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Thursday, April 6, 2017

As hedge funds and sell-siders tango, regular investors foot the bill: James Saft

 SAFT ON WEALTH As hedge funds and sell-siders tango, regular investors foot the bill In the financial market race for information, hedge funds, it seems, are the winners. This of course raises the salient issue of who the losers are, but you probably already know the answer to that. Hedge funds, company stock analysts and shareholders form an ecosystem in which the hedge fund is the apex predator and the sell-side analyst is just the enabler. The average shareholder is the poor sap who makes the whole exercise profitable for the other two. That’s the implication of a newly revised study by the Federal Reserve which investigates the way in which information flows in financial markets: who gets it first and who trades on it when. Read Full Article Here



TRADING AGAINST ADVICE Unlike all the other types of investors in the study, hedge funds actually trade in the opposite direction to the advice of sell-side analysts, selling in aggregate in upgrades and buying on downgrades. “I find that hedge funds are unique: they trade in the opposite direction as the sell-side reports recommend,” Swem writes. “For example, after sell-side analysts publish upgrade reports I find that hedge funds sell. 

These patterns suggest that hedge funds anticipate sell-side reports, and then reverse their trades after market prices have adjusted to the information contained in, or coinciding with, the analyst reports.” What’s more, the more heavily a company is covered by analysts the better the risk-adjusted returns hedge funds generate on these trades. When analysts issue reports, the stocks at issue have an abnormal return of 3 to 4 percent up or down, depending on whether the report contains positive or negative news. Sometimes the sell-side analyst reports themselves contain new information but often they are issued just after a piece of news about a company breaks. 


http://www.reuters.com/article/us-markets-saft-idUSKBN1772QW




Saturday, March 4, 2017

Warren Buffett recently listed his Laguna Beach, California vacation home for $11 million.

Berkshire Hathaway Chairman and CEO Warren Buffett recently listed his Laguna Beach, California vacation home for $11 million. If gets anything near what he's asking, he'll make a decent return on his investment.
He paid $150,000 for the property back in 1971, which is about $900,000 in today's dollars.
What you may be surprised to find out is that Buffet, one of the world's richest people, took out a 30-year mortgage when he bought the 6 bedroom, 7 bathroom seaside spot.
"When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that – it's the only mortgage I've had for fifty years," Buffett said.
He added, "I thought I could probably do better with the money than have it be an all equity purchase of the house."
And indeed he did.
"That $110 or $120 thousand I borrowed, I was buying Berkshire then," says Buffett.
The businessman says he was constantly buying Berkshire in the early '70s, when the stock was around $40 a share.
"I might have bought 3,000 shares of Berkshire or something like that from the proceeds of the loan — so that's [worth] $750 million [today]."
For most people, the home is the most expensive investment they will ever make, and Buffett believes it's a great investment for a family if they plan to be in the same locale for many years. What makes it so attractive, he said, is the 30-year mortgage.
"If you get a 30-year mortgage it's the best instrument in the world, because if you're wrong and rates go to 2 percent, which I don't think they will, you pay it off," he said. "It's a one-way renegotiation. I mean it is an incredibly attractive instrument for the homeowner and you've got a one-way bet."
As for Buffett's main house in Omaha, Nebraska – don't expect to see that on the market anytime soon.
"The home I live in now I bought in 1958 and I wouldn't trade it for anything," he said.
On the Money airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.

Warren Buffett Speaks with CNBC’s Becky Quick

CNBC Excerpts: Billionaire Investor Warren Buffett Speaks with CNBC’s Becky Quick on “Squawk Box” Today























WHEN: Today, Monday, February 27th
WHERE: CNBC's "Squawk Box"
Following are excerpts from the unofficial transcript of a CNBC interview with Berkshire Hathaway Chairman & CEO Warren Buffett on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today, Monday, February 27th. Video from the interview is available on CNBC.com.
All references must be sourced the CNBC.
BUFFETT ON APPLE PRODUCTS
APPLE STRIKES ME AS HAVING QUITE A STICKY PRODUCT. AND AN ENORMOUSLY USEFUL PRODUCT TO PEOPLE THAT USE IT, NOT THAT I DO. TIM COOK IS ALWAYS GETTING ME ABOUT THAT. BUT AGAIN IT GETS DOWN TO THE FUTURE POWER OF APPLE. AND I THINK TIM HAS DONE A TERRIFIC JOB HES BEEN VERY INTELLIGENT ABOUT CAPITAL APPOINTMENT AND I DON'T KNOW WHAT GOES ON INSIDE THEIR RESEARCH LABS OR ANYTHING OF THE SORT BUT I DO KNOW WHAT GOES ON INSIDE OF THEIR CUSTOMERS MINDS BECAUSE I SPEND TIME TALKING TO THEM.
