...Different people approach poker different ways. Loose aggressive types play lots of hands – virtually any two cards – and try to win lots of small pots. They are the day traders of the poker tables. Others play any Ace or any King or any two high cards. They play too many hands, but don’t play them well. These folks can do fine for a while, but get outplayed after the flop by the loose aggressive types who eventually wear them down so that they wind up in a desperate spot playing a decent hand against a strong hand for the remainder of their chips. I would compare them to long-only closet indexers who trade too much. Then there are the rocks. These folks sit around waiting for premium hands – high pocket pairs or an Ace, King. They fold and they fold and they fold. They are going to wait until they know they have a huge advantage. Then they bet as much as they can. It is very hard to beat a player like this. They can last a long time. Once people figure them out, nobody will play them when they do play. So they don’t get the chance to get enough chips in when they have a large advantage. Could this be what is becoming of Berkshire Hathaway?
I will tell you my poker style. It is close to the patient players waiting for a big advantage. I don’t play a lot of hands. But I don’t just wait for the perfect hand. They don’t come up often enough. I try to pick out one or two people at the table I want to play against or who I sense don’t want to play against me. When the situation feels right, I put in a big, aggressive raise with a marginal holding. It is very hard to describe how I know the “feel” and sometimes I get it completely wrong. But to do well in a poker tournament, you have to recognize a few non-traditional opportunities and you need to get people to sometimes fold the better hand. I think we invest similarly. By this I mean that most of our investing lines up nicely in the disciplined, traditional value camp – very low multiples of book value, revenues, earnings, etc., but occasionally we are opportunistic and invest in situations that are difficult to justify under traditional criteria but for one reason or another we believe to be better situations than they first appear.
People ask me “Is poker luck?” and “Is investing luck?”...
Thursday, November 26, 2009
David Einhorn on Poker Strategy vs. Investment Strategy
Wednesday, November 25, 2009
Best advice: Gates on Gates
The father-and-son duo talk about what it was like growing up Gates as they reflect on the advice that has influenced their careers and their relationship.
Tuesday, November 24, 2009
There's something in Guangdong Province water...
In addition, viewing IT patent applications in every province, Guangdong Province was far ahead of others, whose patent applications reached 116,347 pieces. It also was the only province had more than 100,000 pieces of IT patent applications, almost twice as many as those of Beijing which ranked second with 68,356 pieces.
The metro opened on December 28, 2004, making Shenzhen the fifth city in mainland China to have a subway after Beijing, Tianjin, Shanghai and Guangzhou.
The Shenzhen Metro currently has 2 lines, 19 stations, and 21.8 km of total trackage in operation. Both existing lines are undergoing expansion and three new lines are under now construction.
The network will reach a total length of 177 km by 2011.
China emerges as world's top car market.
Average annual per capita income in urban areas jumped from 9,422 yuan (about 122,000 yen) in 2004 to 15,781 yuan (about 205,000 yen) in 2008. In rural areas, the figure rose from 2,936 yuan (about 38,000 yen) to 4,761 yuan (about 62,000 yen) during the same period. Both figures represent an increase of about 60 percent...China's car diffusion rates are about 150 units per 1,000 people in urban areas, but only about 20 or so in rural areas, indicating huge growth potential.
Remembering Mendel Kaplan A"H
"Few, if any, have done as much to build South African Jewry into the dynamic, vibrant community it is today," said the chairman of the South African Jewish Board of Deputies, Zev Krengel. He said that Kaplan could be called "the father of the South African Jewish community."
There is much to celebrate in his 73 years: Cape Gate has been transformed from a modest business selling products like wrought iron and garden benches into a vast conglomerate producing its own steel; it became one of the largest privately owned companies in South Africa. The expansion was largely orchestrated by Mendel and his brother Robert.
A billionaire and philanthropist, Kaplan made his fortune in the South African steel industry. He was known in the Jewish organizational world as a quiet donor to the poor who did not seek any publicity for his donations.
Los Angeles Times: Bubble bursts on Beanie Babies
It was just an online classified ad, under Collectibles for Sale, but it sounded like a cry from the heart: "I'm tired of these things now. Please save me from them."
Kelly Cabral of Tracy, Calif., placed the ad recently after coming across a box in her garage crammed with dozens and dozens of Beanie Babies, the floppy little stuffed animals that sparked an international trading frenzy in the late 1990s.
Years earlier, there were days when Kelly and her husband, Dan, would join the early morning crowds laying siege to gift shops that were expecting shipments of Beanies.
