Mr Buffett is often identified as the heir to his mentor, Benjamin Graham. Graham emphasised intelligent investment based on fundamental value. But in Graham’s day the ability to read a company balance sheet made an investor intelligent. Many trading companies sold in the market for much less than the realisable value of their assets. As Graham recognised by the time of his death in 1976, those days are over.
Mr Buffett’s central achievement was to recognise earlier and more clearly than others that these balance sheets no longer had their old meaning. Once, large business organisations found their rationale in the ability to finance and operate large industrial plants. The returns to shareholders were the reward for providing the plant and machinery.
Thursday, March 27, 2008
Just think, the fees you could charge Buffett
Albert Einstein supposedly observed that the most powerful force in the universe is compound interest, and Mr Buffett’s frugality has enabled compound interest to work its magic. During Mr Buffett’s tenure at Berkshire Hathaway, the S&P 500 index has produced an average total return of 10 per cent. That return reinvested over 42 years will multiply your stake 67 times. But if your investments yield twice as much as that – as Mr Buffett’s have done – your wealth increases not by twice 67, but 67 squared, a factor of 4,500. That arithmetic makes Mr Buffett the richest man in the world.
Wednesday, March 26, 2008
Interview with Peter Bernstein
He says the current credit crisis is a unique historical event, in which too many people took high risks in a low-risk environment, and as a result changed the environment. He believes risks appeared low, not least because so many securities carried triple-A credit ratings. "They[ratings agencies] became part of the delusion instead of being a monitor of the delusion", he says.
He also says central banks do not have the tools to fix the financial crisis: "This is a problem of a seizing up of the whole credit system around the world and rupture of trust." The fix is going to take a long time, he says, and the compressison of credit availability is squeezing the real economy.
...gold's price rise reflects people running from uncertainty, in America and the rest of the world: "You can't eat it, can't live in it, can't do anything with it. But it's a hedge. And this is a hedgy kind of time."
He also says central banks do not have the tools to fix the financial crisis: "This is a problem of a seizing up of the whole credit system around the world and rupture of trust." The fix is going to take a long time, he says, and the compressison of credit availability is squeezing the real economy.
...gold's price rise reflects people running from uncertainty, in America and the rest of the world: "You can't eat it, can't live in it, can't do anything with it. But it's a hedge. And this is a hedgy kind of time."
Tuesday, March 25, 2008
The Shape Of The Future
The central message of our analysis is not that the origin of today's difficulties is uniquely in the household sector or that the residue of these difficulties has scrambled the whole credit structure in the financial markets. Everybody knows about these troubles.
On the other hand, too few observes have noted how the consequences of these developments are going to require an extended period of time before the blockages they impose have been eliminated. But that is not all they have missed. This extended period of difficulty is going to bring about a new economic régime, different in many aspects from the experience of most people alive today. Along the way, we will have to pass through a transition period that harks back to an unfamiliar past in both the financial system and in the household sector.
But this, too, shall pass. Yes, glassy-eyed bankers, prudent consumers, and a reformulated globalization can keep a lid on economic activity around the world for quite a while. What develops from that transition, however, should resemble what took place over the course of the 1980s. Without anyone realizing it, the errors of the past, drip by drip by drip, were buried and a new and better system took their place.
On the other hand, too few observes have noted how the consequences of these developments are going to require an extended period of time before the blockages they impose have been eliminated. But that is not all they have missed. This extended period of difficulty is going to bring about a new economic régime, different in many aspects from the experience of most people alive today. Along the way, we will have to pass through a transition period that harks back to an unfamiliar past in both the financial system and in the household sector.
But this, too, shall pass. Yes, glassy-eyed bankers, prudent consumers, and a reformulated globalization can keep a lid on economic activity around the world for quite a while. What develops from that transition, however, should resemble what took place over the course of the 1980s. Without anyone realizing it, the errors of the past, drip by drip by drip, were buried and a new and better system took their place.
The Greatest Entrepreneurs of All Time
From a Ming dynasty explorer to fast-food titans to contemporary American computer whizzes, meet 30 all-time greats.
They are early colonial traders, 19th-century industrialists, and today's technology gurus and media moguls. These 30 people had the vision to successfully exploit untapped markets, changing the world in the process.
See who they are, what they did, and why they matter today.
They are early colonial traders, 19th-century industrialists, and today's technology gurus and media moguls. These 30 people had the vision to successfully exploit untapped markets, changing the world in the process.
