Note Pickens has a big investment in wind power and water resource in Texas.

You tube videos
Great Artists Steal - Triumph of the Nerds - Revised (very short)

How Windows REALLY Became The Market Leader (Pt.1), 9 min 33 seconds

How Windows REALLY Became The Market Leader (Pt.2), 10 min 50 seconds

John passed away today, at age of 95.

Wimbledon
What a game. Weather played a factor too: the rain and the wind. Maybe it helped Nadal in some way? I was hoping Roger to win but I think he should have no regret (tried his best). One fun fact is the local NBC channel switched to baseball game (Cards vs. Cub), and we watched the game via UUSee web TV (Beijing TV 6). I also like two players comments after the game:

21:24 - A surprisingly stoic Roger Federer not letting any emotion out: “I tried everything, it went a little late and everything, but look Rafa is a deserving champion, he just played incredible todayÂ…. He’s the worst opponent on the best court, but it’s been a joy again to play here, I know I couldn’t win it under the circumstances, but I’ll be back next year.”

21:25 - AND THE NEW WIMBLEDON CHAMPION RAFAEL NADAL: “This is my favourite tournament, for me to win on this court is a dream…. I’m playing in the same time as the best player in history, Roger Federer…. He’s still number one, he’s still the best, he still has five titles here, and I just have one.”

1) how to value a business;

2) how to think about stock market fluctuations.

I think the first one is obvious, all the accounting, financial and quantitative skills. The second, is less obvious, it’s more about psychology. Buffett’s sidekick Charlie Munger summarized in his Human Misjudgement speech. Buffett also said something like “be cautious when others are greedy; be greedy when others are cautious“. This is certainly not science or a rule can be applied easily. For instance, if one person bought SPRD last Friday (like yours truely), it fell more today.

I noticed Danbin, a China hedge fund manager admires Buffett very much, also has his own way. He is almost religous about holding his stocks these days, amid the recent big drop of China market. You can read this article at his blog to get a glimpse. I am sure many of his clients are thinking or asking to bail out.

Oh, well, whatever it works for him/her. The key is to make money in the long run.

(Full size picture here)

May be Bill Gates is selling on behalf of Gates foundation (USAToday article)? As you may know in 2006 Buffett donated large number of shares to Gates fundation (NYTimes article). I was wondering who is buying BRK.B on Friday? I know I could only afford 0.5 share at this time (hint: President Bush, could you speed up the tax rebate

After a little Google search, I found the news from Yahoo message board (BRK-A). It says “BRKB’s added to world market index accounts for volume”. Later I also found the offical news through Reuter, quote Reuter “The largest additions to the MSCI World Index < .MIWD00000PUS> are Berkshire Hathaway’s (BRKb.N: Quote, Profile , Research) Class B shares…”

About adding a stock to major index
It’s generally a good sign that a stock being added to a major stock index. Berkshire is not a component of SP 500. I don’t know the specific of MSCI world index, and the criteria of adding a stock.

But I do know MSCI has lots of index for international stocks. With the increasing weight of interntional stock market (relative to US) and the ETF boom, MSCI world index are also getting popular.

On a side note, one of Buffett’s holding, Moody (NYSE:MCO) took a big hit recently because of mistake in giving out ratings. Interestingly, Buffett did not sell MCO shares in Q1 2008. He did sell some Well Fargo shares in Q1, this seems contradicts with he said in his annual letter: Moody probably lost intrinsic value in sub prime crisis, Well Fargo did not.

BTW, I bought one more BRK.B yesterday, at $4130, not the lowest price of the day but about 5% off the price I bought for my first share. A few things happened since April 3 the day I bought it: the CEO of General Re resigned because of AIG scandal; Mars Wrigley deal; annual shareholder meeting (BRK.A and BRK.B both ran before the meeting); the Q1 earning result was not good because of paper loss of stock index derivatives. But I don’t think those things worsened the value of BRK in anyway.

===
Q9: Melbourne Auz. Berkshire has bought a lot of shares in last twelve months in listed companies. Do you expect return to be between 7-10% pa over many years? Well below achievements in past.

WB: Yes. We would be very happy if we could buy pretax returns of 10%, dividends included. We would probably settle for a little less than that. Berkshire returns will be less, no question, in future than in past. We operate now in universe of marketable stocks with caps of 10bil, but really 50bil and up in order to have an impact. This universe is not as profitable. If we find 10bil, a 5% position is 500mil. If it doubles, we make 325m, this is less than 2/10ths of 1%. We have found things to do time to time to make money. They are nice, but don’t move needle much at Berkshire. Anyone who expects us to replicate past should sell their stock. We’ll get decent returns, but not indecent returns.

