Warren Buffett put $2 billion of Berkshire Hathaway's cash to work at the end of last week when the company purchased high-yielding bonds issued by Dallas-based power producer TXU Corp., according to a person familiar with the deal.
TXU was bought earlier this year in a landmark $45 billion leveraged buyout led by Kohlberg Kravis Roberts. As with many LBOs carried out in buoyant markets, banks agreed to make large so-called bridge loans to help finance the deal, but they got stuck with those loans when demand dried up for LBO-related debt. TXU can now use the proceeds from the bond sale, whose total size was $3.9 billion, to help pay down the bridge loans. The bonds were issued through a subsidiary.
Monday, December 3, 2007
The Many Errors in Thinking About Mistakes
“I think it’s a very difficult subject,” said Paul J. H. Schoemaker, chairman of Decision Strategies International and teaches marketing at the Wharton School of the University of Pennsylvania. “There’s a lot of ambivalence around making mistakes.”
On one hand, as children we’re taught that everyone makes mistakes and that the great thinkers and inventors embraced them. Thomas Edison’s famous quote is often inscribed in schools and children’s museums: “I have not failed. I have just found ten thousand ways that won’t work.”
On the other hand, good grades are usually a reward for doing things right, not making errors. Compliments are given for having the correct answer and, in fact, the wrong one may elicit scorn from classmates.
We grow up with a mixed message: making mistakes is a necessary learning tool, but we should avoid them.
On one hand, as children we’re taught that everyone makes mistakes and that the great thinkers and inventors embraced them. Thomas Edison’s famous quote is often inscribed in schools and children’s museums: “I have not failed. I have just found ten thousand ways that won’t work.”
On the other hand, good grades are usually a reward for doing things right, not making errors. Compliments are given for having the correct answer and, in fact, the wrong one may elicit scorn from classmates.
We grow up with a mixed message: making mistakes is a necessary learning tool, but we should avoid them.
The Long and Short of It at Goldman Sachs
FOR decades now, as a writer, economist and scold, I have been receiving letters from thoughtful readers. Many of them have warned me about the dangers of a secret government running the world, organized by the Trilateral Commission, or the Ford Foundation, or the Big Oil companies or, of course, world Jewry.
I always scoff at these letters. The world is far too complex a place to be run by any one group. But the closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.
This all started percolating in my fevered brain last week when a frequent correspondent, a gent in Florida who is sure economic disaster lies ahead (and he may be right, but he’s not), forwarded a newsletter from a highly placed economist at Goldman Sachs named Jan Hatzius.
I always scoff at these letters. The world is far too complex a place to be run by any one group. But the closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.
This all started percolating in my fevered brain last week when a frequent correspondent, a gent in Florida who is sure economic disaster lies ahead (and he may be right, but he’s not), forwarded a newsletter from a highly placed economist at Goldman Sachs named Jan Hatzius.
The Weitz Funds Conference Call Transcript
This is Wally. I'm here with Brad Hinton and Tom Carney, and we welcome you to the call. I hear there are 48 people at this point. It's been a while since we did one of these calls. I think we felt like we got to the point where we didn't have much to say a year or two ago and now there does seem to be more to talk about and we invited questions. We got quite a few and the three of us will spend, we haven't timed this, but maybe 15 minutes or so talking about the things that seem to be of most interest. Strangely enough there is one stock that seemed to dominate the questions and most of them were politely worded.
At any rate, we're going to start right in with Countrywide Financial (CFC). I wrote some about it in the third quarter letter to shareholders. Things change daily in the mortgage world these days though, so here is a summary of where we are and how we got where we are and what we plan to do going forward.
With Countrywide we really focused on credit; knowing that there were a lot of mortgages held at the bank, that they were holding residuals from securitizations, that they had a pipeline that held lots of mortgages in between the time of origination and the time they were sold. We stress-tested the portfolio and I think we've really been pretty much on target so far about their exposure to credit losses.
Sunday, December 2, 2007
Warren Buffett's Video Tour of Berkshire Hathaway Headquarters Continues: Why 'Durable Competitive Advantage' Matters
Buffett: The picture of the Berkshire is right here. Here we are. Nice orderly office, and right up there is a photo of the big Hathaway Mill in New Bedford, Mass. That was there in 1960, well, I bought the first stock in '62, then in '65 when I took control, now it was over a million square feet. It had probably 50 million dollars of replacement value of machinery and equipment in there. When we finally gave up on the textile business 20 years later, we got less than $200,000 sold for scrap iron. And for that building which is over a million square feet, I got minus $250,000. I have to give up money. So that's, it shows you that gap accounting figures and fixed assets and all that, really don't mean much. It's much better on the Coca-Cola trademark than it is on a bunch of buildings and machinery.
Becky: You know, I never thought about it before, but part of what we're focusing on is just the idea of you going global and looking around and that's an early example of globalization and how it changed your investment theory.
Buffett: In the early, a century plus ago, if you lived in New England, you measured your wealth by looms and bobbins just like people in the Midwest measured their wealth by acres of land. And it turned to dust, basically.
Becky: You know, I never thought about it before, but part of what we're focusing on is just the idea of you going global and looking around and that's an early example of globalization and how it changed your investment theory.
Buffett: In the early, a century plus ago, if you lived in New England, you measured your wealth by looms and bobbins just like people in the Midwest measured their wealth by acres of land. And it turned to dust, basically.
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