Berkshire’s (BRK.A) Warren Buffett and John Bogle propose some ideas. One makes sense, two others, I don’t get…
Tag: buffett
So, what if I told you there was a book out there that gave you the fundamental background of investing from Buffett/Graham yet answered the questions that haunts most value investors……..when to sell?
So, what if I told you there was a book out there that gave you the fundamental background of investing from Buffett/Graham yet answered the questions that haunts most value investors……..when to sell?
Another Look at Dr. Copper
An update from an article back in March…
“Davidson” submits:
It is useful at this time to review “Dr. Copper” and the Baltic Dry Index which many believe offer insight to global economic activity. As I review the multitude of current forecasts there are many which state that the market has over-reached economic reality, others state that while there has been an economic up-tick it will quickly deteriorate to a second dip-the so-called “W”-Shaped recession and a very few see a so-called “V”-Shaped Recovery. Many forecasters point to the short term movements in Comex Copper prices and the Baltic Dry Index to anchor predictions. The net result is a series of “UP” forecasts with up movements in the indices and “DOWN” forecasts with the dips. In some weeks the Baltic Dry Index and Comex Copper are not in alignment and the forecasts are mixed.
My suggestion is to apply Ockham’s Razor and focus on the 3mo trends to smooth out the weekly volatility. Net/net, both of these economic indicators appear to be in up trends.
In my experience there will always be analysts that find a reason to discount market movement. In the current instance their advice is to ignore the trends of Comex Copper and the Baltic Dry Index as being caused by China’s restocking of inventories and that this does not reflect a true increase in economic activity. I disagree! I interpret China’s activity as looking forward to potential needs and making a timely use of excess $US to buy cheaply priced commodities with the marginal cost of production of oil reported in the $70bbl-$80bbl range and for copper the marginal cost of production is reported to be in the $1.50lb-$1.80lb range.
I believe we should view Comex Copper and the Baltic Dry Index in the context of US car and truck sales. US sales turned up months before “Cars for Clunkers” program began and were coupled with anecdotal stories of workers being brought back to factories to replenish inventories. Add to this increased manufacturing activity a story of BYD(the Buffett Chinese electric car company) on August 22, 2009 in which BYD announced its plans to bring its electric cars to the US market in 2010. This is much earlier than previously anticipated.
It seems to me that economic activity is accelerating and that Comex Copper and the Baltic Dry Index are a reflection of this activity. Certainly the activity observed to date does not mean that it will not suddenly stop. But, history supports the notion that once economies begin to turn more positive they generally continue in the same direction even if it appears that government stimulation was involved.
I view this information as positive for investment in stocks and bonds.
Disclosure (“none” means no position):
Buffett: Inflation a Real Threat
I’m guessing Geithner/Bernanke will not be quoting Warren anymore in front of Congress…Berkshire’s (BRK.A) Buffett on what he sees as a potentially huge problem lying in wait down the road.
Full Op-Ed:
IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.
The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.
To be sure, we’ve been doing this for a reason I resoundingly applaud. Last fall, our financial system stood on the brink of a collapse that threatened a depression. The crisis required our government to display wisdom, courage and decisiveness. Fortunately, the Federal Reserve and key economic officials in both the Bush and Obama administrations responded more than ably to the need.
They made mistakes, of course. How could it have been otherwise when supposedly indestructible pillars of our economic structure were tumbling all around them? A meltdown, though, was avoided, with a gusher of federal money playing an essential role in the rescue.
The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.
To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.
Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out.
An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually — and in combination.
The current account deficit — dollars that we force-feed to the rest of the world and that must then be invested — will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients — China leads the list — to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.
Then take the second element of the scenario — borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).
Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime.
Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.
Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets. As the resources of individuals, corporations and countries grow, each can handle more debt. The United States remains by far the most prosperous country on earth, and its debt-carrying capacity will grow in the future just as it has in the past.
But it was a wise man who said, “All I want to know is where I’m going to die so I’ll never go there.” We don’t want our country to evolve into the banana-republic economy described by Keynes.
Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.
Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.
