Tag Archive for 'Buffett’s'

Streamlining the process – Warren Buffett’s Secret “Value” Formula – A response to MrAlanKendall

Just a short video on how you can write your own application in order to find good value stocks using Warren Buffett’s Value Formula. Reduces the manual labor and actually applies the formula for you by parsing online stock data and returning useful results for you to analyze later on.
Video Rating: 5 / 5

Grant Rant #61: Warren Buffett’s Tax Lie

www.GrantCardone.com – Grant Rant #61: Warren Buffett’s Tax Lie – Warren Buffett said his secretary pays more taxes than he does, but that’s not true. People need to dig into the facts and understand his secretary simply makes less money. If Warren Buffett wants to give more money to the government then, by all means, cut the check. Everyone else needs to start investing their money, like Warren Buffett, to reduce the amount of taxes they’ll pay. SELL OR BE SOLD www.grantcardone.com SELL TO SURVIVE BOOK www.grantcardone.com THE 10X RULE www.grantcardone.com CARDONE ZONE SIGNS www.grantcardone.com IF YOU’RE NOT FIRST, YOU’RE LAST BOOK www.grantcardone.com THE CLOSER’S SURVIVAL GUIDE BOOK www.grantcardone.com
Video Rating: 4 / 5

Buffett’s Big Bet

Article by Geoffrey Gannon

Over the past few days, there have been several stories written about Warren Buffett’s $ 14 billion bet on global stock markets. I believe these stories are all in reference to this excerpt form Berkshire Hathaway’s annual report:

“Berkshire is also subject to equity price risk with respect to certain long duration equity index put contracts. Berkshire’s maximum exposure with respect to such contracts is approximately $ 14 billion at December 31, 2005. These contracts generally expire 15 to 20 years from inception. Outstanding contracts at December 31, 2005, have been written on four major equity indexes including three foreign. Berkshire’s potential exposure with respect to these contracts is directly correlated to the movement of the underlying stock index between contract inception date and expiration. Thus, if the overall value at December 31, 2005 of the underlying indices decline 30%, Berkshire would incur a pre-tax loss of approximately $ 900 million.”

It’s impossible to evaluate what exactly this means for Berkshire or what it tells us about Buffett’s thinking without knowing more details. But, there are a few things I’d suggest you consider when reading the news reports.

First, the $ 14 billion headline number makes this bet look larger than it really is. According to the above disclosure, a 30% decline in the underlying indices would only create a $ 900 million pre-tax loss. One article stated that a decline in the indexes to zero was highly unlikely given historical trends. It’s a lot more than highly unlikely. But, since we don’t know the details of Berkshire’s exposure, we can’t evaluate the real risk of a very large loss.

A lot of these news stories have called Berkshire’s “long duration equity index put contracts” a bet on global stock markets. A few individuals have been quoted as saying Buffett has become bullish long-term. Buffett’s always been optimistic about the very long-term insofar as he recognizes how better things are today than they have been at any other time in history, and how that is likely to remain true for some time. Despite Buffett’s concerns about nuclear war, he doesn’t see a return to the Dark Ages and those kinds of anemic returns on capital.

That’s important to keep in mind, because I’m not sure this bet is much more than that. If you assume returns on equity will be similar to those achieved in the years since industrialization began, and you assume central governments will continue to cause inflation, a long duration equity index put contract isn’t much of a stretch.

Equity will earn returns, much of those returns will be retained by the businesses, and inflation will increase (nominal) stock prices regardless of whether the underlying businesses’ assets are increasing or remaining stable.

So, I’m not sure this is a bullish sign. In fact, it may be a bearish sign, because it suggests Buffett can’t find individual equities to buy, three of the four indexes are foreign, and someone wants to be protected against very large losses in a diversified group of holdings.

Remember, someone is paying for this protection. In my opinion, it’s not the kind of protection investors need. It’s long-term protection on an index. I suppose I can see why a pension fund might want this (to increase exposure to equities), but it seems like exactly the sort of thing an insurance company can make money selling. There’s fear of a very large loss, and a lot of factors that are hard to see that will tend to make that loss pretty unlikely.

We don’t know what premiums Berkshire is receiving, so we really can’t evaluate these contracts. If someone writes hurricane insurance it doesn’t mean they think hurricanes are unlikely, it just means they think someone is dumb enough to pay more than the protection is worth. Knowing the odds of a decline in global stock markets isn’t enough to evaluate Berkshire’s contracts, because we don’t know the price.

I’m not enamored with current valuations in the U.S., but looking out a couple decades it’s not all doom and gloom. Markets tend to overshoot in both directions, but there’s usually someone sane enough to buy when stocks get cheap enough.

What’s remarkable about the way investors move stock prices isn’t the magnitude of the truly major moves (up or down); it’s the frequency of meaningful moves when there’s no meaningful changes in underlying values. Think about the price range of an average stock in an average year – that’s the really irrational part of investor behavior. I wouldn’t want to have anything to do with a one-year contract on a single stock. That’s a very different situation.

