Retrieved May 6, One Minute Romantic Night Tour for Two People Amazon Video Jewely Video Distribution Made Easy. I think a number of auditors believed it should be a cost but their clients pressured them and caved, and then Congress got called in. I want to do the work and estimate a value for the stock and then compare that to the current offering price. Yes No Report abuse See all verified purchase reviews newest first Write a customer review.




The best buys have been when the numbers almost tell you not to. Because then you feel so strongly about the product. And not just the fact you are getting a used cigar butt cheap. Then it is compelling. I owned a windmill company at one time. Windmills are cigar butts, believe me. I bought it very cheap, I bought it at a third of working capital. And we made money out of it, but there is no repetitive money to be made on it. There is a one-time profit in something like that. And it is just not the thing to be doing.

I went through that phase. I bought streetcar companies and all kinds of things. In terms of the qualitative, I probably understand the qualitative the moment I get the phone call. Almost every business we have bought has taken five or ten minutes in terms of analysis. We bought two businesses this year. I have never been buvfett their home office. I hope it is there. I have never been there. Before I bought Executive Jet, which is fractional ownership of jets, before I bought it, I had never been there.

I bought my family a quarter interest in the program three years earlier. And Bufeftt have seen the service and it seems to develop well. And I got the numbers. That is the key. It is defining your circle of competence. Everybody has got a different circle of competence. The important thing is not how big the circle is, the important thing is the size of the circle; the important thing is staying inside the circle.

And if that circle only has 30 companies in it out of s on the big board, as long as you know which 30 they are, you will be OK. Everytime I was interested in an industry, say it was jeelry, I would go around and see every coal company. You piece those things together, you learn about the business after awhile. Funny, you jewwelry very similar answers as long as you ask about competitors. If you had a silver bullet and you could put it through the head of one competitor, which competitor and why?

You will find who the best guy is in the industry. So there are a lot of things you can learn about a business. There are not a lot of great insights to get of the sort as you go along. So you do get a database in your head. I had a guy, Frank Rooney, who ran Melville for many years; his father-in-law died and had owned H. Brown, a shoe company. And he put it up with Goldman Sachs. But I knew Frank, and I knew the business. I sort of knew the basic economics of the shoe business, so I could buy it.

Quantitatively, I have to decide what the price is. But, you know, that is either yes or no. If they name a price that makes sense to me, I buy it. We're so limited now because we can only go into very big companies. Charlie and I are probably familiar with buffett sold put options jewelry company in the United States--in a general way--that we can have the kind of position we would need to have [to make a difference in Berkshire Hathaway's performance].

We look for the newelry where we think we pkt what they're going to look jewellry in 10 years. If the price gets attractive and we know a little about the management, and we're quite sure--within a range--what they're going to look like in 10 years, we're in our area. We buy them when the prices are right, like Coca-Cola was some years back. Charlie and I are competent to make judgments on certain things, and not other things. We try to focus on what we can understand, which is a reasonable amount.

In the summer to mid-fall ofwhen junk bonds bufftt very attractive, we bought a lot. Charlie and I do not have a checklist to prioritize categories. I hope he gets a good idea, he hopes I have one and if we find one, then we move, hopefully in a big way. It has to be big. WB: Very very good question. I started out not knowing anything about valuing companies. Ben Graham taught me a way to value certain type of business, but the selection of available companies dried up.

Charlie taught me about durable competitive advantage. Not how big circle of competence is, but knowing where the edges are is most important. Think about businesses in your own home town. Buffett sold put options jewelry questions about the businesses. Which do you want to buy into, which are hard to compete with, talk about businesses with people. What is working, what is not? You have to ask. You would be surprised at how many companies I know nothing about.

The goal is to find companies that will be around for 20 years and offer a margin of safety. You have to recognize your limitations to be successful in this business. I bought 20 and diversified. CM: Obviously if you want to get good at something which is competitive, you have to think about it and practice a lot. You have to go to bed wiser than you got up. As you try to master what you are trying to do — people who do that almost never fail utterly.

Very few have ever failed with that approach. You may rise slowly, but you are sure to rise. CM: I never took a business class, except accounting. When I was a boy, there was a man who came to the club every day at am. I asked my dad about him — he had bkffett a good life! Many businesses are sold under distress. Life is hard to get near top, and hard to hold position once attained. I think you could predict that Kiewits would win, they cared more. I would not have bet on anyone else.

If you have that temperament, you will gradually learn. WB: Avoiding the dumb things is the most important. Learn more, know limitations, avoid the dumb things. He was incapable of thinking about a business without noticing the fundamental economics. CM: I had a client who sold a Caterpillar dealership business jewe,ry a huffett price to an oil business. The oil business had consultants and a concept and a strategy!

We look for people who have a passion for their business. We frequently buy businesses the owners still manage, where they are monetizing a lifetime of work. We just try not to kill or dampen their love for their business. We also look for three things: intelligence, energy and integrity. Gillette, the oil companies, etc. We think that having lots of Executive Vice Presidents, directives from headquarters, centralized Human Resources etc.

The successor to me will come from Berkshire, knows our system, has seen that it works, and will be surrounded by people who believe in it. I described the Business Wire acquisition in the annual report. Daily forex trading signals email got a letter from Cathy [Baron Tamraz, CEO of Business Wire]. I get books occasionally and the projections are just plain silly.

The calls we want to get are from people who care about their business, who for tax or family-ownership reasons want to sell to us. We talk about welcoming partners. The guy doing deals, he wants to do a deal and then unwind it in the near future. We like to build lasting relationships. I think our system will work better in the long term than flipping deals. We see that solx the time. They invariably try to sell it quickly to a strategic buyer, which is another way of saying someone who pays too much.

Our first preference has always been to buy outstanding operating businesses outright. We've made money in stocks, especially in the s, but the climate is not so favorable now. There are enough uewelry that meet our criteria to do two acquisitions per year on average. We haven't had much luck buying businesses overseas, but that's because our phone hasn't rung. We're not on the radar screen, but we're hoping this will change.

Our best source of deals is word of mouth, generally in industries we're invested in. It says something very important about how much they care about their business, their customers and their employees. We don't like the term "deal flow" because we don't view them [businesses we might buy] as deals. We look at deals a few times a year.

In the US, we get a pretty reasonable percentage of the calls we should get. We didn't get those calls years ago because we weren't as well known. It feeds on itself. If we acquire companies and people say good things, we'll hear from more. We acquired one furniture company, which led to four more. It's like a snowball. By being around 38 years, it's been a high mountain [and Berkshire is now a] big snowball and attracts a lot of snow.

I don't hear about one [deal] a week or even a month. But most we want to hear about, we get a good percentage of the calls. It would be a plus [if we were to see more deals] outside this country. This was not the case at all for us -- we scrounged around for companies to buy. For 20 years, bbuffett didn't buy more than one or two per year.

When we bought National Indemnity, it was a big deal for us. We hope there's a lot of mountain left and a lot of buffett sold put options jewelry snow. First, you need two piles. You have to segregate businesses you can understand buffwtt reasonably predict from those you don't understand and can't reasonably predict. An example is chewing gum versus software. You also have to recognize what you can and cannot know.

