Foundation investments
A sampling of the Gates Foundation's largest investments*:
More than $1.5 billion
Berkshire Hathaway Inc.**
Canadian government
Between $1 billion and $1.5 billion
Fannie Mae
German government
Between $100 million and $1 billion
Abbott Laboratories
Archer Daniels Midland Co.
BP (formerly British Petroleum)
Canadian National Railway
Exxon Mobil Corp.
Freddie Mac
French government
Japanese government
Merck & Co.
Schering Plough Corp.
Tyco International Ltd.
Waste Management Inc.
*May include stocks, bonds and other securities
**Warren E. Buffett committed his first installment of Berkshire Hathaway stock in June 2006.
четвъртък, 3 септември 2009 г.
Waiting for the stimulus 'oomph'
The debate over whether the 5-month-old plan is working is still a little premature, but that hasn't stopped economists and politicians from jumping into the fray. The most urgent reason: jobs.
July 5, 2009
Should President Obama seek a "second stimulus"?
Billionaire investor Warren Buffett says yes.
"It looks like we're going to need more medicine, not less," he said last month.
"The recovery really hasn't got going."
Obama's top economic advisor, Lawrence Summers, says no.
"The [stimulus] policies appear to be working," he told the Council on Foreign Relations.
The debate over whether the 5-month-old stimulus plan is working is still a little premature, but that hasn't stopped economists and politicians from jumping into the fray. The most urgent reason for the debate: jobs.
When Obama and his aides unveiled their plan in January, they forecast that unemployment would rise to about 8% this year and peak around 9% next year.
With the right policies and a bit of luck, they said, a recognizable recovery would be underway in 2010 -- just in time for the congressional elections.
But January's unemployment forecast turned out to be far too optimistic.
Last month, the national jobless rate hit 9.5%, and economists expect it to top 10% by the end of the year.
In California, Michigan, South Carolina and other states, it's well above 11% already.
Does that mean the stimulus is failing?
Not necessarily.
Jobs are often the last piece of the economy to recover in a recession.
This recovery is likely to be especially slow because many battered households are saving or paying off old debts rather than spending on new goods.
(Economists call that "the paradox of thrift": Saving is good for individuals but can be bad for the economy as a whole.)
Still, 2010 is an election year, and jobs will almost certainly be voters' top concern when they go to the polls in 16 months.
So members of Congress in both parties are reducing almost every domestic issue to a single word: Jobs. (Who says politicians can't do long-term thinking?)
Last month, when the House debated the energy bill, Speaker Nancy Pelosi said the bill was about creating "jobs, jobs, jobs, jobs and jobs";
Republican leader John Boehner said it was about "killing jobs." (It was mostly about neither.)
Pelosi issues a daily report on stimulus-program spending, trumpeting billions in highway spending in California one day and a new coat of paint for a bridge in Jeffersonville, Ind., another.
Boehner responds with a daily statement of his own -- augmented, last week, by a video of a bloodhound -- asking: "Where are the jobs?"
Truth is, most of the stimulus money hasn't been spent yet.
It was always going to take months for the stimulus to produce tangible economic growth -- or "oomph," as Obama economist Christine Romer calls it.
By this time next year, we should be able to begin measuring the impact of Obama's economic policies by his own standard.
"My measure of success is creating or saving 4 million jobs," he said in February. At this rate, Obama may have to claim that his stimulus saved millions of jobs even though the private economy destroyed millions more -- an argument that may be economically sound but will still be difficult to win.
Mark Zandi of Moody's Economy.com, who criticized the stimulus bill Congress passed in February as too small and too slow, says we should start seeing the effects even before next year.
This summer, he says, will be "the moment of truth" for Obama's plan.
"If the plan is working, retailing will improve soon, and businesses should respond by curtailing layoffs," he said.
If that doesn't happen, the administration should "be quietly preparing another round of fiscal stimulus," including more help to strapped state and local governments whose budget cuts are slowing the recovery.
But any new request would present a political dilemma.
If Obama goes back to Congress -- even to ask for smaller, specific measures, such as more aid to states or new tax credits to forestall home foreclosures -- it would mean admitting that the first package was too small.
And additional spending would get in the way of Obama's other chief goal: bringing the federal deficit under control.
Obama himself is being characteristically cautious. Asked at his news conference last month if another stimulus was needed, he said: "Not yet, because I think it's important to see how the economy evolves and how effective the first stimulus is. ...
We've got to make sure that the programs that we put in place are working the way they're supposed to."
Where does this leave us?
In the short run, don't expect a new stimulus plan.
Obama wants to win his expensive battles over healthcare and energy first.
But if the stimulus doesn't deliver some of its promised "oomph," expect a bigger, louder debate this fall -- one that could back Obama into a tight corner.
The debate over whether the 5-month-old plan is working is still a little premature, but that hasn't stopped economists and politicians from jumping into the fray. The most urgent reason: jobs.
July 5, 2009
Should President Obama seek a "second stimulus"?
Billionaire investor Warren Buffett says yes.
"It looks like we're going to need more medicine, not less," he said last month.
"The recovery really hasn't got going."
Obama's top economic advisor, Lawrence Summers, says no.
"The [stimulus] policies appear to be working," he told the Council on Foreign Relations.
The debate over whether the 5-month-old stimulus plan is working is still a little premature, but that hasn't stopped economists and politicians from jumping into the fray. The most urgent reason for the debate: jobs.
When Obama and his aides unveiled their plan in January, they forecast that unemployment would rise to about 8% this year and peak around 9% next year.
With the right policies and a bit of luck, they said, a recognizable recovery would be underway in 2010 -- just in time for the congressional elections.
But January's unemployment forecast turned out to be far too optimistic.
Last month, the national jobless rate hit 9.5%, and economists expect it to top 10% by the end of the year.
In California, Michigan, South Carolina and other states, it's well above 11% already.
Does that mean the stimulus is failing?
Not necessarily.
Jobs are often the last piece of the economy to recover in a recession.
This recovery is likely to be especially slow because many battered households are saving or paying off old debts rather than spending on new goods.
(Economists call that "the paradox of thrift": Saving is good for individuals but can be bad for the economy as a whole.)
Still, 2010 is an election year, and jobs will almost certainly be voters' top concern when they go to the polls in 16 months.
So members of Congress in both parties are reducing almost every domestic issue to a single word: Jobs. (Who says politicians can't do long-term thinking?)
Last month, when the House debated the energy bill, Speaker Nancy Pelosi said the bill was about creating "jobs, jobs, jobs, jobs and jobs";
Republican leader John Boehner said it was about "killing jobs." (It was mostly about neither.)
Pelosi issues a daily report on stimulus-program spending, trumpeting billions in highway spending in California one day and a new coat of paint for a bridge in Jeffersonville, Ind., another.
Boehner responds with a daily statement of his own -- augmented, last week, by a video of a bloodhound -- asking: "Where are the jobs?"
Truth is, most of the stimulus money hasn't been spent yet.
It was always going to take months for the stimulus to produce tangible economic growth -- or "oomph," as Obama economist Christine Romer calls it.
By this time next year, we should be able to begin measuring the impact of Obama's economic policies by his own standard.
"My measure of success is creating or saving 4 million jobs," he said in February. At this rate, Obama may have to claim that his stimulus saved millions of jobs even though the private economy destroyed millions more -- an argument that may be economically sound but will still be difficult to win.
Mark Zandi of Moody's Economy.com, who criticized the stimulus bill Congress passed in February as too small and too slow, says we should start seeing the effects even before next year.
This summer, he says, will be "the moment of truth" for Obama's plan.
"If the plan is working, retailing will improve soon, and businesses should respond by curtailing layoffs," he said.
If that doesn't happen, the administration should "be quietly preparing another round of fiscal stimulus," including more help to strapped state and local governments whose budget cuts are slowing the recovery.
But any new request would present a political dilemma.
If Obama goes back to Congress -- even to ask for smaller, specific measures, such as more aid to states or new tax credits to forestall home foreclosures -- it would mean admitting that the first package was too small.
And additional spending would get in the way of Obama's other chief goal: bringing the federal deficit under control.
Obama himself is being characteristically cautious. Asked at his news conference last month if another stimulus was needed, he said: "Not yet, because I think it's important to see how the economy evolves and how effective the first stimulus is. ...
We've got to make sure that the programs that we put in place are working the way they're supposed to."
Where does this leave us?
In the short run, don't expect a new stimulus plan.
Obama wants to win his expensive battles over healthcare and energy first.
But if the stimulus doesn't deliver some of its promised "oomph," expect a bigger, louder debate this fall -- one that could back Obama into a tight corner.
Berkshire Hathaway's profit jumps 14%
Associated Press
August 7, 2009 | 3:24 p.m.
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OMAHA, Neb. -- Warren Buffett's company reported a 14 percent jump in second-quarter profit as the improving stock market boosted the value of Berkshire Hathaway Inc.'s derivative contracts and its investments.
On Friday, the Omaha-based company reported $3.3 billion in net income, or $2,123 per share, for the quarter ending June 30.
That's up from $2.88 billion, or $1,859 per share, in the same period a year ago.
The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of $1,238.38.
Berkshire generated revenue of $29.61 billion in the quarter, down slightly from $30.03 billion a year ago.
Berkshire owns more than 60 subsidiaries and it has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
Associated Press
August 7, 2009 | 3:24 p.m.
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OMAHA, Neb. -- Warren Buffett's company reported a 14 percent jump in second-quarter profit as the improving stock market boosted the value of Berkshire Hathaway Inc.'s derivative contracts and its investments.
On Friday, the Omaha-based company reported $3.3 billion in net income, or $2,123 per share, for the quarter ending June 30.
That's up from $2.88 billion, or $1,859 per share, in the same period a year ago.
The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of $1,238.38.
Berkshire generated revenue of $29.61 billion in the quarter, down slightly from $30.03 billion a year ago.
Berkshire owns more than 60 subsidiaries and it has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
The Snowball' is a richly detailed story about the Sage of Omaha
'The Snowball: Warren Buffett and the Business of Life' by Alice Schroeder
By Zachary Karabell
Special to The Times
October 10, 2008
Text size
IT IS difficult to imagine better timing for the publication of a Warren Buffett biography, and not just any biography but a nearly 900-page authorized tome.
For more than five years, Alice Schroeder, a former securities analyst, spent countless hours with the Sage of Omaha, his family, friends and business associates, all of whom spoke freely, with Buffett's permission.
The result, "The Snowball," is likely to remain the most authoritative portrait of one of the most important American investors of our time.
Twice in his life, Buffett has been publicly repudiated only to have his earlier views later vindicated.
The first time was in the late 1990s, when the folksy Buffett refused to invest in high-flying Internet stocks.
He had always said that he would not invest in "businesses where technology which is way over my head is crucial to the investment decision."
