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My five favorite quotes from Warren Buffett

Mon, 12 Aug 2008 10:02:58 GMT

posted by ChristianPF

This post recently appeared on FreeMoneyFinance.com

I am a big fan of Warren Buffett and have always been inspired by his words of wisdom. These are my five favorites…

“Do business with people you like and who share your objectives.”

Isn’t there more to life than money? I have met people who I wouldn’t work with for a million dollars, haven’t you? People are people and you will never be completely insulated from people who bug you, but if you are hiring them or choosing to work with them, they might as well be people you enjoy being around.

When your business partners are sharing your objectives you won’t have to waste your time pulling against each other. If you are building a business to selling eco-friendly products with the sole intention of saving the rainforest and your partner is only concerned with increasing profits - you are going to be in trouble.

“Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.”

A cousin of mine received 8 million dollars as an inheritance on his 21st birthday. A few people I was talking to couldn’t believe me when I said I wouldn’t want it. To me, the joy in life is overcoming the challenges and reaching the successes. I would have felt like I was robbed of the chance to fight and earn it.

I want to be able to look back on my life and see all the obstacles that I overcame in order to reach my destination. Don’t get me wrong, everyone needs help on the way. For some people the 8 million dollars might be just the help they need to get their non-profit off the ground or get their business started.

But for me, if I would have had 8 million handed to me at age 21, it wouldn’t have helped, it would have been crippling. I would have been tempted to relax just a bit too much. I would have probably ended up a big, fat blob.

The irony is that as much as some people desire retirement and the “easy life” many of them find themselves bored out of their minds. We all need something to live for. I remember how miserable I became when I was out of work for a few months. I wanted to contribute to society, but couldn’t find the opportunity. I felt like a big, fat blob and wanted more than anything just to have an opportunity to do some work. Amazingly, as soon as I started working again, I felt a whole lot better about myself.

“Decision making abilities fade as cash flow increases.”

Suppose you only have $5 in your pocket until the end of the week, it is likely that you will make a good decision with it, because it is all you have. On the other hand, if you have $100 for the week, your decisions regarding a $5 purchase are far less critical since you have another $95. Therefore, people tend not to treat those decisions with the same respect they would if it was their last $5.

Parkinson’s Law states that expenses rise to meet income. It is the reason that many people wonder why their last raise didn’t make paying the bills any easier. The way to defeat Parkinson’s Law is to treat each dollar as if it is the last - to make the best possible decision for each and every dollar. Not as a miser, but as someone who is choosing to make wise decisions with their money.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Think Eliot Spitzer, Michael Vick and Kobe Bryant. One day they can be very respected in their fields and the next they can have a whole different perception in the eyes of the public.

With the advances in technology it is becoming more and more difficult to hide from mistakes. Society is much more transparent than it used to be. You can Google a phone number and get directions to the location, employers are checking up on Facebook and Myspace pages, and you can see what was on a website years ago. The days of being able to do something stupid and trying to cover it up are gone. So, Warren’s advice is more relevant now than ever.

“There are no called strikes in the ball game of investing.”

Yea, it would have been nice to have bought Google @ $75 during the IPO, or better yet Microsoft. But, you didn’t LOSE any money by not investing. Even if someone else made thousands while you sat on the sidelines, you still did not LOSE any money. There are plenty of stocks that you could have bought that you would have lost money.

While I agree with what Warren is saying, I have noticed that the problem for most people is that they are afraid to swing the bat. They stand up there watching opportunity after opportunity go by only later to say, “I wish I would have…” I did it for years.

I would see a company pop up and say to myself, “that would be a great stock to buy,” only to watch the price continue to rise without swinging the bat. I would feed myself excuses mostly about how I didn’t have enough money and how it was risky - both were kind of true. But you can now get started investing for as little as $100 at Sharebuilder and we all know that without risk there is no reward. So just get in there, wait for a good pitch and swing for the fences.

Do you have any other great words of wisdom from Warren?

When This Investor Speaks Buffett Jumps

Mon, 10 Jun 2008 13:50:43 GMT

posted by tkeller28

By Dr. Steve Sjuggerud
June 10, 2008

“That is as strong a bull recommendation as I’ve ever seen from Charlie,” legendary investor Warren Buffett told the crowd.