Put everything you can't understand or that is difficult to predict in one pile. That is the too-hard pile. Once you know the other pile, then it's important to read a lot, learn about the industries, get background information, etc. Read a lot o;tions 10Ks and Qs, etc. Read about the competitors. I don't want to know the price of the stock prior to my analysis. I want to do the work and estimate a value for the stock and then compare that to the current offering price.

If I know the price in advance it may influence my analysis. They sell based on what they've sold in the past. Bonds are much more rational. No-one thinks a bond's value will soar to the moon. Their put option long stock xon would go up and they would create their own constituency.

There's a lot to absorb over time. The guy who plays chess blindfolded [a chess master comes to Omaha during Berkshire's annual meeting weekend and, in an exhibition, plays multiple players blindfolded] -- he has a knowledge of option board, which allows him to do this. You'd also hate to give up the Buffalo News [which Berkshire owns]. The New York Times has a much better business section than it had 25 years ago.

I don't read any analyst reports. If I read one, it's because the funny buffett sold put options jewelry weren't available. I don't know why anyone buffett sold put options jewelry it. The beauty of valuing large companies is that it is cumulative. If you started doing it 40 or so years ago, jeaelry really got a working knowledge of an awful lot of businesses. There aren't that many, to start with. What are there, 75 or so important industries?

You get to understand how they all operate, and you don't have to start over again every day, and you don't have to consult a computer or anything like that. So, it has the advantage of the accumulation of useful information over time. Why did we decide to buy Coca-Cola in ? Well, it may have been because of a couple of small, incremental bits of information, but that came into a optlons that had been accumulated over decades.

That's why we like businesses that don't change very much. They ought to think about what he or she understands. Let's just say they were going to put their whole family's net worth in a single business. Would that be a pit they would consider? Or would they say, "Gee, I don't know enough about that business to go into it? It's buying a piece of a business. If they were going to buy into a local service station or convenience store, what would they think about?

They would think about the competition, the competitive position both of the industry and the specific location, the person they have running it and all that. There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.

So if they're walking through the mall and they see a store they like, or buffett sold put options jewelry they happen to like Nike shoes for example, these would be great places to start? Instead of doing a computer screen and narrowing it down? A computer screen doesn't tell you anything. If there are certain businesses in that mall they think they understand and they're public companies, and they can learn more and more about them We used to talk to competitors.

To understand Coca-Cola, I have to understand Pepsi, RC, Dr. Cott is the one you have to understand more than anything else. You need to fill your mind with various competing thoughts and decide which make sense. Then you have to jump in the water — take a small amount of money and do it yourself. Investing on paper is like reading nuffett romance novel vs.

The earlier you start, the better. I remain big on reading everything in sight. And when you get the opportunity to meet someone like Lorimer Davidson, as I did, jump at it. I probably learned more in that four hours than in almost any course in college or business school. Munger: Sandy Gottesman, a Berkshire director, runs a large, successful investment firm. Notice his employment practices. We just kept optiions. We knew during the Long Term Capital Management crisis that there would be a lot of opportunities, so we just had to read and think eight to ten hours a day.

We needed a reservoir of experience. Buffett: You should do well in games with few other players. The RTC [Resolution Trust Corporation] was a great example of a chance to make a lot of money. Here was a seller [government bureaucrats] with hundreds of billions of dollars of real estate and no money in the game, who wanted to wrap up quickly, while many buyers had no money and had been burned.

They were affected in a significant way by Charlie and Phil Fisher in terms of looking at better businesses. Buffett sold put options jewelry need an intellectual framework, which you can get mostly from The Intelligent Investor. Then, think about businesses you can get your mind around if you really work at it. Then, you will do well if you have the right temperament.

Warren has learned a lot. The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive than investing in foreign currencies. When I was seven years old, I first took jewelty interest in stocks. When I was 11, I bought my first stock — three shares. I was following charts. When I was 19, I read The Intelligent Investor and it changed my whole framework.

My advice is to read a lot. There are no secrets in the business that only the priesthood knows. Look for opportunities that fit your framework. Once you have the facts, you have to think about what they mean. There are many things that are important but now knowable, like [whether there ;ut be] a nuclear attack tomorrow. As Ben Graham said in chapter 8 of The Intelligent Investor: The market is there to serve you, not instruct you. If it does something silly, it gives you a chance to do something.

It just sets prices. And the nice thing is that the prices will be different. During the Long-Term Capital Management crisis, we were getting calls on Sunday from people. By optionss way, you can make a lot of money on calls on Sunday — that means things are really screwed up. At that time, there was [an unprecedented] 30 basis point spread between on- versus off-the-run year Treasuries. All you have to do [in such situations] is make sure you can play out your hand under all circumstances.

Maybe for a small investor, continuous investment in index funds might work - but not for us. Investors have to remember: corporate profits are going up, but stocks are going up buvfett. How can that continue indefinitely? How can you get anything more out of a farm than what it grows? I bought into an airline [US Air] with high seat-mile costs of 12 cents. It was protected, but that was before Southwest showed up with solc costs.

We have good businesses, deal from strength, always have a loaded gun and have the right managers and people and an owner-oriented culture. Munger: We learned about foreign labor competition in our shoe business. You should be able to learn not to pee on an electrified fence without actually trying it. Investment data are optiins more conveniently and faster today. But the behavior of investors will not be more intelligent than in the past, despite all this. How people react will not change solr buffett sold put options jewelry psychological makeup stays constant.

You need to divorce your mind from the crowd. The herd mentality causes all these IQ's to become paralyzed. I don't think investors buffett sold put options jewelry now acting more intelligently, despite the intelligence. Smart doesn't always equal rational. To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible. Do you think Ponzi was crazy? The tech and telecom madness that existed just 6 years ago is right up there with the craziest mania's that have ever happened.

Huge training in capital management didn't bufett. Take Long Term Capital Management. They had 's of millions of their own money, and had all of that experience. The list included Nobel Prize winners. They probably had the highest IQ of any people working together in the country, yet the place sodl blew up. It went to zero in a matter of days. Mt4 trading software for institutions can people who are rich and no longer need more money do such foolish things?

Don't put your money in all at once; do it over a period of time. I recommend Osld Bogle's books -- any investor in funds should read them. They have all you need to know. But stock brokers, in toto, will do so poorly that the index fund will do compute public path options nasdaq. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the s.

I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. No, I know I could. It subscribed to Moody's industrial manual, banks and finance manual and public utilities manual. I went through all optiojs page by page. I found a little company called Genesee Valley Gas near Rochester.

It had 22, shares out. I found Western Insurance in Fort Scott, Kansas. The price range in Moody's financial manual I ran an ad in the Fort Scott paper to buy that stock. I found the Union Street Railway, in New Bedford, a bus company. Within 5 or 6 hours, twenty stocks selling at 2 or 3x earnings with strong balance sheets were identified. Korea rebuilt itself in a big way post The strategy was to buy the securities of twenty companies thereby spreading the risk that some of the companies will be run by crooks.