BUFFETT ON APPLE SHARES
BUFFETT: WE BOUGHT A LOT MORE APPLE AFTER YEAR ON END.
QUICK: THE HOLDINGS THAT YOU HAD APPLE WAS ALREADY – WAS IT THE FIFTH BIGGEST –
BUFFETT: 59 MILLION OR SOMETHING LIKE THAT.
QUICK: HOW MUCH MORE DID YOU BUY? 7 BILLION.
BUFFETT: WE CAN CHANGE OUR MIND TOMORROW AND ALL OF THAT. BUT WE HAVE NOT BOUGHT APPLE SINCE THE EARNINGS REPORT CAME OUT. BECAUSE IT SHOT UP SOME THEN. BUT WE WOULD HAVE – ONE OF THE FELLOWS IN THE OFFICE HAS ABOUT 10 MILLION SHARES AND I HAVE FOR BERKSHIRE ACCOUNT ABOUT 123 MILLION SO WE HAVE ABOUT 133 MILLION SHARES.
BUFFETT ON DOUBLING APPLE SHARES
BUFFETT: I THINK WE HAD HAD 59 MILLION AT YEAR END.
QUICK: SO YOUVE MORE THAN DOUBLED IT SINCE THAT TIME?
BUFFETT: THATS CORRECT. AND WE – IT'S AMAZING HOW MUCH YOU CAN BUY OF SOME OF THESE THINGS. WE HAVE BOUGHT THE ADDED – 70 MILLION PLUS. WE BOUGHT THAT ALL BY THE TIME THEY REPORTED THEIR EARNINGS. IT WAS DONE PROBABLY IN 20 BUSINESS DAYS.
QUICK: AND THEIR EARNINGS WERE BETTER THAN PEOPLE HAD EXPECTED IN THE STOCK, JUMPED AS A RESULT.
BUFFETT: I DONT THINK THEY WERE THAT MUCH BETTER THAN PEOPLE EXPECTED.
QUICK: STOCK WAS UP AFTER THE EARNINGS REPORT.
BUFFETT: IT DID JUMP AND THATS WHY WE QUIT BUYING WE WOULD PROBABLY HAVE BOUGHT MORE.
BUFFETT ON DOW CHEMICAL
WE HAVE NEVER OWNED CHEMICAL SHARES. WE OWN A CHEMICAL – A SPECIALIST CHEMICAL COMPANY AT LUBRIZOL. I CAN'T RECALL A CHEMICAL COMMON STOCK WE OWN. WE BOUGHT THE PREFERRED STOCK OF DOW I MEAN, BECAUSE WE WANTED A PREFERRED POSITION AND WE HELD IT…ENDED UP MAKING ABOUT A BILLION DOLLARS PLUS WE HAD ABOUT 8.5% – WELL WE HAD A 8.5% COUPON ON IT FOR THOSE YEARS.
BUFFETT ON MARCH MADNESS
WE ARE GOING TO HAVE THE SAME CONTEST AMONG OUR EMPLOYEES THAT WE HAD LAST YEAR. AND IF THEY CAN GET TO THE SWEET SIXTEEN, IF THERE IS ONLY ONE OF THEM, WHOEVER IT IS, HE OR SHE GETS $1 MILLION A YEAR FOR THE REST OF THEIR LIFE. NOW, WE ALSO HAVE A PRIZE OF $100,000 FOR WHOEVER GETS THE FURTHEST.
BUFFETT ON EQUITIES
THE IMPORTANT THING IS IF YOU HAVE THESE WONDERFUL ASSETS OUT THERE, TO OWN THEM. AND WHICH ONES DO YOU OWN? I MEAN, IF YOU SVAE MONEY, YOU CAN BUY BONDS, YOU CAN BUY A FARM, YOU CAN BUY AN APARTMENT HOUSE, OR YOU CAN BUY PART OF AN AMERICAN BUSINESS. AND IF YOU BUY A TEN-YEAR BOND NOW, YOU ARE PAYING OVER 40 TIMES EARNINGS FOR SOMETHING WHOSE EARNINGS CAN'T GROW. YOU KNOW, YOU COMPARE THAT TO BUYING EQUITIES, GOOD BUSINESSES, I DON'T THINK THERE IS ANY COMPARISON.
