On May 7, 2012, CNBC conducted a wide-ranging interview with legendary investor Warren Buffett. Below are 5 brief excerpts from that interview. (Glad to see he agrees with me!)
BUFFETT ON CASH: “I think cash is probably as risky an asset as you can own over time. You're not taking risk off when you go into cash. You are going into something that is sure to decline in purchasing power over time. So that is the biggest risk I know is to own cash.”
BUFFETT ON HYPE: “Retail investors should not pay any attention to the day's news. If they're paying attention to the day's news and they're trying to buy and sell stocks based on the day's news, they're never going to be successful investors. The idea is to buy a good business. I mean, it's the same way as if you went out to buy a business. You'd look around for a company, some little business that had good prospects over time, had decent and honest management and where the price made sense.”
BUFFETT ON STOCKS: “I think equities are very attractive for the long term. And they may get more attractive next week or next month. But it's the same thing I said in October of 2008. I didn't know where bottoms were going to be or where they were going to be in a year. But equities, good producing businesses are a great thing to own over time, and they will be a great thing to own for the next 100 years. But who knows whether they go up or down in price next week.”
BUFFETT ON TRADING: “I'm not a fan of active trading of any kind. I don't know how to make money trading actively. Maybe if I did, I wouldn't be so negative on it. As to the volume, though, there's still way too much volume in the market. I mean, the idea that the ownership of a company should turn over a hundred percent in a year, that is not the way people behave with apartment houses, it's not the way they behave with farmland. But they have this notion in stocks that they ought to do something every day. The best thing to do with stock is buy stock with a good company and don't look at the price for five years or something.”
BUFFETT ON WHAT TO BUY: “The greatest asset to own is your own abilities. I mean, no matter what happens in the economy or with currency, if you develop your own talents – I tell the college students that the best thing to have is to develop your own talents. The second best thing is to buy into other people's talents. You know, here's Coca-Cola, and people are going to be drinking it 10 years or 50 years from now, and they're going to be drinking more of it, and they'll make more money. So I don't have any idea what Coca-Cola stock is going to do next week or next month or next year, but I'm pretty darn sure where the company will be in 10 or 20 years. And people beat themselves in the stock market. The stock market, literally, in the 20th century, went from 66 on the Dow to 11,400. And you'd said, `How could anybody not have a good experience?' But millions of people don't because they get excited at the wrong time, and they get depressed at the wrong time. So you've got to put your emotions aside, you've got to give up the idea that you can decide when to buy stocks and when to sell stocks. The time to buy stocks is consistently over time.”
Monday, May 21, 2012
Sunday, May 13, 2012
Dear Graduating Class of 2012
To High School Graduates of 2012:
Congratulations on what is probably the greatest accomplishment of your life so far. Now the bad news - it doesn't really matter.
If you are/were a slacker up to now, you probably feel like you got over, and in some sense that's true. The thing of it is, you'd have to be a complete moron, or maybe a criminal, not to get a diploma with the sorry state of public schooling these days. Plus, now you're just going to continue being a slacker, so what did you really get over on? But thank you for your lack of effort anyway, because I'm always going to need people willing and only able to work in the service industry to take care of me.
If you are/were not a slacker up to now, good for you, it might have helped you get a college scholarship and made your family proud. Unfortunately, as of this moment, you are no farther ahead in life than the slacker to which I just referred. All that work took you to the same piece of paper that the lazy students got. Sucks, doesn't it? The good news is, you have a better future ahead, and from here you are going to very quickly improve your chances of future prosperity over the slacker.
To College Graduates of 2012:
Congratulations on what is probably the greatest accomplishment of your life so far. Now the bad news - it's time to grow up.
What the hell is the matter with your generation? Not so long ago, going to college meant you had four years to develop a certain set of intellectual skills, and upon your graduation you already had a job and/or post-graduate school lined up to begin a couple of weeks later. Now more often than not, you take more than four years to get an undergraduate degree, and you have a 'now what?' look on your face as you walk across the stage, and you move back home.
And don't give me the old 'tough job market' excuses. I know, I know, the Great Recession is making it tough on college graduates - that doesn't mean you shouldn't try. It means you need to try harder.
Also, try expanding your job horizons already. It's a big country out there, you don't need to limit your search to the city/state in which you grew up. This may come as a surprise to you, but that was kind of part of going to college, realizing it's a big world of other people and opportunities out there.
