1. Why invest in Utilities? Does not Utilities need a lot of capital, what’s the difference between Utilities and the original Berkshire (BRK.A, BRK.B) textile business? You did explained in your letter that utilities can deploy capital for a decent return. And I read this old article “Why Buffett is buying utilities” from MSN money (Jim Jubak). Do you agree some of what Jim said?
2. Why keep American Express (NYSE:AXP) and Moody (NYSE:MCO)? Don’t we see the permanent demage of consumer credit, and the rating companies? How about Wells Fargo (NYSE: WFC)? Why not sell all Bank of America (NYSE: BAC) shares (noticed you did sell half last year)?
3. Derivatives. There are a lot crititics on this, and you have explain this very well in the shareholder letter. But, as I read “Poor Chariles Almanack”, Charile is much more cautious on derivatives, and its systemantic risk (chain effect of credit risk form counter parties). What’s your comments on over the counter derivatives market in general?
Will add more questions when it pops up.
Disclosure: I sold my remaining BRK.B share yesterday. No positions on the other stocks being mentioned.
This is probablly the most expensive lunch: Chinese fund manager Zhao Dan Yang won the Buffett lunch bid for $2.1 million (International Herald Tribune). The proceeds benifit Glide foundation, a San Francisco based charity formerly supported by Warren Buffett former wife Susan Buffett (Susan passed away in 2005?).
My 2 cents
I was surprised by the amount initially. This amount is almost 3 times of last year winning bid. Perhaps because Buffett is getting older? Also Mr. Zhao must have significant personal wealth to pull off that, no small change for fund managers, because fund managers make money from fees and profit sharing (2-20 rule, I will write more about fund manager fee structure later).
USA today has an interesting article regarding Chinese investors (speculator more precise) learning a tough lesson in the domestic stock market. The article used two example to explain:
(Picture source: USAtoday.com)
In October (2007), Wang, 45, invested $2,800 in a Beijing real estate firm, chosen, Wang explains, “because it’s called an ‘Olympic stock,’ and ought to do well.”
But now Wang’s beginner’s portfolio is down almost $1,000, over three times her previous monthly salary.
and he had done it for 47 years (maybe not every year, but compound annual return), that’s pretty good.
The following is quoted from Buffett 2006 shareholder letter, you can get the full letter at Berkshire web site:
Let me end this section by telling you about one of the good guys of Wall Street, my long-time friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably successful investment partnership, from which he took not a dime unless his investors made money. My admiration for Walter, it should be noted, is not based on hindsight. A full fifty years ago, Walter was my sole recommendation to a St. Louis family who wanted an honest and able investment manager.
Warren Buffett is a popular guy in China, although he has not visited China. But his book (more accurately the books about his investing philosophy) has been translated into Chinese. Such as this one, Buffett’s letters to shareholders, which is good. But there are many other knockoffs, such as this one, Lin Yuan the Chinese Buffett, I haven’t read the whole book, but read a piece of it. I think Lin Yuan is a sharp guy, but he is not Chinese Buffett.
Here is this year’s letter (in PDF). I read his letters a few years back. Recently I bought his book (at right side bar, in blue), it’s essentially a collection of his annual shareholder letters. His letters are highly regarded in the investing community.
I hope one day I could go to his annual shareholder meeting in Omaha. It was said he will meet some international shareholders during the meeting, don’t know if I could qualify for the event. May be buying a B Share (BRK-B, about $3500 a piece) will do it?
This is probablly the hottest IPO this year (so far). It went up 89% on its debut. But I did not jump into it because: 1) I don’t have much cash; 2) Hedge fund is the business I don’t know too much about.
I am not against shorting stocks, trading options and other exotic stuff; but these are the areas I don’t feel comfortable (math, lots of math) and don’t plan to learn it at this time. I am just an old fashioned guy, and my role model is the guy in Omaha. One of his rule is “buy the business you can understand; and the business that generates lots of cash and does not change too much over the years, e.g., Coca Cola and Gillette”.