BUFFETT ON HIS AIRLINES POSITION
IT IS ABOUT THE SAME. THEY MAY HAVE BEEN TWEAKED JUST A SHADE. THERE AGAIN, ONE OF THE FELLOWS IN THE OFFICE HAS ESSENTIALLY ONE OF THOSE POSITIONS. WHILE HE WAS BUILDING THAT POSITION, HE OWNED A COUPLE OF THE OTHERS JUST BECAUSE HE WANTED TO GET THE MONEY INVESTED AND THEN HE WAS GOING TO SHIFT OVER. BUT ONE OF THEM HAS – HE HAS THE AMERICAN AIRLINES POSITION AND I HAVE THE OTHER THREE. THOSE POSITIONS, AS YOU MENTIONED, WE'RE FAIRLY CLOSE TO 10%. WE DON'T WANT TO GO OVER 10% VIRTUALLY ON ANY STOCK. IT COMPLICATES LIFE FOR US.
BUFFETT ON POLITICS
LAST YEAR AT OUR ANNUAL MEETING – AND IT WAS CLEAR I WAS FOR HILLARY – BUT I GOT ASKED A QUESTION ABOUT THE MARKET BASED ON WHO GOT ELECTED. THAT DOES NOT – AND I SAID TO THEM AMERICA'S GOING TO DO FINE UNDER – IN TERMS OF ECONOMICALLY UNDER EITHER CANDIDATE AS PRESIDENT. PEOPLE WHO MIX THEIR POLITICS UP WITH THEIR INVESTMENT ACTIVITIES, I DON'T THINK THAT MAKES SENSE.
BUFFETT ON TRUMP
I WILL JUDGE PRESIDENT TRUMP AFTER FOUR YEARS BASED, NUMBER ONE, ON HOW SAFE THE COUNTRY HAS BEEN KEPT. I MEAN, THAT IS THE NUMBER ONE JOB OF THE CHIEF EXECUTIVE OF THE UNITED STATES. AND THAT IS NOT AN EASY JOB. AND I'M NOT THINKING ABOUT RANDOM KILLINGS OR ANYTHING LIKE THAT. I'M THINKING OF WEAPONS OF MASS DESTRUCTION. I MEAN, THAT IS MY NUMBER ONE WORRY. AND THAT IS THE NUMBER ONE TEST I HAVE. SECONDLY, I'LL JUDGE HIM TO A DEGREE, ALTHOUGH THEY HAVE LESS CONTROL OVER THIS – WELL THEY HAVE, THEY NEED A LITTLE LUCK ON WEAPONS OF MASS DESTRUCTION, TOO – BUT HOW THE ECONOMY DOES OVERALL. AND THEN THIRD, I'LL JUDGE HIM ON HOW – IF THE ECONOMY DOES WELL, WHICH I EXPECT IT TO DO, HOW WIDE THE PARTICIPATION IN THAT, IN A BETTER ECONOMY, EXTENDS.
BUFFETT ON GOP CONGRESS
THE REPUBLICANS – YOU DON'T GET A SHOT LIKE THIS WHERE YOU CONTROL BOTH HOUSES AND THE PRESIDENCY. THEY WILL WANT TO DO THINGS. MCCONNELL WILL WANT TO DO THINGS AND RYAN WILL WANT TO DO THINGS. MY GUESS IS THAT THEY WILL FIND DOING SOMETHING REALLY COMPREHENSIVE WILL BE TOO DIFFICULT. THEY WILL WANT TO GET SOMETHING DONE.
BUFFETT ON BORDER ADJUSTMENT TAX
BORDER ADJUSTMENT TAX, I MEAN, IT'S AN IMPORT TAX AND AN IMPORT TAX IS A SALES TAX. YOU'RE LOOKING – WE'RE AT THE NEBRASKA FURNITURE MART – THIS STORE, IT IS IN SEVERAL BUILDINGS, DOES OVER $400 MILLION A YEAR. 75% OF WHAT YOU SEE IS IMPORTED. IF WE PAY AN IMPORT TAX ON IT, OUR CUSTOMERS ARE GOING TO PAY FOR IT. IT'S A SALES TAX. IT'S A SALES TAX IN THIS CASE ON ITEMS THAT ARE NOT YACHTS OR ANYTHING LIKE THAT. THEY ARE THINGS THAT THE ORDINARY PERSON BUYS. SO IT WOULD BE A BIG SALES TAX.