“I’m going to look into those stocks immediately after this meeting.”

DailyWealth’s own Tom Dyson heard the conversation firsthand. He was in Omaha last month, at the Berkshire Hathaway annual meeting.

Warren Buffett, of course, is the most famous investor ever. But Charlie? When he speaks, Buffett jumps… Who is this guy?

It’s billionaire Charlie Munger, Buffett’s sole investing partner at Berkshire Hathaway. Here’s what he said…

According to Tom Dyson’s notes, a reporter asked Charlie how he felt about regional banks. Charlie replied, “For somebody who’s very diligent, you’ve identified a prospecting territory that has some promise… The questioner is on to something.”

That’s when Buffett told the crowd it was the most bullish recommendation he’d ever heard from Charlie.

So let’s get this straight… The mainstream media tells us commodities are going to the moon, and it’s the end of the world for banks. Meanwhile Charlie Munger, Buffett’s investing partner, sees “promise” in regional-bank stocks. Who should you believe?

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Richard Pzena believes Charlie. Pzena is a world-class money manager. In one of his quarterly letters, he put together a nifty chart… It compares bank stocks with shares of commodities companies.

If you were smart, and you followed this chart, you would have sold your bank stocks a few years ago, when this ratio bottomed, and bought shares of commodities companies. You would have absolutely made a fortune.

But now, the chart is telling us the opposite… It’s telling us banks are cheaper relative to commodity shares than they’ve been at any time in the last 50 years. You can say it the opposite way as well… Commodity shares are more overvalued relative to financial stocks than at any time in the last 50 years.

Just a couple years ago, the right trade was to buy commodities and sell banks. But what about now?

If the chart is right… if Pzena is right (and he’s made a huge bet on it)… and if Munger is right… you could make a whole lot of money in regional banks over the next few years.

The tough part is knowing the right time to put on the trade. The trend has not been your friend so far. Bank stocks have been falling. And unfortunately, I have been early on this one.

Investing Secrets Over Dinner with a Career Banker

Insider’s Take: Time to Buy These Tiny Stocks?

But I think it will turn out to be a mega trade… one where you make a few times your money. So there is no urgency… The right way to do it is to wait for the uptrend to be in place. It’s no big deal to miss the first 20% of a few-hundred-percent rally in order to lower your risk.

We’re not there yet. But you ought to set some chips aside. Get on it when the time is right… when the uptrend returns. It should be worth a few hundred percent for Charlie Munger… and you.

Good investing,

Steve

P.S. As I’ve reported in the past, regional banking is a simple, extremely profitable business “if you don’t try too hard.” Read my early essay for all the reasons small banks can make a great investment. And click here for my most recent update. THIS OIL-SERVICES LEADER IS BREAKING OUT… AGAINIn March 2007, we gave you a free stock tip… check out shares of National Oilwell Varco (NOV), America’s largest maker of oil rigs. The company was riding a wave of high oil prices, and the stock was finally breaking out of a lull.

Free advice is often worth what you pay for it. But we try to point DailyWealth readers in the right direction. In this case, the direction was good for 145% gains in just over a year.

Of course, every bull market needs a breather… The bellwether of oil services “breathed in” and suffered a decline early this year. Now however, NOV is “breathing out” and going on to new all-time highs.

As long as oil remains north of $100, Exxon, Chevron, and every other “on” will go to the ends of the Earth to find new oil… which will stuff the order books of the oil-services industry and keep these stocks headed in the right direction.

Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor, by Janet Lowe

Mon, 10 Jun 2008 00:44:00 GMT

posted by pavansmiles

Warren Buffett Speaks: Wit and Wisdom from the World’s Greatest Investor, by Janet Lowe
ISBN-0470152621

Most people come to know of Warren Buffett through his ability to generate wealth. However, as Janet Lowe reveals in her book, Warren Buffett Speaks, Buffett is more than a money-making machine. Warren Buffett Speaks is a library of notes and quotes that have been collected over the years, aimed at revealing the many aspects of the World’s Greatest Investor–his wit, personality, and wisdom. The first half of the book deals with Buffett’s view of life, family, and friends, while the latter half focuses on Buffett’s investment philosophy and observations about the market. This book is a must for every Buffettologist.