That modest approach led Buffett to miss almost every major stock of the 1990s, and by the end of the decade, as "new economy" companies like America Online and Amazon.com left other companies in the dust, Buffett's portfolio and the shares of investment company Berkshire Hathaway lagged. Then in his 60s, he was written off as a has-been and a curmudgeon;
when the stock market began to crash at the end of 2000, Buffett proved to be not so naive after all.
At the end of last year, Buffet had a net worth of nearly $60 billion.
Money may not be everything, but for an investor it is the score, and he who has the most wins.
In the last month, he has again had the chance to say, in his avuncular way, "I told you so."
In 2002, when the current meltdown was just a cold-sweat nightmare, he was already warning about the perils of derivatives, the way they were being packaged and sold, and the overexposure to the housing market.
In his 2002 shareholder letter, he called them "toxic," and a year later he again sounded the alarm and termed them "financial weapons of mass destruction."
In his view, while the endless packaging could disperse risk in the short term, it could also magnify systemic risk.
Anyone who has been watching events unfold in recent months -- which would be everyone -- can now appreciate the wisdom of Buffett.
In the last few weeks, he has also been a voice of calm and reason in an increasingly panicky market, swooping in with multibillion-dollar investments in General Electric and Goldman Sachs.
Timing aside, Schroeder has written a surprisingly good book, "surprisingly" because even with a surfeit of minutiae about Buffett's private life and one deal after another, she still writes with a deft touch and keeps the narrative moving.
While she clearly has Buffett's blessing and cooperation, she manages to be blunt in her assessment of him.
He comes across as a love-starved child who became a man in deep need of adoration (he told a group students that "the purpose of life is to be loved by as many people as possible").
But his neediness also led to cluelessness toward his wife, his mistress, his children and his family.
He needed catering to, but he was quite callous when others needed from him, especially money.
Much has been made of his notable stinginess toward his children and his grandchildren, and whatever underlying moral vision about earning one's own money, in practice he seems to have been more controlling than kind.
Unless you are one of those tens of thousands of Berkshire Hathaway shareholders who live on Buffett's word, there are long stretches of the book that may be of little interest, including his unconventional wife-mistress triangle in which both knew and liked the other, and the endless history of deals.
The fact is, deal stories are all quite similar -- who's buying, who's selling, what price.
Some are more interesting than others, and Buffett has been at the center of everything including furniture stores and newspaper chains, Coke, U.S. Air and dozens of others.
But after hundreds of pages, the details blur.
Still, Buffett's style and philosophy have shaped the financial markets, and he has been the leading apostle for a type of "value" investing that seeks to uncover the intrinsic worth of a company and invest in it when no one else wants to.
He has dedicated his life to honing and refining that discipline and has not cut his cloth on today's fashion.
He has, as the title of the book suggests, spent more than half a century pushing a small snowball down a hill until it has grown to mammoth size. And he has then given that massive fortune, along with friend Bill Gates, to endow the largest philanthropic foundation that the world has known.
Like many who have left their imprint on the world, he may not be the easiest person to know personally, but he has lived a life worth studying and in Schroeder has found someone uniquely able to tell his story.
'The Snowball: Warren Buffett and the Business of Life' by Alice Schroeder
By Zachary Karabell
Special to The Times
October 10, 2008
Text size
IT IS difficult to imagine better timing for the publication of a Warren Buffett biography, and not just any biography but a nearly 900-page authorized tome.
For more than five years, Alice Schroeder, a former securities analyst, spent countless hours with the Sage of Omaha, his family, friends and business associates, all of whom spoke freely, with Buffett's permission.
The result, "The Snowball," is likely to remain the most authoritative portrait of one of the most important American investors of our time.
Twice in his life, Buffett has been publicly repudiated only to have his earlier views later vindicated.
The first time was in the late 1990s, when the folksy Buffett refused to invest in high-flying Internet stocks.
He had always said that he would not invest in "businesses where technology which is way over my head is crucial to the investment decision."
That modest approach led Buffett to miss almost every major stock of the 1990s, and by the end of the decade, as "new economy" companies like America Online and Amazon.com left other companies in the dust, Buffett's portfolio and the shares of investment company Berkshire Hathaway lagged. Then in his 60s, he was written off as a has-been and a curmudgeon;
when the stock market began to crash at the end of 2000, Buffett proved to be not so naive after all.
At the end of last year, Buffet had a net worth of nearly $60 billion.
Money may not be everything, but for an investor it is the score, and he who has the most wins.
In the last month, he has again had the chance to say, in his avuncular way, "I told you so."
In 2002, when the current meltdown was just a cold-sweat nightmare, he was already warning about the perils of derivatives, the way they were being packaged and sold, and the overexposure to the housing market.
In his 2002 shareholder letter, he called them "toxic," and a year later he again sounded the alarm and termed them "financial weapons of mass destruction."
In his view, while the endless packaging could disperse risk in the short term, it could also magnify systemic risk.
Anyone who has been watching events unfold in recent months -- which would be everyone -- can now appreciate the wisdom of Buffett.
In the last few weeks, he has also been a voice of calm and reason in an increasingly panicky market, swooping in with multibillion-dollar investments in General Electric and Goldman Sachs.
Timing aside, Schroeder has written a surprisingly good book, "surprisingly" because even with a surfeit of minutiae about Buffett's private life and one deal after another, she still writes with a deft touch and keeps the narrative moving.
While she clearly has Buffett's blessing and cooperation, she manages to be blunt in her assessment of him.
He comes across as a love-starved child who became a man in deep need of adoration (he told a group students that "the purpose of life is to be loved by as many people as possible").
But his neediness also led to cluelessness toward his wife, his mistress, his children and his family.
He needed catering to, but he was quite callous when others needed from him, especially money.
Much has been made of his notable stinginess toward his children and his grandchildren, and whatever underlying moral vision about earning one's own money, in practice he seems to have been more controlling than kind.
Unless you are one of those tens of thousands of Berkshire Hathaway shareholders who live on Buffett's word, there are long stretches of the book that may be of little interest, including his unconventional wife-mistress triangle in which both knew and liked the other, and the endless history of deals.
The fact is, deal stories are all quite similar -- who's buying, who's selling, what price.
Some are more interesting than others, and Buffett has been at the center of everything including furniture stores and newspaper chains, Coke, U.S. Air and dozens of others.
But after hundreds of pages, the details blur.
Still, Buffett's style and philosophy have shaped the financial markets, and he has been the leading apostle for a type of "value" investing that seeks to uncover the intrinsic worth of a company and invest in it when no one else wants to.
He has dedicated his life to honing and refining that discipline and has not cut his cloth on today's fashion.
He has, as the title of the book suggests, spent more than half a century pushing a small snowball down a hill until it has grown to mammoth size. And he has then given that massive fortune, along with friend Bill Gates, to endow the largest philanthropic foundation that the world has known.
Like many who have left their imprint on the world, he may not be the easiest person to know personally, but he has lived a life worth studying and in Schroeder has found someone uniquely able to tell his story.
Buffett to tutor kids in finance in Web series
Investor will star in a cartoon to launch on AOL
Warren Buffett, whose market acumen spurred countless Americans to take their first steps as investors, is taking his insights to the online playground.
The billionaire will tutor tots about finance in an Internet cartoon series scheduled to start this year or early next year, producers A Squared Entertainment and Time Warner Inc.'s AOL said in a statement.
Martha Stewart, model Gisele Bündchen and the late astronomer Carl Sagan will also appear in their own series.
Buffett's character will host "The Secret Millionaire's Club," where kids have adventures in business and learn financial lessons, the companies said. The chairman and chief executive of Berkshire Hathaway Inc. came up with the idea and title himself, said A Squared Co-President Andy Heyward, who produced movies for Buffett's annual meetings.
"These are A-plus players," Heyward said in an interview. "If you're going to teach somebody, a kid, about financial literacy, who could be better than Warren Buffett?"
The three-to five-minute episodes will be introduced on AOL sites and then carried elsewhere, according to Los Angeles-based A Squared. The new children's entertainment company is in talks with additional celebrities, Heyward said.
In "Little Martha," a working title, a 10-year-old Stewart runs an event-planning company from her tricked-out treehouse.
In "Gigi & the Green Team," Bündchen is a supermodel by day, superhero protector of the environment by night. Sagan's series "Kosmos" is based on his "Cosmos" television series.
Heyward and his wife, Amy Moynihan, formed A Squared this year. Heyward was CEO of DIC Entertainment Holdings, which created series including Super Mario Brothers, Strawberry Shortcake and Care Bears.
Both have worked with Hasbro and McDonald's, where Moynihan was global head of marketing.
Investor will star in a cartoon to launch on AOL
Warren Buffett, whose market acumen spurred countless Americans to take their first steps as investors, is taking his insights to the online playground.
The billionaire will tutor tots about finance in an Internet cartoon series scheduled to start this year or early next year, producers A Squared Entertainment and Time Warner Inc.'s AOL said in a statement.
Martha Stewart, model Gisele Bündchen and the late astronomer Carl Sagan will also appear in their own series.
Buffett's character will host "The Secret Millionaire's Club," where kids have adventures in business and learn financial lessons, the companies said. The chairman and chief executive of Berkshire Hathaway Inc. came up with the idea and title himself, said A Squared Co-President Andy Heyward, who produced movies for Buffett's annual meetings.
"These are A-plus players," Heyward said in an interview. "If you're going to teach somebody, a kid, about financial literacy, who could be better than Warren Buffett?"
The three-to five-minute episodes will be introduced on AOL sites and then carried elsewhere, according to Los Angeles-based A Squared. The new children's entertainment company is in talks with additional celebrities, Heyward said.
In "Little Martha," a working title, a 10-year-old Stewart runs an event-planning company from her tricked-out treehouse.
In "Gigi & the Green Team," Bündchen is a supermodel by day, superhero protector of the environment by night. Sagan's series "Kosmos" is based on his "Cosmos" television series.
Heyward and his wife, Amy Moynihan, formed A Squared this year. Heyward was CEO of DIC Entertainment Holdings, which created series including Super Mario Brothers, Strawberry Shortcake and Care Bears.
Both have worked with Hasbro and McDonald's, where Moynihan was global head of marketing.
White House lowers deficit estimate as Buffett issues warning
August 19, 2009 | 9:09 pm
It could be just sheer coincidence, but Obama administration officials on Wednesday were busy leaking some relatively encouraging news about the federal budget deficit to wire service reporters -- on the same day that Warren E. Buffett warned of a dollar meltdown if the U.S. debt load keeps ballooning.
Bloomberg News, Reuters and the Associated Press all published stories quoting an unnamed government official saying that the deficit this fiscal year (ending Sept. 30) would be $1.58 trillion, down from the $1.84 trillion the administration projected in spring.
That’s a decline of $262 billion. Feeling better yet?
From Bloomberg:
The White House’s biannual budget review set for release next week will show the projected shortfall lessened primarily because the administration scrapped contingency plans to provide hundreds of billions of dollars in additional aid to the financial industry, said the official.
