# Buffett - past his time?



## Uncle Festivus (7 May 2007)

Just wondering if Warren Buffet is the investment guru everyone makes him out to be, in this current climate. Over the last few years he's made some pretty ordinary calls eg US dollar, and his current investments are starting to look less promising than his usual brilliant returns.
Some of his investments are apparently taking a bit of a hit at the moment - 

                         "Berkshire owns one of the largest networks of real estate agencies in the U.S. and several construction-related businesses, including carpet maker Shaw Industries and building products companies Acme Building Brands, Benjamin Moore, Johns Manville and MiTek.                 
                                                   Shaw revenue fell 11% in the first quarter. Sales and profit are likely to be "significantly" lower for the rest of 2007, Berkshire warned on Friday."

He also has investments in insurance & consumer discretionary, which may come under stress if growth moderates further.
He's been an outstanding investor, but little is said of the ones that do go wrong. He'll take a big hit if it (the economy) continues flatlining or there happens to be a recession after all.

Has he gotten too big (or too old)?


----------



## happytown (7 May 2007)

*Re: Buffet - past his time?*

uf,

not to mention some other arguably questionable investments, although not according to the vast majority of berkshire investors,



> Berkshire shareholders reject Darfur plan
> 
> The investor proposal would have required the company to sell its stake
> in PetroChina, whose parent does business in Sudan.
> ...




cheers


----------



## professor_frink (7 May 2007)

*Re: Buffet - past his time?*



Uncle Festivus said:


> Has he gotten too big (or too old)?




Short answer- no.

A lot of similar comments were made about him during the tech boom because he wasn't involved in it. History has shown his choice to be the correct one.

Of course he'll take a hit in a recession. Most investors/business owners would.

I think it would be a big mistake to write him off as being too big to make money, and provided the mind still works, he isn't too old


----------



## Realist (7 May 2007)

*Re: Buffet - past his time?*



Uncle Festivus said:


> Has he gotten too big (or too old)?




Yes, too big.

Doubling $100 is easy, doubling $100,000,000,000 is alot harder.

Ben Graham notes this in his book in the 1940's.


----------



## ROE (7 May 2007)

*Re: Buffet - past his time?*

the man is a genius  ... He's very humble and never claims he has a genius brain, but this man can do maths calculation of a calculator and hence calculate on business returns in his head very fast and with dead accuracy.

I think it's getting harder to allocate large capital and get high return.

Like Realist say.. easy to double a $100 or even a few millions but once it get to the billion dollar mark it becomes tricky, Warren even admitted this in his annual letters to share holders.


----------



## dhukka (7 May 2007)

*Re: Buffet - past his time?*

To be fair uncle as others have said, the sheer size of Berkshire Hathaway these days makes it very difficult to extract the kinds of returns they have in the past. Still, Berkshire managed 12% earnings growth for 1Q07 while the S&P500 is averaging around 10% this quarter so far. I think the old man is still doing a plum job and it will be a while before he throws in the towel and starts paying dividends.


----------



## hongwong (7 May 2007)

*Re: Buffet - past his time?*

The man said “ It is not hard to pick winners on the stock market, the hardest part was to resist the temptation to keep on trading”.

He has said it getting hard to pick bargain stocks in current climate. 

Nothing is to big we just need the right investment. !

Has the man lost the art of investing ?  That what people in wall street said during the TECHO stock  era and yet the man has proven to us over the long run of XXX years he can still mark money.  And he does not need all of this magic stuff to do it, just a 5 dollar calculator ….

Kind of makes me wonder, should I be checking the price every day/week or month ?

Ask the question in 5 year time :

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.wpLqtMediw&refer=home

Any things you did not know about him ;
http://english.chosun.com/w21data/html/news/200705/200705070003.html

Buffet eyes four successors at Berkshire 
May 7, 2007

Omaha - Warren Buffett might hire up to four people to succeed him as chief investment officer of Berkshire Hathaway, the investment guru said on Saturday, and cautioned that recent strong results from insurance operations were unsustainable. 

