> Warren Buffett Blog: 2016

Tuesday, December 27, 2016

Berkshire owned Dairy Queen to expand to South Korea

Dairy Queen, the restaurant chain owned by Warren Buffett’s Berkshire Hathaway Inc., is extending its international push by expanding in South Korea, with a plan to open 50 locations there in five years.

The ice cream seller is teaming with M2G USA Investment Inc., which is also a partner in the ownership of Taco Bell restaurants in the U.S. and Korea, according to a statement Tuesday from Minneapolis-based Dairy Queen.

Dairy Queen has been expanding globally with more than 2,200 locations outside of the U.S., and some of the recent growth has been concentrated in nations known for hot weather, such as Kuwait and Saudi Arabia. The company also opened locations in Taiwan and Vietnam in recent years and often tweaks menus to appeal to local cultures, offering ice cream flavors such as green tea with red bean. In the Middle East, the chain rolled out beef kofta, a spicier, gyro-type sandwich. The Korean stores will start with traditional Dairy Queen menus, a spokesperson said.


Monday, December 19, 2016

2017 Berkshire conference to include more content on Index funds and passive investments

I don’t know about ETF, but passive will beat active over time. But not for the manager. The manager’s going to make money out of active and the investor’s going to do better with passive. I’m writing a lot about this subject in next year’s annual report. I really am..... A lot.

Wednesday, December 14, 2016

Berkshire allocates capital based on business needs


Warren Buffett on why Burlington North doesn't need more capital

A 22,000-mile railroad needed $4.5 billion last year and that’s what we gave them. If you gave them another billion dollars there isn’t anything to do with it. You’re serving your customers already and your track is in good shape. We allocate capital to the needs of the business. You can’t force-feed a See’s Candy. We’ve tried 50 different ways to use additional capital.

We paid $35.05 a share for the utility [in 2000]. And this year it’ll earn something around $30 a share, after tax.

Monday, December 12, 2016

I like investing in good businesses


We’d love to grow in solar. We’d love to buy another utility. You can’t expect to get returns in the utility business [that you get in other businesses]. It’s not a great business, it’s a good business. And the more money we can put in good businesses the better I like it. Particularly when we’ve got terrific management. Our utility business, ten or twenty years from now, will be a whole lot bigger than it is now.

Wednesday, December 7, 2016

Wind farms in Iowa great for everyone


Iowa is the Saudi Arabia of wind. And it’s enabled us to keep prices very low. It’s also brought in lots of industry to Iowa because the high-tech companies, particularly in the server farm business, which uses a lot of electricity, they not only like the low price, but they also like the idea of using wind energy.

Society has made an intelligent investment. Investment in wind wouldn’t have gone forward in virtually all cases, unless there was the tax credit involved. So the government has said, “We are willing to forego a certain amount of tax receipts in order to foster wind, and solar as well.”


It’s a government-induced result, which I think makes sense for society and makes sense for our consumers, and it makes sense for Berkshire as an investor.

Monday, December 5, 2016

Warren Buffett interview with Fortune 2016

Fortune: You are a person that has consistently been optimistic about America.

Buffett: Very.


Are you optimistic about America today?

Sure, sure. You can’t stop this country.


So the results of the election have not changed your optimism?

Not about the economics of the country. The aggregate output of this country per capita is going to keep going up. Now who gets it depends on what government decides in terms of tax laws and all that. But America will be a wealthier country per capita five years from now, ten years from now, and twenty years from now. You name it.


Do you think the stock market will be higher four years from now than it is today?

I would not make a prediction on the stock market ever. I’m very long-term. Long-term, the stock market is going to be higher, and I’ve written that many times. In terms of what it’s going to do next year, or tomorrow, I have no idea. The stocks we were buying and selling the day before the election were the same stocks we were buying and selling the day after [the] election.

Do you see anything in Trump’s policies that are good or bad for the market?

I’m not looking at it. I don’t know what the market’s going to do at all. Never have, never will.

A few years back you wrote in Fortune about a plan to eliminate our trade deficit. Are you going to call Trump and offer that up as a policy?

I’ve never called any president in my life. I never have and I never will. It’s presumptuous. I guess if I knew a nuclear bomb was someplace I’d get on the phone pretty fast.

Alright, but do you still think your plan, essentially granting tradable import credits to anyone who exports, is a smart way to go about it?

I think that the president needs to understand that, one: The more trade, the better for us and the world over time.

Secondly, the benefits of free trade are diffused over 320 million people. You buy your shoes a little cheaper; you buy your underwear a little cheaper, because of free trade. But the penalties to the person involved, the steel worker in Ohio or the textile worker in Massachusetts are very, very extreme. And some guy that’s spent 35 years of his life making steel so I can buy my underwear a little cheaper understandably feels the system is not working right if he’s not in some way taken care of.

And so I think that we need to have free trade and we have to have policies that moderate and hopefully even cure the damage that are done to the lives of people who are perfectly decent citizens, who’ve spent their life in one trade and at 55, they’re not going to be able to retrain for something else very well.

So you’ve got to have a two-pronged policy. And at that point, I think you’ll have more support for trade.

A lot of people have said we’ve learned there are deeper divides in America. Is there anything that you would say you learned from the results of the election?

If you go back to the first election I voted in, which was Eisenhower versus Stevenson in 1952. Nobody walked into the polling booth and pulled the lever for Eisenhower because they hated Stevenson. And they didn’t pull the lever for Stevenson because they hated Eisenhower. They were for somebody. This election I think, no way to prove it exactly, but a very significant percentage of people went in and voted against the other person.

But you were pretty enthusiastic for your candidate.

Oh yeah, definitely. I think I had 15 fundraising events for Hillary.

Have you talked to Hillary since the election?

No.

Wednesday, November 23, 2016

Buffett buys shares in American Airlines, Delta Airlines and United Airlines


Warren Buffett has updated his third-quarter portfolio Monday afternoon, revealing buys of airline companies.

The three airline stocks purchased by Berkshire were American Airlines, Delta Airlines and United Continental Holdings Inc. 

Buffett has traditionally detested airline stocks, famously saying in 2002, ”If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.”

In 2013 he said "The airline industry has situation where have very, very, very low incremental cost per seat with enormous fixed costs. The temptation to sell that last seat at a very low price is very high and sometimes it’s very hard to distinguish between that seat and the last seat. It’s labor-intensive and capital-intensive and largely commodity-type business. As Bill Miller points out, it’s been a death trap for business since Orville took off. If it ever gets down to one airline it will be a wonderful business and the question will be if having gotten down to relatively few through bankruptcy the question will be whether it is a good business yet. I don’t know the answer but I’m skeptical."

Monday, November 21, 2016

The American dream is still alive


The American Dream
It’s alive for millions and millions. The American dream should be, if you work productively at 40 hours a week, you’re going to have a decent life.

