Wednesday, May 28, 2008

Jeff Bezos D6 Interview - Highlight Reel

Part 1
Part 2

He also appeared on CNBC afterward: HERE
Related Previous Post: Put Buyers First? What a Concept
The Amazon Kindle (price just reduced to $359 - as stated in the interview)

Tuesday, May 27, 2008

David Einhorn Speech - "Accounting Ingenuity"


Friday, May 23, 2008

Berkshire Hathaway 2008 Annual Meeting Transcript

I helped work on an edited transcript from the Berkshire Meeting:

Friday, May 16, 2008

Berkshire's No. 2 man helps from the background

They organized Berkshire Hathaway so they wouldn't ever have much to do besides sit around and think. And that's still how they run the company today, even though it has grown to include roughly 250,000 employees and more than 70 subsidiaries.

"Neither Warren nor I is smart enough to make the decisions with no time to think," Munger said. "We make actual decisions very rapidly, but that's because we've spent so much time preparing ourselves by quietly sitting and reading and thinking."

The real key to Berkshire's success, Munger said, is that he and Buffett like learning and have improved over time. But Munger gives Buffett most of the credit.

"Mr. Buffett is by far the most important person," Munger said in an interview. "And to a huge degree why Berkshire Hathaway is the length and shadow of Warren Buffett."

Munger compares his role at Berkshire to that of Albert Einstein's professional colleagues.

"Practically everybody works better when not in extreme isolation," Munger said. "If Einstein had worked in total isolation, he would not have been as productive as he was. He didn't need a great deal of contact with other colleagues, but he needed some."

But Buffett credits Munger with pushing him beyond value investing.

"Charlie has taught me a lot about valuing businesses and about human nature," Buffett said.

Buffett's early successes were based on what he learned from former Columbia University professor Ben Graham. He would buy stock in companies that were selling for less than their assets were worth, and then, when the market price improved, sell the shares.

"Charlie says, 'You know, let's give this up, and really buy into some fine businesses,'" Buffett said.

Berkshire now prefers to buy and hold businesses for the long term, if not forever.

"Charlie got me started in the right direction on that, and he's had to nudge me back to that periodically," Buffett said while sitting next to Munger at a recent news conference.

Munger deflected Buffett's praise.

"Warren transformed my life way more than I transformed his," Munger said. "He talked me into giving up the law."

Munger has always been modest about his role at Berkshire, and has been willing to avoid most of the limelight, said Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett."

"It's not easy to get two superegos to run something and one of them take the front seat totally and the other take the back seat," Kilpatrick said. "I think he's probably been a huge input all along and hasn't tried to claim it."

But Buffett and Munger found a way to run Berkshire without a clash of egos.

"It's a real privilege to be associated with a place like Berkshire," Munger said. "I think we have more fun doing what we do than practically anybody."



The Snowball: Warren Buffett and the Business of Life

Poor Charlie’s Almanack

Ben Franklin on Humility (and some crafty advice on persuasion)

From his autobiography:

My list of virtues contain'd at first but twelve; but a Quaker friend having kindly informed me that I was generally thought proud; that my pride show'd itself frequently in conversation; that I was not content with being in the right when discussing any point, but was overbearing, and rather insolent, of which he convinc'd me by mentioning several instances; I determined endeavouring to cure myself, if I could, of this vice or folly among the rest, and I added Humility to my list, giving an extensive meaning to the word.

I cannot boast of much success in acquiring the reality of this virtue, but I had a good deal with regard to the appearance of it. I made it a rule to forbear all direct contradiction to the sentiments of others, and all positive assertion of my own. I even forbid myself, agreeably to the old laws of our Junto, the use of every word or expression in the language that imported a fix'd opinion, such as certainly, undoubtedly, etc., and I adopted, instead of them, I conceive, I apprehend, or I imagine a thing to be so or so; or it so appears to me at present. When another asserted something that I thought an error, I deny'd myself the pleasure of contradicting him abruptly, and of showing immediately some absurdity in his proposition; and in answering I began by observing that in certain cases or circumstances his opinion would be right, but in the present case there appear'd or seem'd to me some difference, etc. I soon found the advantage of this change in my manner; the conversations I engag'd in went on more pleasantly. The modest way in which I propos'd my opinions procur'd them a readier reception and less contradiction; I had less mortification when I was found to be in the wrong, and I more easily prevail'd with others to give up their mistakes and join with me when I happened to be in the right.