I don't entirely blame you. I also blame your parents. Apparently, they want you to have an option that they didn't have, meaning moving back home and allowing you to indefinitely leech off of them. Fortunately for you, my generation has decided they would rather be your adult friends instead of being your parents.
It's hard not to take advantage of this invitation to slacker-ville, no doubt. Just be accountable, OK? If you have a new degree but no job, it's probably your fault. Your parents want you succeed, and they may give you a place to avoid the big, bad world for a while, but don't get used to taking advantage of it.
Which brings me to my quick and opposite advice: It's a big, bad world out there. Get used to it.
Sunday, May 6, 2012
Berky Meeting Nuggets 2012
Just made my annual trek to Omaha to attend the Berkshire Hathaway annual shareholders meeting. It may sound crazy, listening to Warren Buffett and Charlie Munger answer questions for five hours, but for me it's a philosophical tune-up not only from an investment perspective, but also from an economic, political, intellectual, and social standpoint.
Similar to last year, here's a summary of what I consider a few highlights of this year's meeting:
On the company movie and celebrity sightings: Board member Bill Gates was there, as was U2 lead singer Bono. The movie included skits with Jimmy Buffett and the cast of Glee.
On Buffett's health: Buffett said he feels terrific. Munger jokingly (as usual) said he resents all of the attention Buffett has been getting after his recent Stage 1 prostate cancer diagnosis - Munger claimed he probably has as much prostate cancer, he just never gets tested for it!
On energy: While natural gas prices are at historically now levels due to increased supply, Munger said it was idiotic to be extracting so much of that finite resource from the earth. He said we should be using other sources that were more abundant. He also said the energy independence is one of the stupidest things he'd ever heard of - we should be importing and using up other countries' resources and keeping ours as a reserve. Had we adopted this philosophy decades ago we'd be a lot better off now.
On SuperPACs: Buffett noted he could probably advance his political causes through SuperPAC donations, but he would never do that. Both he and Munger agreed the Citizens United ruling was bad for the country, allowing a few wealthy folks to have undo influence. And Buffett flat-out said he didn't want to see democracy go in that direction.
On the so-called Buffett Rule on taxing the very rich: Buffett reminded everyone he proposal isn't an attempt to balance the budget, but simple a matter of tax fairness to make sure lower income people don't pay a rate higher than the rich. He said the 400 highest income people in the U.S. averaged $250 million per year, and of those, 140 or so paid taxes of 15% or less. So the Buffett Rule wouldn't even impact most of the super-rich, and those it would impact would be just fine. And yes, it would also raise a few billion per year of tax revenue.
On the so-called Buffett Rule #2: A question from a shareholder's claims his 84-year old father would invest in Berky if it were not for Buffett's tax philosophy. Among other things, Buffett said it sounded like the guy ought to invest in Fox!
Similar to last year, here's a summary of what I consider a few highlights of this year's meeting:
On the company movie and celebrity sightings: Board member Bill Gates was there, as was U2 lead singer Bono. The movie included skits with Jimmy Buffett and the cast of Glee.
On Buffett's health: Buffett said he feels terrific. Munger jokingly (as usual) said he resents all of the attention Buffett has been getting after his recent Stage 1 prostate cancer diagnosis - Munger claimed he probably has as much prostate cancer, he just never gets tested for it!
On energy: While natural gas prices are at historically now levels due to increased supply, Munger said it was idiotic to be extracting so much of that finite resource from the earth. He said we should be using other sources that were more abundant. He also said the energy independence is one of the stupidest things he'd ever heard of - we should be importing and using up other countries' resources and keeping ours as a reserve. Had we adopted this philosophy decades ago we'd be a lot better off now.
On SuperPACs: Buffett noted he could probably advance his political causes through SuperPAC donations, but he would never do that. Both he and Munger agreed the Citizens United ruling was bad for the country, allowing a few wealthy folks to have undo influence. And Buffett flat-out said he didn't want to see democracy go in that direction.
On the so-called Buffett Rule on taxing the very rich: Buffett reminded everyone he proposal isn't an attempt to balance the budget, but simple a matter of tax fairness to make sure lower income people don't pay a rate higher than the rich. He said the 400 highest income people in the U.S. averaged $250 million per year, and of those, 140 or so paid taxes of 15% or less. So the Buffett Rule wouldn't even impact most of the super-rich, and those it would impact would be just fine. And yes, it would also raise a few billion per year of tax revenue.