BUFFETT ON THE AIRLINE INDUSTRY BEING LIKE THE CUBS
IT'S TRUE THE AIRLINES HAD HAD A BAD FIRST CENTURY. THEY'RE KIND OF LIKE THE CHICAGO CUBS. EVERYBODY HAS A BAD CENTURY NOW AND THEN. AND THEY GOT THAT CENTURY OUT OF THE WAY, I HOPE. BUT IT'S BEEN A DISASTER FOR CAPITAL. I MEAN IT'S GOT GLAMOR TO IT. SO YOU CAN ALWAYS GET GUYS TO PUT UP MONEY FOR AN AIRLINE. AND YOU CAN GO TO THE INTERNET AND LOOK AT A 100 OF THEM THAT FAILED AND ALL OF THEM NOW THAT ARE OPERATING WITH THE EXCEPTION OF SOUTHWEST – I MEAN, THEY'VE BEEN THROUGH BANKRUPTCY.
BUFFETT ON THE CONTINUITY OF APPLE
WHEN I TAKE MY GREAT GRAND CHILDREN TO DAIRY QUEEN, THEY BRING ALONG FRIENDS SOMETIMES AND THEY'VE ALL GOT AN iPHONE. I ASK WHAT THEY DID WITH IT AND WHETHER THEY COULD LIVE WITHOUT IT AND THEN THEY TRADE IT IN WHAT THEY ARE GOING TO DO WITH IT AND I SEE WHEN THEY COME TO THE FURNITURE MART THAT PEOPLE HAVE THIS INCREDIBLE STICKINESS WITH THE PRODUCT. IF THEY BRING IN AN iPHONE, THEY BUY A NEW iPHONE. IT JUST HAS THAT QUALITY. IT GETS BUILT INTO THEIR LIVES. THAT DOESN'T MEAN SOMETHING CAN'T COME ALONG THAT WILL DISRUPT IT, BUT THE CONTINUITY OF THE PRODUCT IS HUGE . AND THE DEGREE TO WHICH THEIR LIVES CENTER AROUND IT IS HUGE.
BUFFETT ON IBM
YOU KNOW WELL THE WHOLE MARKET HAS MOVED SO MUCH TO START WITH AND THEY INCREASED THE DIVIDEND I THINK THERE HAVE BEEN SOME MORE INTERESTING DIVIDEND STOCKS THAN THEY INCREASED IT HERE RECENTLY BUT I'VE GOT NO INFORMATION FOR YOU ON IBM EXCEPT THOSE TWO FACTORS. A LOT OF STOCKS I MEAN THEY REALLY MOVED IN THE LAST FEW MONTHS.
BUFFFETT ON FREE TRADE
FREE TRADE IS WONDERFUL FOR THE WORLD AND THE UNITED STATES. BUT ITS BENEFITS ARE DEFUSED AMONG 320 MILLION PEOPLE. YOU BUY YOUR BANANAS CHEAPER BECAUSE WE DON'T TRY AND PRODUCE THEM IN THE UNITED STATES. BUT THE PENALITIES FROM FREE TRADE ARE TERRIBLE TO SPECIFIC INDUSTRIES. AND AS AN INVESTOR, I CAN OWN – MAKE A DUMB DECISION ON OWNING A SHOE COMPANY, BUT IF I OWN A GOOD INSURANCE COMPANY, I CAN DIVERSIFY AWAY THE PROBLEMS. IF YOU ARE A 55 YEAR OLD STEEL WORKER, YOU CAN'T DIVERSIFY AWAY YOUR TALENTS. I MEAN, YOU HAD IT.
BUFFETT ON REX TILLERSON
I DON'T KNOW ANY OF THE APPOINTMENTS WELL, BUT I CERTAINLY THINK REX TILLERSON MAKES A LOT OF SENSE. I MEAN, YOU'VE GOT AN ABSOLUTELY OUTSTANDING PERSON. AND INCIDENTALLY I WOULD SAY THIS TOO, BECAUSE, YOU GET A LOT OF THIS IN POLITICS. REX TILLERSON IS GOING TO BE WORKING FOR THE UNITED STATES IN THAT JOB. I MEAN, PEOPLE THAT GET ALL UPSET BECAUSE HE WAS WITH EXXONMOBIL OR SOMETHING OR BECAUSE HE'S GOT A FAIR AMOUNT OF MONEY – I'VE SEEN A LOT OF PEOPLE ENTER HIGH LEVELS OF PUBLIC SERVICE AND I THINK THE GREAT MAJORITY OF THEM TAKE IT VERY SERIOUSLY THAT THEIR EMPLOYER IS THE UNITED STATES.
BUFFETT ON A BIG DEAL
BUFFETT: I HATE IT.
QUICK: DO YOU HAVE AN ITCHY TRIGGER FINGER AT THIS POINT?