The 76-year-old billionaire said he had received up to 700 inquiries for the job since lamenting in his February 28 annual shareholder letter that Berkshire had no internal candidates young enough.

http://investing.reuters.co.uk/news...825_RTRIDST_0_SP_PAGE_012-N05291825-OISBN.XML

Anyone want to apply ?

Test of time will tell.


----------



## Uncle Festivus (1 March 2008)

*Re: Buffet - past his time?*



> Feb. 29 (Bloomberg) -- Billionaire investor Warren Buffett's Berkshire Hathaway Inc. said fourth-quarter profit fell 18 percent on declining insurance rates.
> Net income decreased to $2.95 billion, or $1,904 a share, from $3.58 billion, or $2,323, a year earlier, the Omaha, Nebraska-based company said today in a statement. Berkshire gets about half its profit from its insurance units.
> Berkshire has been scaling back coverage of coastal property as rates drop from their highs following Hurricane Katrina in 2005. Operating earnings, which exclude a gain from selling PetroChina Co. shares and other one-time items, declined 18 percent to $1,518 a share, lagging the $1,613 average estimate of three analysts compiled by Bloomberg.
> "The party is over,'' Buffett said in his annual letter to shareholders. "It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down.''



http://www.bloomberg.com/apps/news?pid=20601103&refer=us&sid=apPd6en67zgQ


----------



## ROE (1 March 2008)

Actually, he cant do better than his history because the bigger you get the harder it is to get the same return

much easier to get 12% return on 100 Mil, than 12% on 10 Billion as there isn't
many stocks around that you can invest large part of the money without
affecting the price of the stocks.


----------



## Trembling Hand (11 March 2008)

11 reasons to Short Buffett. :

http://www.thestreet.com/story/10406915/1/kass-katch-11-reasons-to-short-berkshire.html


----------



## julius (12 March 2008)

*Buffet Is The Top Dog*

numero uno

http://www.reuters.com/article/businessNews/idUSN0564885820080305


----------



## Rainmaker2000 (12 March 2008)

I think its a reasonable question to ask and agree with the sentiments about how difficult it is to be big and to grow fast.....

If Buffett is past his time, it's far too early to say.......just cause people have  had exposure to a few underperforming sectors and has made some losses does not mean much

I think we would all be surprised to know all the sectors he has exposure too....I know that I was shocked when I read books which were printed about 5 years ago his incredible diversity of assets.....more than that, Birkshire's performance has less to do with new acquisitions but more to do with past acquitions.....again, some of the businesses in the Buffett stable are incredible stories........

It's really no longer got much to do with Buffett but its an incredible range of businesses headed by very smart and ethical individuals who built them in the first place.....Arguably Buffett is a better manager than investor


----------



## julius (12 March 2008)

no idea how you could argue he is a better manager than investor...


----------



## Renhoek (12 March 2008)

Rainmaker2000 said:


> .....Arguably Buffett is a better manager than investor




That's probably true, alot of Berkshire's fortune came from taking over struggling companies for a pittance of their book value and building them into high performing companies.  This has been Buffett's real strength but the media seems to like building him up as an "investment guru" and usually refer to him as "the man who made billions investing in the stockmarket".  So now everyone sees Buffett as an investor first and a takeover shark second (if at all).


----------



## Uncle Festivus (12 March 2008)

The other thing too is that he happened to be around at the start of a huge expansionary stage and basically bought & held, while everybody else was trading short term. Mind you, his knack was finding value in undervalued companies. 
His present danger is his overexposure to consumer stocks, not good in a recession, as he himself has proclaimed to have already started.


----------



## Rainmaker2000 (12 March 2008)

If you read a book like 'The Buffett CEO', Buffett comes across an investor who comes across a business and only purchases it if outstanding management is already in place......he does not shake things up.......just comes in as a patient shareholder and supports management with resources.........

In this way, Buffett's record of management is quite extraordinary as his managers, many of them founders, stay in employment for a massive period of time without interferance.

