Warren Buffett: The Oracle of Omaha Speaks

Warren Buffett: The Oracle of Omaha Speaks

A guru expounds on stocks, fortune tellers, and other secrets of success.

(This text has an historic value, as it was written in 1994).

Warren Buffett, the chairman of the Omaha-based holding company Berkshire Hathaway, Inc., is famous both for his spectacular investment acumen and his folksy, commonsense approach to choosing stocks. He also is, according to Forbes magazine, the second richest person in the nation, with an estimated fortune of some $9.2 billion (Microsoft chairman is the richest). With an initial investment of $100,000 at the age of 25, Buffett built a business empire worth nearly $20 billion today that includes major holdings in Coca-Cola, the insurance giant GEICO, the Washington Post, and General Dynamics.

Buffett enjoys a reputation as a maverick outside, preferring small-town Omaha to Wall Street canyons. But, as Forbes said in 1994, “Don’t bet he’s lost his touch”.

When asked about publishing his gems of investment wisdom gleaned from his letters to shareholders in recent (for 1994) Berkshire Hathaway annual reports, he agreed.

“What makes sense in business also makes sense in stocks : As investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.”

“I am quite content to hold a security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.”

“Beware of past performance proofs in finance. If history books were the key to riches, the Forbes 400 would consist of librarians”.

“The only value of stock forecasters is to make fortune tellers look good. Even now, Charlie (Charles Munger, Berkshire’s vice chairman) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

New York, 57th street. Photo by Elena

“The most common cause of low prices is pessimism – sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”

“When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that stays intact.”

“Just as you should be suspicious of managers who pump up short-term earnings by accounting maneuvers, asset sales and the like, so also should you be suspicious of those managers who fail to deliver for extended periods and blame it on their long-term focus. (Even Alice, after listening to the Queen lecture her about “jam tomorrow”, finally insisted, “It must come sometimes to jam today”.)

“We think the very term “value investing” is redundant. What is investing if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value – in the hope that it can soon be sold for a still-higher price – should be labelled speculation (which is neither illegal, immoral nor – in our view – financially flattening).”

“We try to stick to business we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we’re not smart enough to predict future cash flows. Incidentally, that shortcoming doesn’t bother us. What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know. An investor needs to do very few things right as long as he or she avoids big mistakes.”

“Tax-paying investors will realize a far, far greater sum from a single investment that compound internally at a given rate than from a succession of investments compounding at the same rate.”

“An investor who does not understand the economics of specific business and nevertheless believes it in his interest to be a long-term owner of American industry, should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when “dumb” money acknowledges its limitations, it ceases to be dumb.”

“If you are a know something investor, able to understand business economics and to find five to ten sensibly priced companies that possess important long-term competitive advantages, conventional diversification makes no sense for you. It is apt simply to hurt your results and increase your risk. I cannot understand why an investor of that sort elects to put money into a business that is his 20th favorite rather than simply adding the money to his top choices – the businesses he understands best and that present the least risk, along with the greatest profit potential.”

Financial field and finance scams

Financial field and finance scams

Finance is a fantastic field with a lot of legitimate, lucrative potential. However, like in all ventures involving large sums of money and a lot of different people, the possibility for finance scams, fraud and schemes appears. One of the best known such ploys in today’s world, is that of the infamous overseas prince. Thus, the so-called prince writes an email describing a dreamlike situation and immense wealth, but for one little detail – he lacks a valid bank account and needs yours to make his dreams come true… Needless to say, those who fall prey to this common Internet scam not only never see any promised remuneration, but also part with their own money for good. Alternatively, a variant on the scam is the grandfather scheme, a similar ploy targeting the elderly; a group often targeted by scammers and swindlers.

In contrast, a pyramid scheme may actually pay off for the few “lucky one” to participate in the beginning, the ones used to “hook” the others, so to speak. Pyramid scams are often impressive by the number of people they actually draw in. But don’t get fooled by con-artists or duped by scammers. Remember one simple truth: If it seems too good to be true, it probably is! Thus, in pyramid scams what happens is that the first people to invest actually may get paid their investments. They may generate returns, which is a ploy to attract newcomers by truthful word of mouth. This word of mouth helps scammers at that stage of the game. However, once enough profits have been amassed, the wrongdoers swiftly transfer the funds to some offshore account. The scammers will never be seen again by the duped investors. Be careful out there!

