Buffett Buffet

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AltaRed
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Re: Buffett Buffet

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My supposition on those moves is concern about being on the treadmill to find and develop new reserves and having to maintain drilling momentum to keep production up. The upstream side of both of COPs and XOMs businesses are getting harder to make money in.

OTOH, someone like Suncor has a huge block of reserves that are not going away and will last for a very long time. They can be developed and produced 'manufacturing' style. Same thing with refining. Keep the refineries well tuned and maintained and they will refine oil for decades.. which is exactly what they have been doing.

I see Buffett as not getting out of oil, but strategically shifting oil investments into ones of more certainty and consistency. Which is exactly where I am heading myself having got out* of my direct holdings of the big oils such as XOM et al over the past few years, and looking for more long term certainty into things like CNQ and one or two others yet to be determined when the current crisis settles out.

* Albeit still a factor in my holdings of VTI, etc.
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Re: Buffett Buffet

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Pretty good insights from an "insider". Thanks AR.
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Re: Buffett Buffet

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They also have an excellent chain of retailers in Canada .
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Re: Buffett Buffet

Post by Flaccidsteele »

Recently I've been thinking of getting out of picking individual stocks. I want to simplify things for the future. At the time of Buffett's passing I will likely trim my ~10 stocks down to 4 or 5, and then move everything else into either Berkshire Hathaway or the S&P500. Any opinions on which one would be better and why? Thanks.
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Re: Buffett Buffet

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Celebrating his 50th year running Berkshire Hathaway, the 2014 Shareholder Letter
Fifty years ago, today’s management took charge at Berkshire. For this Golden Anniversary, Warren Buffett and Charlie Munger each wrote his views of what has happened at Berkshire during the past 50 years and what each expects during the next 50. Neither changed a word of his commentary after reading what the other had written. Warren’s thoughts begin on page 24 and Charlie’s on page 39
Give it a download, grab your favorite morning beverage and enjoy!
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AltaRed
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Re: Buffett Buffet

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Peculiar_Investor wrote:Give it a download, grab your favorite morning beverage and enjoy!
Now I don't feel so bad holding so much 'real' cash earning 1-1.9%. :wink:
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Re: Buffett Buffet

Post by Taggart »

Flaccidsteele wrote:Recently I've been thinking of getting out of picking individual stocks. I want to simplify things for the future. At the time of Buffett's passing I will likely trim my ~10 stocks down to 4 or 5, and then move everything else into either Berkshire Hathaway or the S&P500. Any opinions on which one would be better and why? Thanks.
Here's Warren Buffett's advice in a video.
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Re: Buffett Buffet

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Flaccidsteele wrote:Recently I've been thinking of getting out of picking individual stocks. I want to simplify things for the future. At the time of Buffett's passing I will likely trim my ~10 stocks down to 4 or 5, and then move everything else into either Berkshire Hathaway or the S&P500. Any opinions on which one would be better and why? Thanks.
I've though of that same scenario and what I came up with is having a few firms I know and like such as Berk, Fairfax, Brookfield, etc and then allocate the rest in a Russel 2/3000 ETF.
Show me the incentive and I will show you the outcome

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Re: Buffett Buffet

Post by ig17 »

To me, this was the most interesting tidbit:
Buffett wrote: Early in 1967, I had Berkshire pay $8.6 million to buy National Indemnity Company (“NICO”), a small but promising Omaha-based insurer. (A tiny sister company was also included in the deal.) Insurance was in my sweet spot: I understood and liked the industry.

Jack Ringwalt, the owner of NICO, was a long-time friend who wanted to sell to me – me, personally. In no way was his offer intended for Berkshire. So why did I purchase NICO for Berkshire rather than for BPL? I’ve had 48 years to think about that question, and I’ve yet to come up with a good answer. I simply made a colossal mistake.