Buffett is primarily not a buyer/seller, he is just a buyer who pretty much takes companies private into Birkshire (..for ever).....as a result, some of Buffett's companies are incredible growth stories which are not widely known even in Wall Street circles....it is not Buffet who manages these companies but their original managers.


----------



## refined silver (12 March 2008)

Past his time? Never. A true value investor, with good business sense and common sense will never be past their time, until time makes everything start to fade...

He has nailed the current credit crisis, called it back in 2002/3 - OTC derivatives being WMD which is at the heart of it and although the bomb has detonated, very few can see the effects yet. 

Too big? Probably.


----------



## 2020hindsight (12 March 2008)

....
Well at least he was generous.
I mean .. there's more to life than greed .


----------



## Uncle Festivus (18 February 2009)

Please explain Warren.....have you been swimming naked too? Got a spare $20B to loan him?



> NEW YORK (CNNMoney.com) -- Berkshire Hathaway Inc., the holding company run by legendary investor Warren Buffett, saw its overall investment portfolio shrink by 25% in the fourth quarter, according to regulatory forms filed Tuesday with the Securities and Exchange Commission.
> In the the three months ended Dec. 31, the Omaha, Neb.-based company's overall holdings decreased to $51.87 billion from $69.89 billion at the end of September.
> The bulk of the paper losses were tied to Berkshire's investments in financial services sector, which has been battered by the credit crisis and volatile markets.



http://money.cnn.com/2009/02/17/news/Berkshire_Hathaway/index.htm?source=yahoo_quote


----------



## Uncle Festivus (29 April 2009)

> Never ask a barber if you need a haircut.



Someone must have put a no 1 through Berkshire's hair 



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



Apparently not following his own advise?



> April 28 (Bloomberg) -- Berkshire Hathaway Inc. shareholders have a chance this year to do something that’s rare among the Sage of Omaha’s followers: count their losses.
> Despite Berkshire’s reputation as a bear market bulwark, its stock has been walloped. The Class A shares are down 31 percent since September, to $90,000 as of yesterday, exceeding the 26 percent drop in the Standard & Poor’s 500 Index.
> One reason: Chief Executive Officer Warren Buffett’s increasing use of derivatives -- contracts whose value is based on the performance of stocks or bonds or the outcome of a specific event. *That Buffett once called derivatives “time bombs” doesn’t calm investors*.
> Berkshire held contracts with a combined notional value of $67.3 billion at year-end. While this figure is used mostly for reporting purposes and isn’t indicative of potential losses, it dwarfs the company’s $25.5 billion in cash.
> ...


----------



## tech/a (29 April 2009)

Warren Buffett wouldnt be Warren Buffett and Berkshire Hathaway wouldnt be $90,000 a share if Buffett didnt get involved in the derivatives market.

Share holders just want the good times.
Unlike Buffett they dont look at the possibility of hard times and even now with it staring them in the face they still think that Buffett should be beyond and above that which everyone else is a part of.

Fickle lot.

Yet they will look at Buffett to guide them through.
If he does --- well he will be back on the mantle piece and you'll be buying books on surviving the recession "The Buffett Way"


I seem to remember one Donald Trump facing imminent Bankruptcy---doing JUST that!

Its business--BIG business and Buffett is right there being judged by the minows


----------



## truevalue (29 April 2009)

Warren Buffett is past his prime. He is 76 for goodness sake!

I doubt WB would contemplate selling one of his beloved businesses just because he was worried about an economic downturn. He manages to look through those cycles. He is sitting on so much cash now because he did forsee much of this downturn.

His insurance business is a global leader and incredibly strong. He has made a majority of his money through insurance. Insurance allows him to borrow money at no cost and invest it.

His derivative contracts are low risk, long term bets that will make berkshire plenty in years to come. He has not used derivatives to leverage Berkshire's positions in any way (the weapons of mass financial destruction) but the contracts he has written are subject to mark-to-market accounting which will  cause volitility in asset values and earnings as a result.

You can bet against him if you want but you would have to be very sure because he hasn't under performed for 45 years.


----------



## tech/a (29 April 2009)

76

A chicken.