That should be the No. 1 economic goal of this country. You don’t have to worry about having more stuff. You do have to worry about whether people who are perfectly decent citizens, working hard, are getting enough of it so they can live decently.

Monday, November 14, 2016

Monday, November 7, 2016

Rich should pay their fair share of taxes

"Those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.”

“My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."

“As I got to see more of the world, I started to see there were a lot of things that were unfair and the democrats seem to be doing a little bit more about it."

Thursday, November 3, 2016

It takes minutes for Buffett to make a billion dollar deal

"When somebody calls, I can usually tell within two or three minutes whether a deal is likely to happen or not. There’s just half-a-dozen filters. And it either makes through the filters or not."

One of these unsolicited pitches came from Eitan Wertheimer, chairman of Israeli metalworking company Iscar, back in October 2005. Wertheimer’s proposal came in the form of a letter, and although it was just one and a quarter pages long, it was enough to pique Buffett’s interest. Iscar’s management team visited Omaha a month later.

Buffett decided to buy 80% of Iscar for about $5 billion in May 2006. Berkshire later bought the rest of the company for $2 billion in 2013.

Berkshire Hathaway also decided on its largest acquisition with the same speed. The company agreed to buy Precision Castparts in a $37.2 billion in Aug. 2015.

When asked if Buffett he had spent a year studying the company given the cost of the deal, and Buffett responded with “No.” Buffett said that he met Precision’s CEO, Mark Donegan, just a month before the deal was announced, heard him talk for 30 minutes, liked him, and decided that he was interested in offering a bid.


Wednesday, October 19, 2016

Berkshire holding high cash levels

Warren Buffett has the kind of money problem most people would envy: a growing mountain of cash. Buffett compares investing to baseball, except that investing is a game where the hitter can stand at the plate indefinitely waiting for the right pitch.

“The stock market is a no-called-strike game. You don’t have to swing at everything. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’ ”

Nearly $73 billion piled up at Berkshire Hathaway by mid-summer, more than CEO Buffett’s conglomerate has ever held before. And the total continues growing every day Buffett doesn’t make a major investment because Berkshire’s 90-odd businesses generate roughly $1.5 billion in cash every month.

Buffett’s options include buying entire businesses, picking up a few million shares of stock or investing more in companies Berkshire already owns, such as BNSF railroad and the utilities of Berkshire Hathaway energy.

So far, Buffett appears to be mostly sitting on the cash since January, when Berkshire completed its biggest acquisition in its history, a $32.36 billion deal for aviation parts maker Precision Castparts.

Of course, not all of Berkshire’s cash is available because Buffett wants to keep at least $20 billion on hand at all times just in case Berkshire’s insurance companies have to pay a big claim or some other need arises.

Monday, October 17, 2016

I paid almost $1.9 Million income tax for 2015


Answering a question last night about his $916 million income tax loss carry-forward in 1995, Donald Trump stated that “Warren Buffett took a massive deduction.” Mr. Trump says he knows more about taxes than any other human. He has not seen my income tax returns. But I am happy to give him the facts.

My 2015 return shows adjusted gross income of $11,563,931. My deductions totaled $5,477,694, of which allowable charitable contributions were $3,469,179. All but $36,037 of the remainder was for state income taxes.

The total charitable contributions I made during the year were $2,858,057,970, of which more than $2.85 billion were not taken as deductions and never will be. Tax law properly limits charitable deductions.

My federal income tax for the year was $1,845,557. Returns for previous years are of a similar nature in respect to contributions, deductions and tax rates.

I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.

Finally, I have been audited by the IRS multiple times and am currently being audited. I have no problem in releasing my tax information while under audit. Neither would Mr. Trump – at least he would have no legal problem. 

Wednesday, October 12, 2016

Wind Farms make sense from a tax perspective

I will do anything that is basically covered by the law to reduce Berkshire's tax rate. We get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.

Monday, October 10, 2016

Warren Buffett first tax return ever had him owing $7 to the IRS

I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year.) I have copies of all 72 of my returns and none uses a carryforward.

Thursday, October 6, 2016

Know your limitations as an investor to succeed


You do not need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well

Keep things simple and don’t swing for the fences. When promised quick profits... respond with a quick 'no'.

Tuesday, October 4, 2016

Warren Buffett confirms speaking with Wells Fargo CEO John Stump

"It's dead wrong to imply I've spoken to the board directly. Going to the board implies I've gone around Stumpf, the guy who is under fire. I've talked to no one else on the board." 

Warren Buffett's office also confirmed that he talked with Wells Fargo CEO Stumpf once the scandal came to light. According to Buffett, the talk lasted only five minutes, where Buffett said Stumpf might be facing a larger problem than anticipated, and let him know that the fines levied against Wells Fargo were "not a metric to use in determining public reaction."

Monday, September 19, 2016

Buying more Phillips 66 shares


Warren Buffett's Berkshire Hathaway (BRKB) is still adding to his investments of Phillips 66 (PSX) shares. On the most recent filing with the US Securities and Exchange Commission, Berkshire Hathaway indicated that it had added some 1.01 million shares of Phillips 66.

The shares of the oil refiner were priced between 77.0824 and 77.3906.

Berkshire has been steadily building its Phillips 66 stake, adding to his now more-than-15% stake through much of this year.

Despite the turmoil that the energy industry is facing, Mr. Buffett keeps his hopes stacked to Phillips 66. In 2015, Mr. Buffett ended with a 11.8% stake in Phillips 66. The stake was again increased in May when Berkshire Hathaway added another 18 million shares amounting to $1.39 billion. The latest stake was bought at $77.86 per share making the total investment of around $6 million.

Thursday, September 8, 2016

Learnt my investment style from Benjamin Graham

I developed my investment strategy under Graham. I went to Columbia and learned from Graham.  With Graham’s approach, you cannot lose money over time.  It’s very quantitative in nature, and you have to do reasonably well.  On the other hand, it has less and less application as you get  into bigger and bigger companies with larger sums of money.  It’s better to buy wonderful businesses at fair prices than so-so businesses at low prices.

With the “cigar approach”, you can find a nasty cigar on the ground, with one puff left, can pick it up, light it and you get a free puff. You can keep doing this and get many free puffs. That’s one approach, that’s what I did. I looked for very cheap stocks quantitatively. After exposure to Fisher and Charlie, I started looking for better companies. Previously I was doing both. Now we are looking for good companies, not just cheap companies. Railroads are huge, and they will be good in 10 years, and 100 years from now. Burlington Northern is now earning $6 billion pre-tax, as compared to $3 billion a few years ago before we bought it.  Moving much towards Fisher now and less Ben Graham because we are working with larger sums. With smaller sums, we would be looking at better margins/cheaper stocks.