The reduced deficit is also attributable to fewer bank failures than the administration anticipated, which meant spending by the Federal Deposit Insurance Corp. will be $78 billion less than forecast, said the official, who requested anonymity because the figures haven’t been publicly released.
Now, as for Buffett: In an op-ed piece in the New York Times, he first applauded the massive spending by the administration and the Federal Reserve on rescue programs for the economy and the financial system.
But the billionaire warned that "once recovery is gained" the government must show a commitment to slowing the debt buildup or risk the U.S. losing "its reputation for financial integrity."
"With government expenditures now running 185% of receipts, truly major changes in both taxes and outlays will be required," Buffett wrote. "A revived economy can’t come close to bridging that sort of gap."
The administration and the Fed both have pledged to restrain their spending/lending as the economy improves.
But the other way out, Buffett noted, would be for the U.S. to allow a surge in inflation, which would automatically make heavy debts less onerous -- but also would most likely trash the dollar’s value.
Buffett quoted John Maynard Keynes: "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. . . .The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
As usual, Buffett also dug up a folksy quote to better make his point: "It was a wise man who said, ‘All I want to know is where I’m going to die so I’ll never go there.’ We don’t want our country to evolve into the banana-republic economy described by Keynes."
August 19, 2009 | 9:09 pm
It could be just sheer coincidence, but Obama administration officials on Wednesday were busy leaking some relatively encouraging news about the federal budget deficit to wire service reporters -- on the same day that Warren E. Buffett warned of a dollar meltdown if the U.S. debt load keeps ballooning.
Bloomberg News, Reuters and the Associated Press all published stories quoting an unnamed government official saying that the deficit this fiscal year (ending Sept. 30) would be $1.58 trillion, down from the $1.84 trillion the administration projected in spring.
That’s a decline of $262 billion. Feeling better yet?
From Bloomberg:
The White House’s biannual budget review set for release next week will show the projected shortfall lessened primarily because the administration scrapped contingency plans to provide hundreds of billions of dollars in additional aid to the financial industry, said the official.
The reduced deficit is also attributable to fewer bank failures than the administration anticipated, which meant spending by the Federal Deposit Insurance Corp. will be $78 billion less than forecast, said the official, who requested anonymity because the figures haven’t been publicly released.
Now, as for Buffett: In an op-ed piece in the New York Times, he first applauded the massive spending by the administration and the Federal Reserve on rescue programs for the economy and the financial system.
But the billionaire warned that "once recovery is gained" the government must show a commitment to slowing the debt buildup or risk the U.S. losing "its reputation for financial integrity."
"With government expenditures now running 185% of receipts, truly major changes in both taxes and outlays will be required," Buffett wrote. "A revived economy can’t come close to bridging that sort of gap."
The administration and the Fed both have pledged to restrain their spending/lending as the economy improves.
But the other way out, Buffett noted, would be for the U.S. to allow a surge in inflation, which would automatically make heavy debts less onerous -- but also would most likely trash the dollar’s value.
Buffett quoted John Maynard Keynes: "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. . . .The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
As usual, Buffett also dug up a folksy quote to better make his point: "It was a wise man who said, ‘All I want to know is where I’m going to die so I’ll never go there.’ We don’t want our country to evolve into the banana-republic economy described by Keynes."
Buffett report a surprising model of clarity
John Fontaine
Annual report season is upon us... and it's a gloomy one this year.
If a report shows a loss of less than 30 percent, that's good news.
Some funds are down over 50 percent, and the retirement fund for a Wisconsin school district even lost 95 percent of its value.
So take heart, maybe you're not as bad off as you think.
Usually the average person doesn't even read annual reports.
The writing is so dull, complex and legalistic and seems designed to discourage reading.
Many times actually disguises skullduggery as you may have noticed in recent months.
An outstanding exception is the report from Warren Buffett's conglomerate of some 77 diverse companies.
Especially because net worth was down only 9.6 percent.
A mere 96 pages long, the report is a model of clarity.
There are the usual seemingly endless pages of figures and footnotes. Laws and accountants do demand them.
Page 89 should be required reading for those CEOs so recently exposed to the world in all their hubris and greed.
The heading is "Owner-related Business Principles" (Copyright 1996 by Warren Buffett).
There are 13 of them, but the first is like the biblical "summary of the law," and worth reprinting here.
"Although our form is corporate, our attitude is partnership. Charlie Munger (his vice chairman) and I think of our shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our holdings we are also, for better or worse, controlling partners.)
We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own the assets."
This first "principle" is followed by a significant commentary:
"Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around daily and is a candidate for sale when some economic or political event makes you nervous.
We hope you instead visualize yourself as part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership with members of your family.
For our part, we do not view...shareholders as faceless members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us for what may well turn out to be the remainder of their lives."
There are some surprising parts to Buffett's conglomerate and Dairy Queen is a local example. Remember those bland box-like DQs.
Well, check out the stylish new one out on Old Canton Road to see how Buffett burnishes an old image.
A thousand dollars invested with Buffett in 1965 was worth $362,319 at the end of 2008;
Class A stock hit a high of $147,000 a share and Class B $4,858.
There have been no cash dividends since 1967. What do those rich folks live on?
John Fontaine
Annual report season is upon us... and it's a gloomy one this year.
If a report shows a loss of less than 30 percent, that's good news.
Some funds are down over 50 percent, and the retirement fund for a Wisconsin school district even lost 95 percent of its value.
So take heart, maybe you're not as bad off as you think.
Usually the average person doesn't even read annual reports.
The writing is so dull, complex and legalistic and seems designed to discourage reading.
Many times actually disguises skullduggery as you may have noticed in recent months.
An outstanding exception is the report from Warren Buffett's conglomerate of some 77 diverse companies.
Especially because net worth was down only 9.6 percent.
A mere 96 pages long, the report is a model of clarity.
There are the usual seemingly endless pages of figures and footnotes. Laws and accountants do demand them.
Page 89 should be required reading for those CEOs so recently exposed to the world in all their hubris and greed.
The heading is "Owner-related Business Principles" (Copyright 1996 by Warren Buffett).
There are 13 of them, but the first is like the biblical "summary of the law," and worth reprinting here.
"Although our form is corporate, our attitude is partnership. Charlie Munger (his vice chairman) and I think of our shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our holdings we are also, for better or worse, controlling partners.)
We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own the assets."
This first "principle" is followed by a significant commentary:
"Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around daily and is a candidate for sale when some economic or political event makes you nervous.
We hope you instead visualize yourself as part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership with members of your family.
For our part, we do not view...shareholders as faceless members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us for what may well turn out to be the remainder of their lives."
There are some surprising parts to Buffett's conglomerate and Dairy Queen is a local example. Remember those bland box-like DQs.
Well, check out the stylish new one out on Old Canton Road to see how Buffett burnishes an old image.
A thousand dollars invested with Buffett in 1965 was worth $362,319 at the end of 2008;
Class A stock hit a high of $147,000 a share and Class B $4,858.
There have been no cash dividends since 1967. What do those rich folks live on?
5 ценови клопки да избегнем
History's greatest investor, Warren Buffett, has two simple rules.
Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1.
A big, sarcastic thank-you, Warren!
Sure, practically everyone has lost money in this market -- including Buffett.
But take it easy on the Oracle here, because he's dead-on.
Buffett's intense focus on not just investing in great opportunities but avoiding terrible ones has been the key to epic success.
Story continues below ↓
advertisement | your ad here
Avoiding soul-sucking investments -- what we investing nerds dub "value traps" -- is hardly rocket science. Yet, incredibly, I see investors new and salty alike make the same mistakes over and over again, breaking Buffett's rules and walking right into what seem like obvious value traps.
Having spent way too much time thinking about it, I've concluded that there are five primary categories of these dreaded mistakes.
Avoiding these five traps will save you time, money, and more than a little heartache.
1. The quarter-life crisis
These are real heartbreakers.
You find a dominant company whose once sky-high growth has stalled, and its shares along with it.
"TechWidget Corp. is trading at only 15 times earnings right now, only half its five-year average!" you say.
"Its earnings have doubled over the past five years, but the shares are down over the same time period. Sounds like a steal!"
Snap! You just walked into a value trap.
Investors falsely believe that names like Yahoo! will see their relative valuations return to their headier days.
They won't.
Why?
For starters, growth has slowed, technology evolved, and competition emerged.
But all of that misses the real reason.
Instead of returning incremental profits to shareholders via dividends, such companies wreck shareholder value by chasing growth through non-core expansion and high-profile acquisitions.
Oh, and the ill-timed share repurchases that exist primarily to juice per-share earnings and help sop up all that stock option-driven dilution.
Steer clear of flailing tech titans until they're ready, willing, and able to follow the lead of an IBM (NYSE: IBM) or Oracle into dividend-paying adulthood.
2. The soaring cyclical
Here's the rub about cyclical stocks: Their valuations are counterintuitive.
They always look the cheapest when they've reached their priciest, and look priciest when they've reached their cheapest.
Take nearly any mining player from last summer as an example. BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RTP), Peabody Energy (NYSE: BTU), and Vale (NYSE: VALE) looked dirt cheap via crude, PEG-style valuations.
But savvy investors know that cyclical companies' profits mean-revert, which is why cyclical stocks' P/E multiples stay low during booms and high during busts.
In other words, you should be looking at cyclical stocks as their P/Es expand, not shrink.
3. The small-cap Methuselah
The six-year small-cap bull run that came crashing to a halt last year was a painful reminder of a little-known value trap: the Small-Cap Methuselah.
Century-old small caps you'd never heard of were wrapping up five-year runs of 20% annualized earnings growth.
Analysts went gaga, extrapolating those growth rates forward like the party would never end. Valuations followed suit.
Gaga analyst, meet mean-reversion.
You won't find many long-run compounding machines within the small-cap space. Show me a company with a long, proven history of creating serious shareholder value, and I'll show you a mid- or large-cap stock.
4. The too-high yielder
A company usually has a high yield (think above 7%) for one of three reasons:
It has limited growth potential, so managers return as much cash as they can to shareholders.
Think regional telecoms.
The company is in a clear state of decline and investors expect a dividend cut. Think terrestrial radio or newspapers.
The company is in a tax-advantaged structure that doesn't allow it to retain much capital.
Think business development companies, real estate investment trusts like Duke Realty (NYSE: DRE), or master limited partnerships like Boardwalk Pipeline Partners (NYSE: BWP).
Broadly speaking, a high payout is a good thing.
There's a fine line, though. At Motley Fool Income Investor, we're looking for that sweet spot where an attractive payout meets rest-easy status.
Take one Income Investor Buy First recommendation, payroll processing kingpin Automatic Data Processing.
ADP handles the payroll for one in six American workers, collecting a small cut for each one it distributes.