More business savvy than 10 academics a third of his age.
How lucky share holders are that he still has such enormous passion. 

Rupert Murdoch is another.
We need MORE people with this vast amount of experience not less.


----------



## kincella (29 April 2009)

Richard Pratt was on the same level...up on the top 10 list


----------



## Trembling Hand (29 April 2009)

truevalue said:


> His derivative contracts are low risk,



 nonsense. This is a VERY low reward and very high risk.
just how is that low risk 

His sold puts to get some premium while exposing Berkshire to far greater losses. This is not a low risk trade


----------



## It's Snake Pliskin (29 April 2009)

tech/a said:


> 76
> 
> A chicken.
> 
> ...




I agree. 

Tech perhaps one day you can inspire en mass.


----------



## truevalue (29 April 2009)

Trembling Hand said:


> nonsense. This is a VERY low reward and very high risk.
> just how is that low risk
> 
> His sold puts to get some premium while exposing Berkshire to far greater losses. This is not a low risk trade




You got some inside knowledge of his positions?

Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.

If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.


----------



## prawn_86 (29 April 2009)

truevalue said:


> If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.




Are you kidding me?? So you can forecast 15 years into the future and know whats going to happen?

In 1990 the Internet was virtually only a concept, look at what it did to the indexes. Disruptive technology makes it impossible to forecast with conviction that far in advance


----------



## Trembling Hand (29 April 2009)

truevalue said:


> You got some inside knowledge of his positions?
> 
> Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.
> 
> If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.




Yeah!! *do you understand the payout diagram for selling puts??*

A small and *CAPPED reward* now for unlimited potential losses till expiry.






LOL. seen a 20 year chart of the Nikkei??


----------



## sails (29 April 2009)

Trembling Hand said:


> Yeah!! *do you understand the payout diagram for selling puts??*
> 
> LOL. seen a 20 year chart of the Nikkei??




Oh here you are TH - was wondering where the market depth on the SPI had disappeared to...   

Yeah, it's amazing how people are taught that these extremely high risk strategies are low risk...

I guess the only thing is if he was planning to buy the stock any way - he might lose a bit less by starting off with short puts, but also wouldn't make so much if his stock took off to the upside.


----------



## truevalue (29 April 2009)

Trembling Hand said:


> Yeah!! *do you understand the payout diagram for selling puts??*
> 
> A small and *CAPPED reward* now for unlimited potential losses till expiry.
> 
> ...




Dont forget he gets to invest that premium at no cost for 15 years, he is not subject to margin calls, and the holder of the put cannot put it to him anytime in the next 15 years he can only exercise the put at expiry.

I didn't say it was risk free but history and the odds would heavily favour it.

His insurance business is all about taking on this sort of risk (in may different forms) and he has showen that he can price the risks very well and make plenty of money from it.


----------



## Trembling Hand (29 April 2009)

truevalue said:


> Dont forget he gets to invest that premium at no cost for 15 years, he is not subject to margin calls, and the holder of the put cannot put it to him anytime in the next 15 years he can only exercise the put at expiry.
> 
> I didn't say it was risk free but history and the odds would heavily favour it.




Hahahahaha.

now you walked right into it. Companies such as his trade their Balance sheet. With this one transaction he has knocked 6 bil at least off it. That's a bad trade just on that alone. And you are saying this is good.


+ there is talk of the holders wanting guarantees of capital against the puts!!


----------



## alphaman (29 April 2009)

I think Buffett made a reasonable bet, but low probability of losing is not quite the same as low risk.


----------



## truevalue (29 April 2009)

Trembling Hand said:


> Hahahahaha.
> 
> now you walked right into it. Companies such as his trade their Balance sheet. With this one transaction he has knocked 6 bil at least off it. That's a bad trade just on that alone. And you are saying this is good.
> 
> ...




Where do you get $6 billion from?

He took $5 billion in premium and has $35billion risk if the four stock indecies go to zero.

Maybe if he was taking 30 second bets like you guys you would say it was a bad trade but he is has a 10+ year time horizon and from a liquidity perspective there is no risk until the contract is exercised.