When I got out of school, I went through Moody’s manual page by page. Got to page 1433 and learned the good ones were in the back. Western insurance company in 1951 was earning $29.09 a share,  the year before $21.66.  The price of the stock had traded between 3 and 13 the previous 12 months.  The price was at 16 when I saw it, less than 1 x earnings.   A few years ago, in 2004, someone told me I should look at Korea.  I got a book from Citigroup which had 1 stock to a page. Describes all the publicly traded companies in Korea. Went through it and found about 20 companies (ex. Day-Han flower mills) it had book value, eps, and securities. Didn’t tell you anything about the share until you look at the price. Found about 20 like that in an afternoon and bought some of all of them, but didn’t know enough about all of them to load up on them. If you buy 20 stocks selling at 2 times earnings, you’re going to make money. That’s Ben Graham and you can make money doing this. 

If you’re working with bigger money, you have to do Fisher/Charlie style and buy big businesses. Berkshire now looks for large, very strong companies. Like Nebraska Furniture Mart – bought in 1983 and it’s probably earning 20 times as much now. Charlie told me – “You’re never going to disagree with me because you’re smart and I’m always right”.

Tuesday, September 6, 2016

People scarred from the 2008 - 2009 sell off still have not forgotten about it

What you’ve seen overall since 2008 and ‘09 – that was a wound to the American psyche. People were scared silly then … really we hadn’t had since the Great Depression. And you still see that in a lot of ways. 

But since the fall of 2009, we pretty much had 2 percent growth and people started talking sometimes about a double-dip recession; other times they talked about things accelerating. But if you really look at it … average it out, we’re showing 2 percent growth, which isn’t bad, but it does reflect I think still some … people that didn’t think the 2008 and ‘09 could happen, saw it happen and it scarred their attitudes for some period. Same thing happened in the Great Depression. 

People don’t get over that very quickly. When they started worrying about their money-market funds, and they start worrying about their jobs and they worry about the economy coming off the tracks, and banks and everything else, they don’t forget about that six months later.

Wednesday, August 31, 2016

Housing has recovered slow but is getting stronger as of late


I would say that housing came back very late after the panic in 2008 and ‘09, and it’s starting to … it has showed continuing growth and momentum. But it didn’t come back as fast as I initially thought it would. And it’s been getting progressively stronger, particularly in the last year. That continues to this day. 

Household formations fall off a lot in recessions. People double up and move in with their in-laws, but eventually hormones win out. [laughter] And our population growth translates into new housing starts. Now, the one trend is people are moving more from living in single-family housing into rental. Sixty-two and a fraction percent now are in owner-occupied homes as opposed to rental. So there was more of an apartment development going on but now it’s translated to pretty good housing statistics, and we’re in a lot of areas that touch on that. We’re seeing a lot of strength there.

Tuesday, August 30, 2016

I still love reading books specially good political books



I’m going to turn 86 -- I don’t read as well as I used to in terms of speed or anything like that. You slow down some on that. My children used to say I was a book with legs. I like reading biographies ... I love reading good political books, starting with ‘The Making of the President’ back in 1960 [by Theodore White]. I can’t get enough of them. There’s just a huge pile next to this chair I sit in, and my wife claims that the books are breeding. At night while we’re sleeping, she says, these damn books breed.

Thursday, August 25, 2016

Newspaper business is in trouble

I still love newspapers. You’re talking to the last guy in the world. Someday you’ll come out and interview me, and you’ll see a guy with a landline phone, reading a print newspaper. [But]  newspapers are going to go downhill.

Most newspapers, the transition to the internet so far hasn’t worked in digital. The revenues don’t come in. There are a couple of exceptions for national newspapers -- The Wall Street Journal and The New York Times are in a different category. That doesn’t mean it necessarily works brilliantly for them, but they are a different business than a local newspaper. But local newspapers continue to decline at a very significant rate. And even with the economy improving, circulation goes down, advertising goes down, and it goes down in prosperous cities, it goes down in areas that are having urban troubles, it goes down in small towns – that’s what amazes me. A town of 10 or 20,000, where there’s no local TV station obviously, and really there’s nothing on the internet that tells you what’s going on in a town like that, but the circulation just goes down every month. And when circulation goes down, advertising is gonna go down, and what used to be a virtuous circle turns into a vicious circle.


Tuesday, August 23, 2016

I am more optimistic of human nature than before

On the Giving Pledge where Buffett with Bill Gates persuaded billionaires to give away half of their fortunes to charity

I would say it’s been far more successful than I originally expected. I hoped we’d get about 50 people [so far, there are more than 155 pledgers]. I’ve called lots and lots of people, most of whom we didn’t know prior, and we’ve asked a lot of people to pledge half or more of their net worth, and I’ve been surprised by how many we’ve gotten. There are now pledgers in 17 countries. I never envisioned it would go beyond the US. I’ve met some terrific people and overall it’s made me feel very good about human nature.

“Now, some say they couldn’t possibly give half of a billion dollars away and, as I’ve mentioned a couple times, I think I’m going to write a book on how to live on half a billion dollars! I feel they need all the help they could get if they get down to a half-billion [and consider that distressing]! But overall I feel better about human nature than I did before.”

Monday, August 22, 2016

Innovation and Productivity gains will continue to make America great

There’s two things that make it better: innovation and productivity, which are interlocked in certain ways. When you think of it, all of the products that you and I are using to make our lives better weren’t even around 30 years ago. It’s pretty extraordinary. 

And if you go back 100 years, every time I get in the dental chair, I think to myself, if this was 100 years ago, they’d be pouring whiskey down me and holding my arms. Now, I sit there and daydream about other stuff. So anything that improves experiences – what people want to do with the 24 hours in the day that they have. And secondly, what really counts is gains in productivity. If you go back 100 years … the farms around where I live here were producing 30 bushels of corn per acre. Now they’re producing 160 bushels of corn per acre. Well, that’s dramatic, and of course they take less people to do it as well, so, just up and down the line, you look at how many man-hours it takes to produce an auto now compared to 50 years ago. So, productivity – that’s the way the human race improves.

Thursday, August 18, 2016

Extremely proud of Dorris Buffett generosity with money and time

I’ve always said I like to give away money wholesale and she likes to give away money retail. Every individual to her is special. If she picks up a little kid who has dental problems, her reaction is: ‘What dentist can see that kid?’ If I pick up a kid, all I’m thinking is: ‘Who can I hand him off to before he pees!’ I mean, she is genuinely interested in a guy who’s had his pickup truck stolen or whatever it may be. Through no fault of their own, they’ve been handed a bum deal in their life. And I empathize with those people, but I’m not going to spend my days working with them. I’m too selfish for that, and I enjoy what I do.
Warren Buffett with his sister Dorris
My dad would have admired enormously what she’s doing. He would admire her more than what I’ve done — and I do, too. She gives money of her own and takes down her net worth every year by giving money away, and she really does want to die at zero. And on top of that, she gives all this time and energizes other people.

I have never done any philanthropy that has changed my way of living or my family’s, and Doris has. 