As Buffett says, ''You'll seldom see such a percentage anywhere, let alone at large, diversified companies with nominal leverage. You are underestimating quality. We listened to the criticism and changed our mind. This is a good lesson for anyone: the ability to take criticism constructively and learn from it. If you take the indirect lessons we learned from See's, you could say Berkshire was built on constructive criticism.

Now we don't want any optiosn today. Charlie emphasized quality [of a business] much more than I did initially. He had a different background. It makes more sense to buffett sold put options jewelry a wonderful business at a fair price. We've changed over the years in this direction. It's not hard to watch businesses over 50 years and learn where the big money can be made.

Even when you get a new important idea, the old ideas are still there. Bugfett wasn't a strong line of demarcation when we moved from cigar butts to wonderful businesses. But over time, we moved. We started out this snowball at the top of a very long hill. My advice is either start very early or live very long. Staying rational newelry significantly underspending your income helps, too.

And, working with far less capital, our investment universe would be far broader than it is currently. Charlie started out in real-estate development because with only a little capital, brain power and energy, you could magnify the returns in real estate unlike in other sectors. Munger: You should find something to invest in sol then compare everything else against that. You can earn very high returns with very small amounts of money.

You have to find your passion in life. I would choose the same job. It is a terrible mistake to sleepwalk through buffett sold put options jewelry life. My dad had a business with [investment] books on buffett sold put options jewelry shelves, and they turned me on. This was before Playboy. If you have obligations, you have to deal with realities. I tell students to go work for an organization you admire or an individual you admire, which usually means that most MBAs I meet become self-employed.

I never asked my salary. Get the right spouse. Charlie talks about the man who forexpf ru chart usd rub forex twenty years looking for the perfect optiona and found her. Unfortunately, she was looking for the perfect man. If you are lucky, you will be happy and as a result, you will behave better. It makes it easier.

If Warren had gone into ballet, no one would have heard of him. WB: If I were working with small sums of money, it would open up thousands of possibilities. We have found very mispriced bonds. We found them in Korea a few jewelrh ago. You could make big returns but had to be of small size. I had a friend who used to buy tax liens. How many positions would you hold, and what kind of turnover would you have? Cost has nothing to do with it.

We look at price and think about what something is worth. Keep it in the few you know. Solf fact, we are still earning those types of returns on some of our smaller jewdlry. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today's environment because information is easier to access.

You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map - way off the map. You may find local companies that have nothing wrong with them at all. I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them. No one will tell you about these buffett sold put options jewelry, you have to find them. The answer is still yes today that you can still earn extraordinary returns on smaller amounts of capital.

For example, I wouldn't have had to buy issue after issue of different high yield bonds. Having a lot of money to invest forced Berkshire to buy those that were less attractive. With less capital, I could have put all my money into the most attractive issues and really creamed it. I know more about business and investing today, but my returns have continued to decline since the 50's. Money gets to be an anchor on performance.

At Berkshire's size, there would be no more than common stocks in the world that we could invest in if we were running a mutual fund or some other kind of investment business. Attractive opportunities come from observing human behavior. Inpeople behaved like frightened cavemen referring to the Long Term Capital Management meltdown. People make their own opportunities. The point is I got rich looking for stock with strong earnings. Human behavior allows for success if you are able to detach yourself emotionally.

InI got out of school at 20 years old. I recently bought a copy of the Moody off of Amazon. A couple of years ago I got this investment guide on Korean stocks. I began looking through it. It felt like all over again. Look here at this company It earned 12, won previously. It currently had a book value ofwon and was earning 18, won.

It had traded as high as 43, and as low as 35, won. At the time, the current price was 40, or 2 times earnings. In 4 hours I had found 20 companies like this. The point is nobody is going to tell you about these companies. There are no broker reports on Dae Han Flour Company. When you invest like this, you will make money. Sure 1 or 2 companies may turn out to solx poor buffett sold put options jewelry, but the others will more than make up for any losses.

Not all of them will be good, but some optionw and those will jewlery you rich. These opportunities jewelty be there in the next 30 years. The Wall Street analysts are brilliant people; they are better at math, but we know more about human nature. I know more about human nature; these were MIT grads, really smart guys, and they almost toppled the system with their highly leveraged trading. I was misquoted in that article. I get together with about 60 people every couple years and get their expectations of returns.

There is no better way to make managers understand how valuable capital is than to charge them for it. The amount charged to them can depend on elements such as the history of the subsidiary and the level of interest rates, and has varied from 14 to 20 percent at times. If you've got two suitors who are eager to have you, but one is way better than the other, you're going to choose that one rather than ophions other.

That's the way we filter stock buying opportunities. Our ideas are so simple. People keep asking us for mysteries, but all we have are the most elementary ideas. I'm sure people regard me and Charlie as very arbitrary--in the middle of the first sentence, we'll say, "We appreciate the call, but we're not interested. We can sometimes tell by who we're dealing with, whether a deal is ever going to work out or not. I mean, if there's an auction going on, we have no interest in talking about it.

If someone is interested in doing that with their business, then they're going to want to sit down and renegotiate everything with us all over again after the deal is done We don't want to listen to stories all day, and we don't need brokerage reports. There's other things to do with your time. And there are signs, like flags, waving over the awful people. And generally speaking, those people are to be avoided. In regards to the financial information and the business overall what factors do you look at?

What will it look like in years? We invest within our circle of competence. Coke has increased per capita consumption every year it has been in existence. Filter bufett — Does the business have a durable competitive advantage? I will buy soft drinks and chewing gum. This is why I bought Gillette and Coke. Since we have made no change in the marketing, process etc.

You have to look at the brand as a promise to the customer that we are going to offer the quality and service that is expected. We link the product with happiness. We are at the Thanksgiving Day Parades though. Well, it depends whether they are going to be an active investor. Graham distinguished between the defensive and the enterprising and that. So if you are going to spend a lot of time on investment, you know I just advise looking at as many things as possible and you will find some bargains.

And when you find them, you have to act. It doesn't -- it hasn't changed at all since I was here in And it won't change the rest of my life. You start turning pages. When I got optiobs of school, I turned every page in Moody's 10,some pages twice, looking for companies. And you have to find them yourself. The world isn't going to tell you about great deals. You have to find them yourself. And that takes a fair amount of time.

So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over buffett sold put options jewelry long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don't look like you are overburdened with cash anyway. Cash is going buffett become worth less over time.

But good businesses are going to become worth more over time. And you don't buffett sold put options jewelry to pay too much for them so you have to have some discipline about what you pay. But bhffett thing to do is find a good business and stick with it. You had always kept the cash word around, pptions. We always keep enough cash around so I feel very comfortable and don't worry about sleeping at night. But it's not because I like cash buffett sold put options jewelry an investment.

Cash is a bad investment over time. But you always want to have enough so that nobody else can determine your future essentially. The worst -- the financial panic is behind us. The economic spillout which came to optione extent from that financial panic is still with us. I don't know if it will end tomorrow or next week or next month. Or maybe a year. But it won't go on forever.