If BPL had been the purchaser, my partners and I would have owned 100% of a fine business, destined to form the base for building the company Berkshire has become. Moreover, our growth would not have been impeded for nearly two decades by the unproductive funds imprisoned in the textile operation. Finally, our subsequent acquisitions would have been owned in their entirety by my partners and me rather than being 39%-owned by the legacy shareholders of Berkshire, to whom we had no obligation. Despite these facts staring me in the face, I opted to marry 100% of an excellent business (NICO) to a 61%-owned terrible business (Berkshire Hathaway), a decision that eventually diverted $100 billion or so from BPL partners to a collection of strangers.
"A collection of strangers" = public BRK shareholders. That's us! It sounds that he still regrets the mistake. I don't blame him.
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Re: Buffett Buffet

Post by Flaccidsteele »

Taggart wrote:Here's Warren Buffett's advice in a video.
Thanks for the video link. :thumbsup:

This is what I will likely do.

The caveat being that Berkshire Hathaway doesn't drop to something ridiculous like 1x book.

I also like the idea that owning Berkshire Hathaway is currently the only public gateway to owning some fabulous private businesses.
FinEcon wrote:...and then allocate the rest in a Russel 2/3000 ETF.
I've given this some thought as well. I also like the Russel 2/3000. I think if I have at least 15 years of runway until retirement, that I will go with the small cap index. If I have less than 15 years of runway I'll go with the S&P500.
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Re: Buffett Buffet

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If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle
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Re: Buffett Buffet

Post by Flaccidsteele »

I remember chuckling when I first saw that interview. Oldie but goodie.
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Re: Buffett Buffet

Post by Flaccidsteele »

The FT notes that the Financial Stability Board has named 9 primary insurers including, MetLife, Prudential, and AIG "systemically important financial institutions," or SIFIs, which potentially subjects these organizations to further regulation and capital requirements.

So far, no reinsurance companies have been added to this list.


Bank of England asks U.S. Treasury why Berkshire Hathaway reinsurance operations were left off list of "too big to fail" institutions.
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Re: Buffett Buffet

Post by Flaccidsteele »

Business Insider wrote: Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
Here's how Buffett sees the stock market
Business Insider wrote:
Image

...we consider a hypothetical investor who puts $50 at the end of every month into a Nasdaq index fund starting in March 2000 and continuing to the present.

So, she puts this $50 in every month, no matter what happens to the index.

Our investor starts out having a couple rough years while the dot-com bubble was bursting.

She then saw some gains that were taken out during the financial crisis.

Despite that, in the last few years things have been looking very good for her.

The value of our investor's portfolio is about $19,330 at the end of March, 2015, and she has invested a total of $9,050 since 2000. This gives her a huge 114% return on that investment, which works out to a healthy 5.2% annual return.

Here's how rich you'd be if you started investing in the Nasdaq at the top of the tech bubble
If I have a 30+ year investment horizon, everything outside of equities is just noise.
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Re: Buffett Buffet

Post by Flaccidsteele »

I'm still looking for an opportunity to go "all-in" on Berkshire Hathaway stock as a proxy for a low-fee index fund. 1.5x book isn't cheap. :(

Image

Berkshire Hathaway's Operating Income Rises 20%
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Re: Buffett Buffet

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UPDATE 1-Buffett: stock prices would be high if rates were 'normal' By Luciana Lopez, Reuters

"Billionaire investor Warren Buffett said on Saturday that stock prices would appear expensive if interest rates normalized from their ultra-low levels...Regarding the Federal Reserve's loose monetary policy, Buffett said he could not have predicted that rates would remain this low for this long without becoming a problem. "So far, I have been wrong on interest rates. It's so hard for me to see how, if you toss money from helicopters that eventually you don't have inflation, but we haven't."

http://in.reuters.com/article/2015/05/0 ... LN20150502

Warren Buffett: I was wrong on interest rates, by Stephen Gandel Fortune

https://fortune.com/2015/05/02/warren-b ... est-rates/
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Re: Buffett Buffet

Post by Flaccidsteele »

That's the big, massive, "if"...

"stock prices would appear expensive IF interest rates normalized from their ultra-low levels..."

I wish somebody would tell me when "normal interest rates" will arrive. That would be great.

The converse is also true. If interest rates stay low, then stock prices don't appear expensive.
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Re: Buffett Buffet

Post by Flaccidsteele »

This isn't really new. He's talked about avoiding long bonds before, so...

"If I had an easy way, and a non-risk way, of shorting a whole lot of 20- or 30-year bonds, I'd do it," he said.