I’ve given up nothing. I mean, I gave away earlier this month $3 billion worth of stock. I made an annual distribution to a lot of foundations. That stock has no utility to me. None. It can’t make my life happier. It can’t make my physical condition better. It can’t entertain me and it can’t do anything for my children. Having those stock certificates going to someone else who can buy vaccines or maybe teach people how to use small plots of land better in Africa and open up educational opportunities allowing for women to plan their families has enormous facility to others but hasn’t taken anything away from me. No question it does a lot of good. But there are no wishes I’ve had in life that I’ve given up in order to help someone else. I’ve given away something that has no meaning.

But Doris is giving time, and time is the scarcest commodity. No matter who you are, you have 24 hours a day, and when you give time up you’re giving up something important. So if you were keeping a scorecard in life, you’d give her a higher score than me. If a person puts five or 10 dollars in the collection plate and that makes a difference whether they eat out or not, that’s giving something up. There’s nothing wrong with what I do, but if you’re judging the quality of our giving, Doris wins.

Wednesday, August 17, 2016

Todays children being born in the US are the luckiest ever so far

Humans have developed weapons that could wipe out all of humanity. 

Aside from the problem of weapons of mass destruction, which unfortunately is going to be with us forever, aside from that, the luckiest person born in history is the baby being born in the United States today.

It's an election year, and candidates can't stop speaking about our country's problems (which, of course, only they can solve),

As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history.

Tuesday, August 16, 2016

Warren Buffett buys more Apple shares

The Oracle of Omaha Warren Buffett upped his stake in Apple by 61% in the second quarter of this year 2016. Berkshire Hathaway filed documents indicating that it upped its shareholding in the tech giant to 15.8 million shares, up from 9.8 million in the first quarter of 2016. Although they have rallied over the last month, Apple’s share price during Buffett’s buying spree dropped 12%.

Walmart
Warren Buffett cut his number of shares in Wal-Mart Stores to 40.2 million shares from 55.2 million the prior quarter. Wal-Mart’s share price rose nearly 7% over that period.


Phillips 66
He also increased his bullish bet on oil prices going up in the longer term, raising his stake in oil company Phillips 66 to 78.8 million from 75.6 million. Phillips 66’s shares dropped 8% in the second quarter.

Suncor
However, he cut his interest in fracking, reducing his interest in Canadian oil sands group Suncor Energy to 22 million from around 30 million. Suncor’s shares were down 0.3% over the course of that period.

Wednesday, August 10, 2016

Donald Trump should release his tax returns

Donald Trump isn’t going to release his tax returns just because virtually every presidential candidate has done so since 1969 — but would he respond to Warren Buffett's request ?



At a Hillary Clinton event in Omaha, Nebraska, on Monday, Berkshire Hathaway chair Warren Buffett made Trump an offer — “an offer I hope he can’t refuse.” Last week, Trump campaign chair Paul Manafort said his boss will not be releasing his tax returns — though, “It has nothing to do with Russia, it has nothing to do with any country other than the United States and his normal tax auditing process.”

Trump often claims that he can’t release the documents because his taxes are under audit, but Buffett explained that’s yet another thing the candidate made up. “I’ve got news for him, I’m under audit, too. I would be delighted to meet him any time, any place before the election,” Buffett said.

“I’ll bring my tax return. He can bring his tax return. Nobody is going to arrest us. There are no rules against showing your tax returns and just let[ting] people ask questions about the items that are on there,” Buffett continued. “I will meet him in Omaha, or Mar-a-Lago, or he can pick the place.”

Monday, August 8, 2016

Closing of all CDS Credit Default Swap positions

Warren Buffett just took another step to simplify Berkshire Hathaway Inc.’s derivatives.

The company paid $195 million in July to wind down the last contract in which Omaha, Nebraska-based Berkshire provided protection against losses on bonds, according to a regulatory filing Friday that didn’t identify the counterparty. As of June 30, 2016 the maximum risk on that credit-default agreement was about $7.8 billion.

Buffett labeled derivatives “financial weapons of mass destruction” in 2003, but went ahead and entered a number of the contracts in the following years. The billionaire has argued that agreements he made were attractive because they gave him money up front that he could invest. Berkshire’s derivatives also differed from contracts that brought down other financial institutions during the 2008 credit crisis, because he had less onerous collateral requirements.

“That was a very interesting chapter for Berkshire and its shareholders and it looks like that chapter is winding down.” said David Rolfe, chief investment officer at Wedgewood Partners, a Berkshire investor that oversees about $7.8 billion.

Berkshire’s last credit derivative had such a long potential lifespan that it could’ve continued under the next chief executive officer. Buffett may have been thinking, “why even bother someone with that?” Rolfe said.

Buffett, 85, has told shareholders to look past the fluctuations from derivatives and focus instead on the underlying earnings for Berkshire’s dozens of businesses, from railroad BNSF to ice-cream chain Dairy Queen. On Friday, the company reported that operating earnings climbed 18 percent to $4.61 billion in the second quarter, driven by gains at insurance and manufacturing businesses.

The contract covered in the July agreement was written in 2008 and related to municipal debt issues with maturities from 2019 to 2054, according to regulatory filings. Buffett didn’t respond to a request for comment outside normal business hours.

For years, the billionaire has been winding down derivatives or letting them expire. In 2012, he struck a deal to terminate contracts linked to municipal bonds. Others tied to corporate debt expired the following year.

Concerns about derivatives holdings could prove inconvenient during market crises -- times when Berkshire has typically used its financial strength to seize opportunities and make lots of money.

“When you have to mark these contracts to market in a downturn like 2008, it gives the appearance that Berkshire’s fortress balance sheet is weakened,” said Richard Cook at Cook & Bynum Capital Management, which oversees about $350 million including Berkshire shares. “I would prefer Buffett to have as much flexibility as possible when the tide rolls out.”

Berkshire still has some derivatives tied to the performance of stock indexes. Potential liabilities on those agreements have narrowed in recent years as markets rallied. Liabilities on the equity index puts -- which expire between June 2018 and early 2026 -- stood at about $4.4 billion at the end of the second quarter.

Some of Berkshire’s energy businesses also use derivatives to hedge fuel costs. But Buffett has been downplaying the role the contracts will play at his company when he’s no longer around.

“I don’t think there’ll be much of a derivatives book” under a new CEO, he said at Berkshire’s annual shareholder meeting in 2012. “There are a few operating businesses that will have minor positions.”

Wednesday, August 3, 2016

How Warren Buffett used cashflow to get rich

Warren Buffett’s company Berkshire Hathaway (really just a legal entity that owns other companies) is a very unique business. And no, it’s not because “Warren Buffett buys cheap stocks, value stocks, Buffett’s a great guy blah blah blah”. It’s because of Warren Buffett’s investment model. Buffett’s true buy and hold strategy works something like this.

