Dr. George meets Warren Buffett

[NormR]

Notes from the Meeting Dr. George Athanassakos and Ivey MBA and HBA

students had with Mr. Warren Buffett  ...

 

http://www.bengrahaminvesting.ca/Resources/Interviews_Notes/Buffett_2015.pdf

[Pretium]

Brilliant, thanks.

 

Reminds me of what Jeremy Siegel said when he was in Chicago late last year for a conference. "Stocks are the least risky asset in the long-run".

 

https://www.mpmgllc.com/wp-content/uploads/2014/12/siegel-stocks-long-run.png

[loganc]

The most federal income tax that Burger King has ever paid was approximately $30 million but their earnings are in the neighbourhood of $12 billion so the tax shelter benefits are negligible.

 

I can't say anything about the exact US federal cash taxes that BKW has paid, but BKW doesn't have "earnings" anywhere close to $12 billion.  I suspect there was some kind of a typo here or misunderstanding.   

[Jurgis]

With regards to risk, the Berkshire portfolio suffered a 2% loss once and had 1% losses twice in our

history.

 

I've seen him say this more than once, but is this really true?

Looking at http://www.berkshirehathaway.com/letters/2014ltr.pdf , 2008 shows 9.6% book value drop, 2001 shows 6.2% book value drop. Are these not related to portfolio drops? (I guess they might be operating business goodwill writedowns - 2001 could be GenRe, I'd have to look up...). Also didn't he have Washington Post drop over 50% as he was buying it and wasn't that a large part of his portfolio?

 

It is still very surprising that he never suffered higher than 2% loss per year in his portfolio - if that's what he means. I don't think there's anyone else who has this kind of record...

[Jurgis]

"Question #8:

With the rise of social media and constant information it seems students are losing the ability to sit

down, think, and formulate their own thoughts like you have in the past."

"It means that I gain knowledge from reading a few 10-K's while others are tweeting what they had for breakfast. "

 

;D

 

Buffett's answer is good, but the questioner is overgeneralizing. :) There were tons of young people at DJCO annual and I assume the same is true for BRK, etc. Young people are not becoming more stupid.

[Jurgis]

Question#4:

Have you ever made money on someone else’s ideas?

 

B:

My preference is for my own ideas.

 

Wasn't See's Munger's idea? Wasn't Lubrizol Sokol's idea that he had to pitch to Buffett for quite a bit?

 

Not to put down Buffett, but nobody lives in a vacuum. If the idea is not from screening and just reading 10Ks (which might be majority of his ideas, but I don't think they all are), it's partially "not his" idea.

 

Maybe he means that inspiration might be from someone else, but analysis is his. I can see that. :)

[gfp]

He's talking about realized loss as a percentage of total net worth of the firm.

 

 

With regards to risk, the Berkshire portfolio suffered a 2% loss once and had 1% losses twice in our

history.

 

I've seen him say this more than once, but is this really true?

Looking at http://www.berkshirehathaway.com/letters/2014ltr.pdf , 2008 shows 9.6% book value drop, 2001 shows 6.2% book value drop. Are these not related to portfolio drops? (I guess they might be operating business goodwill writedowns - 2001 could be GenRe, I'd have to look up...). Also didn't he have Washington Post drop over 50% as he was buying it and wasn't that a large part of his portfolio?

 

It is still very surprising that he never suffered higher than 2% loss per year in his portfolio - if that's what he means. I don't think there's anyone else who has this kind of record...

[gfp]

It's his standard comment that Burger King paid ~$12Billion for Tim Hortons.  "Why would you spend 12 billion to save 30 million"...

 

The most federal income tax that Burger King has ever paid was approximately $30 million but their earnings are in the neighbourhood of $12 billion so the tax shelter benefits are negligible.

 

I can't say anything about the exact US federal cash taxes that BKW has paid, but BKW doesn't have "earnings" anywhere close to $12 billion.  I suspect there was some kind of a typo here or misunderstanding. 

[Jurgis]

He's talking about realized loss as a percentage of total net worth of the firm.

 

 

With regards to risk, the Berkshire portfolio suffered a 2% loss once and had 1% losses twice in our

history.

 

I've seen him say this more than once, but is this really true?

