a great price. I care more about the business than I do about events. I care about if there’s price flexibility and whether the company can gain more market share.
If I were running a business school I would only have 2 courses. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility.
Q: Why did you invest in Harley-Davidson?
Buffett: I like the 15%. I measured that 15% against other credits and it looked attractive on both a relative basis and an absolute basis. Also, we have to have a certain amount of the portfolio go to debt. Any company where you can get your customers to tattoo your name on their body has quite a strong brand. For this investment I had to think what is the probability that they will not pay me back and would I want to own the company if they did not, basically that the equity isn’t worth zero.
I bought See’s in 1972 and I think understanding the value of brand helped drive the decision to buy Coca-Cola in 1988.
Buffett: [Showed his blank schedule book]. Bill Gates is overscheduled. I am extremely lucky and I can say no to anything because there isn’t an entity that can use economic pressure to make me do something. A lot of CEOs get into a lot of the rituals that are part of the job. I would rather deliver papers than be the CEO of GE. The 76 or so CEOs that run companies at Berkshire don’t have to deal with bankers or lawyers. At Berkshire, we’ve never had a meeting for all of them anywhere. There are no presentations and no committees. They can be more productive, and it makes it attractive when they can do what they like to do best.
When I took over Solomon I had to pick the best person to run it. I asked myself, “Who would I go into a foxhole with?” I never look at grades or where you went to school. When I picked Deryck Maughan, he never asked me about pay or options or indemnity. He went to work.