Start off with $200,000 in 1950 (Buffett’s dad was a Congressman in the 1940’s/50’s). Buy a company (let’s call it Company A). Use the cashflow from that Company A to buy shares in another attractive company (let’s call this Company B). Eventually have enough cash from Company A to buy all of Company B. Use the newly combined cashflow to buy shares in Company C. Eventually have enough cash from Company A and Company B to buy all of Company C. Repeat this process with Companies D, E, F, G, and so on.

Thus, Berkshire Hathaway is a Buy and Hold Machine. That’s why Buffett’s biography is called The Snowball. Your investments will snowball as you own more and more companies. The mechanisms of this investment strategy are real slick. The cash generated from businesses goes into investing in other businesses, which increases the cash flow, which allows for more businesses to be bought, which generates even larger cash flows. And the cycle repeats itself.

via modestmoney

Monday, August 1, 2016

Public company vs Private company

I've had an interesting transformation on that. I originally would have preferred that Berkshire Hathaway be a private company. And over the years, my view on that has changed 180 degrees. I enjoy being a public company now.

I like the fact that people put their trust in us, and we treat them like partners and they feel like partners.

Wednesday, July 27, 2016

Companies should be more transparent in reporting earnings

Earnings guidance can lead to a lot of malpractice. I've seen guidance produce some bad results.

There's a lot of attempts to find a couple extra pennies someplace. There are ways to move earnings toward the end of a quarter, and sometimes even after the end of a quarter. 

Report two real numbers; this year versus last year. 


Jamie Dimon of JP Morgan

Jamie gave me a call ... probably a little more than a year ago and suggested we get together and see if we could come together on some general principles for corporate governance that might help show a pathway to the future.

Monday, July 25, 2016

Warren Buffett drops to 4th place on the World Billionaires Index

Warren Buffett is now the fourth-richest person in the world.

According to the Bloomberg Billionaires Index, Amazon CEO Jeff Bezos surpassed Berkshire Hathaway’s Warren Buffett to snag the number three spot behind Spain’s Amancio Ortega, the founder of the clothing retailer Zara, and Bill Gates, co-founder of Microsoft, and the world’s richest person. Both are worth $73 billion and $89 billion, respectively.

Bezos’s net worth was $65.05 billion on Thursday, which topped Buffett by $32 million on the Bloomberg Billionaires Index. 

Wednesday, July 20, 2016

Warren Buffett donates $2.2 billion

Warren Buffett donated about $2.2 billion of stock in his annual gift to the Bill & Melinda Gates Foundation, betting that risk-takers at the group will make breakthroughs in global health and US education even as they acknowledge that some efforts will be unsuccessful.

According to Bill Gates, "Some of the projects we fund will fail. We not only accept that, we expect it — because we think an essential role of philanthropy is to make bets on promising solutions that governments and businesses can't afford to make. As we learn which bets pay off, we have to adjust our strategies and share the results so everyone can benefit."

Buffett, 85, contributed 15 million class B shares of his Berkshire Hathaway stock to the foundation on Wednesday, according to a regulatory filing on Thursday. He made a pledge in 2006 to hand over a total that equates to 500 million shares, and each year he gives 5 per cent of the remaining total. Through last year, he donated more than $17 billion of stock to the foundation.

The annual sums have often climbed because of gains in the share price. While he is known for looking for a margin of safety with Berkshire's investments and often faults himself when his stock wagers sour, Buffett is more tolerant of bets going bad in philanthropy.

"If you succeed in everything you're doing in charity, you're attempting things that are too easy," the Berkshire chairman and chief executive officer said in 2011.

The Gates Foundation has donated more than $36 billion, including for projects that expand access to immunisations in developing countries and provide financial services to poor communities.

Bill Gates, the 60-year-old co-founder of Microsoft, has acknowledged it's been more difficult to make advances in US education than in improving mortality rates for children. Buffett also donated 1.5 million shares on Wednesday to the Susan Thompson Buffett Foundation, which is named after his first wife, who died in 2004. His three children's foundations received 1.05 million shares each this week. 

Monday, July 18, 2016

BYD auto stock prices rise on interest from Samsung

Shares of BYD, the Chinese battery supplier and automobile manufacturer backed by Warren Buffett’s Berkshire Hathaway, rose by 5% to their best close in Hong Kong since June 2015 on hopes that talks on cooperation with Samsung will bear fruit.

BYD confirmed in a statement that Samsung was considering the purchase of a stake via a planned domestic “A-share” secondary offering. The South Korean electronics giant’s interest “is primarily based on its confidence in the Company’s development prospects in the long term and future strategic cooperation with the Company in relation to electric vehicle components,” BYD said.  “Going forward, the parties will jointly seize opportunities in the rapid development of the global electric vehicles industry and promote sustainable development of the parties’ electric vehicles related businesses.”

A switch to battery-powered vehicles from fossil fuels, the spread of self-driving cars, and expanding Internet connectivity is expected to reshape the auto industry in the coming decade, many auto industry executives in China believe.

BYD’s chairman Wang Chuan-fu has helped BYD to make a mark as a producer of electric and hybrid electric vehicles. It set up an electric bus manufacturing plant in southern California in 2014 and has a contract to supply electric buses to Los Angeles County. In the past 2 years, its electric buses or cars have gone into service from Montevideo to Jakarta.

Wang, who was China’s richest man with a fortune of $5.8 billion in 2009, was worth $5.5 billion on the Forbes Real-Time Billionaire’s List today. In 2008 Warren Buffett’s Berkshire Hathaway bought a 10% stake in BYD.

Wednesday, July 13, 2016

Warren Buffett buys more of IBM

Warren Buffett increased its stake in International Business Machines by 0.25% based on its latest 2016 Q1 filing. 

Berkshire Hathaway Inc bought 198,853 shares as the company’s stock rose 11.40% with the market. 

Berkshire held 81.23M shares of the computer manufacturing company at the end of 2016 Q1, valued at $12.30B, up from 81.03M at the end of the previous reported quarter. 

Monday, July 11, 2016

Berkshire made $150 million from loan to Harley Davidson

In 2009 during the market crisis, Berkshire Hathaway lent Wisconsin-based Harley-Davidson $303 million over five years by buying unsecured notes issued by the manufacturer — essentially, a loan. The maker of street bikes was in a cash crunch as the recession deepened.

The interest rate charged by Berkshire Chairman and Chief Executive Buffett was a juicy 15 percent. While the exact repayment terms and schedules aren’t known, on a yearly lump payment at a standard interest-and-principal paydown, the loan would have yielded Berkshire lending income of about $150 million when it was all over.

But what if Berkshire had insisted upon what Wall Street calls an “equity kicker”? That means shares in the company, maybe even preferred ones such as the ones Berkshire owns in Bank of America that come with a special dividend and the right to convert to common shares at an enormous profit on a later date.

While the prospect is worth considering, Buffett investors, scholars and stock market observers agree on one thing: Berkshire’s profit on the $300 million Harley-Davidson loan is high cotton.