Looking at http://www.berkshirehathaway.com/letters/2014ltr.pdf , 2008 shows 9.6% book value drop, 2001 shows 6.2% book value drop. Are these not related to portfolio drops? (I guess they might be operating business goodwill writedowns - 2001 could be GenRe, I'd have to look up...). Also didn't he have Washington Post drop over 50% as he was buying it and wasn't that a large part of his portfolio?

 

It is still very surprising that he never suffered higher than 2% loss per year in his portfolio - if that's what he means. I don't think there's anyone else who has this kind of record...

 

Ah. Gotcha. Makes sense. Thanks. :)

[merkhet]

An alternative explanation for the 2% and 1% comments is that he's talking about permanent loss and not temporary markdowns.

[Jurgis]

An alternative explanation for the 2% and 1% comments is that he's talking about permanent loss and not temporary markdowns.

 

Yes, that's what globalfinancepartners said: "He's talking about realized loss".

 

This is somewhat less surprising with hold-forever good quality companies: they might underperform, but they hopefully don't lead to loss.

 

It might be still surprising that he did not suffer realized losses during Graham cigar butt years, but I guess the valuations then were really attractive.

[merkhet]

Ah, I took that to mean that the 2% and 1% were realized losses compared to the net worth of the company versus investment loss -- i.e. let's say that operating companies comprise 90% of the value of the company, and the realized investment losses were 10% of the investment portfolio.

 

As opposed to a 1% or 2% realized investment loss on the portfolio with the portfolio being the denominator.

 

One of the things that helped Buffett with the Graham-type stocks was that he was quite the activist in his day -- though he currently eschews the strategy.

[Jurgis]

Ah, I took that to mean that the 2% and 1% were realized losses compared to the net worth of the company versus investment loss -- i.e. let's say that operating companies comprise 90% of the value of the company, and the realized investment losses were 10% of the investment portfolio.

 

As opposed to a 1% or 2% realized investment loss on the portfolio with the portfolio being the denominator.

 

 

Yes, I guess it's a bit unclear which denominator he used. :)

[beerbaron]

I love Buffet but gees, he's like a politician with a playback button.

 

What will advance American competitiveness in the next 20 years? What are the biggest threats to

that competitiveness?

 

There is an abundance of information available these days, which is amazing. It’s important to realize

that everyone in this room is living a better life than John D. Rockefeller. In the next 20 years, we will be

living incomparably better lives than we do now. I hesitate to think about the service my dentist

provided me 20 years ago. At the same time, I’m sure that in 20 years people will feel the same way.

The drawback of growth, however, is that evil can leverage this progress to harm a significantly greater

proportion of the population. I see the biggest threat to American competitiveness as represented by

the acronym CNBC, namely Cyber, Nuclear, Biological and Chemical. By far the greatest threat to

humanity is that of a Nuclear war. If I could allocate all my resources to effectively combat this threat, I

would. Unfortunately there are very few effective channels that could effect this change.

 

What customs have you witnessed overseas that American businesses should adopt?

 

It is important to play with better players than you. The US is the best place to operate and you don’t

need to go beyond the US. It is easy to see success but it is more difficult to repeat the success. It is also

important to study failure as much as you study success. In general, I find it very interesting to observe

the market every day. For instance the 2008 crisis was a great movie and nobody knew how it would

end. In my opinion China has changed their system to be more “US like”.

 

??? Did he even listen to the questions... I'm wondering he he gives a proper answer in a one by one with a friend.

[Txvestor]

With regards to risk, the Berkshire portfolio suffered a 2% loss once and had 1% losses twice in our

history.

 

I've seen him say this more than once, but is this really true?

Looking at http://www.berkshirehathaway.com/letters/2014ltr.pdf , 2008 shows 9.6% book value drop, 2001 shows 6.2% book value drop. Are these not related to portfolio drops? (I guess they might be operating business goodwill writedowns - 2001 could be GenRe, I'd have to look up...). Also didn't he have Washington Post drop over 50% as he was buying it and wasn't that a large part of his portfolio?

 

It is still very surprising that he never suffered higher than 2% loss per year in his portfolio - if that's what he means. I don't think there's anyone else who has this kind of record...

 

 

I think he is referring to a loss recorded at sale as a percent of BV. He wrote about this in his annual letter, i beleive when he was referring to Tesco which loss amounted to something like 1/3 of 1% of Berkshire BV when sold.

[gurpaul88]

He does tend to repeat similar answers through his interviews, I think Alice Schroeder mentioned this somewhere. Nice to listen to Warren nonetheless.