On the so-called Buffett Rule #2: A question from a shareholder's claims his 84-year old father would invest in Berky if it were not for Buffett's tax philosophy. Among other things, Buffett said it sounded like the guy ought to invest in Fox!
Wednesday, April 18, 2012
Danger in Numbers
The following is taken directly from an April 18, 2012 email to parents of students at West Des Moines Valley Southwoods Freshman High School:
Dear VSW Parents/Guardians:
At a community meeting on Monday evening, it was suggested that building principals share the following information from the WDM Substance Abuse Coalition about April 20th with our parents:
4:20 or 4/20 (pronounced four-twenty) is a term used as a discreet way to refer to the consumption of marijuana and a way to identify oneself with the drug subculture. Marijuana users observe 4:20 as a time to smoke together and April 20 has become a counterculture holiday, where people gather to celebrate and consume marijuana.
4:20 has become a code for a time to get high, a symbol of marijuana and its culture. Teenagers believe they can talk about getting high in front of their parents without them knowing by using the phrase 4:20. Fortunately, your teenager will not have that option. April 20 events are international and 4:20 has become a worldwide "burn time." For parents, it's a red flag, a warning sign that your teenager may be into something that could harm their future. When you see the symbol 4:20 or your child wearing excessive green clothing on April 20, beware of what it represents. April 20 has now become National Pot Smokers Day. Our pop culture is pro-marijuana, as evidenced by the success of movies and celebrities who flaunt their use. This makes it more difficult for parents to get anti-drug messages across to kids. Use 4:20 as your opportunity to get a dialogue going about drugs, and not just marijuana.
Isn't that awesome/crazy/stupid! When I read this, I knew immediately there was a high (no pun intended) probability I would blog about it.
This email is asinine for a lot of reasons, many of which I've written about before. (Just click on the labels.) These reasons can be put into two main categories:
1) School administrators who think it's their job to govern kids 24/7. Like I've said before, what happens outside of school or school functions is the responsibility of parents. If the parents choose not to raise their children the 'right' way, that doesn't make school administrators their surrogate.
Trying to educate parents on pop culture like this is nothing more than a thinly-veiled attempt to do a parent's job. I love how the author notes at the beginning that "it was suggested that building principals" share this information. Who suggested it, one of the principals? Had to be I guess, because if a parent knew about four-twenty, they'd already have a grip on communicating about it.
2) People who think any suggestion of marijuana means the worst. It's a "warning sign" if your kid wears "excessive green clothing" on 4/20? A warning sign of what, that they follow pop culture or that they must be a pothead? You mean like if a girl wears a short skirt she must be a slut, or if a boy wears a sideways cap he must be a gang member?
And how about the statement that "our pop culture is pro-marijuana"? I see a helluva lot of pop culture that "flaunts" drinking too much, or using violence, but smoking pot? Not so much. Regardless, smoking pot would be less harmful than either of those other two things, but our society is much too repressed to admit that!
So kudos to you, Valley Southwoods Freshman High School administrators, for drawing attention to this falsely dangerous calendar date. You've truly earned the ridicule that the students are going to point in your direction on four-twenty.
Dear VSW Parents/Guardians:
At a community meeting on Monday evening, it was suggested that building principals share the following information from the WDM Substance Abuse Coalition about April 20th with our parents:
4:20 or 4/20 (pronounced four-twenty) is a term used as a discreet way to refer to the consumption of marijuana and a way to identify oneself with the drug subculture. Marijuana users observe 4:20 as a time to smoke together and April 20 has become a counterculture holiday, where people gather to celebrate and consume marijuana.
4:20 has become a code for a time to get high, a symbol of marijuana and its culture. Teenagers believe they can talk about getting high in front of their parents without them knowing by using the phrase 4:20. Fortunately, your teenager will not have that option. April 20 events are international and 4:20 has become a worldwide "burn time." For parents, it's a red flag, a warning sign that your teenager may be into something that could harm their future. When you see the symbol 4:20 or your child wearing excessive green clothing on April 20, beware of what it represents. April 20 has now become National Pot Smokers Day. Our pop culture is pro-marijuana, as evidenced by the success of movies and celebrities who flaunt their use. This makes it more difficult for parents to get anti-drug messages across to kids. Use 4:20 as your opportunity to get a dialogue going about drugs, and not just marijuana.