I know long term investing is hard to understand for some but we are not all judged by the short-term emotional outpourings of the stockmarket.


----------



## impala_group (29 April 2009)

truevalue said:


> Where do you get $6 billion from?
> 
> He took $5 billion in premium and has $35billion risk if the four stock indecies go to zero.
> 
> ...




...and on that note, I think we all ought to respect an investor of tramendous achievements like Warren Buffett.


----------



## Uncle Festivus (29 April 2009)

truevalue said:


> You got some inside knowledge of his positions?
> 
> Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.
> 
> If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.




He better bet that things return to 'normal' then, but then again he probably won't be around to deal with the consequences?



> Potential Losses
> Shanker also sketched out grimmer scenarios. Starting with the 50 percent decline, if the S&P 500 rises at the stock market’s post-1800 average annual rate of 2.8 percent, Berkshire could be out $5.4 billion at the end of the bet. That assumes an initial one-third loss on the premiums followed by 2.5 percent annualized returns.





> Worrisome Bets
> The final category is the most worrisome, Shanker says. Berkshire has sold contracts that require it to pay when credit losses occur at companies that are included in certain unnamed high-yield-bond indexes. The notional value is $7.9 billion.
> Berkshire took in $3.4 billion in premiums on these contracts and has paid losses of $542 million. The company has also recognized a noncash, $3 billion mark-to-market loss. With these contracts, payments are made when a credit event occurs. They expire from September of this year to December 2013.
> *Losses on these contracts are accelerating as bankruptcies grow, Buffett said in his shareholder letter in February. “Now with the recession deepening at a rapid rate, the possibility of an eventual loss has increased,” he wrote.     *


----------



## freddy2 (29 April 2009)

Trembling Hand said:


> + there is talk of the holders wanting guarantees of capital against the puts!!




Well they should have asked for that *before* the contracts were written. Plus if they had asked for this, the price of the contract would have been higher or not be written at all.


----------



## tech/a (29 April 2009)

It's Snake Pliskin said:


> I agree.
> 
> Tech perhaps one day you can inspire en mass.





Im past my prime.


----------



## It's Snake Pliskin (29 April 2009)

tech/a said:


> Im past my prime.



Ok. You've given here so that helps I guess.


----------



## tech/a (29 April 2009)

tech/a said:


> Im past my prime.





Did I say that!
Damned Dimentia!


----------



## ceasar73 (29 April 2009)

seems to me buffett doing exactly what he has always said he wld do...get greedy when others get fearful!

General electric shares were approx $40 not long ago...buffett got a **** load at 8 bucks i think!!


----------



## tech/a (29 April 2009)

ceasar73 said:


> got a **** load at 8 bucks i think!!




"*Buffett Load*"


----------



## ceasar73 (29 April 2009)

tech/a said:


> "*Buffett Load*"




L:L


----------



## brty (29 April 2009)

If you really look at the bet, it expires when he is 96.

The price he wrote the put, the market indexes were nearly 50% below their level of 9 years ago. By the time the puts expire it is likely that half of the stocks constituting those indexes will have been changed (history tells us this).

With inflation over the next 20 years almost a given (due to the massive govt spending), then the new inflated value of these indexes make this an easy winner for Buffett. Plus he may help some of the new stocks entering the indexes achieve very good results, by using some of his put premium.

The man is A, not stupid and B, not a saint.

What I would really like to know is what idiot is on the other side of this bet?? that has looked at the history of indexes in the US and called it bunk??

brty


----------



## ceasar73 (30 April 2009)

"The man is A, not stupid and B, not a saint." - True.


----------



## bowman (30 April 2009)

The top 10 questions that Jeff Matthews readers would like to ask Buffett at the AGM.



#1 To what extent does Berkshire's reinsurance business rely on Ajit Jain and is there currently another individual in the division capable of replacing Mr. Jain?

#2 Why not either sell the Moody’s position entirely since the franchise value and moat are severely and possibly permanently impaired (redeploying capital into more attractive investments that no doubt exist); or buy Moody’s entirely and use the Buffett/Berkshire reputation to entirely revamp Moody’s into a highly valuable business again? Berkshire may be one of the only franchises that could install the integrity needed to turn around the ratings agencies.