And to sit around and try and pick the bottom, people were trying to do that last March and the bottom hadn't come in unemployment and the bottom hadn't come in business but the bottom had come in stocks. Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow. We're not positioning ourselves. We just try to do smart things every day, and if there's nothing smart, then we sit on cash. Well, good things would have happened with following either party.

Graham obviously had more influence on me than Phil. I worked for Ben, I went to school under him, and his three basic ideas: look at stocks as businesses; have a proper attitude toward the market; and operate with a margin of safety--they all come straight from Graham. Phil Fisher opened my eyes a little more toward trying to find buffettt wonderful business. Charlie did more of that than Phil did, but Phil was espousing that entirely, and I read his books in the early 60s. Phil's still alive, and I owe Phil a lot, but Ben was one of a kind.

That's the natural outcome--as Milton said, "If I've seen a little farther than other men, it's by standing on the shoulders of giants. No doubt somebody will come along and do a lot better than we have. With Ben it really was incidental, at least by the time I knew him. The process, the whole game, didn't interest him more than a dozen other things may have interested him. With me, I just find it interesting, and therefore I've spent a much higher percentage of my timing thinking about investing, and thinking about businesses.

I probably know way more about businesses than Ben ever did. He had other things that interested buffett sold put options jewelry. I pursued the game quite a bit differently than he did, and therefore comparing buffett sold put options jewelry record is not proper. You buffett sold put options jewelry need another Ben Graham. You don't need another Moses. There were only Ten Commandments; we're still waiting for the eleventh.

His investing philosophy is still alive and well. There are disciples of him around, but all we are doing is parroting. I did read Phil Fisher later bufeftt, which showed the more qualitative aspects of businesses. Common stocks are part of a business. Markets are there to serve you, not to instruct you. You can often find a couple of companies that are out of line.

Find one; get rich. Most people think that what the stock does from day to day contains information, but it doesn't. It isn't just something that wiggles around. The stock market is the best game in the world. You can take advantage ;ut people who have no morals. Businesses don't change in value that much. That is simply crazy. There are extreme degrees of fluctuation, and Mr. Market will call out the prices. Wait until he is nutty in one direction or the other.

Put in a margin of safety. Don't find a bridge that says no more than 10, pounds when you have a pound vehicle. It isn't buffetf function of IQ, sopd receptivity of the mind. When investing you don't have to invest in all 10, companies available, you just have to find the one that is out of line. Market is your servant. Market is your partner and wants to sell the business to you everyday.

Bufett days he is very optimistic and wants a high price, others he is pessimistic and will sell at ubffett low price. You have to use this to your advantage. The market is the greatest game in the world. There is nothing else that can, at times, get this far out of line with reality. Negotiated transactions are less volatile. Some get this; others don't.

Just keep your wits about you and you can make buffettt lot of money in the market. Buffett: I had 49 university groups, in clumps of six, [visit me] last year. Start with a small circle of competence, things you can understand. You need to understand accounting, which has enormous limitations. Learn that the market is there to serve bfufett, not instruct you.

In the investing buffet, if you have an IQ ofsell 30 points to someone else. You do not need to be a genius. Reducing the nonsense would be a good goal. Buffett: [My experience] has given me a jaundiced view of academia generally. Efficient market theory—that everything is priced appropriately—is bunk. If the market closed for years, we wouldn't care. Would still keep making Sees candy, Dilly bars, etc.

If you focus on the price, you're assuming that the market knows more than you do. That may be the truth, but in that case you shouldn't own it. The stock market is there to serve you, not to instruct you. Focus on price and value. If a stock gets cheaper and you have some cash, buy more. We sometimes stop buying when prices goes up.

When we're buying something, we want the price to go down and down and down. You only have to be right one or two times a year. I used to handicap horses. You can come up with a very profitable decision on a single company. You only have to be right a few times in your lifetime, as long as you don't make any big mistakes. They hire lots of people, evaluate Merck vs. You can't do it. Very few people have adopted our approach. Investing is the same way. Charlie and I have seen it.

The whole world in the late s went a little mad in terms of investments. How osld that happen? Temperament is the ability to not be swayed by the market. See what you are supposed to see. Never going to be a takeover or sell business because street thinks unfocused. I don't quite agree with Fisher, think can ride some stocks forever. Almost buffett sold put options jewelry sell operating businesses, and if we do, we do so because they aold fix their problem.

There could be something that happens by I think the chances are almost nil. So what we really want to do is buy businesses that we would be happy to own forever. It is the same way I fell about people who buy Berkshire. I want people who buy Berkshire to plan to buffett sold put options jewelry it forever. They may not for one reason or the other but I want them at the time they buy it to think they are buying a business they are going to want to own forever.

I measure Berkshire by how little activity there is in it. If I had a church and I was the preacher and half the congregation left every Sunday. I would rather go to church where all the seats are filled every Sunday by the same people. Well that is the optionss we look at the businesses we buy. We want to buy something virtually forever.

And back when I started, I had way more ideas than money so I was just constantly having to sell what was the least attractive stock in order to buy something I just discovered that jeweley even cheaper. But that is not our problem really now. So we hope we are buying businesses that we are just as happy holding five years from now as now. And if we ever found a huge acquisition, then maybe we would have to sell something. Maybe to make that acquisition but that would be a very pleasant problem to have.

We never buy something with ejwelry price target in mind. That is not the way to look at a business. The way to look at a business is this going to keep producing more and more money over time? We are best at evaluating businesses where we can come to a judgment that they will look a lot like they do now in five years. Iscar opfions be better — maybe a lot bigger — in five years, but the fundamentals will be the same. Charlie says we have three boxes: In, Out and Too Hard. I was virtually there at the birth of Intel.

Some businesses are very, very hard to predict. Do you have an explanation? You look at the Nebraska Furniture Mart NFM. They have share of mind. Investment knowledge is cumulative, and things you learn will make you better in the future. Stick to things you understand. How do you beat Bobby Fisher? Play him in anything except chess. Charlie and I went to Memphis to look at a chewing tobacco company. My view is that energy production should move to nuclear.

Berkshire Hathaway has and will buy what trades, but will not buy companies that engage in certain behaviors. If they did not own it, someone else would. Sodl protest investment in Chinese companies though. We just finished looking for someone. The Board has 3 candidates to replace me as CEO and 4 candidates to replace me as investor.

InI wound up my partnership and I had to help people find someone to manage their money. The problem with guys that do well is they attract so much money that it neutralizes their advantage. Buffett: All investing is laying out cash now to get some more back in the future. He knew a lot, but not that [he lived in] BC. What is the discount rate?

It should be solr. It should shout at you, without all the spreadsheets. We see something better. The higher math was false precision. The markets saw it in the Long-Term Capital Management [hedge fund] in It only happens to people with high IQs. Buffett: Opportunity costs have been in the forefront of our minds during the last 18 months. Tougher and possibly more profitable. We got lots of calls [for potential investments]—most we ignored. We never want to get dependent on banks.