Now, she says, "My husband's like, 'Where did we get all these?' Then you realize you spent way too much time on this insanity."
...
In many ways, in fact, Beanie Babies mania was the dot-com stock bubble writ small.[emphasis added]
Both were creatures of a frothy, peacetime economy with low unemployment and towering consumer confidence. Both were abetted by the advent of online trading and the explosive growth of the Internet. Both gave rise to celebrity oracles who seemed able to decode the mysteries of the market. Both spawned fraud and even episodes of violence. And, finally, both flouted all classical notions of investment value. Until they didn't.
...
At its 1998 peak, the magazine was thicker than Glamour or Fortune and was selling 650,000 copies a month at a newsstand price of $5.99. It contained ads from dealers and articles about collectors, but the heart of the magazine was the price survey.
Sobolewski's survey filled the same need for Beanie Babies as "pink sheet" price listings do for obscure over-the-counter stocks: It helped keep the market orderly by giving buyers and sellers at least a reference point for negotiations.
Ty's market maneuverings helped make Beanie mania one of the longest-running toy fads in U.S. history. Still, the fate of a bubble is to burst. In August 1999, Ty shocked the collecting world by announcing that it would stop making Beanie Babies on Dec. 31, 1999.
“History doesn't repeat itself - at best it sometimes rhymes” - Mark Twain
- Today. Here, and here.
- Tomorrow? Here, and here.
- Yesterday! An interesting book.
- There once existed an Old World of 2008 ("brick and mortar") before the New Era of 2009 ("investment opportunity of a lifetime")
What's a "classical notion of investment value" for a bathtub full of gold?
Monday, November 16, 2009
TEDIndia: The Future Beckons.
"Well, the best systems are ones where you have good short-term metrics, great accounting, looking at profits, looking at risk and willing to do things long-term. Investing in new research, letting people build new companies. I was a huge beneficiary of this country's unique willingness to take risk on a young person. And, you know, I got to hire people who were older. I got to sell to people who were older. And it was kind of a dream come true. And that kind of thing is -- other countries have seen it and they are trying to create that same dynamic. And that's good for the world. It's excellent that China and India will borrow our ideas about universities, about entrepreneurship, simplification of business. None of us want to borrow this extreme leverage that we got into. But in a sense, that's kind of a -- I don't want to say minor, but it doesn't speak to the heart of why things have worked so well."
TEDIndia - Mysore, Karnataka:
Excerpt: Warren Buffett on Charlie Rose Show
WARREN BUFFETT: Well, we may have used most of our powder on that one. (LAUGHTER)
CHARLIE ROSE: You said I stretched to the last nickel for this one.
WARREN BUFFETT: Yes.
CHARLIE ROSE: Why did you do it?
WARREN BUFFETT: Well, I felt it was an opportunity to buy a business that is going to be around for 100 or 200 years, that’s interwoven with the American economy in a way that if the American economy prospers, the business will prosper. It is the most efficient way of moving goods in the country. It is the most environmentally friendly way of moving goods, and both those things are going to be very important. But the biggest thing is the United States is going to do well. I mean, we can’t move the railroad to China or India. They haven’t figured out how to do that. So you know, it’s sort of like if you remember that song about New York-- we have to make it here or we can’t make it anywhere.
CHARLIE ROSE: Frank Sinatra. (LAUGHTER)
WARREN BUFFETT: But it does move 400 -- it moves a ton of goods 470 miles on one gallon of diesel. It replaces -- a train replaces 280 trucks on the road. It emits far less into the atmosphere that’s damaging than trucking, and it moves-- I’m talking about the whole rail industry-- it moves 40 percent of the goods.
CHARLIE ROSE: And you have new ports of entry like Houston that are bringing a lot of goods...
WARREN BUFFETT: Oh, sure.
CHARLIE ROSE: ... through the Panama canal.
WARREN BUFFETT: And we’re going to have more people in this country and they’re going to be using more goods over time. And sure, there’s a bad year from time to time. In the next 100 years, there will probably be 15 bad years, and I don’t know what order they’ll appear, but I also know the railroads will be essential to the country.
CHARLIE ROSE: Now, when you called Charlie Munger and said I’m thinking about this, did he say right on, Warren? Or did he say, how about this?
WARREN BUFFETT: Well, if Charlie said "right on, Warren," I would figure I had the wrong number. No, that would be a wrong number.