Geoff Gannon writes a daily value investing blog and produces a twice weekly (half hour) value investing podcast at http://www.gannononinvesting.com

Related Warren Buffett Articles

Buffett’s Berkshire Joins Bidding Group for Citi Unit

Buffett’s Berkshire Joins Bidding Group for Citi Unit
Berkshire Hathaway has joined the group bidding for Citigroup’s consumer lending unit OneMain, formerly known as CitiFinancial, the Wall Street Journal said, citing people familiar with the matter.
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Carrick’s Reader: Renovation rationalization
Rob Carrick rounds up the best in personal finance reading
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Gamer-turned-successful investor
CREDIT cards may be one of the five Cs that many young Singaporeans aspire towards, but not Scott Lee Dong Yi. The economics major, who considers Warren Buffett an idol of sorts, is rather disdainful of the cashless mode of transactions often lauded for its convenience.
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Warren Buffett’s big bet pays off

Los Angeles Times business reporter Walter Hamilton explains why Warren Buffett is smarter than you and me. His billion investment in Goldman Sachs in the midst of the financial crisis has paid off handsomely. Read more at lat.ms


Video Rating: 5 / 5

Warren Buffett’s Management Secrets

Warren Buffett’s Management Secrets

Even in today’s economic climate, when so many investors and major companies are failing, Warren Buffett continues to be successful in all aspects of his life. Mary Buffett and David Clark have written the first book ever to take an in-depth look at Warren Buffett’s philosophies for personal and professional management — what they are, how they work, and how you can use them. Through close examination of Warren Buffett’s life and career from his earliest days to now, Buffett and Clark shed li

List Price: $ 25.00


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MYSTRATEGYSTORE.COM, INC. Makes First Investment In Warren Buffett’s Berkshire Hathaway Inc.

MYSTRATEGYSTORE.COM, INC. Makes First Investment In Warren Buffett’s Berkshire Hathaway Inc.

Sherwood, AR (PRWEB) March 22, 2010

During these difficult economic times, most businesses are going under, laying off workers and watching their 401(k)s dwindling in value, the founder and CEO of MYSTRATEGYSTORE.COM, INC. has been able to weather the storm. In fact, Gerald Dukes, the Founder and CEO of MYSTRATEGYSTORE.COM, INC. has grown the company’s unique visitors from 100 visitors per month back in November 2009 when the company was incorporated, to 4,000 unique visitors as of end of February 2010 and is growing.

“About 30% or 1,200 are loyal customers or buyers on my website,” Dukes said. “Our Web site visitors are coming from 78 countries in addition to the United States. Our largest revenue generators are our social virtual gaming page and both of our Men and Women Product Pages,” Dukes said.

“I am blessed to be able to invest into Mr. Buffett’s Berkshire Hathaway Inc. Class B shares. I have been doing research on the company for five years and have been waiting on the sidelines for the shares to split into affordable shares. I decided to use a portion of my company’s capital to invest in a stable company that I understand, a management team that I respect and trust and a place where I can store capital for the next ten years or so. MYSTRATEGYSTORE.COM, INC. have invested $ 10,000 into Berkshire Hathaway Inc. Class B shares and will receive the stock certificate within 4-6 weeks. As our revenue grows and we have excess cash to deploy, we will be adding other income producing assets in the near future to the company’s investment holdings,” Dukes said.

About the company

MYSTRATEGYSTORE.COM,INC. is an online advertising, shopping and virtual gaming site that offers a fun and unique shopping experience for the entire family. For more information, visit http://www.mystrategystore.com.


Gerald Dukes

(501) 960 – 7450


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Buffett’s firm says former executive broke ethics policy with trades; Sokol denies wrongdoing

Buffett’s firm says former executive broke ethics policy with trades; Sokol denies wrongdoing
OMAHA, Neb. – Berkshire Hathaway said Wednesday that a former executive believed to have been in line to succeed Warren Buffett as CEO violated
Read more on Canadian Business

Buffett’s Berkshire Could Sue Sokol
Sokol announced his resignation from Berkshire last month, citing a desire to build his personal wealth and spend more time on philanthropic causes, but various press reports later reported that he bought nearly 100,000 shares of Lubrizol in advance of Berkshire’s formal acquisition offer, casting a dark cloud over Buffett’s firm.
Read more on Indie Research via Yahoo! Finance

Berkshire says former exec violated company policies
Berkshire says former exec violated company policies By JOSH FUNK The Associated Press Published Apr 27, 2011 06:33PM MDT Omaha, Neb. • Berkshire Hathaway said Wednesday that a former executive believed to have been in line to succeed Warren Buffett as CEO violated the company’s insider trading and ethics policies by buying stock in a chemical company Berkshire is acquiring and failing to …
Read more on The Salt Lake Tribune

Berkshire Hathaway Gets An “I” For Incomplete On Sokol Investigation
Plausible deniability. Warren Buffet’s “notoriously decentralized” management style makes it very easy for him to consistently claim it.
Read more on Forbes

3. Billionaire Warren Buffett’s Berkshire case highlights need for checks

3. Billionaire Warren Buffett’s Berkshire case highlights need for checks
THE case involving the purchase of shares by David Sokol – a former manager of Berkshire Hathaway Inc – in Lubrizol Corp, whose takeover he helped to negotiate, highlights the need for higher governance in large funds.
Read more on The Star

Top Ten: The week’s top 10 videos on MarketWatch
In case you missed them here are the 10 most popular videos that appeared on MarketWatch for the week of April 4-8.
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Buffett ‘Snow Job’ Has Conned the Media: Steinhardt
Warren Buffett is the “greatest PR person of recent times” and has “managed to achieve a snow job that has conned virtually everyone in the press,” Wisdom Tree Investments Chairman Michael Steinhardt told CNBC.
Read more on CNBC