BUFFETT: NO, YOU CAN'T AFFORD TO HAVE AN ITCHY TRIGGER FINGER. IN ONE SENSE YOU CAN SAY I ALWAYS HAVE AN ITCHY ONE IN THE SENSE THAT I,M ALWAYS LOOKING FOR THINGS TO DO. IT DOESN'T CHANGE YOUR STANDARDS. I'M ALWAYS LOOKING. IF WE ONLY HAD $20 BILLION WE REGARDED AS OUR MINIMUM I WOULD BE LOOKING BECAUSE WE COULD SELL SOME THINGS IF I FOUND SOMETHING ATTRACTIVE ENOUGH TO DO.
QUICK: IF YOU HAVE $86 BILLION, IF IT DOESN'T CHANGE YOUR STANDARDS, IT CERTAINLY BROADENS YOUR HORIZONS.
BUFFETT: WE CAN DO SOMETHING BIG AND WE'D LOVE TO DO SOMETHING BIG.
QUICK: ARE YOU WORKING ON ANYTHING NOW?
BUFFETT: I'M ALWAYS LOOKING BUT I WOULD SAY THAT THERE'S NOTHING CLOSE.
BUFFETT ON BONDS
WHEN RATES HAVE BEEN WHERE THEY HAVE BEEN THE LAST FIVE OR SIX YEARS OR EVEN LONGER, SELLING VERY LONG BONDS MAKES SENSE FOR THE SAME REASON I THINK IT'S DUMB TO BUY THEM. I WOULDN'T BUY 50 YEAR BOND IN A MILLION YEARS AT THESE RATES IF IT'S THAT DUMB FOR ME TO BUY IT, ITS PROBABLY PRETTY SMART FOR THE ENTITY TO SELL THEM. IF I AM RIGHT. SO I WOULD SAY THE TREASURY – THERE'S A LOT OF CONSIDERATIONS THEY HAVE, BUT I WOULD BE SHOVING OUT LONG BONDS.
BUFFETT ON BUYING CONSISTENTLY
THE BEST THING WITH STOCKS ACTUALLY IS TO BUY THEM CONSISTENTLY OVER TIME. YOU WANT TO SPREAD THE RISK AS FAR AS THE SPECIFIC COMPANIES YOU'RE IN BY OWNING A DIVERSIFIED GROUP AND YOU DIVERSIFY OVER TIME. BY BUYING THIS MONTH, NEXT MONTH, THE YEAR AFTER, THE YEAR AFTER, THE YEAR AFTER. YOU'RE MAKING A TERRIBLE MISTAKE IF YOU STAY OUT OF A GAME YOU THINK IS GOING TO BE VERY GOOD OVER TIME BECAUSE YOU THINK YOU CAN PICK A BETTER TIME TO ENTER IT.
BUFFETT ON NO BUBBLE
AND WE ARE NOT IN A BUBBLE TERRITORY. OR ANYTHING OF THE SORT. IF INTEREST RATES WERE 7 OR 8%, THEN THESE PRICES WOULD LOOK EXCEPTIONALLY HIGH. BUT YOU HAVE TO MEASURE – YOU MEASURE EVERYTHING AGAINST INTEREST RATES BASICALLY. AND INTEREST RATES ACT LIKE GRAVITY ON VALUATION.
BUFFETT ON STOCKS CHEAP
MEASURED AGAINST INTEREST RATES, STOCKS ACTUALLY ARE ON THE CHEAP SIDE COMPARED TO HISTORIC VALUATIONS. BUT THE RISK ALWAYS IS THAT INTEREST RATES GO UP A LOT AND THAT BRINGS STOCKS DOWN. BUT I WOULD SAY THIS, IF THE TEN YEAR STAYS AT 230 AND WOULD STAY THERE FOR 10 YEARS, YOU WOULD REGRET VERY MUCH NOT HAVING BOUGHT STOCKS NOW.
BUFFETT ON UNILEVER
I JUST SAID, YOU KNOW, IF THIS IS REGARDED AS HOSTILE OR UNFRIENDLY, YOU DON'T HAVE TO WORRY ABOUT IT. THERE ISN'T AN OFFER. BUT IF IT IS SIMPLY BECAUSE YOU ARE NEGOTIATING, WHICH PEOPLE OFTEN DO, WHEN THEY TAKE IT TO THE BOARD AND THEY SAY WELL, IT'S NOT ENOUGH MONEY AND ALL THAT, AND THEN, YOU KNOW, I'M NOT A NEGOTIATOR MYSELF. BUT THE 3G PEOPLE ARE MORE THAT WAY. SO, BUT ONCE THE THREE OF US LEARNED THAT IT WAS REGARDED AS UNFRIENDLY, WE HAD NO INTENTION OF MAKING ONE. AND I THINK THE UNILEVER PEOPLE UNDERSTAND THAT NOW.