Isn't that awesome/crazy/stupid! When I read this, I knew immediately there was a high (no pun intended) probability I would blog about it.
This email is asinine for a lot of reasons, many of which I've written about before. (Just click on the labels.) These reasons can be put into two main categories:
1) School administrators who think it's their job to govern kids 24/7. Like I've said before, what happens outside of school or school functions is the responsibility of parents. If the parents choose not to raise their children the 'right' way, that doesn't make school administrators their surrogate.
Trying to educate parents on pop culture like this is nothing more than a thinly-veiled attempt to do a parent's job. I love how the author notes at the beginning that "it was suggested that building principals" share this information. Who suggested it, one of the principals? Had to be I guess, because if a parent knew about four-twenty, they'd already have a grip on communicating about it.
2) People who think any suggestion of marijuana means the worst. It's a "warning sign" if your kid wears "excessive green clothing" on 4/20? A warning sign of what, that they follow pop culture or that they must be a pothead? You mean like if a girl wears a short skirt she must be a slut, or if a boy wears a sideways cap he must be a gang member?
And how about the statement that "our pop culture is pro-marijuana"? I see a helluva lot of pop culture that "flaunts" drinking too much, or using violence, but smoking pot? Not so much. Regardless, smoking pot would be less harmful than either of those other two things, but our society is much too repressed to admit that!
So kudos to you, Valley Southwoods Freshman High School administrators, for drawing attention to this falsely dangerous calendar date. You've truly earned the ridicule that the students are going to point in your direction on four-twenty.
Friday, April 13, 2012
School's In...For...Summer!
This week the Iowa legislature got its shorts in a bunch over the earliest date schools should be able to begin their school year. It's been fun to watch.
For many years, Iowa law has mandated that elementary and high schools are not to begin classes prior to September 1st. However, schools can (and do) apply to have that mandate waived, which it always is. Consequently, many schools in Iowa have begun to start within the first half of August, and all before September 1st.
No problem - local control, everybody's happy, right?
Enter the special interest groups, namely the tourism lobby. Schools are now starting so early that they conflict with family vacations, and more specifically, with the Iowa State Fair. The Fair and the tourism industry want the starting date mandate enforced.
The debate between local control and tourism quickly deteriorated into dumb versus dumber arguments. If you support tourism, you're accused of being against education. If you support local control, you're accused of being against common sense.
Of course, the goofy teachers' lobby had to get involved, letting everyone know their precious Spring Break may have to be eliminated if schools have to start later. Do they not realize that outside of central Iowa, most school districts don't even have a Spring Break? And how is a Spring Break good for education?
In the end, a compromise bill has been crafted to mandate that schools not begin classes prior to the last Monday in August. So the debate ends with all parties missing the obvious answer - we should be looking at year-around school.
This is the 21st century, with air conditioning and technology. It's time to accept that kids don't need all summer off.
Good for education? Yes. Good for tourism? Sure. Good for teachers? Talk to the hand.
For many years, Iowa law has mandated that elementary and high schools are not to begin classes prior to September 1st. However, schools can (and do) apply to have that mandate waived, which it always is. Consequently, many schools in Iowa have begun to start within the first half of August, and all before September 1st.
No problem - local control, everybody's happy, right?
Enter the special interest groups, namely the tourism lobby. Schools are now starting so early that they conflict with family vacations, and more specifically, with the Iowa State Fair. The Fair and the tourism industry want the starting date mandate enforced.
The debate between local control and tourism quickly deteriorated into dumb versus dumber arguments. If you support tourism, you're accused of being against education. If you support local control, you're accused of being against common sense.
Of course, the goofy teachers' lobby had to get involved, letting everyone know their precious Spring Break may have to be eliminated if schools have to start later. Do they not realize that outside of central Iowa, most school districts don't even have a Spring Break? And how is a Spring Break good for education?
In the end, a compromise bill has been crafted to mandate that schools not begin classes prior to the last Monday in August. So the debate ends with all parties missing the obvious answer - we should be looking at year-around school.
This is the 21st century, with air conditioning and technology. It's time to accept that kids don't need all summer off.
Good for education? Yes. Good for tourism? Sure. Good for teachers? Talk to the hand.