“I do not believe Buffett is having any second thoughts in his arrangement with Harley-Davidson,” said David Kass, a Berkshire shareholder and business professor at the University of Maryland. “He is probably very pleased with his 15 percent loan, which he perceived as having very little risk.”

Thursday, July 7, 2016

Warren Buffett could increase his Wells Fargo Bank stake

Wells Fargo stock has dropped almost 15 percent this year, as large U.S. banks get pummeled by low interest rates and volatility related to lackluster oil prices, slowing Chinese growth and Brexit. Warren Buffett has often advised investors to "Be Greedy when others are Fearful". 

Now Buffett is potentially going to increase his stake in Wells Fargo. Berkshire has put in a request for the Federal Reserve approval to expand its stake in the San Francisco based Wells Fargo bank beyond 10%. Wells Fargo is already one of Buffett's four biggest equity holdings, and thanks to the bank's buybacks, his stake grew to 10% earlier this year, according to a March regulatory filing.

The requirement that investors seek Federal Reserve permission to to hold more than 10% of a financial institution is a provision of the Change in Bank Control Act, which is used by regulators to monitor activity between banks and non-financial institutions, and prevent acquisitions that might be harmful to customers or the general public.

"Berkshire is seeking permission to retain its current ownership position in Wells Fargo and to acquire additional shares of common stock of Wells Fargo," the Omaha, Neb.-based company said in an application to the Fed. "Berkshire does not have any specific transaction or dollar value in mind. And Berkshire does not have any present intention to acquire additional shares of common stock of Wells Fargo," according to the filing. The company said it nonetheless "routinely assesses market conditions and may decide to purchase additional shares," depending on the potential gain from such an investment.

Berkshire's application said that the company hasn't purchased stock in Wells Fargo since Oct. 21 and that it has no plans or proposals to merge, liquidate, or sell any portion of the bank or change its business strategy or corporate structure.


Tuesday, July 5, 2016

Warren Buffett almost never met Bill Gates

It was the summer of 1991 where a 35-year-old Bill Gates had an opportunity to meet the then 60 year old Warren Buffett. Bill Gates dismissed this opportunity initially describing Buffett as "some guy who moved money around for a living". Despite friends and family’s insistence, Gates wasn’t keen to drive a few hours to meet this Warren Buffett.

That friendship has changed the face of American philanthropy. Writing on his blog, Gates remembers his initial resistance and the phone conversation he had with his mother, Mary Gates, that changed his mind about meeting Buffett.

Gates writes:

    "In 1991, when my mother called me to come out to our vacation home on Hood Canal to meet a group of friends, including Warren, I didn’t want to go. I told her I was too busy at work. Warren would be interesting, my mother insisted. But I wasn’t convinced. “Look, he just buys and sells pieces of paper. That’s not real value added. I don’t think we’d have much in common,” I told her. Eventually, she persuaded me to go."

The Bill and Melinda Gates foundation now is an almost 40 billion endowment and Warren Buffett serves as a trustee.

Wednesday, June 29, 2016

Berkshire is poised for success whether its Trump or Clinton for president of USA

In my lifetime, GDP per capita in real terms has gone up six for one … I’m confident that 20 years from now there will be far more output per capita than there is now. No presidential candidate or president is going to end that. They can shape it in ways that are good or bad, but they can’t end it.

If either Donald Trump or Hillary Clinton becomes president, I think Berkshire will continue to do fine.

Buffett endorses Hillary Clinton

Monday, June 27, 2016

Warren Buffett making money in Canadian electric market

Two years ago, Buffett’s Berkshire Hathaway Inc. bought more than half of all the electric transmission lines crisscrossing Albertan farmland in a $3.2-billion acquisition of Calgary-based AltaLink LP from troubled SNC-Lavalin Group Inc., making Berkshire Hathaway the electricity transmission provider to 85 per cent of Albertans.

Electricity analysts in the province say that purchase, like many of Buffett’s deals, now looks brilliant. Electricity prices in the province have collapsed — from $49 per megawatt hour in 2014 to around $16 so far this year — but transmission prices have risen, and will continue to rise for at least the next five years.

“It’s got to be the sweetest deal around,” said Calgary-based electricity consultant Sheldon Fulton of Buffett’s business in Alberta, where controversial government regulations force consumers to pay 100 per cent of the cost to build new transmission lines while AltaLink — or its smaller competitors such as Atco Ltd., Enmax Corp. and Epcor Utilities Inc. — have a provincially set 8.75-per-cent after-tax return on their equity in the power lines.

Monday, June 20, 2016

Apple stake purchase done by Todd Combs or Ted Weschler

Berkshire Hathaway's purchase price of Apple Stock has now been revelaed as $99.49. That’s what Warren Buffett’s company paid, on average, to accumulate its stake in Apple, according to a recent regulatory filing.

The company purchased 9.81 million shares of Apple in the days through March 14 for about $976 million, The holding was initiated by one of Buffett’s investment managers, Todd Combs or Ted Weschler. Though the billionaire’s deputies may deviate from his well-known avoidance of technology stocks, they tend to follow his deeper ideas about investing, including buying stocks at prices where they believe there’s a “margin of safety” — or a buffer against losses.

Monday, June 13, 2016

Someone just agreed to par $3.4 million to have lunch with Warren Buffett

Billionaire Warren Buffett has again auctioned off a private lunch to raise money for a San Francisco homeless charity, and this time the meal goes to the highest bidder for $3.4 million.

The bid of $3,456,789 from the winner, who wishes to remain anonymous, ties for the record highest. In 2012, the winner also paid $3,456,789 to become the most expensive individual charity item ever sold on eBay.

“The one thing I will tell you, because we’re in this crowd: It’s a woman,” Buffett, the billionaire chairman of Berkshire Hathaway Inc, said at a United State of Women conference in Washington.


The winner and up to seven friends can dine with Buffett at the Smith & Wollensky steakhouse in midtown Manhattan.

The weeklong eBay auction began June 5 and wrapped up Friday night. By midmorning Friday, the bidding reached more than $2.6 million, nearly $300,000 higher than last year’s winning bid by Beijing-based Dalian Zeus Entertainment Co.

Six of the past eight winners paid more than $2 million to dine with Buffett, the investor who leads the Berkshire Hathaway conglomerate.

Buffett has raised more than $20 million for the Glide Foundation. The lunch auctions began after Buffett’s first wife, Susie, showed him Glide, where she had been volunteering. Susie Buffett died in 2004, but the connection between Warren Buffett and Glide’s founders has endured. Buffett has praised the foundation’s approach in providing meals, health care, job training, rehabilitation and housing support to the poor and homeless.


updated: June 20, 2016 to include the gender of the winner

Wednesday, June 8, 2016

Buy when everyone is selling and sell when everyone is buying

During the Depression, the Dow hit its low of 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980's, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Monday, June 6, 2016

Saving money for future

I have pledged – to you, the rating agencies and myself – to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.