CHARLIE ROSE: That’s not the likely reply.
WARREN BUFFETT: That might be my wife or my, you know -- but Charlie gave kind of a low-level grumble, and that is a real endorsement from Charlie.
CHARLIE ROSE: But I mean, he also pointed out, it is said, that, you know, there was-- this was a regulated industry.
WARREN BUFFETT: Sure.
CHARLIE ROSE: This was an industry that was capital-intensive.
WARREN BUFFETT: Very capital-intensive.
CHARLIE ROSE: This was an industry...
WARREN BUFFETT: You spend money...
CHARLIE ROSE: That was unionized.
WARREN BUFFETT: It was unionized. You spend money in this business regularly every day. You’re spending a lot of money to repair track, add rolling stock, whatever it may be. So it’s capital-intensive, and it is regulated, and it will continue to be regulated, and it will continue to be capital-intensive. I think that what the service provided by railroads is so important in many ways. I mean, it’s the right way to move goods around the country to the extent that you can do it. And it’s far, far more attractive in terms of global warming than using trucks, for example. So it will be here, and if we get a reasonable return on the added capital investment-- because it will take added capital investment-- we’ll do OK.
CHARLIE ROSE: Reasonable return is good enough?
WARREN BUFFETT: Reasonable return is good enough, Charlie. I mean, 50 years ago, I was looking for spectacular returns, but I can’t-- I can’t get them. We have-- we have eight or $10 billion to invest every year. And we’re in the utility business, and it’s the same thing there. When we build electric generation or something of the sort, we shouldn’t expect a spectacular return. We’re building things that are essential to society, and people need our services. They really don’t have any choice in the case of the electric utilities, for example, and sometimes in case of rail. And we should get a decent return on that. Enough to encourage us to keep putting money into the business, but we’re not entitled to spectacular returns.
CHARLIE ROSE: You carry coal?
WARREN BUFFETT: Well, that’s a big one in terms of tonnage, yes.
CHARLIE ROSE: And if, in fact, we wean ourselves off coal, is that a big problem?
WARREN BUFFETT: Well, we will wean ourselves off coal over time. We can’t change 40 percent of electric generation that goes-- that comes from coal. We can’t change that next week or next month or next year, but we will reduce it over times, and we should reduce it over time.
CHARLIE ROSE: And you can add other things to carry and changes will be...
WARREN BUFFETT: There will be more grain to move, and there will be more all kinds -- chemicals-- or whatever it may be. There will be more things moving around this country 10 or 20 or 30 years from now.
CHARLIE ROSE: Knowing your idea about moats, is it a pleasing idea that no one is likely to get into the railroad business?
WARREN BUFFETT: If they wanted to reproduce the Burlington Northern Santa Fe, it might take $100 billion or so.
CHARLIE ROSE: And 100 billion years.
WARREN BUFFETT: They’d have to be a real sport. (LAUGHTER)
CHARLIE ROSE: And they are also modernized today, are they not?
WARREN BUFFETT: Enormously. Enormously. The railroads-- take a railroad like BNSF. They’re moving far more ton miles of product with less in the way of people, less in the way of fuel. Railroads have become far more efficient over the years. There were a million and a half people employed in the rail industry after World War II. Now there are about-- less than 200,000 in the United States, and they’re moving far more goods. So it’s really become efficient. You watch those 130-unit trains double stacked...
The New Yorker: Video of Atul Gawande
On Sunday, October 18th, at the Directors Guild Theatre, Atul Gawande spoke about the importance of discipline and procedure in medicine, and how following a simple checklist can help save lives in the operating room.
Thank you, dcollon!
Friday, November 13, 2009
Reflections on Croupier Investing.
Function: noun
Etymology: French, literally, rider on the croup of a horse, from croupe croup
Date: 1709
an employee of a gambling casino who collects and pays bets and assists at the gaming tables
Small Stream --> Tributary --> Amazon.
Your analysis on Microsoft, why I should invest in it, and why I don’t could not be more on the money. In effect the company has a royalty on a communication stream that can do nothing but grow. It's as if you were getting paid for every gallon of water starting in a small stream but with added amounts received as tributaries turned the stream into an Amazon.
Rearview, 20th Century:
Windshield, 2011:
Windshield, 2015:
CNBC TRANSCRIPT: Warren Buffett & Bill Gates - Keeping America Great
QUESTION: Hi. My name is Katrina Gankena, and I was born in Russia. And I'm a second-year student at Columbia Business School. My question is for Mr. Gates. What industry do you think is going to produce the next Bill Gates? Because that's the industry I want to get a job in. [LAUGHTER] [APPLAUSE]
GATES: Industries do have different paces of innovation.