ADP's average payroll client has spent more than a decade with the company, thanks to the high switching costs for payroll processing and ADP's unique ability to compete on price and service for large companies.
That stability helps foot a fat, incredibly secure, CD-topping payout of 3.4%. Tack on plenty of upside on a jobs rebound, and you're looking at awfully low-hanging fruit for the income-loving investor.
5. The unopened book
Book values need to be adjusted -- especially heading into and during recessions. Acquisition-happy companies inevitably end up slashing the goodwill they'd booked while making bloated acquisitions in the years previous.
The book values of asset-centric plays (homebuilders, natural resource producers, etc.) also need a good tweaking to reflect the depressed values of those assets.
Don't get me wrong: I'm all for buying stocks when they're down and out.
We do just that at Income Investor.
But there's a catch: We're only interested in good values if they also happen to be great businesses, companies with years of exceptional performance behind and ahead of them.
And, of course, ones that pay us to wait for our thesis to play out.
But I digress.
Wrapping the traps
To recap, you can smooth and improve your returns if you:
1. Avoid the stalled-out growth stock undergoing a quarter-life crisis.
2. Don't get tripped up by seemingly cheap soaring cyclicals.
3. Steer clear of hot small caps with blah track records.
4. Think twice about the yield that looks too good to be true.
5. Don't lean on inflated or unadjusted book values.
You've probably picked up on an underlying theme here: You need unconventionally conventional thinking if you want low-stress success in the stock market.
Looking for great, simple-to-understand businesses at good prices is the easiest way to avoid stepping into a value trap -- and bag great returns besides. That's what advisor James Early and friends do over at Income Investor, where our average recommendation yields 4.8% and has beaten the market by five percentage points.
Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1.
A big, sarcastic thank-you, Warren!
Sure, practically everyone has lost money in this market -- including Buffett.
But take it easy on the Oracle here, because he's dead-on.
Buffett's intense focus on not just investing in great opportunities but avoiding terrible ones has been the key to epic success.
Story continues below ↓
advertisement | your ad here
Avoiding soul-sucking investments -- what we investing nerds dub "value traps" -- is hardly rocket science. Yet, incredibly, I see investors new and salty alike make the same mistakes over and over again, breaking Buffett's rules and walking right into what seem like obvious value traps.
Having spent way too much time thinking about it, I've concluded that there are five primary categories of these dreaded mistakes.
Avoiding these five traps will save you time, money, and more than a little heartache.
1. The quarter-life crisis
These are real heartbreakers.
You find a dominant company whose once sky-high growth has stalled, and its shares along with it.
"TechWidget Corp. is trading at only 15 times earnings right now, only half its five-year average!" you say.
"Its earnings have doubled over the past five years, but the shares are down over the same time period. Sounds like a steal!"
Snap! You just walked into a value trap.
Investors falsely believe that names like Yahoo! will see their relative valuations return to their headier days.
They won't.
Why?
For starters, growth has slowed, technology evolved, and competition emerged.
But all of that misses the real reason.
Instead of returning incremental profits to shareholders via dividends, such companies wreck shareholder value by chasing growth through non-core expansion and high-profile acquisitions.
Oh, and the ill-timed share repurchases that exist primarily to juice per-share earnings and help sop up all that stock option-driven dilution.
Steer clear of flailing tech titans until they're ready, willing, and able to follow the lead of an IBM (NYSE: IBM) or Oracle into dividend-paying adulthood.
2. The soaring cyclical
Here's the rub about cyclical stocks: Their valuations are counterintuitive.
They always look the cheapest when they've reached their priciest, and look priciest when they've reached their cheapest.
Take nearly any mining player from last summer as an example. BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RTP), Peabody Energy (NYSE: BTU), and Vale (NYSE: VALE) looked dirt cheap via crude, PEG-style valuations.
But savvy investors know that cyclical companies' profits mean-revert, which is why cyclical stocks' P/E multiples stay low during booms and high during busts.
In other words, you should be looking at cyclical stocks as their P/Es expand, not shrink.
3. The small-cap Methuselah
The six-year small-cap bull run that came crashing to a halt last year was a painful reminder of a little-known value trap: the Small-Cap Methuselah.
Century-old small caps you'd never heard of were wrapping up five-year runs of 20% annualized earnings growth.
Analysts went gaga, extrapolating those growth rates forward like the party would never end. Valuations followed suit.
Gaga analyst, meet mean-reversion.
You won't find many long-run compounding machines within the small-cap space. Show me a company with a long, proven history of creating serious shareholder value, and I'll show you a mid- or large-cap stock.
4. The too-high yielder
A company usually has a high yield (think above 7%) for one of three reasons:
It has limited growth potential, so managers return as much cash as they can to shareholders.
Think regional telecoms.
The company is in a clear state of decline and investors expect a dividend cut. Think terrestrial radio or newspapers.
The company is in a tax-advantaged structure that doesn't allow it to retain much capital.
Think business development companies, real estate investment trusts like Duke Realty (NYSE: DRE), or master limited partnerships like Boardwalk Pipeline Partners (NYSE: BWP).
Broadly speaking, a high payout is a good thing.
There's a fine line, though. At Motley Fool Income Investor, we're looking for that sweet spot where an attractive payout meets rest-easy status.
Take one Income Investor Buy First recommendation, payroll processing kingpin Automatic Data Processing.
ADP handles the payroll for one in six American workers, collecting a small cut for each one it distributes.
ADP's average payroll client has spent more than a decade with the company, thanks to the high switching costs for payroll processing and ADP's unique ability to compete on price and service for large companies.
That stability helps foot a fat, incredibly secure, CD-topping payout of 3.4%. Tack on plenty of upside on a jobs rebound, and you're looking at awfully low-hanging fruit for the income-loving investor.
5. The unopened book
Book values need to be adjusted -- especially heading into and during recessions. Acquisition-happy companies inevitably end up slashing the goodwill they'd booked while making bloated acquisitions in the years previous.
The book values of asset-centric plays (homebuilders, natural resource producers, etc.) also need a good tweaking to reflect the depressed values of those assets.
Don't get me wrong: I'm all for buying stocks when they're down and out.
We do just that at Income Investor.
But there's a catch: We're only interested in good values if they also happen to be great businesses, companies with years of exceptional performance behind and ahead of them.
And, of course, ones that pay us to wait for our thesis to play out.
But I digress.
Wrapping the traps
To recap, you can smooth and improve your returns if you:
1. Avoid the stalled-out growth stock undergoing a quarter-life crisis.
2. Don't get tripped up by seemingly cheap soaring cyclicals.
3. Steer clear of hot small caps with blah track records.
4. Think twice about the yield that looks too good to be true.
5. Don't lean on inflated or unadjusted book values.
You've probably picked up on an underlying theme here: You need unconventionally conventional thinking if you want low-stress success in the stock market.
Looking for great, simple-to-understand businesses at good prices is the easiest way to avoid stepping into a value trap -- and bag great returns besides. That's what advisor James Early and friends do over at Income Investor, where our average recommendation yields 4.8% and has beaten the market by five percentage points.
PhillyDeals: Horsham's Capmark gets Buffett behind it
By Joseph N. DiStefano
Canny investor Warren Buffett, whose stock in his insurance-based holding company, Berkshire Hathaway Inc., has made him the world's richest investor, is riding to the rescue of a Horsham lender - and it will pay him millions of dollars for the privilege of being saved.
Capmark Financial Group Inc., the former General Motors loan subsidiary crippled by the credit-market collapse of 2007, has agreed to sell its mortgage-banking and servicing businesses to a partnership between Berkshire Hathaway, of Omaha, Neb., and insurance investor Leucadia National Corp., of New York, in a complex, conditional deal.
Capmark agreed to pay $40 million for the right to guarantee that Berkshire's and Leucadia's Berkadia L.L.C. will buy Capmark for up to $490 million if Capmark decides to sell in the next 60 days.
Berkadia would pay $375 million cash, and part or all of the remaining $115 million may be kept by the buyers to pay losses and costs, depending on what kind of shape Capmark is in when the deal closes.
The deal leaves room for a better offer if Capmark files for bankruptcy protection.
Capmark employs about 600 at its Montgomery County headquarters.
McCord backpedals
Fat fee increases for Pennsylvania's 529 Guaranteed Savings Plan have been pushed back to Sept. 12, state Treasurer Rob McCord said this week on his Web site.
McCord, elected in the fall, seems to have a "good news only" policy for his announcements: He didn't post any statement when he imposed higher fees on savers - the households investing for their children's future college tuitions - last month.
The Inquirer reported the increase in this space Aug. 23 after outraged Pennsylvania parents, who had believed the state's guarantee promise, were informed of the new charges by state mail and e-mail and brought the higher fees to my attention.
Some families that dutifully put aside money for their children's education through the program will be socked by unexpected fees of more than $1,500 a year as a result of the increase. Or they can apply to transfer the tax-exempt money to another of the dozens of U.S. 529 plans, most of which aren't "guaranteed."
Did parent and voter outrage persuade McCord to delay the fee increase a little? "We have been getting feedback," Treasury spokeswoman Carrie Fischer Lepore said.
Some parents weren't getting notice of the increases in time to do anything about it. "We wanted to let families take advantage of lower tuition rates and premiums" before the increases take effect, Lepore said.
McCord raised the fees because of a situation he inherited: The state's hired investment managers lost as much as $400 million when markets fell last year. They've regained part of the loss, but McCord felt - as previous treasurers felt in similar circumstances - that it's best to boost assets to make sure there'll be enough money to pay when the time comes.
As I noted in Sunday's column, some of the 529 plan managers have given money to McCord and other state officials for their political campaigns.
The Securities and Exchange Commission wants to stop such donations, with a proposal that would bar states and towns from paying firms that gave money to politicians in the previous two years.
McCord's move may foreshadow attempts to freeze some of Pennsylvania's 3,000-plus taxpayer-funded municipal- and state-worker pension plans, and replace them with plans funded mostly by worker contributions, under proposals being debated in the General Assembly.
Treasury cuts
McCord yesterday laid off 60 people, from his staff of 490, because of state budget cuts.
A big drop in income tax receipts and a summer-long fight between Gov. Rendell, who wants to raise taxes, and state Senate Republican leaders, who want to cut programs that Democrats like, have put pressure on state agencies to cut more jobs. Treasury had to cut its budget 15 percent, spokeswoman Lepore told me.
By Joseph N. DiStefano
Canny investor Warren Buffett, whose stock in his insurance-based holding company, Berkshire Hathaway Inc., has made him the world's richest investor, is riding to the rescue of a Horsham lender - and it will pay him millions of dollars for the privilege of being saved.
Capmark Financial Group Inc., the former General Motors loan subsidiary crippled by the credit-market collapse of 2007, has agreed to sell its mortgage-banking and servicing businesses to a partnership between Berkshire Hathaway, of Omaha, Neb., and insurance investor Leucadia National Corp., of New York, in a complex, conditional deal.