Our definition of comfortable is very comfortable. If you are a professional and have confidence, then I would advocate lots of concentration. The economy will do fine over time. If you have a harem of 40 women, you never really get to know any of them well. Charlie and I operated mostly with 5 positions. I told investors they could pull their money out.

The position was American Express after the Salad Oil Scandal. In I put the bulk of my net worth into GEICO. Later inLTCM was in trouble. If I like so,d business, then it makes sense to buy more at 20 than at The question is about diversification. I have a dual answer to that. If you are not a professional investor. If your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification.

All they are going to do is own part of America. And they have made a decision that owning a part of America is worthwhile. That is the way they should approach it unless they want to bring an intensity to the game to make a decision and start evaluating businesses. Once you xold in the businesses of evaluating businesses and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree.

I got asked that question the slld day at SunTrust. If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into a seventh one instead of putting more money into your first one is gotta be a terrible mistake. Very few people have gotten rich on their seventh best idea.

But a lot of people have gotten rich with their best idea. So I would say for anyone working with normal capital who really knows the businesses they have gone into, six is plenty, and I probably have half of what I like best. I call him Noah, he has two of everything. You will see things where it would be a mistake not to act.

WB: You just had a good banker. I saw things in in junk bonds that would have been worth going heavily into. You could have bought Cap Cities in — selling for one-third the property value, with the best manager, and in a good business. CM: Students learn corporate finance at business schools. They are taught that the whole secret is diversification.

But the exact rule is the opposite. The goal of investment is to find situations where it is jewelrj not to diversify. Very seldom do we get to buy as much of any good idea as we would like to. Buffett: We will not be spinning off any companies. We have a real advantage in allocating capital—moving money around.

When we buy companies from people, we buy them for keeps. People can trust us to keep our word on this. Munger: Wall Street sells that stuff [spin-offs] for jeweory. Buffett: We have listened to presentation after presentation by investment bankers, but there is always a fee. If we lose confidence or conditions change, we sell. When in doubt, bufffett keep holding. If we were wrong, we sell. The answer is: nothing. Our peculiarity is our commitment to buy for keeps. I asked Graham the same buffegt.

Graham lived a life of sharing. He may have had more money hoarding, but lived happier because of it. At age jrwelry I started investing, purchasing three shares of Cities Service Preferred. I was really into charting and technical analysis. Did Ben lose because I read his buffetg The reason gets down to temperament. Charlie and I have educated competitors. GEICO still has enormous possibilities for growth.

That being said, I advise you to pay off your credit card. This is a good life lesson: getting the right people into your system is the most important thing you can do. The key to Graham's approach to investing is not thinking buffett sold put options jewelry stocks as stocks or part of the stock market. Stocks are part of a business. People in this room own a piece of a business. If the business does well, they're going to do all right as long as long as they don't pay way too much to join in to that business.

So we're thinking about business risk. Business risk can arise in various ways. It can arise from buffett sold put options jewelry capital structure. When somebody sticks a ton of debt into a business, if there's a hiccup in the business, then the lenders foreclose. It can come about by their nature--there are just certain businesses that are very risky.

There are certain businesses that opgions, because of long lead time, because of heavy optionz investment, basically have a lot of risk. Commodity businesses have a lot of risk unless you're a low-cost optionw, because the low-cost producer can put you out of business. Our textile business was not the low-cost producer. We had fine management, everybody worked hard, we had cooperative unions, all kinds of things.

But we weren't the low-cost producers so it was a risky business. The guy who could sell it cheaper than we could made it risky for us. We tend to go into businesses that are inherently low risk and are capitalized in a way that that low risk of the business is transformed into a low risk for the enterprise. The risk beyond that is that even though you identify such businesses, you pay too much for them. That risk is usually a risk of time rather than principal, unless you get into a really extravagant situation.

Then the risk becomes the risk of you yourself--whether you can retain your belief in the real fundamentals of the business and not get too concerned about the stock market. The stock market is there to serve you and not to instruct you. That's a key to owning a good business and getting rid of the risk that would otherwise exist in the market. You mention volatility--it doesn't make any difference to us whether the volatility of the stock market is a half a percentage of a point a day, or a quarter percent a day, or five percent a day.

In fact, we'd probably make a lot more money if volatility was higher because it would create more mistakes in the market. Volatility is a huge plus to the real investor. Ben Graham used the example of Mr. Ben said that just imagine that when you bought a stock you in effect bought into a jdwelry where you have this obliging partner who comes around every day and offers you a price at which he'll either buy or sell and that price is identical.

No one ever gets that in a private business, where daily you get a buy-sell offer by a party. But you get that in the stock market, and that's a huge advantage. And it's a bigger advantage if this partner of yours is a heavy-drinking manic depressive. So, as an investor, you love volatility. Not if you're buffett sold put options jewelry margin, but if buffett sold put options jewelry an investor you're not on margin, and if you're an investor you love to get these wild swings because it means more things are going to get mispriced.

Actually, volatility in recent years has dampened from what it used to be. It looks bigger because people think in terms of Dow points, but volatility was much higher many years ago than it is now. The amplitude of the swings used to be really wild and that gave you more opportunity. My best advice to all of you would be to totally ignore this development. Risk had a very good colloquial meaning, meaning a substantial chance that something could go horribly wrong, buffett sold put options jewelry the finance professors sort of got volatility mixed up with a bunch of foolish mathematics and to me it's less rational than what we do.

And I don't think we're going to change. They want to measure risk, and they don't know how to do it, basically. So they said volatility measures risk. I've often used the example of the Washington Post's stock. That's something I've thought about ever since they told me that 25 years ago and I still haven't figured it out. But, over a 5 or 10 year period it probably has almost no buffftt at all.

The myth that volatility of a stock somehow equates to risk was discussed. In fact, volatility often creates great buffett sold put options jewelry, in Buffett's view. Buffett sold put options jewelry following comments on risk in investments were bugfett the Annual Report, on page "Charlie and I decided long ago that in an investment lifetime it's just too hard to make hundreds of smart decisions.

That judgment became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart- and not too smart at that - only a eold few times. Indeed, we'll now settle for one good idea a year. Charlie says it's my turn. The optiojs we've soold precludes our following standard diversification dogma.

Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it.

In stating this opinion, we define risk, using dictionary terms, as "the possibility of loss or injury". Academics, however, like to define investment "risk" differently, averring that it is the relative volatility of a stock or portfolio of stocks - that is, their volatility as compared to oprions of a large universe of stocks. Employing data bases and statistical skills, these academics compute with precision the "beta" of a stock - its relative volatility in the past - and then build arcane investment and capital-allocation theories around this calculation.

In their hunger for a single statistic to measure risk, however, they forget a fundamental principle: It is better to be approximately right than precisely wrong". For owners of a business - and that's the way we think of shareholders - the academics' definition of risk is far off the mark, so much so that it produces jewrlry. For example, under beta-based theory, a stock that has dropped very sharply compared to the market - as had Washington Post when we bought it in - becomes "riskier" at jewerly lower price than it was at the higher price.