BUFFETT ON UNILEVER OFFER
BUFFETT: IT BECAME VERY APPARENT THAT UNILEVER DID NOT WANT THIS OFFER BASED ON, WITHIN A FEW DAYS, PRESS REPORTS. FOR ONE THING, IT LEAKED SOMEHOW ON A WEDNESDAY PRIOR TO THE FRIDAY ONE. SO ON SATURDAY, I GOT – AFTER THAT FRIDAY – I GOT CALLS INDICATING THAT THE OFFER WAS UNWELCOME. AND I SAID, IF IT'S UNWELCOME – AND JORGE PAULO SAID THE SAME THING – I MEAN, IF IT'S UNWELCOME, THERE IS NO OFFER. I MEAN, IT WAS ONLY INTENDED TO BE PRESENTED IF THERE WAS A POSSIBILITY.
QUICK: IT WAS NEVER INTENDED AS A HOSTILE OFFER?
BUFFETT: NO, ZERO.
BUFFETT ON NO BACKUP DEAL
THERE IS NO BACK UP DEAL. I MEAN,T HAT WAS THE ONLY ONE THAT CERTAINLY I SERIOUSLY THOUGHT ABOUT THAT MADE SENSE. SO, NO. WILL THERE BE ANOTHER DEAL AT KRAFT HEINZ SOMEDAY? MY GUESS IS YES, BUT WHO KNOWS WHEN. YOU KNOW, I MEAN, THERE'S NO BACK UP DEAL.
BUFFETT ON WELLS FARGO
WITH WELLS FARGO, BECAUSE THEY REPURPOSED SHARES, WE ACTUALLY OWN SLIGHTLY MORE THAN 10%. WE HAVE TO BE A PASSIVE INVESTOR THERE BY LAW UNLESS WE WANT TO BECOME A BANK HOLDING COMPANY, WHICH WE DON'T WANT TO BECOME. SO, I MIGHT WELL HAVE BEEN JUST AS PASSIVE ANYWAY. BUT I CAN TELL YOU THAT I HAD TO BE PASSIVE IN ANY EVENT.
BUFFETT ON JOHN STUMPF
I WILL SAY THIS, IF THE TOP GUY DOESN'T DO ANYTHING ABOUT IT, THE PEOPLE DOWN BELOW WON'T. JOHN STUMPF IS A PERFECTLY DECENT GUY IN MY OPINION. I'D HAVE HIM AS TRUSTEE IN MY WILL AND I WOULDN'T WORRY FOR A SECOND. BUT SOMEHOW, WHEN HE SAW THE EVIDENCE, HE DIDN'T DO SOMETHING ABOUT IT. NOW, MAYBE HE THOUGHT SOMEBODY ELSE WAS GOING TO DO SOMETHING ABOUT IT. THAT PART IS SIMILAR TO WHAT HAPPENED AT SOLOMON.
BUFFETT ON WELLS FARGO FINE
THERE FINE WAS LIKE 180 MILLION OR 185 MILLION. I THINK THEY SAW THAT, WRONGLY, AS IN THE LIGHT OF $5 BILLION FINES THAT WERE PUT ON FOR MORTGAGE PRACTICES AT SOME OTHER BANK AND 3 BILLION FINES. SO THEY SAW THE PROBLEM AS SIZED BY THE SIZE OF THE FINE. AND IT WASN'T AT ALL. I MEAN, ANY TIME YOU HAVE PEOPLE MAKING UP ACCOUNTS AND DOING ALL THE THINGS THEY WERE DOING, IT ISN'T THE SIZE OF THE FINE THAT MEASURES THE CUSTOMER IMPACT AND HOW YOUR REPUTATION WILL SUFFER. IT IS WHAT YOU WERE DOING, AND IT WAS WRONG.
BUFFETT ON WELLS FARGO MISTAKE
I JUST KEEP PREACHING TO OUR GUYS THAT IF YOU SEE A PROBLEM, ATTACK IT IMMEDIATELY. IT ISN'T GOING TO GET BETTER. AND A HUGE MISTAKE WAS MADE AT WELLS. NOT IN COOKING UP THE INCENTIVE PLANS. CROSS SELLING IS FINE, I MEAN, YOU WANT TO HAVE INCENTIVES FOR PEOPLE TO DO IT. BUT YOU DON'T WANT TO HAVE IT LEAD TO CRAZY BEHAVIOR, WHICH IT DID. AND THE BIG MISTAKE WAS WHEN THEY FOUND OUT ABOUT IT, THEY DIDN'T DO ANYTHING ABOUT IT.