Wednesday, June 1, 2016

Berkshire company buys precious metal company John Nordt

Richline Group, a jewelry company owned by Warren Buffett’s Berkshire Hathaway, made a second acquisition in less than a month with the purchase of a precious-metals company, John C. Nordt.

Nordt, a manufacturer for and supplier to the jewelry industry, was founded in 1872 in New York and has operated in Roanoke, Virginia, since 1984.

The deal, effective June 1, comes hot on the heels of Richline’s purchase of online jewelry seller Gemvara.

“Nordt is another important and strategic addition to our brands. The synergies between Nordt and our LeachGarner and Nobilis business units will accelerate our growth into the platinum-group metals industrial markets,” said Joe Esposito, Richline’s executive vice-president of manufacturing.


Monday, May 30, 2016

Spending more time thinking allows you to be more successful in the long run

Warren Buffett spends 80% of his time reading in a typical week. Asked for advice on how to get so smart, he held up a sheet of investing related documents and said, “Read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”

“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions, than most people in business.” 


Wednesday, May 25, 2016

Canada's Warren Buffett is betting big on stocks falling

If Warren Buffet and Charlie Munger are eternal optimists, Prem Watsa (Oracle of Canada) is steadfast in his bleakness. He famously made inspired and lucrative "big short" derivative bets against US housing in 2008 that netted the company billions. Daniel Acker

Toronto in time may become the next Omaha. For years, Prem Watsa, the chairman of Canadian insurance group Fairfax Financial, has been heralded as that nation's version of Warren Buffett.

Now he's on the back-foot as his ultra bearish bets drain billions in profits and blemish what was once a spectacular 30-year performance.

Watsa believes the current market is comparable to the time of the Great Depression when there was a false recovery in stocks that preceded another crash. He bought puts on the S&P 500 which so far have cost the company more than $US2 billion.

Watsa has had a large bet, again through derivatives, that a deflationary spiral will take hold in the major developed economies. The threat of deflation is alive and well and so far these contracts are only modestly profitable. They've cost around $US650 million yet may net a profit of more than $US100 billion.

Some investors are losing patience, but Watsa isn't budging. Watsa is also becoming increasingly disturbed about the run up in house prices in Canada's largest cities, a situation that is highly analogous to Australia.

"He couldn't believe that so many young people are mortgaging their future on these property prices. This is something Australia will have to deal with in the next 10 years," says Nathan Bell a value investor who visited Omaha to attend the recent Berkshire shareholder meeting. On the experience itself, Bell revealed his disappointment at the many wasted audience questions and the apparent refusal of Buffett to answer some of the tougher questions, such as an insight into his losing position in IBM.

"Everything else is working all right but as an investor you want to know what's not working," he says. The most interesting point to come out of the AGM, Bell says, was Buffett's admission that low interest rates are prompting him to pay more for some businesses. The $US37 billion he forked out for jet engine parts maker Precision Castparts was such a big amount because interest rates were so low.

This, Bell suggests, should make other investors recognize the reality of low interest rates which force investors to either take more risk than they otherwise would, or to place a higher premium on quality businesses when returns are harder to come by.

"A lot people think value investing is about buying a low P/E stock. But Buffett always says growth is just a part of value – they are joined at the hip."

The best proponents of "value investing" are constantly redefining the discipline. High flying tech stocks like Facebook and Google might look expensive, and therefore unappealing to value investors, but Bell says they are "coming around to how dominant these businesses are and how they can continue to grow".

"We may be in a situation where, rather than trying to pay 14 or 15 times for an average business, you may be better off paying 20 times for wonderful businesses."

Monday, May 23, 2016

Hedge Funds are losing to Index Funds

There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” Buffett said, citing a simple Vanguard Group index fund that tracks the S&P 500 index of large American companies. He said that fund has beat a group of costlier hedge funds over time.

“Now that may sound like a terrible result for hedge funds, but it’s not a terrible result for the hedge fund managers,” Buffett said to laughter at the event held in Omaha.

During the financial crisis, Buffett bet the asset management company Protege Partners $1 million that the S&P 500 will outperform a portfolio of hedge funds over the 10 years through 2017. Buffett said Saturday the index fund is beating the hedge funds by nearly 44 percentage points over 8 years.

It is not the first time Buffett has delivered the message. In his annual letter to shareholders two years ago, Buffett said he has ordered most of the money he is not giving away at his death to be placed in an index fund.

“You just have to sit back and let American industry do its job for you,” Buffett said.

Buffett said the cost of consulting and management fees, as well as commissions, eat up investment returns for the wealthy individuals, endowment funds and public pensions that use hedge funds.

Vice Chairman Charlie Munger, who was seated next to Buffett, offered that some people who have given their savings to Berkshire and some other investors have done well. But, he said, finding such investors is “like looking for a needle in a haystack.”

Wednesday, May 18, 2016

Dan Gilbert is bidding for Yahoo and how it is linked to Berkshire

Warren Buffett could finance fellow billionaire Dan Gilbert's bid to buy Yahoo, but Buffett said he's not planning to be an equity partner in the deal, according to CNBC.
Yahoo CEO Mayer
"I'm an enormous admirer of Dan and what he has accomplished in Quicken Loans,” Buffett told CNBC, the cable network reported today. ”Yahoo is not the type of thing I'd ever be an equity partner in. I don't know the business and wouldn't know how to evaluate it, but if Dan needed financing, with proper terms and protections, we would be a possible financing help."


Reuters today reported that Gilbert and Buffett are among investors vying for Yahoo's Internet assets. And the Financial Times reported a letter co-signed by Buffett and Gilbert expressed interest in the internet group and said Buffett's company, Berkshire Hathaway, was ready to provide debt financing for the deal.


The group of investors is in the second round of bidding in an auction of Yahoo's assets, according to Reuters and Bloomberg News.


Monday, May 16, 2016

Warren Buffett buys APPLE shares


Warren Buffett’s Berkshire Hathaway Inc. took a new stake in Apple Inc. in the first quarter, a move that comes as the technology giant’s shares have been battered amid a slowdown in iPhone sales.

The legendary investor’s firm reported owning 9.81 million shares of Apple  as of March 31, 2016 valued at approximately $1.07 billion. 

Berkshire acquired its position at an average price of about $109 a share. It's worth noting, though, that Buffett's position in Apple is still relatively small compared to Berkshire's top holdings- most notably Kraft Heinz, Wells Fargo, Coca-Cola, IBM, American Express and Phillips 66. 

Berkshire, which for years had avoided technology stocks, also increased its position in International Business Machines Corp. IBM, +0.53%  by 198,853 shares. He first bought IBM stock in 2011, making an investment worth more than $10 billion.

Wednesday, May 4, 2016

America is already great | Donald Trump is wrong on that

There's no need to 'make America great again.' America is greater than it's ever been. This country works. And it works in a way that blows the mind. In the 20th century, the Dow went from 16 to 11,400. And we had two World Wars and a Great Depression. And we're just starting. Your children are going to live better than you if we elect three bad presidents in a row.