Would that description have then made any sense to someone who was offered the entire company at a vastly-reduced price? Risk to us is 1 the buffett sold put options jewelry of permanent loss of capital, or 2 the risk of inadequate return. Some great businesses have very volatile returns -- for example, See's usually loses money in two quarters of each year -- and some terrible businesses can have steady results.

I've been iewelry for this craziness to end buffett sold put options jewelry decades. It's been dented, jewery it's still out there. Our default is [to have our capital] in short-term instruments and only do something jjewelry it makes sense. Volatility does not measure risk. The problem is that the people who have written about and taught volatility do not understand risk. Past volatility does not determine risk. But stocks are traded and jiggle around and so people who study markets translate past volatility into all kinds of measures of risk.

The whole concept of volatility is useful for people whose career is teaching, optinos useless to us. We recognized early on that very smart people do very dumb things, and we wanted to know why and who, so we could avoid them. We would love to own a lot of roulette wheels. In general, emerging markets are not great for me because I need to put a lot of money to work.

Risk does not equal 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. I might be risk averse but I am not action adverse. When I bought Nebraska Furniture Mart inMrs. B took cash and not Berkshire stock. She understood cash and that is what she took.

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. I like to play from a position of strength. I always try to have the odds in my favor. I like those odds better. Buffett: It breaks down into two periods of my life: when I had more ideas than money, I was constantly buffftt my portfolio, figuring out which stock to unload to buy a new one. Buffett: We think about adding more to certain stocks and have done so.

We add to ones that look attractive and that we can buy. When I closed the Buffett Partnership, I felt and wrote to my investors that the prospective return was about the same for equities and municipal bonds over the next decade, and I was roughly right. Buffett: Of course, you could have said that and have been right at any point in the past century — there are always disruptions — but stocks have still done well.

Buffett on the Stock Marketwhat would you be writing? You talked about year periods. Inpeople were extrapolating from the experience of the previous 17 years and had unrealistic expectations. They pit bound to be disappointed. I would not have high expectations for equities, but better than for bonds. But every now and then, things really get out of whack. But the gradations in between are too tough.

If you own great businesses, you should just hold on most of the time, maybe sell if the valuations get extremely high and buy more if they get really cheap like in the early s. I don't think that the stock market will return 6. Stocks usually yield a little more, but that isn't ordained. Every once in a while, stocks will get very cheap, but it isn't ordained in scripture that this is so. Risk premiums are mostly nonsense. The world isn't calculating risk premiums.

The best book prior to Graham was written by Edgar Lawrence Smith in called Common Stocks as Long Term Investments. It was a study that jwelry how bonds compared to stocks in various decades of the past. There weren't opgions whole lot of publicly traded companies back then. He thought he knew what he was going to find. He thought that he'd find that bonds outperformed stocks during periods of deflation, and stocks outperformed during inflationary times.

But what he found was that stocks outperformed the bonds in nearly all cases. Keynes then enumerated the reasons that this was so. He said that over time you have more capital working for you, and thus dividends would grow higher. This was novel information back then and investors then went crazy and started buying stocks for these higher returns. But then they started to get crazy, and mewelry longer really applied the sound tactics that made the reasons given in the book true.

Be careful that when you buy something for a sound reason, make sure that the reason stays sound. If you jewwelry GM, you need to write the price and the respective market valuation. Then write down why you are buying the business. If you can't, then you have no business doing it. The questioner is Jon Brandt, the son of a very good friend of mine for many years. This should be shown as an expense in the income statement. I think a number of auditors believed it should be a cost but their clients pressured them and caved, and then Congress got called in.

The accounting in America is corrupt. Jeweelry is not a good idea to have corrupt accounting. They could make butfett here at some point, but not with Charlie and me. I think there's a very excellent chance that neither Warren or I will see those opportunities again, but that's not all bad. We'll just keep plugging away. You can never predict what markets will do. We could be in for a period in which the average fancy paid investment advisor just won't do very well.

The world hasn't changed that much. The problem is the starting point in predicting modest returns for equity investors. In a low inflation environment, how much will GDP grow? It provides a pretty decent real return in a period of low inflation. If you get high inflation, you could get very low real returns, even negative. If an economist saw a job going to China, he doesn't care -- it saves costs. But if all the jobs go to China, what then?

People actually get paid to say things like this. The exchange has done a very good job over the centuries. The enemy of investment success is activity. The exchange of yesterday will be better for the American investor. I know the American investor will not be better off if buffett sold put options jewelry doubles on the NYSE, and I know the NYSE will be trying to figure out how to buffeft that if it is trying to maximize its own earnings per share. Trading is the frictional cost of capitalism.

GM or IBM will not earn more money if their stock turns over more actively, but a for-profit NYSE will. I think we have lost our way when people like the [board of] governors and the CEO of the NYSE fail to realize they have a duty to the rest of us to act as bkffett. You do not want your first-grade school teacher to be fornicating on the floor or drinking booze in the classroom; similarly you do not want your stock exchange to be setting the wrong moral example.

Our hurdles reflect our estimate of future opportunity costs. Berkshire has previously said that they would prefer more private investments but have trouble finding suitable ones. At the present time, the public market offers more opportunity. There are very few good private situations around and those that are available tend to be overpriced.

Berkshire has a billion dollars in cash at present. Buffett says there is more possibility of significant bffett in the public stock market. This is because emotion plays a larger role in the best technical indicators forex trading journal template market, and the very superficial knowledge with which most investors operate.

Owners of significant private business on the other hand, tend to have a much better idea of what their businesses are really worth. There is very tough competition buffett for the few good private businesses of decent size from: MBO funds or LBO funds. Typically these funds are run by people using other people's capital; they benefit from upside but don't suffer as much from downside since it is not their money that is at stake.

Therefore, they are less worried about overpaying for a business Other public companies. They don't mind overpaying; management of these types of companies are often more focused on size, than on return on investment and often are not big shareholders. These types of buyers don't mind issuing new stock in payment, whereas Berkshire doesn't like to issue new common stock. If you understood a business perfectly and the future of the business, you jewelryy need very out in the way of a margin of safety.

So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10, pounds and you've got a 9, pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, put options ibm z890 if it's over the Grand Canyon, you may feel you want a little larger margin of safety in terms of driving only drive a 4, pound truck across.

It depends jeewelry the nature of the underlying risk. We don't get the margin of safety now that we got in the s. The best thing is to learn from other guys' mistakes. Patton used to say, "It's an honor to die for your country; make sure the other guy gets the honor. The biggest one, the biggest category over time, is being reluctant to pay up a little for a business that I knew was really outstanding. The cost of that I think is in the billions, and I'll probably keep making that mistake.

The mistakes are made when there are businesses you can understand and that are attractive and you don't do something about them. I don't worry at all about the mistakes that come about like when I met Bill Gates and didn't buy Microsoft or something like that. Most of our mistakes have been mistakes of omission rather than commission. We don't care if a company is large cap, small cap, middle cap, micro cap. It doesn't make any difference. The only questions that matter to us: From my personal standpoint running Berkshire now because we got, pro forma for Gen.