BUFFETT ATTACK PROBLEM
I THINK TO SOME EXTENT WHEN YOU GET BEHIND THE 8-BALL AND DON'T DO IT IMMEDIATELY YOU KEEP THINKING WELL, MAYBE IT WILL GO AWAY BECAUSE IF I COME IN NOW, THEY WILL SAY WHY DIDN'T I COME IN SIX WEEKS AGO OR SIX MONTHS AGO. WHATEVER IT WAS, IT'S A TERRIBLE MISTAKE, WHEN YOU SEE A PROBLEM, NOT TO ATTACK IT IMMEDIATELY. IT CAN BE UNPLEASANT, BUT I SAY GET IT RIGHT, GET IT FAST, GET IT OUT, GET IT OVER. I KEEP TELLING OUR MANAGERS THAT. I'M SURE SOMETHING IS BEING DONE WRONG NOW WITH 367,000 EMPLOYEES AT BERKSHIRE AND I JUST HOPE I FIND OUT ABOUT IT AND DO SOMETHING ABOUT IT.
BUFFETT ON FANNIE FREDDIE
I THINK ITS ENORMOUSLY IMPORTANT FOR THE ECONOMY THAT WE HAVE READILY AVAILABLE 30-YEAR GOVERNMENT GUARANTEED MORTGAGES. I THINK THIS COUNTRY WILL FUNCTION BETTER. HOME OWNERS WILL BORROW FOR LESS WITH A GOVERNMENT GUARANTEED MORTGAGE. I THINK THE PROBLEM COMES WHEN YOU TRY TO MIX UP THE PRVATE SECTOR WITH THE GOVERNMENT. BECAUSE SERVING TWO MASTERS IS TOUGH. AND YOU HAD THAT – THE BOARDS OF FREDDIE AND FANNIE WITH SOME GOVERNMENT REPRESENTATIVES, YOU HAD THE CONGRESS TELLING THEM WHAT TO DO AND YOU HAD WALL STREET TELLING THEM WHAT TO DO. I THINK THAT'S A BAD MODEL.
BUFFETT ON SELLING HIS ULTRA LONGS
WE HAVE NO INTENTION OF SELLING THOSE. ON THE OTHER HAND, LET'S SAY THE WORLD'S THE GREATEST DEAL CAME UP, I MEAN, I AM NOT – THERE IS NO SELF IMPOSED BAN ON SELLING THOSE. I HAVE NO PLAN TO SELL THEM. BUT I JUST WANTED TO CLEAR UP THAT ONE PONT, BECAUSE THE WAY I HAD SAID IT EARLIER WASN'T CLEAR.
BUFFETT ON RETAILING
I THINK RETAILING IS JUST TOO TOUGH FOR ME, JUST GENERALLY. WE BOUGHT A DEPARTMENT STORE IN 1966 AND I GOT MY HEAD HANDED TO ME. I'VE BEEN IN VARIOUS THINGS IN RETAILING. BUT WE WON TESCO OVER IN THE UK. IT WASN'T WE, I BOUGHT TESCO OVER IN THE UK AND GOT MY HEAD HANDED TO ME. RETAILING IS VERY TOUGH AND I THINK THE ONLINE THING IS HARD TO FIGURE OUT.
AMAZON VS. WALMART
I THINK AMAZON IN PARTICULAR IS SOMEONE THAT'S GOING TO – IT'S AN ENTITY THAT IS GOING TO HAVE EVERYBODY IN THEIR SIGHTS. AND THEY HAVE GOT DELIGHTED CUSTOMERS. AND IT'S EXTRAORDINARY WHAT THEY HAVE ACCOMPLISHED. A LOT OF PEOPLE LIKE THE DELIVERY. THAT IS A TOUGH, TOUGH, TOUGH COMPETITIVE FORCE. NOW WALMART IS PUSHING FORWARD ONLINE THEMSELVES. THEY HAVE GOT ALL KINDS OF STRENGTHS, BUT I JUST DECIDED THAT I'D LOOK FOR A LITTLE EASIER GAME.
