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Warren Buffet - Is He Good for Investment Advice?

WheelsRCool

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Aug 12, 2007
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Alright, I know that Warren Buffet is beloved by tightwads and the like very much, but I'm wondering, is his investment advice good for fastlane folks? For example, once you get serious cash to invest, is his investment advice very good to follow?

Or should one avoid his ways?

I got out of the library a book called "The Warren Buffet Way," but I don't know if I should read it or not.
 

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tbsells

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Warren Buffett is rich enough to give away $40 billion and not miss it. I can't see how it would hurt to read the book. I personally don't know enough about him to answer the original question but the book sounds like it would be worthwhile. I don't think he got that rich in the slowlane.
 

JScott

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I can't imagine why anyone wouldn't want to get investment advice from the greatest investor of all time... :)

I personally think that everyone should take (many) lessons from Buffett, and apply them to their investing strategy. The problem is, most of Buffett's advice boils down to common sense and patience, and too many investors either don't have those things or refuse to believe that's all it takes.

At it's most basic, Buffett invests in company fundamentals, including (and especially) the management team, the business model, and the competitive landscape. He likes to rely on public information, and he has often said that if a company can't (or won't) explain what it does in it's annual report in terms that any lay-person could understand, he won't invest. Which probably explains why he prefers to own companies like Coca-Cola, Gillette, furniture and jewelry companies, newspapers, and lots of insurance and reinsurance companies. And why he rarely ever invests in technology, which he claims that he just doesn't understand well enough to know where the industry will be in 10 years (he's confident he knows what Coca-Cola and Gillette will be doing in 10 years :)).

Buffett bases much of his style off of Benjamin Graham ("The Intelligent Investor"), whom he studied under and worked for for many years.

My favorite Buffett quote is:

"All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies."
 

Venturer

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Nov 11, 2007
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Although I admire Warren Buffett very much and he has definitely been the greatest investor (in the conventional sense of the word) for the last few decades, I don't see his investment strategy as being 'fast lane'. If you're already rich and you're looking for a way to make your capital grow at roughly an average of 20% annually (which is fantastic) Buffett's investment approach is excellent. However, if you don't have enough money yet to be financially independent, this is certainly not an approach to get to that point fast.
 

JScott

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Despite how he denies it, Buffett uses financial leverage. This doesn't diminish his abilities, but his insurance operations generated fairly large amounts of "float" which he is able to gain usually at a free cost(due to well priced insurance contracts) Then he invests that money.
I think this is one of the things that Buffett freely admits. He *loves* the insurance/reinsurance business so much because he sees the float as pure leverage, essentially a 0% interest loan. While there's certainly risk involved in using it that way, he's made billions (for himself and others) doing it...
 

kimberland

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Jul 25, 2007
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Ummm....
lets see
buy assets for less then they're worth (always a good strategy... LOL)
and
buy enough to have a controlling interest (making you a business owner).
(TheGreatBear's point about using leverage is a bonus strategy)

If we have to ask whether that's fastlane,
then I think, MJ, we need a refresher on the definition.

As for those that say it is only applicable for the already wealthy,
well, sure, if you're buying the Coca-Colas of the business world
but what about Jack or Jill small/mid cap?

I never understand why small investors play in large caps
(unless they are rock bottom bargains).
 

6.0_bull

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Nov 27, 2007
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Warren buffet has his methodologies for investing doesn't mean it will work for you or anyone of us he has a net worth of billions ....But getting started in some type of investment is key to the fastlane ...and by all means you should read his book because you could never be educated enough , and I am sure you will pick up great advice from the man himself as a bases for your investment ideas ...
 

randallg99

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Aug 9, 2007
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That's not the impression he gives most people. Like in his letters to shareholders, he used to say, "Debt is a four letter word around here." While float may not seem to be debt, it is still a liability, and an foreseen disaster could cause large losses. He's playing a numbers game just like the LTCM guys.
LTCM got nailed because they had too much leverage and werent allowed to pass it on to the piss poor masses like insurance companies can...

insurance biz is the only one I know that can recoup losses by changing premium rates the following year after disasters/losses
 
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WheelsRCool

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Thanks for the information people, there is a LOT I need to learn about investing!

Ummm....
lets see
buy assets for less then they're worth (always a good strategy... LOL)
and
buy enough to have a controlling interest (making you a business owner).
(TheGreatBear's point about using leverage is a bonus strategy)
I do have this future dream to start a capital management company that would buy broken down companies and then build them back up (sort of like that Cerberus Capital Management that just bought Chrysler from Daimler-Benz).
 

JScott

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That's exactly how Buffett started...when he bought Berkshire Hathaway as a run-down and financially trampled textile company...