I would just look for businesses I understood. Now, I think, on balance, large cap companies as businesses have done extraordinarily well the last ten years--way better than people anticipated they would do. And that is something nobody dreamed of and that is being produced by very large companies in aggregate. So you have had this huge revaluation upwards because of lower interest rates and much higher returns on capital.

And that has happened with big companies in recent years, whether it is permanent or not is another question. I am skeptical of that. I wouldn't even think about it--except for questions of how much money we run--I wouldn't even think about the size of the business. If I can find one now, as big as we are, Bhffett would love to buy it. It is the certainty of it that counts. No two distinct categories of business.

PV of cash a company generates is what the business is worth. All decision you decide how much value you are going to get. When we buy a stock we think of it in terms of buying the whole enterprise. Aesop's wrote the first investment primer "A bird in the hand Lay out cash today is worth buffett sold put options jewelry in the bush". Esop forgot to say when you get the two in the bush and what the interest rate was. People associate growth with the birds in the bush but they still have to figure out when they get the birds.

People often are not thinking of the mathematics implicit in what they are doing. Investing is where you find a few great companies and then sit on your ass. Ben Graham did optiosn in He did pair trading. He was right 4 out of 5, but the last one would kill him. We shorted the market to some degree. We would borrow stocks from universities. We were early sod this. It buffett sold put options jewelry some odd looks when I told the universities I wanted to short all of their stocks.

It was not a big deal. We might have made a little money on it in the s, but it is not something we do these days. If you have good long ideas on businesses that are undervalued, it is not necessary to short. Many will sell you the idea of the day. No great statistical merit. When humans compete against computers in chess, how can human compete?

They get rid of the nonsense. I worked on Wall Street for a couple of years and I have my best friends on both coasts. I like seeing them. I get ideas when I go there. But the best way to think about investments is to be in a room with no one else and just think. The disadvantage of being in any type of market environment like Wall Street in the extreme is that you get over-stimulated.

You think you have to do something every day. And the trick then is not to do anything else. Even not to sell atwhich the family did later on. So what you are looking for is some way to get one good idea a year. And then ride it to its full potential and that is very hard to do in an environment where people are shouting prices back and forth every five minutes and shoving reports in front of your nose and all that.

Wall Street makes jewelfy money on activity. You make your money on inactivity. If everyone in this room trades their portfolio around every day with every other person, you will all end up broke. And the intermediary will end up with all the money. If you all own stock in a group of average businesses and just sit here for the next 50 years, you will end up with a fair amount of money and your broker will be broke. He is like the Doctor who gets paid on how often to get you to change pills.

If he gave you one pill that cures you the rest of your life, he would make one sale, one transaction and that is it. But if he can convince you that changing pills every day is the way to great health, it will be great for him and the prescriptionists. You want to stay away from any environment that stimulates activity. And Wall Street would have the effective of doing that. I get to do what I want, where I want — on a boat, wherever. My wife was responsible for bringing up the children.

It will be a much tougher choice for women, and always be somewhat unequal. In my adult business life I have never had to make a choice of trading between professional and personal. I have simple pleasures. I play bridge online for 12 hours a week. After a talk at Harvard, I told them to work for who they admired the most, so they all become self-employed. But women are the ones who have tough situations.

There are always conflicts. Asset gathering can be more important than buffettt managing. There will always be opportunities to outperform. People still make the same mistakes. Charlie has a company called the Daily Journal Company. I own shares. They sat on cash for a long time, but opportunities come around. You have to be prepared to grab them. Definitely it is possible with moderate amounts of money.

Charlie will be more pessimistic. WB: Money management — it is easy to scale buffett sold put options jewelry. It would have been harder for me to work as a plant manager. Did we change our standards? It does not reflect our giving up on finding an elephant of jedelry business to acquire. We have plenty of cash and could sell stocks if we really needed to. We acquired TTI in the first quarter, which is a terrific business.

We wish it pjt five times bigger, but maybe some day it will be. Some of my friends have big boats where 55 people are serving Reminds me of the story of the 60 year old man that got a 25 year old to marry him. I knew along time ago that I was going to be doing something I loved doing with people that I loved doing it with.

InI had my dad take me out of the will, as I knew I would be rich anyway. I let my two sisters have all the estate. I bet we all in this room live about the same. We buffett sold put options jewelry about the same and sleep about the same. We pretty much drive a car for 10 bufftt. All this stuff doesn't make it any different. I will watch the Super Bowl on a big screen television just like you.

We are living the same life. I have two luxuries: I get to do what I want to do every day and I get to jewlery a lot faster than you. You should do the job you love whether or not you are getting paid for it. Do the job you love. Know that the money will follow. I travel distances better than you do. The plane is nicer. But that is about the only thing that I do a whole lot different. I didn't know my salary when I went to work for Graham until I got his first paycheck.

Do what you love and don't even think about the buffett sold put options jewelry. A 60 man crew is needed. They could be stealing, sleeping with each other, etc. Professional sports teams are a hassle, especially when you have as much money as him. Fans would complain that you aren't spending enough when the team loses. If there is a place that is warm in the winter and cool in the summer, and you do what you love doing, you will do fine. You're rich if you are working around people you like.

You will make money if you are energetic and intelligent. This society lets smart people with drive earn a very good living. You will be no exception. You just had to have the courage of your convictions and the willingness to act when everyone else was terrified and paralyzed. You should have seen the people in the bank trust departments. Now, there are armies of smart people at private investment funds, etc.

If there were a crisis now, there would be a lot more people with a lot of money ready to take advantage. It had already passed. I just have to outrun you! He came up with the idea and Warren got jewflry about it. Right now, I optionss pay a hundred-thousand dollars for 10 percent of the future earnings of any of you. So, if anyone wants to see me after this is over. If ten percent of you is worth a hundred-thousand?

You could improve on that, many of you, and I certainly could have when I got out, just in terms of learning communication skills. You can dramatically increase your value by improving oral and written communication skills. When we were viewed as out of step a few years ago, I didn't care as long as I felt okay about how Berkshire was doing.

WB: I started investing when I was I believe in reading everything in sight. I wandered around for 8 years with technical analysis. The Intelligent Investor has three big lessons: You are absolutely correct that the jewelfy equity funds are a form of competition for Berkshire. But our strong preference is to buy entire businesses at a fair price rather than stocks, even if stocks [can be acquired] a bit cheaper. If someone wants what we are offering, we are pretty much one-of-a-kind.

Optuons can sell their company to us, yet continue to run it as they please as long as they want. There is no-one else who can make the promises we can make [not to ever sell the acquired company]. Berkshire will not do as well as long as this persists. Managers want to earn the extra fees on the extra assets. We [unlike this gentleman] have all of our net worth on the downside as well. The competition right now is tough, so our efforts to buy businesses are likely to be futile.

But there are deals we might get done Things happen to change the landscape. It was so bad in that I closed my partnership. But only four years later, it was the best time to be a buyer in my entire life. History shows that over time, almost all closed-end funds go to discounts. Occasionally, Charlie and I have seen closed-end funds that trade at a premium for a long time. Eventually they will come back down to earth. What buffrtt slow it down is if the spread between high-yield bonds budfett safe bonds widens.

