Warren Buffett and Bill Gates talk to the MBA students at Columbia University in New York. Enjoy the town-hall interview: CNBC: Warren Buffett & Bill Gates – Keeping America Great.
The talk overall was quite interesting. Warren Buffett kept things light with his usual manner of funny and logical humour. His honest answers is one of the many reasons people admire him so much. For example, a woman in the audience asked what industry will be good to be in in future and Bill Gates named a few (IT, Healthcare, Energy…). But Warren said that she should do what she’s passionate about and what she cares about and not what the sectors are going to do well in future, as she’ll most probably do very well and she’ll be happier if she does what she’s passionate about.
More smart people have gone broke through leverage than to any other activity. A smart person can’t go broke unless they use leverage. As one of my friends says: If you’re smart, you don’t need it. And if you’re dumb you’ve got no business using it. So, it just doesn’t make sense.
Investing isn’t gambling, there’s a real distinction. Basically, it’s subjective, but in investment attitude you look at the asset itself to produce the return. So if I buy a farm and I expect it to produce $80 an acre for me in terms of it’s revenue from corn, soya beans etc. and it cost me $600. I’m looking at the return from the farm itself. I’m not looking at the price of the farm every day or every week or every year. On the other hand if I buy a stock and I hope it goes up next week, to me that’s pure speculation.
The Crisis of Credit Visualised Video by Jonathan Jarvis beautifully illustrates how the credit crisis or credit crunch came about. It’s a very well made video that is easy for non-financially literate people to understand.
The video illustrates the relationship between the home-owners, banks, brokers, hedge funds, CDO’s, investment bankers, prime mortgages, sub-prime mortgages etc. and makes it easy for anybody to understand.
Dr Marc Faber is interviewed by HoweStreet.com on the 8th of May 2009 which produced the following two interesting videos.
With all the government bailouts I was surprised to hear that the possible M3 (simple definition here), which the Fed stopped reporting. It is reported to be increasing to around 10% per month. That’s going to be quite a bit of inflation heading our way.
Marc Faber has some very interesting things to say, as always, and I’ve enjoyed the videos — especially part 2.
Last weekend the Berkshire Hathaway annual meeting took place where some 35,000 shareholders turned up to listen to Warren Buffett and Charlie Munger — otherwise known as the “Woodstock for capitalists”.
Some quotes from the weekend:
Warren Buffett:
If you have a 150 I.Q., sell 30 points to someone else. You need to be smart, but not a genius.
If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it.
[When asked why the conglomerate structure seemed to work so well for him] We’ve got this ability in terms of moving money around into various opportunities [without tax consequences]
Leverage is what causes people real trouble in this world. You don’t want to be in a position where someone can pull the rug out from under you or, emotionally, where you pull it out from under yourself.
There is so much that’s false and nutty in modern investing practice and modern investment banking, if you just reduced the nonsense, that’s a goal you should reasonably hope for.
I think the most important lesson is the world needs a whole lot less leverage.
In short, bad news is an investors best friend. It lets you buy a slice of America’s future at a marked- down price.
I’m not worried at all about a run on the banks.
In poker terms, the Treasury and Fed have gone ‘all in.’ Economic medicine that was previously meted out by the cupful (pumping dollars into the economy) has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.
We’re certain, for example, that the economy will be in shambles throughout 2009—and, for that matter, probably well beyond—but that conclusion does not tell us whether the stock market will rise or fall.
Charlie Munger:
Some of the worst business decisions I’ve ever seen are those with future projections and discounts back. It seems like the higher mathematics with more false precision should help you, but it doesn’t. They teach that in business schools because, well, they’ve got to do something.
We do not need insane accounting that rewards people that can’t handle the temptation.
In my case, I’m so nearly dead anyway that it’s a minor detail.
Well, we still have a rising young man here named Warren Buffett.
The stupidity in the management practices of the rest of the corporate world will likely be ample enough to give this company some comparative advantage in the future.
In show business, they say something ‘has legs’ if it is going to last. I think Berkshire Hathaway’s system ‘has legs’.
We’re going to have a hell of a time getting this fixed the way it should be fixed.
This ‘one size fits all’ reasoning in the case of bank stress tests is very likely to be done poorly.
I think you have to start with the idea that a lot of the current troubles are richly deserved.
It’s a real privilege to be associated with a place like Berkshire, I think we have more fun doing what we do than practically anybody.
Peter Schiff is an American economic commentator, author and licensed stock broker who currently serves as president of Euro Pacific Capital Inc., a fully accredited brokerage firm based in Darien, Connecticut. Schiff was an economic adviser to Ron Paul’s 2008 presidential campaign. Schiff is also a supporter of the Austrian School of Economics, along with Mark Faber.
This is just a blog about making income using the internet and personal finance in general… well, it seems it turned into a finance video blog instead.