Luckily, most reputable asset management firms are upfront about their advisers’ credentials. Just as investors perform due diligence (professional due diligence being so valuable that it warrants costs in the ranges of $25,000)… Thus, to reiterate, just as investors perform due diligence about a potential venue before investing, so it would be wise for you to research the consultant or fund manager beforehand, prior to trusting him or her with your financial decisions.

After all, it’s your money!

Finance scams. Cats have a scam going – you buy the food, they eat the food, they go away; that’s the deal. (Eddie Izzard, an English Comedian). Illustration: © Megan Jorgensen (Elena)

Assistants

Assistants

Assistants differ in their specializations. To illustrate, there exist executive, administrative, legal and even simply personal assistants. Likewise, an assistant manager would contribute to a store’s management alongside the shop’s manager.

Furthermore, just as in almost everything else, professions differ between them. For example, while it is entirely plausible (and has happened on more than one occasion), that a salesperson or sales associate worked their way up to store manager or even commercial director, even despite lacking higher education, other occupations do not offer the same opportunities. For example, a legal assistant cannot become a lawyer or notary without a law degree, regardless of years of practice and experience in administration of legal affairs, or how good and competent he or she is.

A mysterious, otherworldly pilot. Image: © Megan Jorgensen (Elena)

Although the relationship fails to stand across the job market, since many jobs, especially in business and management, state in their employment descriptions that experience equivalent to a degree is an acceptable possibility. Still, as a rule, studies tend to show that better educated and highly skilled individuals earn higher salaries than their less qualified counterparts.

So what are the skills most sought out by employers? Of course, the answer greatly depends on the economy, as well as the field and the position one covets. Notwithstanding, computer, people (interpersonal), organizational and communication competencies seem to be in high demand. Also, writing outstanding CVs (curriculum vitae or resume), cover letters, craftily passing interviews and building a strong professional network all appear to contribute to a successful outcome to the looking for work process

Blackjack

Blackjack

The object of blackjack is to have a hand with a point value that is higher than the dealer’s. You must do this without going over 21 points, which is why the game is also known as Twenty-one. A player or dealer with 22 points or more has busted and automatically loses the hand. All numbered cards are worth their face value ; picture cards (Jacks, Queens, Kings) are worth 10 points each; and Aces are worth either 1 or 11 – which the player gets to determine. Suits and colors are disregarded in the game.

Before each deal, all players make their bets, if you’re playing at a casino.Two cards are then dealt to everybody including the dealer, who is dealt one card face down. A player whose first two cards add up to 21 (e.g., an Ace and a Queen) has a Blackjack and is immediately paid 2-2, unless the dealer also has a Blackjack. Whenever a dealer and player tie, it is known as a push, and neither one wins the hand.

Once everyone has been dealt, players have several options to choose from. The best move depends both on what you have been dealt and on the one exposed card of the dealer’s hand. A player can:

Hit: Take an additional card.

Stand: Take no additional cards.

Double Down: Double the original bet and take only one additional card.

Split: When a player has been dealt two cards of identical value (e.g., two 9s), he can choose to double the original bet and play the two card as two separate hands.

Claim Insurance: When a dealer is showing an Ace, players are invited to claim insurance that the next dealer’s card will be worth 10 (and thus Blackjack). Insurance involves risking half the amount of the original bet and pays off at two to one, if the dealer has a Blackjack.

Surrender: Forfeit the hand and lose half of the original bet. (Not an option in many casinos).

Once all players are either satisfied with their hands or have busted, the dealer proceeds. Unlike the players, who get to make choices, the dealer must proceed according to set rules: drawing on any hand that it less than 17 and standing on anything 17 or higher.

A party. Photo by Elena.