See who they are, what they did, and why they matter today.
Confessions of an interested party
My name is usually associated with Iscar, and I am glad that it is. But Iscar is a well-known story, and I want to speak here not of billion-dollar businesses, but of two relatively new, relatively small projects I am now involved in: a not-large factory and a small school. A man must renew himself, and I decided to branch out in the direction of what seems to me a very important area: non-innovation.
Wednesday, March 19, 2008
Search Mission
When Google founders Sergey Brin and Larry Page wanted a C.E.O. for their rapidly growing company in 2001, they turned to a technology executive, Eric Schmidt, who had previously worked at Sun Microsystems and Novell. Coincidentally, Yahoo co-founders Jerry Yang and David Filo were also looking for a C.E.O. that year, and they picked a Hollywood insider: Terry Semel, who had run Warner Bros.
Schmidt sat down with Condé Nast Portfolio senior writer Russ Mitchell to talk about his plans for Google.
Schmidt sat down with Condé Nast Portfolio senior writer Russ Mitchell to talk about his plans for Google.
Tuesday, March 18, 2008
Betting Big, Winning Big: Interview With Bruce Berkowitz, CEO of Fairholme Capital Management
BRUCE BERKOWITZ, PRESIDENT OF FAIRHOLME FUND and CEO of Fairholme Capital Management in Miami, runs concentrated portfolios -- and keeps a lot of powder dry to pounce on opportunities as he looks for companies that throw off a lot of free cash. This approach has paid off nicely for the firm, which now oversees about $9 billion, the vast majority of it in the no-load Fairholme1 Fund (ticker: FAIRX), of which Berkowitz is president. Since its launch at the end of 1999, the fund has finished near the top of its Morningstar category, with an annual "since-inception" return of 16.27%, trouncing the S&P 500's performance of minus 0.03% over the same period. The fund also bests most of its peers based on one-, three- and five-year returns.
Friday, March 14, 2008
Tony Dye
It was in 1996 that Dye first argued that, at 4,000, the FTSE 100 was overvalued. He moved a chunk of his clients' money into cash, withdrawing some £7 billion from the stock market. As share prices continued to soar, he was attacked by his clients and ridiculed in the City and the press. In 1999 Phillips and Drew (P&D) lost more clients than any other fund manager and came a humiliating 66th out of 67 in an institutional fund league table. The Times described the firm as a "standing joke".
The irony was that the hundreds of fund managers who had followed the herd and been proved disastrously wrong kept their jobs, while Dye paid the price for his independence of mind. Yet he remained philosophical, taking wry comfort from Keynes's observation that "worldy wisdom teaches that it is better to fail conventionally than it is to succeed unconventionally".
In recent years Dye had issued regular warnings that house prices were overvalued, and he predicted a crash "about as bad in real terms as the crash in the 1980s". In 2002 he wrote to the Financial Times accusing Mervyn King, the soon-to-be Governor of the Bank of England, of being unwilling to speak out on the cost of housing in the UK and of "recognising a bubble [only] after it has burst".
The irony was that the hundreds of fund managers who had followed the herd and been proved disastrously wrong kept their jobs, while Dye paid the price for his independence of mind. Yet he remained philosophical, taking wry comfort from Keynes's observation that "worldy wisdom teaches that it is better to fail conventionally than it is to succeed unconventionally".
In recent years Dye had issued regular warnings that house prices were overvalued, and he predicted a crash "about as bad in real terms as the crash in the 1980s". In 2002 he wrote to the Financial Times accusing Mervyn King, the soon-to-be Governor of the Bank of England, of being unwilling to speak out on the cost of housing in the UK and of "recognising a bubble [only] after it has burst".
Can You Beat the Market? It’s a $100 Billion Question
INVESTORS collectively spend around $100 billion a year trying to beat the stock market. That’s the finding of a rigorous effort to measure the total costs of Americans’ efforts to surpass the returns they would have received by simply holding a stock index fund. The huge price tag helps explain why beating a buy-and-hold strategy is so difficult.
The study, “The Cost of Active Investing,” began circulating earlier this year as an academic working paper. Its author is Kenneth R. French, a finance professor at Dartmouth; he is known for his collaboration with Eugene F. Fama, a finance professor at the University of Chicago, in creating the Fama-French model that is widely used to calculate risk-adjusted performance.
Subscribe to:
Posts (Atom)