Capmark agreed to pay $40 million for the right to guarantee that Berkshire's and Leucadia's Berkadia L.L.C. will buy Capmark for up to $490 million if Capmark decides to sell in the next 60 days.
Berkadia would pay $375 million cash, and part or all of the remaining $115 million may be kept by the buyers to pay losses and costs, depending on what kind of shape Capmark is in when the deal closes.
The deal leaves room for a better offer if Capmark files for bankruptcy protection.
Capmark employs about 600 at its Montgomery County headquarters.
McCord backpedals
Fat fee increases for Pennsylvania's 529 Guaranteed Savings Plan have been pushed back to Sept. 12, state Treasurer Rob McCord said this week on his Web site.
McCord, elected in the fall, seems to have a "good news only" policy for his announcements: He didn't post any statement when he imposed higher fees on savers - the households investing for their children's future college tuitions - last month.
The Inquirer reported the increase in this space Aug. 23 after outraged Pennsylvania parents, who had believed the state's guarantee promise, were informed of the new charges by state mail and e-mail and brought the higher fees to my attention.
Some families that dutifully put aside money for their children's education through the program will be socked by unexpected fees of more than $1,500 a year as a result of the increase. Or they can apply to transfer the tax-exempt money to another of the dozens of U.S. 529 plans, most of which aren't "guaranteed."
Did parent and voter outrage persuade McCord to delay the fee increase a little? "We have been getting feedback," Treasury spokeswoman Carrie Fischer Lepore said.
Some parents weren't getting notice of the increases in time to do anything about it. "We wanted to let families take advantage of lower tuition rates and premiums" before the increases take effect, Lepore said.
McCord raised the fees because of a situation he inherited: The state's hired investment managers lost as much as $400 million when markets fell last year. They've regained part of the loss, but McCord felt - as previous treasurers felt in similar circumstances - that it's best to boost assets to make sure there'll be enough money to pay when the time comes.
As I noted in Sunday's column, some of the 529 plan managers have given money to McCord and other state officials for their political campaigns.
The Securities and Exchange Commission wants to stop such donations, with a proposal that would bar states and towns from paying firms that gave money to politicians in the previous two years.
McCord's move may foreshadow attempts to freeze some of Pennsylvania's 3,000-plus taxpayer-funded municipal- and state-worker pension plans, and replace them with plans funded mostly by worker contributions, under proposals being debated in the General Assembly.
Treasury cuts
McCord yesterday laid off 60 people, from his staff of 490, because of state budget cuts.
A big drop in income tax receipts and a summer-long fight between Gov. Rendell, who wants to raise taxes, and state Senate Republican leaders, who want to cut programs that Democrats like, have put pressure on state agencies to cut more jobs. Treasury had to cut its budget 15 percent, spokeswoman Lepore told me.
Buffett’s HomeServices Buys Chicago Property Broker (Update3)
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By Brian Louis
Sept. 1 (Bloomberg) -- The real estate brokerage controlled by Warren Buffett’sBerkshire Hathaway Inc. bought a Chicago- based agency, entering the third-largest U.S. metropolitan area amid signs of a rebounding real estate market.
HomeServices of America Inc. acquired Koenig & Strey GMAC Real Estate from Brookfield Residential Property Services, according to a statement by HomeServices, which didn’t disclose the terms.
Founded in 1961, Koenig & Strey has 21 offices and about 900 agents in the Chicago region.
New home sales in the U.S. rose more than forecast in July and sales of existing houses rose to the highest in almost two years, prompting some analysts to suggest the worst housing market since the Great Depression may have reached bottom. Falling home prices and a government tax credit for first-time buyers are bolstering demand for U.S. houses.
“Koenig & Strey is a respected company, with an excellent reputation and long-term ties to the community,” Ron Peltier, chairman and chief executive officer of Minneapolis-based HomeServices, said in the statement. HomeServices said it will “continue to look for additional opportunities, both here and throughout other major markets in the United States.”
Sales in the Chicago region rose less than 1 percent in July from a year earlier to 7,427, according to an Aug. 21 statement by the Illinois Association of Realtors. The median home price fell 16 percent to $213,500.
The Competition
HomeServices is the second-biggest U.S. residential brokerage after Apollo Management LP’s Realogy Corp. HomeServices’ revenue fell 18 percent to $279 million in the second quarter after housing prices dropped from the same period a year earlier, according to a regulatory filing by the company’s parent, MidAmerican Energy Holdings Co.
MidAmerican is majority-owned by Omaha, Nebraska-based Berkshire, whose chairman and CEO is Buffett.
Realogy, the Parsippany, New Jersey-based broker acquired by Apollo Management for $6.8 billion in 2007, reported a second-quarter loss last month of $15 million. Revenue from commissions fell 28 percent to $746 million and the average price of brokered home sale fell 15 percent to $188,489, Realogy said.
Realogy’s $1.7 billion of 10.5 percent notes due in 2014 rose 0.8 cent to 60 cents on the dollar to yield 26 percent at 3:02 p.m. New York time, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Realogy owns the Coldwell Banker and Century 21 brands.
Share | Email | Print | A A A
By Brian Louis
Sept. 1 (Bloomberg) -- The real estate brokerage controlled by Warren Buffett’sBerkshire Hathaway Inc. bought a Chicago- based agency, entering the third-largest U.S. metropolitan area amid signs of a rebounding real estate market.
HomeServices of America Inc. acquired Koenig & Strey GMAC Real Estate from Brookfield Residential Property Services, according to a statement by HomeServices, which didn’t disclose the terms.
Founded in 1961, Koenig & Strey has 21 offices and about 900 agents in the Chicago region.
New home sales in the U.S. rose more than forecast in July and sales of existing houses rose to the highest in almost two years, prompting some analysts to suggest the worst housing market since the Great Depression may have reached bottom. Falling home prices and a government tax credit for first-time buyers are bolstering demand for U.S. houses.
“Koenig & Strey is a respected company, with an excellent reputation and long-term ties to the community,” Ron Peltier, chairman and chief executive officer of Minneapolis-based HomeServices, said in the statement. HomeServices said it will “continue to look for additional opportunities, both here and throughout other major markets in the United States.”
Sales in the Chicago region rose less than 1 percent in July from a year earlier to 7,427, according to an Aug. 21 statement by the Illinois Association of Realtors. The median home price fell 16 percent to $213,500.
The Competition
HomeServices is the second-biggest U.S. residential brokerage after Apollo Management LP’s Realogy Corp. HomeServices’ revenue fell 18 percent to $279 million in the second quarter after housing prices dropped from the same period a year earlier, according to a regulatory filing by the company’s parent, MidAmerican Energy Holdings Co.
MidAmerican is majority-owned by Omaha, Nebraska-based Berkshire, whose chairman and CEO is Buffett.
Realogy, the Parsippany, New Jersey-based broker acquired by Apollo Management for $6.8 billion in 2007, reported a second-quarter loss last month of $15 million. Revenue from commissions fell 28 percent to $746 million and the average price of brokered home sale fell 15 percent to $188,489, Realogy said.
Realogy’s $1.7 billion of 10.5 percent notes due in 2014 rose 0.8 cent to 60 cents on the dollar to yield 26 percent at 3:02 p.m. New York time, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Realogy owns the Coldwell Banker and Century 21 brands.
Плосър: Фед има стратегия за излизане и тя е светкавично вдигане на лихвите
3 септември, 2009
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Федералният резерв трябва да вдигне лихвата толкова бързо и агресивно, когато икономиката се възстанови, колкото бързо я намали, за да избегне риска от инфлация, заяви в интервю пред CNBC преди минути Чарлз Плосър, президент на филаделфийския Фед.
Анализаторите по цял свят се опасяват, че мерките по стимулиране на икономиката и огромното печатене на пари ще доведат до инфлация и обезценка, като някои европейски политици вече предлагат изтеглянето на мерките по стимулирането да стане наведнъж за да се предотврати това.
Фед има стратегия за излизане и ще я приложи, когато настъпи момента за това, казва Плосър.
„Нашата стратегия за излизане е наистина много проста: трябва да започнем да се изтегляме от нашите извънредни мерки, иначе сме изправени пред месеци или години на инфлация. В идните няколко тримесечия инфлацията няма да е проблем, но ще стане, ако Фед не дирижира внимателно стратегията си за излизане. Имаме инструментите да го направим” – казва банкера.
„Въпросът е – ще можем ли да го направим навреме, да уцелим момента, така че да предотвратим всяка потенциална заплаха от инфлация. Това може да означава, че ще трябва да вдигнем лихвите светкавично. Поне толкова агресивно, колкото ги свалихме.”
Запитан дали ще има вдигане на лихвата през 2009 Плосър отговори – „Вероятно не”. Запитан за 2010 той каза:
„Трябва да изчакаме и да видим как ще се развие възстановяването на икономиката”.
Според него щатската икономика е в период на преход от рязко свиване към растеж, като ще бъде подпомогната от растежа навън, който ще спомогне за ръст в износа, както и за възстановяване на нивата на материалните запаси.
„Постепенно, в хода на следващите няколко месеца очаквам добрите новини да доминират, като очаквам растеж през втората половина на годината” – оптимист е Плосър.
3 септември, 2009
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Коментирай
Федералният резерв трябва да вдигне лихвата толкова бързо и агресивно, когато икономиката се възстанови, колкото бързо я намали, за да избегне риска от инфлация, заяви в интервю пред CNBC преди минути Чарлз Плосър, президент на филаделфийския Фед.
Анализаторите по цял свят се опасяват, че мерките по стимулиране на икономиката и огромното печатене на пари ще доведат до инфлация и обезценка, като някои европейски политици вече предлагат изтеглянето на мерките по стимулирането да стане наведнъж за да се предотврати това.
Фед има стратегия за излизане и ще я приложи, когато настъпи момента за това, казва Плосър.
„Нашата стратегия за излизане е наистина много проста: трябва да започнем да се изтегляме от нашите извънредни мерки, иначе сме изправени пред месеци или години на инфлация. В идните няколко тримесечия инфлацията няма да е проблем, но ще стане, ако Фед не дирижира внимателно стратегията си за излизане. Имаме инструментите да го направим” – казва банкера.
„Въпросът е – ще можем ли да го направим навреме, да уцелим момента, така че да предотвратим всяка потенциална заплаха от инфлация. Това може да означава, че ще трябва да вдигнем лихвите светкавично. Поне толкова агресивно, колкото ги свалихме.”
Запитан дали ще има вдигане на лихвата през 2009 Плосър отговори – „Вероятно не”. Запитан за 2010 той каза:
„Трябва да изчакаме и да видим как ще се развие възстановяването на икономиката”.
Според него щатската икономика е в период на преход от рязко свиване към растеж, като ще бъде подпомогната от растежа навън, който ще спомогне за ръст в износа, както и за възстановяване на нивата на материалните запаси.