Unfortunately, BH didn't make it back to life as a textile company, but Buffett salvaged the corporate shell and it's now worth thousands of dollars... :)
 

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WheelsRCool

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Thousands...? Is it like BH itself is worth thousands but the companies it owns are worth billions...?
 

andviv

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This is an interesting topic.... Funny that everybody and their uncle think they know how this guy makes decisions and what formula he follows. however, the most interesting article I ever read about him presents a different picture. This is a genius that sits down on his office, does not talk to anybody, and then goes and makes a purchase order for controlling shares for the company he wants to get. It is just the way his brain works. I think it is terrible trying to dissect this and coming with statements like "this mutual fund follows the same strategy as WB". He is now a marketing catchphrase. It is so bad that he himself has decided he will need three geniuses to replace him. go figure.

I remember that his only real advice has been two rules: 1. do not lose money and 2. don't forget rule number 1. Is that what you call good investment advice? really?

But like I said, genius, pure genius.
 
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WheelsRCool

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Some people just have a knack for stuff that can't really be taught.

Sort of like a business executive that has a knack for spotting trends in the markets and then goes off to start their own company that becomes a big company.

You might ask them, "Hey, HOW EXACTLY do you spot these trends..." to which they might be like, "UH, I don't know, I just DO..."
 

AlwaysCurious

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Jan 16, 2008
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Investing eventually becomes quite boring
which is why most people aren't wealthy.
They get bored and switch techniques
before they have a chance to get wealthy.
If investing is that easy, just boring calcs, then it should be easy as well to automate this or to find someone to do the hands on stuff for you, right? I for myself would be more than happy to be an outsourcing partner for a bored investor with a fool-proof strategy and get some piece of the cake as well. Hehe. Until I am bored by myself :smxB:
 

Rufus Quail

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Jan 30, 2008
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......Warren Buffet is beloved by tightwads....is his investment advice very good to follow?....a book called "The Warren Buffet Way," but I don't know if I should read it or not.
Buffett does not give advice. The book is written by someone who studied Buffett's methods. Buffett's letters to stockholders can be downloaded from the Berkshire-Hathaway website. In his letters he gives statements about his investment philosophy, but not advice. Buffett is an entertaining writer, so it's a shame he doesn't write a book.

Anyone should be able to read a book and decide whether it is worthwhile. Maybe this person is afraid the book will poison his mind.

I'd like to know how this person was able to determine that Buffett is popular with "tightwads."

Following Buffett's methods requires a lot of time and patience. There is nothing fast about it. You need skill in analyzing financial statements and balance sheets. The books by Peter Lynch are an alternative. Lynch gives lots of advice in a format that is accessible by non-financial types.
 
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KLPInvestments

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Jan 22, 2008
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That's not the impression he gives most people. Like in his letters to shareholders, he used to say, "Debt is a four letter word around here." While float may not seem to be debt, it is still a liability, and an foreseen disaster could cause large losses. He's playing a numbers game just like the LTCM guys.
This is laughable to compare Buffett's Berkshire to LTCM.
 

KLPInvestments

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Jan 22, 2008
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That's not the impression he gives most people. Like in his letters to shareholders, he used to say, "Debt is a four letter word around here." While float may not seem to be debt, it is still a liability, and an foreseen disaster could cause large losses. He's playing a numbers game just like the LTCM guys.
C'mon Bear....Berkshire's stock portfolio could fall 30% tomorrow and Buffett wouldn't even blink. Do you know how many billions they have in cash on their balance sheet right now? Do you know how much free cash flow they are spinning off? Do you know that they are one of the very few companies with a AAA credit rating? Their balance sheet is pristine. They are a financial fortress. Sure they use float. They'd be crazy not to. Who wouldn't want to borrow money at 0% interest. Their insurance busineses have been through hurricanes, earthquakes, and many other calamities. They were like speedbumps to Berkshire. Sure, they had a negative impact on Berkshire's earnings for a time, and surely their cash position shrunk, but many other companies were put out of business or in financial crisis. Their stock prices plummeted, their credit ratings reduced, and in the end, their customers fleed to the safety of Berkshire Hathaway's insurance subsidiaries.

As an aside, when LTCM went belly up, guess who they called to bail them out? His initials are WB.
 

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WheelsRCool

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Aug 12, 2007
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:coffee:
Anyone should be able to read a book and decide whether it is worthwhile. Maybe this person is afraid the book will poison his mind.
There are lots of books I plan to read, but some are just not worth the time to read and are just fluff, which was what I was mostly trying to determine. I don't want to work through a book and really pay attention to it and then find out it is not worth studying from.

I'd like to know how this person was able to determine that Buffett is popular with "tightwads."
A lot of people (at least that I know) who are tight with their money admire Buffet because of his extraordinary wealth but lack of a very luxury lifestyle.

Which isn't to say there's anything wrong with that, I didn't mean "tightwads" as an insult.
 

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