Disclosure (“none” means no position):
Monday's Links
Buffett, TALF, Gas, Happy Hour
– Worried about inflation……welcome aboard
– This market may just be starting to shake loose a bit
– Some predictions for Natural Gas
– Nice program. @Dasan as alway has some very interesting thing to say
Disclosure (“none” means no position):
Monday’s Links
Buffett, TALF, Gas, Happy Hour
– Worried about inflation……welcome aboard
– This market may just be starting to shake loose a bit
– Some predictions for Natural Gas
– Nice program. @Dasan as alway has some very interesting thing to say
Disclosure (“none” means no position):
2008 Seth Klarman Interview
Great line:
Warren Buffett once wrote that the concept of value investing is like an inoculation- — it either takes or it doesn’t — and when you explain to somebody what it is and how it works and why it works and show them the returns, either they get it or they don’t. Ultimately, it needs to fit your character. If you have a need for action, if you want to be involved in the new and exciting technological breakthroughs of our time, that’s great, but you’re not a value investor and you shouldn’t be one. If you are predisposed to be patient and disciplined, and you psychologically like the idea of buying bargains, then you’re likely to be good at it.
Seth Klarman – IIMagazine -2008
Disclosure (“none” means no position):
Value Investing Congress Speaker Update
For my money, this is the premier value investor event. Yeah, I know Berkshire (BRK.A) and Buffett have the “Woodstock for Capitalists” every year but let’s be really honest, by the time it is held, Buffett has been on TV 50,000 times that year and there isn’t really anything he says there that is “new”. Yes it is a great event (have been before) but as far as an event that provides actionable ideas in the value setting, it just isn’t it.
The Value Investing Congress in just that event.
Here is the current speaker lineup…
For the record, other than attending the conference and being a huge fan of it, I have no affiliation with it at all.
I plan on attending again this year and blogging/twittering about it live….
With any luck I’ll nab an interview with one of the more prominent speakers….. hint,hint out there…
Disclosure (“none” means no position):
Notes on Buffett’s Media Tour
Berkshire’s (BRK.A) made the rounds yesterday. Some of his comments:
For those not sure Berkshire is intimately tied to the consumer through its Shaw Carpets, American Express (AXP), Dairy Queen, Home Services (real estate brokerage), furniture companies, banks and more. Because of that, Berkshire is uniquely sensitive to all sectors of the economy. So, when Buffett says he is seeing little improvement, it is something we all need to pay attention to. Quote may not be 100% accurate verbally but are for sentiment. For instance, “we” rather than “us” etc….meaning of quotes intact.
“We are setting the stage for VERY SIGNIFICANT inflation down the road”
On US Dollar: “probability of significant purchasing power decline has risen dramatically”
US AAA Rating: “the US will keep it as long as I and you (Liz Claymen) are alive and longer”
Unemployment: “it is going higher, we are not coming off the bottom yet”..
Obama’s health care reform: “malpractice premiums are 1/2 of 1% of what we (the US) spend on health care each year”
Regulation: “the wrong regulation would be one that attempts to solves evils and stifles the markets system that has worked pretty well over the years”
Acknowledged he is sitting on a $1 billion profit from his Goldman Sachs (GS) investment and said he will “keep the warrants for their duration”
On the de-leveraging process for consumers and corporate America “there is a lot still to do”
“Economy will be in shambles this year and well beyond”
“you can’t produce a baby in 1 month by getting 9 women pregnant”. Meaning we can’t turn the economy around in a couple months, it is a long process and gov’t officials would be wise to acknowledge this.
Should Ben Bernanke be given another term?: “I don’t know how you could do any better”
“The incentives in a market system are too overshoot” and he gave the impression he was relatively sure it would happen again some day.
“I do not worry about deflation a all and we will not see any serious deflation….”
On Gov’t TARP funds & Wells Fargo (WFC) “the gov’t set the terms, they (WFC) just signed a blank piece of paper”
On Steve Jobs “if any CEO is facing serious surgery, it is a material event”
Cap and Trade: “is a regressive tax”
Disclosure (“none” means no position):Long WFC, None
Warren Buffett Makes the Rounds Today…
Berkshire’s (BRK.A) Buffett was everywhere today. Saying this was a “cautious” interview session would be understated..