„Постепенно, в хода на следващите няколко месеца очаквам добрите новини да доминират, като очаквам растеж през втората половина на годината” – оптимист е Плосър.
вторник, 1 септември 2009 г.
Berkshire Gains as U.S. Reinsurer Surplus Rebounds (Update1)
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By Jamie McGee
Aug. 31 (Bloomberg) -- Warren Buffett’sBerkshire Hathaway Inc. and Munich Re are among reinsurers that benefited in the second quarter as the industry’s surplus in the U.S. expanded for the first time in seven periods on investment gains.
The combined surplus of 19 reinsurers climbed 11 percent in the three months ended June 30 to $66 billion, the Reinsurance Association of America said today in a report. The surplus, a measure of assets minus liabilities, hadn’t increased since the third quarter of 2007. The figure was $72.8 billion on June 30, 2008, before the collapse of Lehman Brothers Holdings Inc. forced down the value of the industry’s investments.
“You are starting to see a rebound in the financial markets, and therefore you are starting to see a little bit of an uptick in the valuations of the assets,” said Michael Paisan, an analyst at Stifel Nicolaus & Co.
Reinsurers provide coverage to primary carriers, protecting them from large claims including catastrophes. Munich Re, the world’s largest reinsurer, posted a 14 percent profit gain in the second quarter as investments and sales climbed. Buffett told investors this month that he is more willing to take the risk of covering disasters after Omaha, Nebraska-based Berkshire’s investment portfolio gained.
“Barring a catastrophe in the third quarter,” the surplus gains are likely to continue, said Dean Evans, an analyst with KBW Inc. “The current outlook is still pretty good for profitability.”
Hurricane Season
“Global reinsurers’ performance to date could be counted as an achievement, given the state of the financial services industry and the economy,” A.M. Best said.
Policy Sales
Policy sales for the group of 19 reinsurers climbed to $12.8 billion in the first half of the year, up from $12.7 billion the same period in 2008, the Washington-based RAA said.
Berkshire’s Gain
Munich Re’s surplus in the U.S. advanced about 6.2 percent in the three months ended June 30 to $3.6 billion. The surplus at Berkshire’s National Indemnity Co. gained 18 percent to $28.4 billion.
“Due to the restoration of net worth that occurred during the second quarter, management’s willingness to write large catastrophe risks has increased, but to date rates have not warranted such writing,” Berkshire said in an Aug. 7 regulatory filing.
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By Jamie McGee
Aug. 31 (Bloomberg) -- Warren Buffett’sBerkshire Hathaway Inc. and Munich Re are among reinsurers that benefited in the second quarter as the industry’s surplus in the U.S. expanded for the first time in seven periods on investment gains.
The combined surplus of 19 reinsurers climbed 11 percent in the three months ended June 30 to $66 billion, the Reinsurance Association of America said today in a report. The surplus, a measure of assets minus liabilities, hadn’t increased since the third quarter of 2007. The figure was $72.8 billion on June 30, 2008, before the collapse of Lehman Brothers Holdings Inc. forced down the value of the industry’s investments.
“You are starting to see a rebound in the financial markets, and therefore you are starting to see a little bit of an uptick in the valuations of the assets,” said Michael Paisan, an analyst at Stifel Nicolaus & Co.
Reinsurers provide coverage to primary carriers, protecting them from large claims including catastrophes. Munich Re, the world’s largest reinsurer, posted a 14 percent profit gain in the second quarter as investments and sales climbed. Buffett told investors this month that he is more willing to take the risk of covering disasters after Omaha, Nebraska-based Berkshire’s investment portfolio gained.
“Barring a catastrophe in the third quarter,” the surplus gains are likely to continue, said Dean Evans, an analyst with KBW Inc. “The current outlook is still pretty good for profitability.”
Hurricane Season
Catastrophes last year, including Hurricanes Gustav and Ike, cost $25.2 billion, the most since the record storm season of 2005, an industry group said in January.
Forecasters have scaled back predictions for the severity of this year’s storm season because of warming in the eastern Pacific Ocean.
The Atlantic didn’t produce a named storm in 2009 until Ana on Aug. 15, the latest in more than two decades for the first storm of a calendar year to reach that intensity.
The season runs from June 1 to Nov. 30.
Reinsurers have been able to pull money from reserves after determining they set aside more than necessary in prior quarters.
The reserve releases contributed to an increase in underwriting profit for the industry, ratings firm A.M. Best said today in a statement, maintaining a “stable” outlook for the industry.
“Global reinsurers’ performance to date could be counted as an achievement, given the state of the financial services industry and the economy,” A.M. Best said.
Policy Sales
Policy sales for the group of 19 reinsurers climbed to $12.8 billion in the first half of the year, up from $12.7 billion the same period in 2008, the Washington-based RAA said.
Property reinsurance rates have advanced as capital has diminished and insurers seek protection from natural disasters.
Reinsurance prices for U.S. catastrophe zones increased as much as 15 percent in July 1 renewals, Willis Group Holdings Ltd. reported last month.
Reinsurers have been unable to boost prices for casualty coverage, Paisan said.
“Particularly on the property-catastrophe reinsurance, you are seeing a pretty sizeable uptick in pricing,” Paisan said.
“In the current market where the equity markets are volatile, and debt markets are essentially closed or prohibitively costly, the only additional alternative form of capital is the reinsurance market.”
Berkshire’s Gain
Munich Re’s surplus in the U.S. advanced about 6.2 percent in the three months ended June 30 to $3.6 billion. The surplus at Berkshire’s National Indemnity Co. gained 18 percent to $28.4 billion.
“Due to the restoration of net worth that occurred during the second quarter, management’s willingness to write large catastrophe risks has increased, but to date rates have not warranted such writing,” Berkshire said in an Aug. 7 regulatory filing.
Capital needs have led reinsurers to pursue acquisitions this year, Paisan said.
Validus Holdings Ltd. announced plans to buy IPC Holdings Ltd., and PartnerRe Ltd. agreed in July to acquire Paris Re Holdings Ltd.
“The real driver for merger and acquisition activity within the reinsurance area would be more based on trying to build a larger capital base,” Paisan said.
“It’s been increasingly more important to have a larger capital base within the reinsurance industry.”
Five Stocks For An Era Of Slow Profit Growth
John Reese, Validea.com, 08.31.09, 06:20 PM EDT
If robust rates of profit growth become hard to find, then these five stocks will become even more valuable to investors.
With that in mind, I decided to look for stocks using the tools on my investment research web site, Validea.com, that have the following four qualities:
--They to have the fundamentals to pass one or more of my Guru Strategies--computer models each based on the approach of a different investing great;
--The companies must have upped their earnings per share in at least nine of the past 10 years;
--They must have manageable debt, which I defined by low debt-to-equity ratios or the ability to pay off debt using profits in a reasonable timeframe (i.e., under two years);
--They must be yielding 2% or more.
One more reason to like Fastenal: It's paying a decent 2.02% dividend yield.
United Technologies ( UTX - news - people ): This manufacturing firm makes a range of heavy equipment, including Carrier heating and air conditioning, Hamilton Sundstrand aerospace systems and industrial products, Otis elevators and escalators, Pratt & Whitney aircraft engines and Sikorsky helicopters.
Finally, my Lynch-based model considers JNJ a "stalwart" because of its moderate 12.7% growth rate and high sales. With a yield-adjusted P/E/Growth ratio of 0.84, JNJ looks like a good buy according to this model. The five stocks above appear to be solid picks for the "new normal" that PIMCO and Gross envision, they should appeal to investors regardless of what the future "normal" looks like. With strong fundamental, track records of increasing earnings through good and bad times, manageable debt, and decent yields, they're worth a look no matter what future financial landscape you envision.
John Reese, Validea.com, 08.31.09, 06:20 PM EDT
If robust rates of profit growth become hard to find, then these five stocks will become even more valuable to investors.
Ever since the collapse of the financial markets last fall, one of the biggest buzz terms hovering over the investment world has been the "new normal."
With the days of huge leverage gone, many are saying that investors shouldn't expect the same kind of profit growth--or investment returns--that we've enjoyed over the past couple decades.
Bill Gross, managing director of bond giant PIMCO, has said, for example, that "it is probable that trillion-dollar deficits are here to stay because any recovery is likely to reflect 'new normal' GDP growth rates of 1%-2% not 3%+ as we used to have.
… Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delevered financial markets."
Of course, no one knows for sure whether we are indeed headed to a "new normal."
Others say that this is another example of "this-time-is-different" thinking that has so many times turned out not to be true.
But given Gross' track record--he was one of the few strategists who warned of the credit crisis and market trouble in advance--it's worth considering what stocks you might be able to count on if profit growth becomes precious.
With that in mind, I decided to look for stocks using the tools on my investment research web site, Validea.com, that have the following four qualities:
--They to have the fundamentals to pass one or more of my Guru Strategies--computer models each based on the approach of a different investing great;
--The companies must have upped their earnings per share in at least nine of the past 10 years;
--They must have manageable debt, which I defined by low debt-to-equity ratios or the ability to pay off debt using profits in a reasonable timeframe (i.e., under two years);
--They must be yielding 2% or more.
The idea is that if profits become more scarce, your best bet will be companies that have solid balance sheets, have long track records of being able to increase profits through good and bad market conditions, aren't weighed down by debt and are giving you a solid dividend payout.
Firms that meet all those criteria are few and far between--so those that do deserve your attention.
Here are a few that made the grade:
Fastenal Company ( FAST - news - people ): This unheralded Minnesota-based firm is the largest distributor of fasteners in the U.S., and also makes an array of other industrial tools and supplies.
It has 12 distribution centers in the U.S. and more than 2,300 stores, and a market cap of about $5.4 billion.
Fastenal gets high marks from my Warren Buffett-based Guru Strategy, in part because of its exceptional earnings history.
The firm has upped earnings per share in all but one of the past 10 years, with the lone dip coming eight years ago.
My Buffett-based model also looks for firms with enough annual earnings that they could, if need be, pay off all their debt in less than five years.
Fastenal doesn't need five years; it doesn't even need five days.
It has no long-term debt, a great sign.
Two other qualities Buffett has been known to look for in stocks are a "durable competitive advantage" and strong management, and one way he has measured both of those is by looking at return on equity.
My Buffett-based model likes companies to have a ten-year average ROE of at least 15%, and Fastenal, at 20.1%, easily makes the grade.
One more reason to like Fastenal: It's paying a decent 2.02% dividend yield.
Special Offer: Warren Buffett bought Goldman Sachs at $110 with a 10% yield.
Which financial and steel stocks appeal to Buffett's strategies right now?
Click here to try the Validea Hot List for a complete model portfolio of guru buys.
China Mobile Ltd. ( CHL - news - people ): This Hong Kong-based cellular service giant ($205 billion market cap) is China's leading mobile services provider and has the world's largest mobile network and subscriber base.
As of the end of last year, it had more than 450 million subscribers, and its market share was about 72% in Mainland China.