How to Win at BlackJack

You got to know when to hold’em, and know when to fold’em.

•     Always hit when you have been dealt 8 or less. You have no chance of busting, and you need to get closer to 21.
•     Always stand on hard hands of 17 or more, regardless of what the dealer is showing. A hard hand is a hand that either has no Aces or has an Aces that must be worth only one point because to be worth more would mean a bust (e.g., a 6, a Jack, and an Ace). If you hit, odds are you will bust.
•     Always hit if you have 16 or less and the dealer’s card is a 7,8,9,10, or Ace. There are the best cards and it is likely that the dealer will beat you. Although you have a good chance of busting, it is worth the risk of getting closer to 21.
•     Always stand on hard hands of 12 or more if the dealer’s first card is a 2,3,4,5, or 6. These are the worst cards and it is likely that the dealer will bust. But, you don’t win if you bust first.
•     Always stand on soft 19s and 20s. A soft hand is one that has an Ace that can still be valued at either 1 or 11. Don’t risk losing the good hand.

How to Monitor Representative

How to Monitor Representative

Keeping Tabs on Your Legislators

How closely does that campaign rhetoric match the reality? You can't monitor every vote of your Representative personally, but there are organizations that do just that and more on a regular basis. We've listed some of the most influential interest groups in the U.S., whether you want to join their cause and lobby Congress or merely find out what your elected officials are up to, these organizations can help.

Business and Labor

AFL-CIO Committee on Political Education: the nation's most powerful labor group, it's actually a federation of local, state and national unions.

U.S. Chamber of Commerce: One of the big three probusiness lobbying groups. Had its heyday during the Reagan administration.

National Association of Manufacturers: The most politically middle-of-the-road of the big three. Its members are, not surprisingly, large manufacturing firms.

National Federation of Independent Business: Champions the interests of small, independent business and is closest to the grass roots of the big three business groups.

Civil Rights

Rainbow/PUSH result of the merge between People United to Save Humanity (Push) and National Rainbow Coalition, Inc.: Founded by the Rev. Jesse Jackson, this group is best known for its advocacy of racial and ethnic tolerance.

View on the Manhattan Island. Photo by Elena

Consumer Groups

Common Cause: Among other things, Common Cause advocates public financing of congressional campaigns and ethics in government. It has been a player in the recent debate about campaign finance reform.

Consumer Federation of America: This federation of hundreds of organizations claims to stand up for the rights of average consumers in Congress and before federal regulatory agencies.

The environment

National Wildlife Federation: One of the most powerful public advocates for the environment and endangered species.

The Christian Coalition: The coalition has mobilized thousands of Christian activists around the country in support of a host of conservative issued. Leader Ralph Reed has been scoring points as one of Washington's savviest operators. TV evangelist Pat Robertson is the power behind the scenes.

National Abortion reproductive Rights Action League: The most prominent organization supporting reproductive choice and safe, legal abortions.

National Right to Life committee: The other side of the abortion battle. The committee opposes abortion, euthanasia, and infanticide, and supports abortion alternative programs.

National Rifle Association: The self-appointed defender of the Second Amendment, the NRA knows how to flex its muscle in Washington. It is one of the most powerful PACs in the country.

American Israel Public Affairs Committee: A powerful voice in Congress on issues that affect the future of Israel.

American Jewish Congress: Along with AIPAC, the most prominent lobbying force in Washington for Jewish affairs. Promotes civil rights and religious freedom.

American Association for Retired Persons: Arguably the most vocal public interest group of them all, and certainly one of the most powerful, this senior citizens' organization is legendary for its legislative savvy. Its magazine, Modern Maturity, has the largest circulation of any in the U.S.

If you whist to communicate with the President and his minions, the White House has its own Website, where you can see up-to-the minute press releases and transcripts of presidential speeches, get information on White House tours and other events at the mansion. You can as well send a message to the president.

How to E-Mail Congressperson

Your congressperson may be inside the Beltway, but that doesn't mean they're out of touch. Their e-mail addresses, as well as the texts of House bills, the Bill of Rights, election results, etc. are available.