And this mode, which I at first put on with some violence to natural inclination, became at length so easy, and so habitual to me, that perhaps for these fifty years past no one has ever heard a dogmatical expression escape me. And to this habit (after my character of integrity) I think it principally owing that I had early so much weight with my fellow-citizens when I proposed new institutions, or alterations in the old, and so much influence in public councils when I became a member; for I was but a bad speaker, never eloquent, subject to much hesitation in my choice of words, hardly correct in language, and yet I generally carried my points.

In reality, there is, perhaps, no one of our natural passions so hard to subdue as pride. Disguise it, struggle with it, beat it down, stifle it, mortify it as much as one pleases, it is still alive, and will every now and then peep out and show itself; you will see it, perhaps, often in this history; for, even if I could conceive that I had completely overcome it, I should probably be proud of my humility.


Related previous post: Ben Franklin's 13 Virtues

Book: The Autobiography of Benjamin Franklin (also available as an Audio Book)

Tuesday, May 13, 2008

More Funds Find Security in Cash


Morningstar Interview with Bill Miller

Short (but good) interview with Bill Miller: HERE

First Eagle Funds Conference Call - May 6, 2008

Jean-Marie Eveillard:

Now, let me move to an update to the current investment scene as we see it. I think investing is a matter of trying to balance what I would call circumstances and prices. In terms of circumstances, we have been, for a while, in a financial crisis, probably the worst since the end of World War II, which is a polite way of saying that it’s the worst since the Great Depression. This financial crisis is, to a large extent, I believe, a result, a consequence of the previous 25-year credit boom that was briefly interrupted in 1990. That credit boom, because it went on so long, in the last few years of the boom, the acrobatics by financial types, not us mind you, were extraordinary. Then the credit cycle turned in August of last year, with the sub prime housing crisis, and it has been painful ever since.

Now, I’m sure, of course, that the crisis will find its resolution; all crises do eventually. The key question, I believe, is, “How long and how painful the transition will be towards the resolution of the crisis.”

We are just beginning to see the economic consequences of the crisis. In other words, the economic slow down. We also have to worry, I believe, about the unintended consequences of the very unusual steps taken by the Federal Reserve to prevent the crisis from degenerating. Among those unintended consequences, of course, is the status of the dollar as the world’s reserve currency and the possibility that domestic inflation will accelerate.

Now it’s true that we’ve had, depending upon how one counts, six or seven financial crises over the past 20 years. And it seems to me that most investors take the attitude that in the past six or seven crises, it was all right to start buying equities in the middle of the crisis because those six or seven crises were handled by Mr. Greenspan, the former Chairman of the Federal Reserve. In each instance, he flooded the system with liquidity and after a few uncomfortable months, the crisis was over.

I would not bet the farm on a repeat of that scenario. It may happen that the crisis is over quickly, but again, I wouldn’t bet on it.

If I move to prices, the American equity market is off about 10 or 12% from its high last October. The high came at the end of a five-year bull market between 2002 and 2007.

In Europe, equity prices are also off 10 to 15% from their highs of last year. In Japan, the market is off much more than that. Not to mention China, where up until recently, the market was off about 50% from its high. But then China, and to a lesser extent, India, had been involved in major bubbles.

So what I’m saying about global prices is, hey, stock markets are off from their highs, but at least in the U.S. and in Europe, the decline is, so far, quite moderate. Nevertheless, as equity markets come down, as they did since last October, a few opportunities, to our mind, appeared here and there. We’ve been net buyers since the beginning of 2008, but I must say we may not be looking in the right places for all I know, but we have not come up with a great many opportunities yet.