CM: You can take Warren’s promises to bank. We are happy making money at lower rate in future, and we suggest you adopt the same attitude. You may have better things to do with your money than buying Berkshire. You will find things that are more intelligent, if you spend the time. We don’t think it is the most attractive investment in world. We like buying good size to very large with good management. Nice formula, it should work well over time.
===
Q12: Germany, high school. What should I do with my life?

WB: We prefer questions that are harder. [laughter]

Q12 cont: what would you do if you started over?

WB: You have to find your passion in life. I would choose same job. I enjoy it. It is a terrible mistake to sleep walk through your life. Unless Shirley Maclain is right you won’t have another one. Dad had a business, with books on his shelves and they turned me on. This was before Playboy. If he was a minister I’m not sure I would have been as enthused. If you have obligations, you have to deal with realities. Go to work for organization you admire or an individual you admire. Which also means most MBAs I meet would be self employed. [laughter] I went to work for Ben Graham. I never asked my salary. Get the right spouse. Charlie talks about the man who spent twenty years looking for a perfect woman and found her. Unfortunately she was looking for perfect man. If you are lucky, you will be happy and as a result you will behave better. It makes it easier.

CM: You’ll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him.

WB: Or would have heard of me very differently.

MX: I wish all the young men have listened to Munger’s perfect man joke.
===
Q23: With small sums of money, what strategies would you pursue?

WB: If I were working with small sums of money, it would open up thousands of possibilities. We found very mispriced bonds. We found them in Korea a few years ago. You made big returns but had to be small size. I wouldn’t be in currencies with small amount of money. I had a friend who used to buy tax liens. I’d look in small stocks or specialized bonds. Wouldn’t you say that Charlie?

CM: Sure.

MX:
===

(Youtube: interview with the Berkshire Shareholders)

Q5: Would you use stock options to enter a position in a public co?

WB: If you want to buy or sell a stock, you should buy or sell a stock. We sold puts on Coca-cola once, but usually it is best to just buy stock. Using option technique is an idea where you get to buy a stock cheap. 4 out of 5 times you get it right and one time you may miss the opportunity to buy. We virtually have never used options to enter or exit a position. We have sold long term equity put options described in press report. We don’t get involved in fancy techniques.

CM: If I remember right, a public authority was wondering if they should set up an option exchange market. Warren was alone in the opinion (against it). You wrote a letter saying it wouldn’t do any good to throw out margin rules in this fashion. It doesn’t serve the country. I always thought Warren was totally right. Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.

WB: A University of Chicago Graduate student asked me once, what are we being taught that is wrong? In business school the amount of time spent teaching option pricing is total nonsense. You only need 2 courses, how to value a business and how to think about stock market fluctuations. The thing is that instructors know the formulas and you don’t, so they have something to fill the time. It has nothing to do with investment success – what matters is buying businesses at the right price. If you were teaching Biblical studies and you could read the Bible forward, backward and in four different languages, you would find it hard to tell everyone that it comes down to the Ten Commandments. The priests want to spend a lot of time preaching. You must have attitude where you aren’t influenced by market. You need a mindset, and you need to have the attitude to divorce yourself from letting the market influence you.

My thoughts:
“Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.” This is happening exactly in some part of the Chinese stock market, isn’t it? Think the excessive issuance of new warrants at SSE last year. Those warrants trading enriched many brokage firms, at the expense of many small investors/speculators

Working with Buffett (NBR Susie Charib interview 3 CEOs working for Berkshire subsidiaries).

Berkshire shareholder meeting at its early days
Quote from CNBC:

Buffett: It’s a gathering of partners. And, you know, we have a lot of partners, but I like the fact they feel part of the act. And to see it’s a real company, real products, real people. And, I get to see real stockholders, so it’s, it’s, it’s a gathering.

Becky: It started out as a very small event. When was the first, when was the first one?

Buffett: Well, if you go way back we used to hold ‘em in New Bedford, Mass., where Berkshire Hathaway started. So I would go back there. And, and it was me and somebody taking the minutes… And we would have about anywhere between 8 and 12 people, for the next 10 or so years until about 1981. And my aunt Katie would come and my Uncle Fred. I always packed the audience with people that would be sure to nominate me.

Becky: Eight to 12 people in the lunchroom at National Indemnity. It, it’s a, very modest beginnings for what it’s turned into, a huge, huge event.

Buffett: Yeah. Just, we held it down there because I had a canteen, they had to buy their own coffee or (laughs) candy or something like that. I was always trying to turn a profit on the meeting. And then, when we merged with Blue Chip Stamps we, we moved to a room at a hotel here where we maybe had 100 people… The sound system didn’t work right or anything. But, but it was fun, seeing shareholders and having ‘em ask questions. And, I liked it. My partner Charlie Munger liked it. And, we’re kind of hams. So, it was a chance to get an audience.