Over the years, as Warren Buffett’s influence and affluence have grown, one thing has remained the same—his unpretentious, honest, and optimistic approach toward business and life. In this completely revised edition of Warren Buffett Speaks, bestselling author Janet Lowe shows you why.

Updated to reflect Buffett’s life over the past decade, this book contains a delightfully entertaining collection of quotes, writings, and favorite sayings from the world’s most successful investor.

Often surprising, always intriguing, and sparked throughout by Buffett’s unique combination of savvy business smarts and dry wit, this new edition is filled with Buffett’s musings on subjects such as the Internet economy, family and friends, running a business, paying taxes, and much more. It also examines the thinking that prompted the second richest man in the world to give 85% of his wealth to the first richest couple (Bill and Melinda Gates) to distribute to charity.

More than just a book about investing, Warren Buffett Speaks reveals the personality and philosophy of one of the world’s most compelling figures.

Peppered with pearls of wisdom cultivated throughout his life, this book will help you understand and appreciate Buffett’s beliefs on a variety of important issues. Here’s a sample of just some of the honest and engaging insights you’ll find inside:

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. Rationality is essential.”

“I want to be able to explain my mistakes. This means I do only the things I completely understand.”

“You should invest in a business that even a fool could run, because someday a fool will.”

“Over the years, a number of very smart people have learned the hard way that a long stream of impressive numbers multiplied by a single zero always equals zero.”

CLICK HERE TO DOWNLOAD

Buffett's buys

Mon, 3 Jun 2008 21:47:00 GMT

posted by Nutt

These lists appear every quarter on investing websites, no doubt culled a lowly staffer burning the midnight oil, scouring the EDGAR database. Despite how much you might appreciate their efforts, ignore the info. It's not that helpful to know what Berkshire Hathaway bought after the fact. You'd want to know beforehand. What would be even more exciting would be knowing what is Mr Buffett's personal brokerage account, outside of Berkshire shares. I know that 99% of his networth is in Berkshire shares, but I imagine that he invests somewhat differently for just himself than for his shareholders. After all, he's dealing with a smaller sum, so he can buy all sorts of interesting, smaller stocks that he can't for Berkshire.

In others news, I was in the elevator at work and this index, the Tomo 300 flashed on the screen. It's an index that attempts to capture the value of intellectual property. Has anyone ever heard it referred to previously? I know that it's very new(it debuted in mid-December '06), but I can't think of ever hearing about it on Bloomberg or CNBC. There apparently are a few Claymore ETFs that license it and trade on the AMEX. The holdings are really all over the place: energy, telco, materials, consumer staples.

How Buffett's wisdom applies to ordinary people

Sun, 9 Jun 2008 13:29:00 GMT

posted by marykittneel

I'm talking Warren Buffett, not Jimmy Buffet, although "If life gives you limes, make margaritas" has quite a bit to offer.

Investment genius Warren Buffett has been a little higher in profile recently, meaning you could just sorta look in the media and find him rather than wondering if he was real or just a made-up oracle that gives Omaha a good name.

Buffett's wisdom on investing, which boils down to "don't buy what you don't understand" is the kind of advice that applies across the board. As in, if you're poor, don't use payday loan services or rent-to-own unless you genuinely like giving away hundreds or thousands of dollars for no good reason.

If you're on the cusp of buying your first house, don't sign any papers for some weird-ass loan whose terms make no sense to you, because it will always end up bad, and it will always end up in the lender's favor, not yours.

For those of you suffering in this economy, I'm right there with you. I'm a freelancer, meaning income is sporadic, and I've been granted a court settlement that has yet to be paid, so I'm cautiously watching my savings dry up and my credit card debt increase. At this point, investment means not buying anything I don't actually need, and consistently dropping change into a very large jar with a very small opening.

Maybe one of these days I'll be back to caring how my 401K investments are distributed, but with all the immediate economic issues pressing on my household, my attitude is less Warren Buffett and more Jimmy Buffett: "Is it ignorance or apathy? Hey, I don't know and I don't care."