China Mobile is another favorite of my Buffett-based model, in part because it has grown EPS in each of the past 10 years.
The firm also has annual earnings of more than $16 billion, meaning it could pay off its $1.45 billion in debt in a matter of months.
And, CHL has an excellent 23.1% average return on equity over the past decade.
The Buffett model isn't the only one that likes CHL, which is paying a handsome 3.54% dividend yield.
The strategy I base on the approach of mutual fund great Peter Lynch considers the stock a "fast-grower"--Lynch's favorite type of investment--because of its 24.42% long-term growth rate (I use an average of the three-, four- and five-year EPS figures to determine a growth rate).
To identify fast-growers selling on the cheap, Lynch famously used the P/E/Growth ratio, and the model I base on his writings considers P/E/Gs below 1.0 good values.
By dividing CHL's 12.63 P/E ratio by its growth rate, we get a very solid P/E/G of 0.52.
While the Lynch model considers it a fast grower, the value model I base on the writings of James O'Shaughnessy also gives China Mobile high marks.
This method looks for large firms with strong cash flows and high yields. China Mobile's $60 billion-plus in trailing 12-month sales, $6.74 in cash flow per share, and 3.54% yield all make the grade.
United Technologies ( UTX - news - people ): This manufacturing firm makes a range of heavy equipment, including Carrier heating and air conditioning, Hamilton Sundstrand aerospace systems and industrial products, Otis elevators and escalators, Pratt & Whitney aircraft engines and Sikorsky helicopters.
The Hartford, Conn.-based company has a market cap of more than $56 billion, and it's increased EPS in every year of the past decade.
Because of its high sales and moderate 16.65% growth rate, my Lynch-based model considers UTX a stalwart, the kind of large, steady stock that will often offer protection during a downturn or recession.
Since stalwarts often pay nice dividends, Lynch adjusted the "G" portion of the P/E/G ratio to include yield.
Thanks in part to its solid 2.58% yield, UTX has a yield-adjusted P/E/G of 0.71, easily passing this model's most important test.
Lynch also liked firms with manageable debt, and my model requires stocks to have debt/equity ratios below 80%. At 62.24%, UTX has a fair amount of debt, but it doesn't appear to be overleveraged.
Since July 2003, the S&P 500 is down 2.1%, but the Validea Hot List is up 105.5%.
Click here to get the latest Hot List portfolio of stocks that pass muster with strategies of the all-time investing legends like Buffett, Benjamin Graham, Peter Lynch, and more.
General Dynamics Corporation ( GD - news - people ): This Virginia-based firm is one of the U.S.'s largest aerospace and defense firms, making battle tanks and assault vehicles, armaments and munitions, battleships and nuclear submarines and military information technology systems.
It has a $22.6 billion market cap, and is paying a decent 2.6% yield.
General Dynamics is one of the highest rated stocks in the market right now according to my strategies.
It gets approval from four of my models, including the strategy I base on the writings of hedge fund guru Joel Greenblatt--which is up more than 50% this year.
Greenblatt's simple, highly successful strategy looks only at two variables: earnings yield and return on capital.
GD's earnings yield of 14.94% ranks 95th of the thousands of stocks in my database, while its return on total capital of 59.13% ranks 85th.
Combined, those two figures make GD the 14th most-attractive stock in the market, according to my Greenblatt-based model.
My Lynch model is also high on GD, which it considers a fast grower because of its 20.21% growth rate, and loves the firm's 0.46 P/E/G ratio.
My Buffett-based model, meanwhile, likes that GD has upped EPS in nine of the past 10 years, with the lone dip coming six years ago, and that it has enough earnings to pay off all its debts in less than two years.
GD also impresses the Buffett model with its 10-year average return on equity of more than 20%
Another model that gives GD high marks is the strategy I base on the early writings of Kenneth Fisher.
Fisher pioneered the price/sales ratio as a way to identify undervalued stocks, and my Fisher-based model requires noncyclical companies like GD to have P/S ratios below 0.75. At 0.72, GD makes the grade.
The Fisher-inspired model also likes the firm's manageable 35.59% debt/equity ratio and 7.9% average three-year net profit margins.
Johnson & Johnson ( JNJ - news - people ): This New Jersey-based health care giant is one I've mentioned recently, but as one of the few firms that meet all my "new normal" criteria, it's definitely worth another look. Johnson & Johnson, whose brands include Tylenol, Band-Aid and Neutrogena, gets high marks from three of my models.
My Buffett strategy likes that JNJ has upped earnings in nine of the past 10 years, and that it has more annual earnings than debt.
JNJ also has a 25.9% 10-year average return on equity.
My O'Shaughnessy-based value model likes JNJ's size--it has a $167 billion market cap and more than $61 billion in annual sales--as well as the firm's strong cash flow per share of $5.65, and its solid 3.23% dividend yield.
Finally, my Lynch-based model considers JNJ a "stalwart" because of its moderate 12.7% growth rate and high sales. With a yield-adjusted P/E/Growth ratio of 0.84, JNJ looks like a good buy according to this model. The five stocks above appear to be solid picks for the "new normal" that PIMCO and Gross envision, they should appeal to investors regardless of what the future "normal" looks like. With strong fundamental, track records of increasing earnings through good and bad times, manageable debt, and decent yields, they're worth a look no matter what future financial landscape you envision.
Alice Schroeder on How Buffett Values a Business and Invests
On November 20, 2008, Alice Schrooder, author of "The Snowball: Warren Buffett and the Business of Life", spoke at the Value Investing Conference at the Darden School of Business. She gave some fascinating insights into how Buffett invests that are not in the book. I hope you find them useful.
Much of Buffett's success has come from training himself to practice good habits.
His first and most important habit is to work hard.
He dug up SEC documents long before they were online.
He went to the state insurance commission to dig up facts.
He was visiting companies long before he was known and persisting in the face of rejection.
He was always thinking what more he could do to get an edge on the other guy.
Schroeder rejects those who argue that working harder will not give you an edge today because so much is available online.
Buffett is a "learning machine".
This learning has been cumulative over his entire life covering thousands of businesses and many different industries.
This storehouse of knowledge allows Buffett to make decisions quickly.
Schroeder uses a case study on Mid-Continent Tab Card Company in which Buffett invested privately to illustrate how Buffett invests.
In the 1950's, IBM was forced to divest itself of the computer tab card business as part of an anti-trust settlement with the Justice Department.
The computer tab card business was IBM's most profitable business with profit margins of 50%.
Buffett was approached by some friends to invest in Mid-Continent Tab Card Company which was a start-up setup to compete in the tab card business.
Buffett declined because of the real risk that the start-up could fail.
This illustrates a fundamental principle of how Buffett invests: first focus on what you can loose and then, and only then, think about return.
Once Buffett concluded he could lose money, he quit thinking and said "no".
This is his first filter.
Schroder argues that most investors do just the opposite: they first focus on the upside and then give passing thought to risk.
Later, after the start-up was successfully established and competing, Buffett was again approached to invest capital to grow the business.
The company needed money to purchase additional machines to make the tab cards.
The business now had 40% profit margins and was making enough that a new machine could pay for itself in a year.
Schroeder points out that already in 1959, long before Buffett had established himself as an expert stock picker, people were coming to him with special deals, just like they do now with Goldman Sachs and GE.
The reason is that having started so young in business he already had both capital and business knowledge/acumen.
Unlike most investors, Buffett did not create a model of the business.
In fact, based on going through pretty much all of Buffett's files, Schroder never saw that Buffett had created a model of a business.
Instead, Buffett thought like a horse handicapper.
He isolated the one or two factors upon which the success of Mid American hinged. In this case, sales growth and cost advantage.
He then laid out the quarterly data for these factors for all of Mid Continent's factories and those of its competitors, as best he could determine it, on sheets of a legal pad and intently studied the data.
He established his hurdle of a 15% return and asked himself if he could get it based on the company's 36% profit margins and 70% growth.
It was a simple yes or no decision and he determined that he could get the 15% return so he invested.
According to Schroder, 15% is what Buffett wants from day 1 on an investment and then for it to compound from there.
This is how Buffett does a discounted cash flow.
There are no discounted cash flow models.
Buffett simply looks at detailed long-term historical data and determines, based on the price he has to pay, if he can get at least a 15% return.
(This is why Charlie Munger has said he has never seen Buffett do a discounted cash flow model.)
There was a big margin of safety in the numbers of Mid Continent.
Buffett invested $60,000 of personal money or about 20% of his net worth.
It was an easy decision for him. No projections - only historical data.
He held the investment for 18 years and put another $1 million into the business over time.
The investment earned 33% over the 18 years.
It was a vivid example of a Phil Fisher investment at a Ben Graham price.
Buffett is very risk averse and follows Firestone's Law of forecasting: "Chicken Little only has to be right once."
This is why Berkshire Hathaway is not dealing with a lot of the problems other companies are dealing with because he avoids the risk of catastrophe.
He is very realistic and never tries to talk himself out of a decision if he sees that it has cat risk.
Buffett said he thought the market was attractive in the fall of 2008 because it was at 70%-80% of GDP.
This gave him a margin of safety based on historical data.
He is handicapping. He doesn't care if it goes up or down in the short term.
Buying at these levels stacks the odds in his favor over time.
Buffett has never advocated the concept of dollar cost averaging because it involves buying the market a regular intervals - regardless of how overvalued the market may be.
This is something Buffett would never support.
BYD’s Wang Says Buffett’s MidAmerican May Boost Stake (Update4)
Aug. 31 (Bloomberg) -- Warren Buffett’s MidAmerican Energy Holdings Co. wants to boost its stake in BYD Co., said Wang Chuanfu, chairman and chief executive officer of the Chinese company. BYD shares rose to a record.
“If Buffett were to make an additional investment in BYD, the deal’s pricing will provide a benchmark for the stock’s value,” said Barry Leung, who rates BYD shares “buy” at Sun Hung Kai Securities in Hong Kong. “BYD’s shares have run up a huge amount following Buffett’s initial investment, so even if they can agree a discount to the current stock price, it will still be a lot more than what they paid in the first deal.”
Electric Car
First-half net income rose 98 percent to 1.18 billion yuan from a year earlier, the company said yesterday. Revenue increased 30 percent to 16.1 billion yuan.
BYD more than doubled first-half vehicle shipments to 176,814 autos, outpacing a 26 percent gain in nationwide passenger-car sales.
Aug. 31 (Bloomberg) -- Warren Buffett’s MidAmerican Energy Holdings Co. wants to boost its stake in BYD Co., said Wang Chuanfu, chairman and chief executive officer of the Chinese company. BYD shares rose to a record.
“They are very positive about BYD’s business,” Wang told reporters in Hong Kong today. BYD will discuss plans by MidAmerican to increase its investment, he said.
Ann Thelen, a spokeswoman at MidAmerican, said the company doesn’t comment on future investments.