#3 Washington Post went from being a local paper to a national paper to a learning company. Wells Fargo went from being a conservative bank to a highly leveraged mortgage lender. Moody's went from being a boring ratings agency to a co-conspirator in the mortgage bubble. How do you justify holding stocks “forever” when the original investment eventually becomes unrecognizable in most cases?

#4 You said in your letter the United States' best days lie ahead of it. Upon what do you base that statement: economic data, natural optimism, political pressure, or wishful thinking?

#5 Isn't there significantly more risk than what you are suggesting in your sale of long-dated index puts? If one had sold puts on the Dow from 1927 to 1929 (during the run up, a period similar to when Berkshire sold their options), 15 years later, the market was down from an average of say 300 on the DJIA to approximately 140 a loss of a little over 50%. And if one had reinvested the premium in the market, one would have lost 50% of that. So the cheap financing ( less than 1%) does not end up being cheap. Finally, isn't there a risk of doubling down on the stock market as most of Berkshire's business returns are tied to returns in the stock market?

#6 You’ve written See’s Candies’ beauty rests in the minimal incremental tangible capital required to grow profits. Recently, you’ve expressed excitement for Berkshire’s investments in utilities, insurance and railroads – capital intensive industries potentially facing massive inflation. Can you reconcile these contrasting viewpoints?

#7 What factors, if any, would cause you to change your favorite holding period from “forever” to “sometime in the future” when thinking about the challenges your businesses face?

#8 On Conoco, it seems Berkshire made the uncharacteristic move of buying an asset with a price chart that went straight up, rather straight down. Please explain the decision making process on Conoco and what you learned from this admitted mistake.

#9 Being a major shareholder in Moody's, why didn't Mr. Buffett play a more active role in urging Moody's to change its rating process and save it from disrepute?

#10 How do you sleep at night knowing you sacrificed Ron Furgeson [sic; it is spelled Ferguson] to avoid your own responsibility with the General Re/AIG crime?

Jeff Matthews
I Am Not Making This Up

http://jeffmatthewsisnotmakingthisup.blogspot.com/


Any questions from ASF members?


----------



## Uncle Festivus (30 April 2009)

brty said:


> What I would really like to know is what idiot is on the other side of this bet?? that has looked at the history of indexes in the US and called it bunk??
> 
> brty




The 'bet' is still current, so it's yet to be determined who will be the idiot?


----------



## truevalue (30 April 2009)

Uncle Festivus said:


> The 'bet' is still current, so it's yet to be determined who will be the idiot?




This is insurance. This is the business Berkshire is in. I pay $1500 pa to NRMA to insure my car for $30,000. Will I be an idiot if I never have a car crash and make a claim? Is NRMA an idiot if I do? Berkshire is in the business of protecting peoples assets for a fee. Berkshire needs to make sure they price the risk correctly but if all goes well Berkshire gets a fee and the customer gets peace of mind.


----------



## Uncle Festivus (30 April 2009)

truevalue said:


> This is insurance. This is the business Berkshire is in. I pay $1500 pa to NRMA to insure my car for $30,000. Will I be an idiot if I never have a car crash and make a claim? Is NRMA an idiot if I do? Berkshire is in the business of protecting peoples assets for a fee. Berkshire needs to make sure they price the risk correctly but if all goes well Berkshire gets a fee and the customer gets peace of mind.



You should probably direct your questions to the poster who called the counter party(s) an idiot??


----------



## Uncle Festivus (22 October 2014)

Poor ol Warren, soon be down to his last Billion?



> The following is how much Buffett has made or lost on those holdings, based on the share performance of the companies since they reported results. The calculation is based on price levels through afternoon trade on Tuesday:
> 
> • Wells Fargo WFC, +0.06% up 22 cents: +$101,960,787
> • Coca-Cola KO, -0.10% down $2.79: -$1,116,000,000
> ...


----------