So the IT industry, driven by the magic of software, the magic of the optic fiber, magic of the chip which doubles in power every couple of years, it's been the industry that has not only been the most exciting, it's also changed the rules for many other industries. The idea of information being available, what the online world is like, that's incredible. I'll tell you, there are a few other industries that will compete for being exciting in the decades ahead.
The energy business, some approach will provide cheaper energy that's environmentally friendly. And there's a lot of science, a lot of business. That's a global thing. There will be some great careers there.
Medicine, you know. We haven't solved Parkinson's or Alzheimer's or about 20 diseases of these poor countries, and yet we can be sure that we're on track to do that. And so those three industries I think you would do great in. There's many others, but those are the ones that have the strongest appeal to me.
BUFFETT: Find what turns you on. Find what you have a passion for. If somebody said to me when I was getting out of Columbia, you know, that Bill's business was going to be the one that would be exciting, you know, I don't think I'd have done so well. [LAUGHTER]But I knew what turned me on. I had a professor, Ben Graham, I offered to go to work for him for nothing. He said, "You're overpriced." Nonetheless, I went into the business. [APPLAUSE]
I will guarantee, you will do well at whatever turns you on. There's no question about that. Don't let anybody else tell you what to do. You figure out what you are doing. [APPLAUSE]
...
QUESTION: Hi, my name is Lisa Williams. I'm from South Orange, New Jersey. I'm currently a first-year at the MBA program. Glad to have you both here. My question is actually for Mr. Buffett. There has been a lost of discussion around the true drivers with the recent deal with Burlington Northern I was wondering if you could share with us your key motivation for wanting to increase exposure to the railroad sector at this time.
BUFFETT: You know, when I was six, I wanted a railroad set and my dad didn't get it. [APPLAUSE] You think about it. The railroads are tied to the future prosperity of this country. You can't move a railroad to China or India or anyplace else. We start out with the premise, and I can't think of a more sound premise, that there will be more people in this country, 10, 20, 30 years from now.
They will be moving more and more goods back and forth to each other. And you have the most environmentally friendly and the most cost-efficient way of doing that on the railroads. The Burlington Northern last year moved -- on average it moved a ton of freight, 470 miles on one gallon of diesel. That is far, far more efficient than what takes place over the highways. You have the situation where overall they use 1/3 less fuel, they put far fewer pollutants into the atmosphere than trucks will. One train will supplant 280 trucks are so on the road. So the rails are in tune with the future.
I like the West. I like the 30-some-thousand miles of roadway that Burlington has. And, you know, if this country has a poor future, the rails have a poor future. I'm willing to bet a lot of money, 34 billion to be specific -- [LAUGHTER] -- on the fact that 10 years from now, 20 years from now, 50 years from now, there will be more and more goods being moved by rail and better for the country and it will be better for the shareholders of the Burlington Northern.
...
QUESTION: I'm Peter Lawrence, first-year student from Columbia. And, first of all, thank you both so much for coming here. Mr. Buffett, the recent runup in the market has been historic. And it seems that many people question the sustainability of the current price level. Do you think the rally is for real?
BUFFETT: What's going to happen tomorrow, huh? [APPLAUSE]
Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. [LAUGHTER]What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there's no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of '53.
Unemployment peaked in September of '54. So until November of '54 you hadn't seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it.
You should decide whether to buy or sell stocks based on how much you're getting for your money, long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don't care, in making a purchase of the Burlington Northern, I don't care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It's silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.
Thursday, November 12, 2009
CNBC: The New Age of Walmart
Five years ago CNBC's David Faber took an unprecedented look inside the world's largest retailer. Since then, much has changed. A brutal onslaught of lawsuits, intense criticism and a plummeting stock price have resulted in re-invention at the largest company in the world. Today there’s new leadership at the top, major store renovations and a newfound focus on environmentally friendly policies.
So far, it looks like Walmart’s new image campaign is working. While many companies are cutting back or going bankrupt in the midst of recession, Walmart continues to grow -- outperforming its major competitors.
But are the changes Walmart has undergone substantial ones… or merely slick public relations ploys? And what challenges does the giant retailer face as it continues its aggressive expansion? CNBC's Emmy Award winning anchor and reporter David Faber investigates The New Age of Walmart.