Monday, April 9, 2012
Remember December
Remember December? It was only a few months ago. Equity markets had
just finished a volatile and generally poor year. European nations were arguing over
how to deal with a mountain of sovereign debt, while the rest of the world fretted over
how that debt would affect global markets.
Most market analysts expected further tough times in early 2012.
Financial magazine Barron's warned, "For investors frightened by the stock market's
volatility in the past six months and tired of worrying about places in Europe once given little thought,
2012 promises scant comfort—at least in the first half."
As an investor, if you had taken that advice and left the stock
market, you would have just missed one of the best short‐term equity rallies in recent history.
The S&P 500 index was up 12% in the first quarter of 2012, its biggest first‐quarter percentage
gain since 1998. Broader equity market benchmarks also made record or near‐record quarterly
gains.
Why the turnaround in markets so far in 2012? The primary drivers have
been signs of economic stabilization in Europe, along with signs of economic
recovery in the U.S. But the most important thing to know is that a few months ago, virtually no
one predicted either of those to happen.
This brings me back to my oft‐repeated investment philosophy: No one
knows how markets will perform going forward, because that requires an ability to accurately
predict unforeseen events. Since the future is unknown, it’s best to maintain your pre‐determined
asset allocation, in the most diversified and lowest cost manner available.
Market discipline works both ways, of course. Just as it was wrong to
assume the market pessimism of last year would continue into early 2012, it would not be
prudent to anticipate that the rest of this year will resemble the first three months.
You can always guess, of course, but experience reveals that isn't a very good investment strategy. Remember December?
Tuesday, April 3, 2012
Get A (Private Industry) Job!
A recent story on 60 Minutes covered the plight of former space shuttle employees in Breverd County, Florida, home of the Kennedy Space Center. In short, the end of the shuttle program has led to severe unemployment and the subsequent closing of many local businesses.
The people interviewed are angry and feel betrayed because the government led them to believe a replacement space program, called Constellation, would allow them to keep jobs. The economy and budget cuts kept that from happening.
There is one thing these folks are having trouble understanding - Americans like me don't care about their feelings!
Are you kidding me? The 7,000 (yes, 7,000) people employed by NASA's shuttle program, and the businesses they patronized, have sucked at the taxpayers' teat for the better part of three decades. They made good wages with fantastic federal benefits. And yes, I'm sure most of them were good civil servants.
Unfortunately, it didn't occur to those employees, nor to the businesses around them, that Uncle Sam might not always need them. How did they not see this coming? Everyone has known for years that the shuttle program was going to be shut down, and they made no contingency plans?
Yes I know, they were counting on the Constellation program. Well, let me introduce you to a million other people who also lost their private employment jobs when the economy went south in 2008. I don't see them sitting around hoping for the government to create other jobs in their county. (Check that, thousands of them are sitting around collecting benefits from me.)
Just because these folks were denial doesn't mean anyone should feel sorry for them. They had plenty of time to learn another trade, or revamp their business. And if they didn't then, they do now.
I for one am glad to see that the flow of dollars from my pocket to theirs has stopped, during a time when the U.S. is so far in debt that it has rightfully contracted its space exploration program.
The people interviewed are angry and feel betrayed because the government led them to believe a replacement space program, called Constellation, would allow them to keep jobs. The economy and budget cuts kept that from happening.
There is one thing these folks are having trouble understanding - Americans like me don't care about their feelings!
Are you kidding me? The 7,000 (yes, 7,000) people employed by NASA's shuttle program, and the businesses they patronized, have sucked at the taxpayers' teat for the better part of three decades. They made good wages with fantastic federal benefits. And yes, I'm sure most of them were good civil servants.
Unfortunately, it didn't occur to those employees, nor to the businesses around them, that Uncle Sam might not always need them. How did they not see this coming? Everyone has known for years that the shuttle program was going to be shut down, and they made no contingency plans?
Yes I know, they were counting on the Constellation program. Well, let me introduce you to a million other people who also lost their private employment jobs when the economy went south in 2008. I don't see them sitting around hoping for the government to create other jobs in their county. (Check that, thousands of them are sitting around collecting benefits from me.)
Just because these folks were denial doesn't mean anyone should feel sorry for them. They had plenty of time to learn another trade, or revamp their business. And if they didn't then, they do now.
I for one am glad to see that the flow of dollars from my pocket to theirs has stopped, during a time when the U.S. is so far in debt that it has rightfully contracted its space exploration program.
Subscribe to:
Posts (Atom)