BUFFETT ON NEWSPAPERS
THERE ARE ONLY TWO PAPERS IN THE UNITED STATES THAT I THINK HAVE AN ASSURED FUTURE BECAUSE THEY HAVE A SUCCESSFUL INTERNET MODEL TO GO WITH THEIR PRINT MODEL AND THATS THE JOURNAL AND THE NEW YORK TIMES. I'M NOT SAYING IT WILL EVEN BE EASY FOR THEM. BUT THEY HAVE DEVELOPED AN ONLINE PRESENCE THAT PEOPLE WILL PAY FOR. NOW, THE THIRD THAT MAY DO IT, AGAIN, GOING BACK TO BEZOS, IS THE WASHINGTON POST. HE'S IMPROVED DRAMATICALLY THEIR SITUATION ONLINE. SO IT'S CONCEIVABLE THAT THEIR MATH WORKS.
BUFFETT ON NOT BUYING AMAZON
THAT'S A GOOD QUESTION, BUT I DONT HAVE A GOOD ANSWER. OBVIOUSLY, I SHOULD HAVE BOUGHT IT LONG AGO BECAUSE I ADMIRED IT LONG AGO. BUT I DIDN'T UNDERSTAND THE POWER OF THE MODEL AS I WENT ALONG. AND THE PRICE ALWAYS SEEMED TO MORE THAN REFLECT THE POWER OF THE MODEL AT THAT TIME. SO IT'S ONE I MISSED BIG TIME.
BUFFETT ON JEFF BEZOS
QUICK: THIS INVESTOR SAID THAT HE OR SHE HAD HEARD YOU RECENTLY MAKING SOME COMMENTS ABOUT AMAZON WHERE YOU WERE VERY COMPLIMENTARY OF AMAZON, ITS FOUNDER JEFF BEZOS.
BUFFETT: YEAH.
QUICK: SAID HE'S PROBABLY THE BEST MANAGER YOU'VE EVER SEEN.
BUFFETT: I THINK MAYBE HE IS. YEAH. I'VE SAID THAT. IT'S REMARKABLE. I MEAN, HERE'S A GUY GETS IN THE CAR WITH HIS WIFE, STARTS DRIVING ACROSS AND THINKS HOW AM I GOING TO TAKE OVER THE WORLD? MAYBE I'LL SELL BOOKS ONLINE. HE'S ONE TERRIFIC BUSINESS PERSON.
BUFFETT WASTING MONEY
I MENTIONED IN THE PAST WHEN I DIE, I TOLD MY WIFE, 90% OF HER AND TRUSTEE – TO HAVE 90% OF IT IN AN INDEX FUND. IT WILL DO BETTER UNBALANCED THAN WHAT THEY WILL GET IF THEY GO TO PROFESSIONALS…IF YOU TAKE HALF THE PEOPLE IN THE COUNTRY AND THEY DON'T DO ANYTHING, THEY JUST OWN THE AVERAGE, THEY ARE GOING TO GET AVERAGE RESULTS, RIGHT? AND IF THEY DON'T HAVE ANY EXPENSES THEY WILL GET THOSE BOTH GROSS AND NET. THE OTHER HALF, BY DEFINITION, HAVE TO DO AVERAGE IF THAT OTHER PART IS. I MEAN, AVERAGE IS LEFT FOR THEM AND THEY ARE GOING TO INCUR ALL KINDS OF FEES AND THEY ARE GOING TO DO WAY BETTER – I MEAN WAY WORSE THAN THE PEOPLE IN THE – WHO DO NOTHING. AND I MADE THIS BET IN ORDER TO JUST ILLUSTRATE AND YOU KNOW, THE DIFFERENCE IS INCREDIBLE. I MEAN, THE AMOUNT OF MONEY THAT PEOPLE HAVED WASTED GETTING INVESTMENT ADVICE IS JUST RIDICULOUS IN THIS COUNTRY.
BUFFETT KNOW NOTHING INVESTOR
THIS IS A PERSON WHO IS NOT A PROFESSIONAL. I'M A KNOW NOTHING DOCTOR, I'M A KNOW NOTHING DENTIST, I'M A KNOW NOTHING OBSTETRICIAN. YOU KNOW, I'M NOT IN THAT BUSINESS. AND THE IDEA THAT YOU'RE GOING TO BEAT A GAME THAT YOU'RE NOT NECESSARILY TRAINED FOR, SPENT YOUR LIFE AT OR ANYTHING LIKE THAT, IT'S NOT SAYING THE GUY HAS A ZERO IQ. YOU COULD HAVE A 200 IQ, BUT NOT BE INVOLVED IN INVESTMENTS. I DON'T KNOW WHY LIGHT SWITCHES GO ON. YOU KNOW, I THINK I'M GENERALLY REASONABLY INTELLIGENT, BUT I STILL DON'T KNOW. YOU KNOW, I'M A KNOW NOTHING PHYSICIST.

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