I think it will be quite some time before disillusion sets forex news trading tools with a mission [among the sodl in private-equity funds]. I recall a deal that was pitched to us by someone who said the company only wrote fire insurance on concrete bridges covered by water.

I recommended Charlie, Sandy Gottesman and Bufcett Ruane. Anytime someone who takes what I think is an unfair fee structure because they can get it, I rule them out. If we like a deal, we want to do it all. Charlie, can you think of any? Munger: You did something with Leucadia, but they brought us the deal. But they invited us to participate in their deal. We came in on the same terms they black swan options trading wire. That was a very good experience.

Bridge is the best game there is. It teaches you about partnership and other human skills. In bridge, you draw inferences from everything and that carries over well into investing. The past does not make the future definitive but you can draw from those experiences. I think the partnership aspect of bridge is a great lesson for life. I was playing with a world champion and we were playing against my sister and her husband. We lost, so I took the scorepad and I ate it. The formula for value jeewlry handed down from BC by a guy named Aesop.

A bird in the hand is worth two in the bush. Investing is about laying out a bird now to get two or more buffett sold put options jewelry of the bush. The keys are to only look at the bushes you like and identify how long it will take to get them out. Think about what the asset buffett sold put options jewelry 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 buffet I do about events. I bufeftt about people drinking more Coke. I asked him, how much it cost to buy corn, plow the field, harvest, how much an acre will yield, what price to expect. 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.

The stock market is funny. You have no compulsion to act and a bunch of silly people setting prices all the time, it is great odds. Jeelry want the market to be like a manic depressive drunk. Market is the most important thing I have ever read. Now think about the NYSE. You have thousands of companies to choose from. For me, that universe has shrunk because I need to put large dollar amounts to work.

Attitude is much more important than IQ. You can really get into trouble with a high IQ, i. You need to have the right philosophical temperament. Intrinsic value is terribly important but very fuzzy. We try to work with businesses where we have fairly high probability of knowing what the future will hold. If you own a gas pipeline, not much is going to go wrong. Maybe a competitor enters forcing you to cut slod, but intrinsic value hasn't gone down if you buffetf factored this in.

We looked at a pipeline recently that we think will come under pressure from other ways of delivering gas [to the area the pipeline serves]. We look at this differently from another pipeline that has the lowest costs [and does not face threats from alternative pipelines]. If you calculate intrinsic value properly, you factor in things like declining prices.

When we buy business, we try to look out and estimate the cash it will generate and compare it to the purchase price. We have to feel pretty good about our projections and then have a purchase price that makes sense. Over time, we've had more pleasant surprises than we would have expected. I've never seen an investment banker's book in which future earnings are projected to go down. But many businesses' earnings go down. If you can't come up with reasonable estimates for that, then you move on.

If we could see in looking at any business what its future cash flows would be for the next years, and discount that back at an appropriate interest rate, that would give us a number for intrinsic value. It would be like looking at a bond that had a bunch of coupons on it that was due in a hundred years Businesses have coupons jjewelry, the only problem is that they're not printed on the instrument and it's up to the investor to try to estimate what those coupons are going to be over time.

In high-tech businesses, or something like that, we don't have the faintest idea what the coupons are going to be. In the businesses where we think we can understand them reasonably well, we are trying to print the coupons out. If you attempt to assess intrinsic value, it all relates to cash flow. The only reason to put cash into any kind of investment now is that you expect to take cash out--not by selling it to somebody else, that's just a game of who beats who--but by the asset itself If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.

Buffett sold put options jewelry feel that if we're right about the business, we're going to make a lot of money, and if we're wrong about the business, we don't have any hopes of making money. With this attitude you get a concentrated portfolio, which we don't mind. That practice of ours which is so simple is not widely copied, I don't know why. Even at great universities and intellectual institutions.

It's buffettt interesting question: If we're right, why are so many other places so wrong. We will want companies where the certainty gets close to that, or we would figure we'd be better off buying wold Coke. If every management, before they bought a business, said is this better than buying in our own stock or even buying Coca-Cola stock, there'd be a lot less deals done. We try to measure against what we regard as close to perfection as we can get.

Well, we won't stick a price on it. They are absolutely wonderful businesses run by sensational people, and they are selling at prices that are higher than they've sold at most of the time. But they may well be worth it, either in present terms, or they may be a couple of years ahead of themselves. Gillette doesn't repurchase their shares Coke consistently repurchases their shares. We generally like the policy of companies that have really wonderful businesses repurchasing their shares.

The problem with most companies repurchasing their shares is that they are frequently so-so businesses and they are repurchasing shares buffett sold put options jewelry purposes other than intensifying the interest of shareholders in a wonderful business. It's hard to do things intelligently with money in this world and Coke has been very intelligent about using their capital, particularly to fortify and develop their bottler network around the world, but there's only so far you can go with that, and to enhance the ownership of shareholders in a company like Coca-Cola [is great].

The bottling is actually kind of interesting Then ina couple of guys from Chattanooga came along, and in those days soft drinks were sold over the counter, and they said bottling's got a future and you're busy with the pump side of the business, so why don't you opfions us develop the bottling side of the business. And I guess Mr. Canver didn't think much of bottling, so he gave them a contract that gave them the rights, in perpetuity for almost all of the United States, and gave them the right to buy Coca-Cola syrup at a fixed price forever.

And the Coca-Cola company was faced over the years with the problem of having this bottling system which soon became the dominant system of distribution for Coke, being subject to a contract where there was no price buffett sold put options jewelry and where the contract ran for perpetuity. And of course every bottler on his deathbed would call his children and grandchildren around, and he would prop himself up, and he would croak out in his last breath, "Don't let 'em screw with the bottling contract.

You know you're not going to get results on that in a day or a month or a year, but they decided that to get the job done they had to do this, and they used capital to get that job done, but they used capital beyond that to repurchase shares, and it's been very smart, and they're probably repurchasing shares even as we talk.

There's just jfwelry after lesson after lesson in the history of the Coca-Cola company. But it's too long a story for today. We may be more conservative in estimating cash in some situations. Just because interest rates are at 1. We have minimum thresholds in our mind that are a whole lot higher than government rates. When we're looking at a business, we're looking at holding it forever, so we don't assume rates will always be this low.

Munger: The concept of a hurdle rate makes nothing but sense, but a lot of people using this make terrible errors. Everything is a function of opportunity cost. The IRR is based on what buffeyt CEO wants. The numbers are made up.




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Magazine. Customer Service; Subscribe; Buy this issue; Billboard biz. The online extension of Billboard Magazine, fantastic-art.ru is the essential online destination. [When asked about the relative attractiveness of bonds, arbitrage, etc., Buffett replied:] Charlie and I are competent to make judgments on certain things, and not. “Becoming Warren Buffett,” the documentary to be shown on HBO on Jan. 30, features Buffett talking with about a dozen students in an Omaha Central High School.