Monday, May 2, 2016

DOW would rocket up to 100,000 if the Fed has zero interest rates for an extended period of time

If the government absolutely said interest rates are going to be zero for 50 years, the Dow would be at 100,000. 

If you had zero interest rates and you knew you were going to have them forever, stocks should sell at, you know, 100 times earnings or 200 times earnings. 


Monday, April 18, 2016

Warren Buffett invests in Wind Turbines

Warren Buffett's MidAmerican Energy company sets its sight to a $3.6 billion investment that would usher in more wind turbines to supply renewable energy in the State of Iowa.

MidAmerican Energy announced its plans to provide 1,000 wind turbines that could supply 2,000 megawatts of renewable energy in Iowa. This plan makes it the biggest economic development project in the state. 

The Wind XI could dominate the Alta Wind Energy Center, the current largest wind farm in the United States. 

"We don't know of another U.S. energy provider that has staked out this 100 percent position. Our customers want more renewable energy, and we couldn't agree more," said Bill Fehrman, president and CEO of the company.

Fehrman added that this investment will provide the State of Iowa a cleaner, 100 percent renewable energy, which is equivalent to 85 per cent of annual client sales.

Along with Fehrman is Iowa Governor Terry Branstad who praised the company's plan on wind farm.

"[Wind XI] puts Iowa on track to be the first state in the nation to generate more than 40 percent of its energy needs from wind power - far ahead of any other state. Today, Iowa is the only state to have crossed the 30 percent mark," said Branstad.

The wind farm will be complete without any additional cost on Iowa's citizens. The capital is said to be recouped from the 10-year tax incentives.

Negotiations are still ongoing to where the plant will stand. According to Fehrman, if the project gets is approval from the board by fall, the construction will begin in 2017, aiming to complete the majority of the project by 2018.

This is not the first time that the MidAmercan Energy company stored a wind farm in Iowa. In 2004, they had already built a facility producing 3,450 megawatts of energy.

The MidAmerican energy company is currently supplying the 752,000 users in four midwestern states.

Monday, April 4, 2016

Class warfare helping the rich and hurting the average person in USA

When US companies move their operations overseas to reduce their US taxes, it means the people who remain and don’t have overseas offices, such as voters, either need to pay more taxes to make up for the lost revenue or they have to accept less government. The practical result is a declining educational system, failing roads plus plans to reduce Social Security payments and cut health benefits.


“There’s been class warfare going on for the last 20 years, and my class has won. We’re the ones that have gotten our tax rates reduced dramatically.” 
- Warren Buffett

Monday, March 28, 2016

Sometimes even sound investing ideas can lead to big troubles

My former boss, Ben Graham, made an observation 50 or so years ago to me that it really stuck in my mind and now I've seen evidence of it.

He said, 'You can get in a whole lot more trouble in investing with a sound premise than with a false premise.'

If you have some premise that the moon is made of green cheese or something, it's ridiculous on its face. If you come out with a premise that common stocks have done better than bonds, [it] became the underlying bulwark for the [1928-1929] bubble. People thought stocks were starting to be wonderful and they forgot the limitations of the original premise. So after a while, the original premise, which becomes sort of the impetus for what later turns out to be a bubble is forgotten and the price action takes over.

Now, we saw the same thing in housing. It’s a totally sound premise that houses will become worth more over time because the dollar becomes worth less.

And since 66% or 67% of the people want to own their own home and because you can borrow money on it and you're dreaming of buying a home, if you really believe that houses are going to go up in value, you buy one as soon as you can. And that’s a very sound premise. It’s related, of course, though, to houses selling at something like replacement price and not far outstripping inflation.

So this sound premise that it’s a good idea to buy a house this year because it’s probably going to cost more next year and you’re going to want a home, and the fact that you can finance it gets distorted over time if housing prices are going up 10 percent a year and inflation is a couple percent a year. Soon the price action – or at some point the price action takes over, and you want to buy three houses and five houses and you want to buy it with nothing down and you want to agree to payments that you can’t make and all of that sort of thing, because it doesn’t make any difference: It’ s going to be worth more next year.

And lender feels the same way. It really doesn’t make a difference if it’s a liar’s loan or you know what I mean? Because even if they have to take it over, it's going to be worth more next year. And once that gathers momentum and it gets reinforced by price action and the original premise is forgotten, which it was in 1929.

The Internet was the same thing. The Internet was going to change our lives. But it didn't mean that every company was worth $50 billion that could dream up a prospectus.

And the price action becomes so important to people that it takes over the — it takes over their minds, and because housing was the largest single asset, around $22 trillion or something like that, not above household wealth of $50 trillion or $60 trillion or something like that in the United States. Such a huge asset. So understandable to the public – they might not understand stocks, they might not understand tulip bulbs, but they understood houses and they wanted to buy one anyway and the financing, and you could leverage up to the sky, it created a bubble like we’ve never seen."

Monday, March 21, 2016

Warren Buffett on Investing vs Speculating or Gambling

Speculation, I would define as much more focused on the price action of the stock, particularly that you, or the index future, or something of the sort. Because you are not really — you are counting on — for whatever factors, because you think quarterly earnings are going to be up or it's going to split, or whatever it may be, or increase the dividend — but you are not looking to the asset itself.

When I buy a stock, I don't care if they close the stock market tomorrow for a couple of years because I'm looking to the business — Coca-Cola, or whatever it may be — to produce returns for me in the future from the business.

Now, if I care if whether the stock market is soap tomorrow, then to some extent I'm speculating because I'm thinking about whether the price is going to go up tomorrow or not. I don't know whether the price is going to go up.




Tuesday, March 15, 2016

Warren Buffett likes his Dayang suits

Warren Buffett loves his 'Made in China' suits. Dayang has long been patronised by Warren Buffett, who professed in 2009 that all his suits were made in China. His love of Dayang began in 2007 during a visit to the country. So impressed was he with their custom-made suits that he threw out "all his other suits", which included some from Italian fashion house Ermenegildo Zegna. Buffett, who prefers single-breasted suits, once revealed in an interview that he likes Dayang suits because they don't "crease and, you could wear them day after day and they look like they just came back from the cleaners".

Monday, March 14, 2016

Warren Buffett company Dairy Queen adding more locations in Massachusetts

DQ lovers in Massachusetts may rejoice, because Dairy Queen, the brand with the homespun image, is expanding in the MA and Boston market.

The company, owned by Warren Buffett’s Berkshire Hathaway Inc., said it will add 60 franchises to its repertoire of 33 in Massachusetts over the next five years, part of a US expansion effort that will build dozens of new “quick-service restaurants” in a state that loves its dairy.

“We go where the consumers want our products,” said Jim Kerr, a vice president at International Dairy Queen, based in Minneapolis. “I think it’s safe to say, there’s going to be a blizzard of Dairy Queens there.”