...

"But that's not my game, and it can't be done in the kind of quantity that would make sense for us," he said. "But I think that bonds are very overvalued. I'll put it that way."


BUFFETT: 'I think that bonds are very overvalued'
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Re: Buffett Buffet

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Flaccidsteele wrote:This isn't really new. He's talked about avoiding long bonds before, so...

"If I had an easy way, and a non-risk way, of shorting a whole lot of 20- or 30-year bonds, I'd do it," he said.


Long bonds can be quite risky, like stocks. But, as to which one is more "overvalued" (stocks or bonds), who knows?
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Re: Buffett Buffet

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Interesting insights on growth and capital. With a conglomerate he has private companies with solid earnings and cash flow but have little or no growth prospects. With this structure and a multitude of companies he can redeploy the excess capital in companies that have outstanding growth prospects. He also explains how Charlie Munger got him to move away from his Graham cigar butt approach. Look for great business enterprises at a fair price, companies with a very high return on capital and equity with a competitive advantage. I try to follow this in my stock investments. The challenge isn't finding strong enterprises with high returns on equity. The challenge is finding them at a fair price. I am sitting with a fair chunk of cash waiting for a correction so I can buy some of them.
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Re: Buffett Buffet

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Thegipper wrote: The challenge isn't finding strong enterprises with high returns on equity. The challenge is finding them at a fair price. I am sitting with a fair chunk of cash waiting for a correction so I can buy some of them.
Stick with it! I'm virtually always fully invested and am normally impatient at my rate of saving since it's keeping me from being even more fully invested. There's no question that this aging bull market has been making me lazy with regards to valuations. I'll have to either sharpen up or inevitably regret my failure to do so....
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Re: Buffett Buffet

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Thegipper wrote:The challenge isn't finding strong enterprises with high returns on equity. The challenge is finding them at a fair price. I am sitting with a fair chunk of cash waiting for a correction so I can buy some of them.
I agree. I'm having the same problem. Cash piles up fast. Nothing interesting yet.

Didn't like cigar butt approach either. Too much work/monitoring and eventual turnover if things didn't pan out. Invest-and-forget much easier. Sleep better at night.
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Re: Buffett Buffet

Post by Taggart »

Lazy Ninja wrote:
Thegipper wrote: The challenge isn't finding strong enterprises with high returns on equity. The challenge is finding them at a fair price. I am sitting with a fair chunk of cash waiting for a correction so I can buy some of them.
Stick with it! I'm virtually always fully invested and am normally impatient at my rate of saving since it's keeping me from being even more fully invested. There's no question that this aging bull market has been making me lazy with regards to valuations. I'll have to either sharpen up or inevitably regret my failure to do so....
Unlike Lazy Ninja, I can't honestly say I'm fully invested. Let's just say I have a healthy emergency fund. I'm not waiting for a correction either. From what I've experienced, it's just been a waste of time waiting for one. Unlike Warren Buffett and his sidekick Charlie Munger, I certainly wasn't one of those investors who could pick which financial institution in the U.S. would survive and was worth investing in, and which would completely disappear during the 2008-09 crisis. About the only thing Buffett got wrong then was investing in an Irish Bank or two.

Every few years ago a story comes up in the news about some tightwad (usually single) who has been making a mediocre salary in some lousy job all his/her working life, but who diligently invests any savings in common shares and then re-invests their dividends in more shares. Usually you only hear about these investors after they've died but their wills have left a few $million to charities and/or relatives. I never hear about them trying to engage in market timing while they were alive. They are focused on what they are doing as an investor, and just let the miracle of compounding do all the work.
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Re: Buffett Buffet

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Taggart wrote:just let the miracle of compounding do all the work.
+ 1

I learned that lesson at age 55. I wish someone had explained it, and I had listened, when I was 30. Then I wouldn't have had to work so bloody hard between 55 and 65.

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Re: Buffett Buffet

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ghariton wrote:Then I wouldn't have had to work so bloody hard between 55 and 65.

George
In my case it was grappling with my marital dissatisfaction. But it only cost me 55 to 60 because the compounding was working well (and I was in my maximum earning years). But it was bloody hard work as well!
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