Warren Buffett’s Way

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Moneyweb's Alec Hogg reporting back from Berkshire Hathaway AGM ( Omaha, Nebraska May 2009)

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  • I appreciate you sharing this...I love the photos of the arena and Buffett's comment about reading 5 newspapers a day but not wanting to buy a newspaper company is funny.

    I just penned something on Buffett and Munger's Four Filters Invention for Investing for any of you who want more: http://www.purchase.com/blog/investing/four-filters-invention
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Warren Buffett’s Way

  1. Warren Buffett’s Way Alec Hogg Reporting back from Berkshire Hathaway AGM Omaha, Nebraska May 2009
  2. Buffett: Nebraskan to the core, man of simple tastes...
  3. And a close South African connection, too
  4. Some of what 35,000 Pilgrims come for...
  5. 6:55am, May 2, 2009, Qwest Centre, Omaha
  6. 7:30am, May 2, 2009 - Qwest Centre, Omaha
  7. 7:30am, May 2, 2009 - Qwest Centre, Omaha
  8. / 25 Warren Buffett, media star
  9. Buffet 38, Market 6 2008 1965 to 2008 Negative -9.6 % Negative 37.5% 11.0 % 5.5 % 20.5 % 8.9 % Key: Berkshire Hathaway S & P 500 In 44 years, Berkshire Hathaway lost money only once before 2001: - 6,2% During same period S&P was negative 11 times 2008 Berkshire Hathaway: -9.6% S&P 500: -37.5% 1965 to 2008 Berkshire Hathaway: 20.3% S&P 500: 8.9% NB 70% of active managers UNDERPERFORM index 8.9 %
  10. <ul><li>Lost $11.6bn, down 9.6% </li></ul><ul><li>“ We do not consider this our worst year by miles. W e measure what we do on a relative basis and will always do it that way …….” </li></ul><ul><li>“ We would love to double up on everything we own …” </li></ul><ul><li>Share price fell 33% in past 12 months </li></ul><ul><li>“ Judging what’s going on by looking at share prices is a fool’s way of doing it” </li></ul><ul><li>“ We are copying Andrew Carnegie’s Playbook and we are not going to do it any other way.” </li></ul>BERKSHIRE’S WORST YEAR, BUT………
  11. <ul><li>Excessive leverage </li></ul><ul><li>“ The most important lesson is the world needs a whole lot less leverage” </li></ul><ul><li>Gross immorality </li></ul><ul><li>… consumer credit given to perople who couldn’t handle it </li></ul><ul><li>… derivatives traders preyed on their customers </li></ul><ul><li>Stupidity </li></ul><ul><li>… People inside institutions themselves; Regulators didn’t listen </li></ul><ul><li>“ Horribly failed” by accounting profession </li></ul><ul><li>…” the people who created the principles should be removed. </li></ul>KEY CAUSES OF THE MELTDOWN
  12. <ul><li>Deep economic recession which “it’s going to last a very long time” </li></ul><ul><li>Probably lead to increased regulation for financial services </li></ul><ul><li>China, not US taxpayer is picking up the tab </li></ul><ul><li>Lower US Dollar as politicians lower the value of ballooning debt </li></ul><ul><li>Buffett: “You can bet on inflation.” </li></ul>CONSEQUENCES OF THE FINANCIAL CRASH …….
  13. <ul><li>Buffett loves Wells Fargo: “below $9 if there was one stock into which I’d be happy to put my total net worth, it’s Wells.” </li></ul><ul><li>Munger loves BYD: “ I have never in my life been more privileged to be associated with something as I am with this company.” </li></ul><ul><li>Both agree, Google has the widest, deepest moat: “It’s an incredible business model. I’ve looked very hard and I don’t know how to take it away from them.” </li></ul>Three stocks they love
  14. <ul><li>Buffett and Munger reads five newspapers a day, but “we would not buy a newspaper company in the US at any price. They have the possibility of going to unending losses.” </li></ul><ul><li>Remuneration Committees are worthless: “They’re appointed by the CEO and he wants cocker spaniels, not doberman’s. The CEO’s salary should be determined by the whole board, not a sub-committee.” </li></ul><ul><li>Share buy-backs: “Probably 90% of them are not in shareholders’ interests.” </li></ul><ul><li>* Lack of financial literacy: Buffett’s experience in </li></ul><ul><li>Flamingo Bar, Las Vegas, in 1952. Munger: “A world </li></ul><ul><li>where legalised gambling is encouraged by many </li></ul><ul><li>Statutes needs a lot more financial literacy.” </li></ul>And some of their pet hates
  15. <ul><li>Buffett will eventually be replaced by two people: </li></ul><ul><li>- Three current Berkshire executives have been identified as candidates for the CEO position : “The most important part of this job will be to manage relationships with the subsidiary companies” </li></ul><ul><li>Four candidates have been identified to run the $50bn share investment portfolio as the CIO: Bu the race is wide open. None of the four performed well in 2008, all losing around 38% of the value of their portfolio last year. </li></ul>Succession
  16. <ul><li>1) How to value a business </li></ul><ul><li>2) How to think about stock market fluctuations </li></ul><ul><li>AND NOTHING MORE………………….. </li></ul>Buffett believes… WHAT SHOULD BE TAUGHT IN BUSINESS SCHOOLS
  17. <ul><li>. </li></ul>Finally, some recommended reading <ul><li>From Warren on the financial meltdown ……. </li></ul><ul><li>JP Morgan Chase CEO Jamie Dimon’s letter to shareholders (“it’s long but well worth reading” - WEB) </li></ul><ul><li>On the man himself……. </li></ul><ul><li>Alice Schroeder’s book The Snowball – </li></ul><ul><li>Warren Buffett and the business of life </li></ul><ul><li>(all 838 masterful pages) </li></ul><ul><li>AND, NATURALLY, THE ANNUAL BERKSHIRE LETTER TO SHAREHOLDERS…….. </li></ul>
  18. KEEP CONNECTED <ul><li>ALEC HOGG’S CONTACT DETAILS </li></ul><ul><li>F acebook.com/alechogg </li></ul><ul><li>[email_address] </li></ul><ul><li>WWW.MONEYWEB.CO.ZA </li></ul><ul><li>SAFM 6pm weeknights </li></ul><ul><li>Boardroom Talk newsletter </li></ul><ul><li>AND TWEETING FLAT-OUT VIA www.twitter.com/alechogg </li></ul>
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