There is nothing wrong with waiting. As Warren Buffett has said, “One has got to wait for the fat pitch.”
Five value-oriented mutual fund managers that might be worth looking into:

Monday, May 12, 2008

The best fund manager of our time

Related Previous Posts:

Friday, May 9, 2008

Wesco 2008 Annual Meeting Notes

A big thanks to Peter Boodell.

The only duty of corporate executive is to widen the moat. We must make it wider. Every day is to widen the moat. We gave you a competitive advantage, and you must leave us the moat. There are times when it is too tough. But duty should be to widen the moat. I can see instance after instance where that isn’t what people do in business. One must keep their eye on ball of widening the moat, to be a steward of the competitive advantage that came to you. A General in England said, ‘Get you the sons your fathers got, and God will save the Queen.’ At Hewlett Packard, your responsibility is to train and deliver a subordinate who can succeed you. It is not all that complicated – all that mumbo jumbo. We make bricks in Texas which use the same process as in Mesopotamia. You need just a few bits of ethos, and particularly engineering ethos. Think through the system, and get a margin of safety.

Q13: Scott from LA. With portfolio of $2m, vs. that of Berkshire, how would your mandate be different? Small vs mid, us vs intl, etc?

If I was managing smaller money I’d be looking in smaller places, I’d look for mispricing. But I don’t want to change places with you. [laughter]

Q21: Matt from NYC. How does Berkshire thru its subsidiaries manage an annual budgeting process?

We don’t have one. Obsessing over budgets creates bad incentives. Just eliminate unnecessary costs. Budget committees tend to do just the opposite.

Q24: Ashok from LA. Checklist?

I don’t have a simple checklist. You have to work at it a long long time. I still do dumb things after years of hard work. The more big ideas you have the easier. We exclude a whole lot of things because they are in the too tough pile. If you exclude, you do better. Then you must have field where rationality will be rewarded. Some of political ideas – it is very hard to know how they will work out over next few centuries. We are not trying to involve ourselves. We look for things that can be done. But I have no little short list. People who sell strong abs on TV at night might have one. I have no rule for a strong brain.

Q29: I’m curious, you are student of history. Does today remind you of any time in past, and why?

I punched premium channel in hotel in Tokyo, and out came exercise in pornography. I would argue Soddom and Gomorah is still around. I think Athens of Pericles is still around today. Our bullies are similar to past eras.

Q40: CA. Average investor should invest in index funds.

All intelligent investing is value investing. Calling something a value fund doesn’t absolve it. You can call yourself a ballet dancer if you dance like me, but it is not a good thing. I wouldn’t recommend people broadly invest with any value fund. I would avoid funds that have 100% turnover per year. It is a ridiculous way for an ordinary index fund to behave. It is imperfect, but best outcome for most know-nothings, in order to avoid being misled by fools and liars.

Q45: What has changed since you first started investing?

I owe a great deal to Mr Buffett. It took a while to convince me. Warren and I together got very good at reinsurance transactions and portfolio transfers. We’ve learned together at it. Berkshire would have been a mess if it had ever stopped learning. Only reason we’ve been able to keep a shred of decency in our record is that we have been hell bent to keep learning.


Book: Poor Charlie’s Almanack

David Einhorn and Bill Ackman on CNBC's Squawk Box

In order:


Book: Fooling Some of the People All of the Time: A Long Short Story By David Einhorn

Thursday, May 8, 2008

Value Investing Congress - Speaker Picks

All of the presented ideas are located on the Value Investing Congress Blog. Here's a couple of them:

Tuesday, May 6, 2008

McGraw-Hill Professional to Publish 75th Anniversary Edition of Graham and Dodd's Security Analysis


2008 Berkshire Hathaway Annual Meeting Notes

For detailed notes on the whole meeting, go HERE.

