This is the fundamental difference between what Buffett sees and what traders see. A business, or percentage of that business is worth X amount. Buffet tries to stick with businesses he understands and can value with some reasonable precision. (He wouldn't buy GOOG, but several 'value investors' own MLP - see my thread on the 'Stocks' board.) The prices you see stocks trade for on the market are simply that - prices. Price and Value: They are two very distinct numbers. A value investor doesn't confuse them. Traders do. Buffet takes care to know the value of what he gets into, and gives himself the timeframe to ONLY TAKE ADVANTAGE of price. Price is related to an instrument's value only tenuously - price certainly doesn't equal its value. Unless of course you must sell immediately, but then you must sell regardless of value or whatever price the market, or Mr. Market, gives you. (BTW 'Mr. Market' is a construct of Benjamin Graham, Buffet's teacher. Not some half-wit ET lurker.) For instance, I can tell you GM, F, C, BAC - I wouldn't wipe my ass with any of these stock certificates. They are worthless as 'slices of a business.' Yet, oddly enough, they all trade for some value on the exchanges. Because Berk doesn't pay dividends, there is a very definite relationship between its BV and Value. That Berk share price might dive and soar all over the place is IRRELEVANT.
War is business. You are way off. WWII jump started the military industrial complex which solidified U.S. position for the next 50 years. There was little destruction of wealth in the U.S. There was however the creation of many jobs because of the war effort. Don't forget we were in a slump before the war started (ie. post 1929). Also, the boomers (another effect of WWII became a major economic driver). The U.S. becames stronger due to WWII not weaker.
those same prices tend to outperform the vast majority of investors. it sure heck is a better guide of 'value' than the FASB. I'm simply making the observation that on a mark to market basis brk 'earnings' would have been negative, big time(brk is a gigantic US mutual fund after all). Now you might have an argument that the market is wrong and the portfolio will reserve those losses over time but that was the same argument dick fuld was making about his portfolio or MBIA/ABK. Will buffett prevail again, probably but he was buying BAC back in aug 07, he by not means saw this coming like the biased buffettologists say
No Buffet didn't see it coming, that's true. But get this: He doesn't have to. Buffet didn't see many things coming in the last 40 years, he made many mistakes (read his annual shareholder letters, he recounts many of them unlike others who only mention their calls that turned out to be correct), and he still made out pretty well. United Airlines preferreds ($350m investment in 1989/1990 if I recall correctly and I think they were later tethering on bankruptcy and had problems paying the preferred dividends) and the Salomon Brothers disaster are among the more notable mistakes of Buffet and he still did pretty well. Unlike Lehman, Berkshire will likely still be around to profit from another bull market in say 5 or 10 years time.
The last 4 quarters profits for BERK declined. The last quarter by about 75%. I read an article not so long ago that tried to proof that the Buffett concept is losing performance very fast. Unfortunatelly i cannot find it anymore. What Buffett did the last 4 decades was phenomenal, but that doesn't mean that he will never get hurt badly. One year ago nobody would have believed that the financial system could get hit as it is now. Even Buffett is a human with all the consequences of being human, even he can fail one day. He is telling people to buy stocks, not because it is the moment to buy, but to protect his own investments. If the markets collaps he will be hit also. That has already been proven the last 4 quarters. Never say never in investing.
yes; if you are the best student of Benjamin Graham, at same time your father was at least a congressmen. Anyway, Buffets worked hard for his fortunes and he was "lucky" at same time.
Another good example is General Re with AIG deal, clearly it was inside trade went horrible wrong. And SEC didn't do much with it. Maybe it was the reason Buffet loathed on derivatives so much later on.
Wrong. He is nowhere near being DOWN $40 billion on those positions as you claim. Furthermore, the put options that he sold go out nearly 14 years . . . "We don't know the details of how the puts are structured, but let's assume the payouts are on a straight-line basis, such that if the indices are down 50% 13.5 years from now - another 17% from today's levels - then Berkshire will have to pay $18.5 billion (half of the $37 billion maximum). That would be a painful loss, to be sure, but one that Berkshire could easily afford: the company's earning power today exceeds $10 billion per year and, as of the end of October, its net worth exceeded $111 billion, both figures that will be much higher more than a decade from now. It's also important to understand that the loss in this doomsday scenario would not be $18.5 billion minus $4.85 billion because Buffett can invest the $4.85 billion for the entire period. If he earns a mere 7% return for 13.5 years, $4.85 billion becomes $12.1 billion (at a more likely 10% annually, it would be $17.6 billion)." http://seekingalpha.com/article/107990-berkshire-s-puts-not-such-a-great-idea
A lot in life can depend on something called "luck". Did you know that when Buffett was starting out doing his "partnerships" it was in the 50s? That was a raging bull market then. He got a "beachhead" and then proceeded to make most of it. Had he began in the 30s life would be very different for him. There would not be a lot of people lining up to invest in him (he subsequently folded those partnerships and began his own) Generally speaking, Buffett profited from the post WWII American Corporate Dominance. http://en.wikipedia.org/wiki/Warren_Buffett Look at the timeframe. He began his career at just the right time. Let's forget about Buffett for one second. If you look at Peter Lynch one of his holdings during his legendary Magellan time was Ford. Ford is trash right now which just goes to show that buy and hold and value investing requires a long term strategic business acumen.
Well said. However, once you have such a bloated money supply, it is hard to value invest. Everything becomes overvalued due to artificially driven demand.