BYD has surged more than five-fold in Hong Kong trading since September 2008, when it first disclosed the HK$1.8 billion ($232 million) initial investment from MidAmerican, a unit of Berkshire Hathaway Inc.
The transaction has generated a profit of more than $1 billion for the U.S. power producer, according to Bloomberg data.
“If Buffett were to make an additional investment in BYD, the deal’s pricing will provide a benchmark for the stock’s value,” said Barry Leung, who rates BYD shares “buy” at Sun Hung Kai Securities in Hong Kong. “BYD’s shares have run up a huge amount following Buffett’s initial investment, so even if they can agree a discount to the current stock price, it will still be a lot more than what they paid in the first deal.”
Electric Car
BYD, China’s seventh-biggest carmaker, rose 8 percent to close at HK$48.60 in Hong Kong, compared with a 1.9 percent drop in the city’s benchmark Hang Seng Index.
The stock traded at HK$8.40 on Sept. 26, 2008, a day before MidAmerican announced its proposed investment.
The U.S. company last month completed its acquisition of BYD shares at HK$8 each.
MidAmerican will help BYD’s plans to expand in the North American market, Wang said today.
The Chinese company now aims to start selling an electric-powered vehicle in the U.S. next year, earlier than its previous target of 2011, he said.
BYD plans to sell shares on the mainland next year, Wang said today.
The company last month said it is seeking regulatory approval to offer 100 million so-called Class A shares in Shenzhen, where the company is based.
The company’s car revenue more than doubled to 8.88 billion yuan ($1.3 billion) after it added models including the F3-R compact, and China cut taxes on smaller vehicles to boost industrywide demand.
The gain offset slumping demand for mobile- phone batteries as consumers worldwide pared spending on electronics amid the global recession.
First-half net income rose 98 percent to 1.18 billion yuan from a year earlier, the company said yesterday. Revenue increased 30 percent to 16.1 billion yuan.
BYD more than doubled first-half vehicle shipments to 176,814 autos, outpacing a 26 percent gain in nationwide passenger-car sales.
понеделник, 31 август 2009 г.
Бъфет с претенции към фалирала банка в САЩ
Само последните три закрити трезора ще струват на американския държавен регулатор FDIC 446 млн. долара
30.08.2009 18:49:30
Уорън Бъфет
Още три американски банки в Калифорния, Мериленд и Минесота бяха закрити в края на миналата седмица, предадоха световните агенции. Една от тях е базираната в Балтимор Bradford Bank, с 452 млн. долара активи и 383 млн. долара депозити. По данни на Федералната корпорация за гарантиране на депозитите (FDIC) към активите на трезора претенции може да има основният акционер в него Уорън Бъфет. Според вестник Baltimore Sun най-богатият инвеститор в света участва чрез компания Manufacturers & Traders Trust.
В края на миналата седмица FDIC е поела контрол над базираната във Вентура, Калифорния, Affinity Bank, която има около 1 млрд. долара активи и 922 млн. долара депозити и Mainstreet Bank, базирана във Форест Лейк, Минесота, която има 459 млн. долара активи и 434 млн. С тях общият брой на закъсалите трезори в САЩ от началото на годината достигна 84. Bradford Bank е втората финансова институция в щата Мериленд - след Provident Bank, която падна жертва на лошите кредити след срива на пазара на недвижими имоти. Всички депозити на Bradford Bank, които са в размер на $383 млн., ще бъдат поети от деветте клона на M&T Bank, която подписа договор с FDIC за изплащане на обезщетенията. M&T Bank пое депозитите и на фалиралата в началото на годината Provident Bank, припомня Baltimore Sun.
Закритите Bradford Bank, Affinity Bank и Mainstreet Bankтрезори, които притежават активи за общо $1,9 млрд. и депозити за $1,7 млрд., ще струват на държавния регулатор FDIC $446 млн. С тази сума ще трябва да бъдат обезщетени хората, които са депозирали пари в тях.
Още стотици щатски банки се очаква да фалират в следващите няколко години. Броят на банките в „проблемния списък" на FDIC скача до 416 в края на юни, в сравнение с 305 през първото тримесечие на годината. Фалиралите американски банки само през 2009 г. надвишават почти три пъти броя на закритите кредитни институции от началото на финансовата криза в САЩ. За цялата 2008 г., когато се разрази финансовата криза, FDIC закри 25 банки, вкл. и такива гиганти като Lehman Brothers и Bear Stearns, което предизвика паника на световните пазари. Ако закриването на банки продължи със същите темпове, в продължение на 5 години бюджетът на САЩ трябва да изплати във вид на застраховка около $70 млрд., прогнозират от FDIC, цитирани от агенция AP.
неделя, 30 август 2009 г.
Основал нова компания “Мисисипи” , като сметката била следната - Който иска да си купи акции на компанията, срещу тях трябвало да представи облигации от дърважния заем! Тези облигации се купуват с книжни пари, които пък банката на Лоу печата.
Срещу облигациите пък клиентът получава акции на компанията. После, банката на Лоу унищожавала държавните облигации (нямала претенции за главницата към държавата), а правителството на Франция се задължавало да плаща в продължение на 25 години 3 % (около 4 милиона ливри годишно) лихви. Тоест, държавния дълг се елиминирал!
Акциите първо не тръгнали бързо. После обаче Банк Женерал сменила името си на Банк Роял и започнала да печата банкноти гарантирани и от държавата.
Сам Лоу знаел колко опасно може да бъде това печатане и е казал следното – “На всеки няколко години, банката може и да няма възможност да извършва плащанията си, но с изобилни кредити може да се наема работна ръка, да се разшири търговията така, че опасността от неплатежоспособност е по-малка от ползите от един подем”
Нещата тръгнали бавно, но скоро компанията “Мисисипи” глътнала и изкупила още няколко търговски компании. Славата и на “гигант” се разнесла. Отделно, била проведена масирана рекламна кампания с пари на компанията. На акционерите се обещавало бляскаво бъдеще и високи печалби и т.н.. Акциите първо бавно, а после все по бързо почнали да се качват. Отделно изобилието книжни пари оживило икономиката. Наеми, заплати, имоти, стоки, всичко удвоило цената си само за кратък период от време и цените продължавали да растат. Всички обаче били доволни, защото ето на, кредити има, акциите вървят само на горе, имотите също, селскостопанските продукти също, заплатите и те растат и въобще идва златен век.
На улица Рю Кинкампоа, царяла бясна търговия с акции. Улицата била завардена от двете страни с жандарми и на платното и имало хиляди хора, спекулиращи с акции не само на компанията “Мисисипи” , но и на почти всичко друго което се търгувало, като ценни книжа. Еуфорията била такава, че балконите над улицата се давали под наем на зяпачи искащи да се насладят на гледката долу.
Някой обаче били скептици. Стари изпечени търговци, индустриалци и някой хитри благородници гледали, но не се включвали в настъпилия икономически и борсов бум. Херцог дьо Сен Симон - "От баснята за Мидас насам, не знам някой да умее да превръща всичко до което се докосне в злато! Джон Лоу едва ли ще може!” . Херцогът на Савоя , когото попитали защо не си купува акции казал – “Не съм достатъчно богат, за да се разорявам!” .
Някой умни спекуланти влезли в сделките също следили изкъсо пазара.
Банк Роял печатала пари, с парите се купували държавни облигации , а срещу тях акции. Когато дълга на държавата бил покрит, Лоу казал че ще дава от новата емисия акции (увеличение на капитала) само на тези които покажат 4 стари акции. Пазарът полудял и акциите се изстреляли нагоре.
Икономиката преживяла бум, а населението на Париж почти увеличило само за месеци с 1/3 .
Джон Лоу обещавал вече 40 % дивидент някъде в бъдещето. Отчета на дружеството обещавал постъпления от 90 милиона ливри. Парите не били проблем, още повече, че той си ги печатал. В началото на 1720 година бил стигнат върха, на пазара.
Някой по умни инвеститори започнали да продават, тихо-мълком акциите си.
Джон Лоу почнал да изкупува акциите си за да не позволи спада им.
Един маркиз, продал акциите си на борсата, отишъл една сутрин при Джон Лоу, с една купчина книжни пари и поискал да го обмени в злато. Лоу нямало как да откаже и маркизът натъпкал 6 карети (!) със златни монети, казал довиждане и си отишъл. Само няколко часа по-късно, дошъл и друг (абат този път) и натъпкал 3 карети със злато.
Хората се стреснали – Щом тези продават, какво правим ние?!
.. И почнали първо полека, а а после панически разпродажби. Пари имало, но книжни и печатането на банкноти не успокоявало пазара.
За да няма паника, правителството забранило притежанието на злато и сребро!!!
Уви. Никой не вярвал вече, всички си искали злато, сребро или нещо стойностно.
Акциите се сринали повличайки всички други акции. Сринало се и всичко друго купувано с обезценени хартийки.
Само след месеци, в края на годината, Джон Лоу бягал с фалшив паспорт към Брюксел с 800 златни ливри в джоба (само толкова), правителството на Франция нямало дългове (все пак постигнало целта си), но кризата довела по голямата част от населението до просешка тояга.
Естествено, всички пак се върнали към старото, но все пак имащо стойност злато.
За инфлацията винаги ще се намери ...
26.02 11:37
За инфлацията винаги ще се намери оправдание ;)
Въпроса е струва ли си винаги заради 3-4 години растеж, да се плаща с 5 години рецесия после.
цитирай
3. valsodar - Или по-скоро
26.02 13:24
Оправдава ли лакомията към лесно забогатяване, цената която следва да се плати след това ?
Рецесията е процес на саморегулация на прегретите пазари.
И погледнато в исторически план, проекта Луизиана на Джон Лоу е бил практически осъществим, ако не е била прекомерната алчност на краля на Франция, довела до неговият крах.
Същата прекомерна алчност накарала икономиките на водещите индустриални държави да изгърмят заради продажбите на нереализирани блага.
И не виждам как бягството в гонене на един балон към друг би помогнало в случая.
Защото, инвестиционното злато, е следващият балон, който ще гръмне до броени месеци.
цитирай
4. borsi - Златото ще падне като му дойде вр...
26.02 17:44
Златото ще падне като му дойде времето, както пада и се качва всичко, но говорим за различни неща.
Зад парите трябва да стои още нещо освен голо доверие, а безконтролното им печатане винаги е водило до лоши резултати. Впрочем и балона със златото, с имотите, този който бе с петрола, житото и други стоки, нямаше да го има, ако някой не печатаха пари без покритие.
Инфлацията създава поне според мен, фалшив растеж, а след него винаги следва икономическа криза.
Дали зад парите стои злато, сребро, ръж (ръжената марка в Германия от 20 години, след голямата инфлация там) или стока, но няма ли нещо материално, то парите не са нищо друго освен парченце хартия и винаги някой се изкушава да ги печата в повече.
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