On Bloomberg
On Fox talking Economy & Inflation
On Fox talking Unemployment
On CNBC talking the Economy
Disclosure (“none” means no position):
After a brief lull from the serial insurance acquisitions of last year, Wells Fargo (WFC) is back at it.
Chicago, June 4, 2009 – Wells Fargo Insurance Services, Inc. – part of Wells Fargo & Company (NYSE: WFC) – announced today that they have signed a definitive agreement to acquire Grady & Associates, a single office, retail insurance broker in Las Vegas, Nevada. The acquisition closed June 1, 2009, and the terms of the transaction were not disclosed.
Grady & Associates has served customers across in Nevada since 1999. Founded by John Grady, the agency focuses exclusively on health and benefits insurance. The company serves a broad customer base, including customers in the hospitality, construction, hospitals, auto sales and home development industry.
“We’ll continue to service our customers in the same ways we have in the past,” said John Grady, Managing Director of Employee Benefits. “Joining Wells Fargo Insurance Services is a great benefit for our customers. We will expand our health and benefit capabilities to help customers protect their business and employees, and also be able to help them to grow their assets through our Wells Fargo connection.”
“Grady & Associates boasts a highly respected team of professionals,” said Nick Rossi, Regional Managing Director, Mountain West Region. “The team will strengthen and further support Wells Fargo Insurance Services’ existing health and benefits insurance professionals in serving our customers.”
“Grady & Associates is an outstanding retail brokerage firm and we’re excited to welcome the company to Wells Fargo,” said H. David Wood, Executive Vice President, insurance brokerage operations, West. “They will strengthen our growing presence in Nevada and further support Wells Fargo Insurance Services and the Wells Fargo commitment to help our customers succeed financially”.
About Wells Fargo Insurance Services
Wells Fargo & Company is a diversified financial services company with $1.3 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,400 stores, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.Wells Fargo Insurance Services, Inc., along with Wachovia Insurance Services, is the fifth largest insurance brokerage in the world and the largest bank-owned insurance brokerage in the U. S.
Wells is quietly becoming not only one of the largest banks in the US but one of the largest insurance brokers. With Warren Buffett being the largest shareholder in Wells and his Berkshire Hathaway (BRK.A) essentially being an insurance company, this does fit.
I currently hold shares and while I do not trust the veracity of banks earnings currently, I do know this:
1- We need banks
2- Wells Fargo & JP Morgan (JPM) may just be the only two that continue from here on out as is. Citi (C) and Bank of America (BAC) are just very weak.
3- Warren Buffett is a backstop for Wells shareholders that no other bank shareholders have and that means something.
4- Insurance, when run right is VERY profitable and diversifies Wells away from pure banking in a very positive way. This focus by Wells is a very good idea.
What you essentially have is a shrinking base of banks that will handle what banking there is out there. That means a far greater piece of the pie for those left. With that greater piece of the pie will come the profits associated with it.
Yes, Congress has plans for increased regulation but one thing we know, Bankers are smarter that those who write the laws designed to thwart them. They will still find a way to make money after all is said and done.
Would I be running out and buying banks shares now? Personally I am not as I see far other more compelling opportunities elsewhere. That does not mean I am a seller though. I am going to hold and see how this plays out.
Disclosure (“none” means no position):Long WFC, none
Berkshire’s Sokol: "No Green Shoots"
The man rumored to be taking over for Berkshire’s (BRK.a) Warren Buffett says 2011 may be the turn….not now or next year.
Disclosure (“none” means no position):
"Regulate": Warren Buffett Rap $$
Some humor….Hat Tip Reader Jeff for finding & emailing..
Disclosure (“none” means no position):
Monday’s Links
Optimism, PIPP Explained, Gas, Energy
– I disagree, in the interest of full information
– Nice compilation here
– Let’s hope so
– A great article on the debate
Disclosure (“none” means no position):