Below are some of my notes. I just wrote down a few things I thought were interesting. Much of it has been said before by Mr. Buffett (WB) and Mr. Munger (CM), but good advice is always worth repeating. These are my notes and paraphrasing, not direct quotes from Warren and Charlie.

WB: There should only be 2 investment courses taught in school: (1) How to Value a Business, and (2) How to Think about Market Prices. Option pricing theory, etc. is all nonsense. [added to the etc. that is nonsense are things like Efficient Market Theory, Beta as a measure of risk, and the Capital Asset Pricing Model (CAPM)]

CM: If you have some extreme political ideology, you’re very likely to make some dumb charitable gifts.

WB: Don’t ever trade away reputation for money.

CM: While we don’t like inflation because it’s bad for our country and our civilization, we’ll probably make more money because of inflation.

WB: The most important factor in choosing a career is finding something you’re passionate about.
CM: But you’ll do better if you develop a passion in something you have an aptitude for.

In response to a question from a professor who is writing a book to help people who are introverted:
WB: The ability to communicate, both in writing and orally, is enormously important. It is great for people who have trouble with that [like he said he used to] to get into situations where they have to do it [get up and talk in front of a bunch of people, etc.], preferably with other people having trouble too, at first.
CM: It’s a real pleasure to have an educator come who is doing something simple and important instead of foolish and unimportant.

WB: [After mentioning that he shorted out the market generally while running his partnership] It is really unnecessary to short anything if you have some good long ideas.

CM: [After Buffett discussed the inefficiency in the Municipal Bond Market recently] The dislocation in Muni bonds was very brief and very extreme. You had to be ready to act fast.

CM: We prefer businesses that drown in cash. [Told a story about a friend with construction business whose profit at the end of the year was sitting in the yard] Berkshire prefers those businesses that can write a check at the end of the year.

CM: Because of human nature….we’ll have turmoil [in this world] for as far as you can see. [There will always be something.]

CM: The goal of investment is to find situations where it is safe to non-diversify. This is the opposite of what is taught in school.
WB: There may be situations where by only putting 20% or less of your net worth in an investment, you’ll miss the opportunity of a lifetime.

WB: WB read the annual report for PetroChina [without talking to management or anyone else] and thought it was worth about $100 billion. He then checked the price and it was trading for $35 billion. The basic business was easy for him to understand and there was a big margin of safety, so he bought. When oil was at about $70-75 he thought it was worth $275-300 billion which is where it was trading, so they sold.

WB: Most big food businesses are good businesses in that they earn good returns on tangible assets. You can feel good about branded products when they’re runaway leaders in their field. If you buy good branded products and don’t pay too much, you should do okay – but you won’t do exceptional because that fact is well known. A brand is a promise.

CM: A risk officer is often just a guy who makes you feel good while you do dumb things. Models and things that make you feel good and have confidence in an investment often just clobber up your head.

WB: There’s no reason to be exposed to ruin and disgrace for something that doesn’t matter that much.

There are a lot of things WB and CM can make quick decisions about because there are a whole lot of things they won’t allow themselves to take the time to think about.

CM: I would argue there’s an environmental reason for using coal. [Explained something along the lines of using those (coal) hydrocarbons so that we can save food producing hydrocarbons – oil, gas – for food production]. Most people don’t think that way, but I do.

WB: You can become, to an enormous degree, the person you want to be.

CM: Avoid being manipulated by vendors and lenders by using their own tricks. [Recommended Robert Cialdini’s book Influence, and his new book, Yes!.]

WB: Americans have an aversion to mass transit. I don’t think this view will change anytime soon.

CM: Agrees with Al Gore that we shouldn’t be burning hydrocarbons, but they have different reasons. “My brain works differently than Al Gore’s. You’ll have to decide which you prefer.”

CNBC - LIVE BLOG ARCHIVE: Warren Buffett News Conference