Tag: berkshire hathaway

Free Advice From Seth Klarman & Charlie Munger

Posted on by The INO.com Team

By: Tim Melvin

It was Sir Isaac Newton who famously said, "If I have seen further than certain other men, it is by standing upon the shoulders of giants."

Those who came before us in life have left a huge treasure trove of knowledge, but it seems few ever take the time to study what those great minds have already learned.
Nowhere is this truer than in the markets, particularly when it comes to investing in the financial markets.

There have been some wildly successful investors who have been embarrassingly generous about sharing their secrets of making money, but almost no one takes the time to read the body of work.
The Legends And Their Myths

Most people know who some of these legends are but have never read the material. Most investors have heard of Benjamin Graham, but very few have ever read The Intelligent Investor, and even fewer have ever cracked the cover of Security Analysis. Continue reading "Free Advice From Seth Klarman & Charlie Munger" →

Buy-And-Hold No Longer Gold?

Posted on by The INO.com Team

When I first contacted Christopher Hill, editor of Investorazzi.com, about doing a guest blog post he jumped at the chance and hit me with his idea for an educational post for our members. Truthfully this post is a LONG time coming. It delves into the Buffett world. Now most people either love his style or think he's just lucky.

Well read the article below and make your comments and thoughts known. Do you think Buffett will survive? Do you think Faber is crazy? Whatever it is let's get the comments rolling as this is a great topic.

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Legendary stock investor Warren Buffett has been in the news a lot lately.  This past weekend, the noise was all about Berkshire Hathaway, Buffett’s investment holding company.  The Bloomberg website reported Saturday:

“Warren Buffett’s Berkshire Hathaway Inc. posted a fifth-straight profit drop, the longest streak of quarterly declines in at least 17 years, on losses from derivative bets tied to stock markets.

Fourth-quarter net income fell 96 percent to $117 million, or $76 a share, from $2.95 billion, or $1,904 a share, in the same period a year earlier, the Omaha, Nebraska-based firm said in its annual report. Book value per share, a measure of assets minus liabilities that Buffett highlights in his yearly letter to shareholders, slipped 9.6 percent for all of 2008, the worst performance since Buffett took control in 1965.”

As if this wasn’t enough bad news, earlier this week it was revealed that Berkshire Hathaway, which lists more than 70 operating businesses in its latest annual report to shareholders, is cutting manufacturing jobs and closing facilities.

Due to all the bad headlines, some are starting to question if the “Oracle of Omaha” is starting to lose his magic touch.  And investors, in particular, wonder if the buy-and-hold investing strategy, which Buffett is known to champion, is ineffective for these volatile times.

One veteran investor who openly questions the buy low, sell high approach to stocks these days is Dr. Marc Faber, otherwise know as “Dr. Doom” by the financial press.  Faber, who publishes the “Gloom Boom & Doom” report, predicted the current financial crisis and is famous for telling his clients to get out of U.S. stocks a week before the October 1987 market crash.  Back on December 1, Faber said the following on CNBC regarding the buy-and-hold strategy:

“We’ve moved into an environment of very high volatility where you will have up and down moves of, like, 20 percent all the time and that is a traders’ market… The Warren Buffett approach is dead and it’s been dead for ten years and it’s going to be dead for another ten years… We can have huge rebounds and then huge downturns again and I think the best for the average investor is to play it relatively in small amounts and not gear up and take big risks.”

Is Dr. Faber correct in his assertion that the stock market is now a traders’ market?  Buffett’s critics might say so, and point to the performance of his investment vehicle as proof.  Yet, I still remember those who dismissed Buffett as being over-the-hill in the late nineties due to his avoidance of technology stocks.  And what ever happened to these individuals?  Recently, Marc Faber has been calling for a rebound in equities.  Just last week, he told investors gathered in Tokyo:

“A countertrend rally could occur soon where stocks would suddenly rise quite substantially.”

If Faber is right and equities rally, then fall again significantly, expect the strategy, and poster boy, of buy-and-hold investing to come under even more fire down the road.

Christopher E. Hill
Editor
Investorazzi.com
“Tracking The World’s Greatest Investors”

Is now the time for a bear market rally?

Posted on by The INO.com Team

I've been in contact and reading the blog Psychologyofthecall.com for a few months now and from what I've read they seem to be on top of a number of issues. I asked them to answer one question for me...Is now the time for a bear market rally? Here's their answer:

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The ongoing global financial crisis has made perma bears look like geniuses, yet the Psychology of the Call team (POTC) senses the imminent appearance of a bear market rally for four good reasons.

1) President elect Obama's first speech and chief of staff pick, Mr. Rom Emanuel, were very bearish for the market; we are confident both of those negativities will change soon. POTC believes Mr. Obama's goal in the coming days and weeks will be to do everything popular to be re-elected to a second term in just four short years. He understands that half of U.S. citizens are in some way affected by the mayhem of the recent sell off; Americans expect transparent leadership and policies now.

It's that second pivotal term where Presidents are more inclined to show their true colors, especially in terms of openly hell bent left or right policy. We remain confident and are prepared for a lag effect Thanksgiving Obama rally to begin this week, as his centrist appointments and policies begin leaking through hedge fund insiders. We are not waiting for New Year to enter long positions, as that seems to be the easiest and most ‘herdish’ trade today: we remain forward thinking contrarians and are going long the S&P emini contracts into Thursday's death spike.

We believe President elect Obama will appoint some Wall Street friendly names to his first administration, doing so to satisfy his political appetite to win that critical no holds barred second term in 2012.

Yet, if he chooses to select only hard line left wingers, the market will not rally. After witnessing the extremely well planned and hard fought victory, we would be shocked to see a concentrated (leftist) cabinet:. We are confident that will not occur.

2) The pressure from Warren Buffett on President elect Obama to call for a change in mark to market accounting from the SEC, or announce a huge infrastructure stimulus plan plays a factor in our short term bullish call as well.

Berkshire Hathaway just reported a horrible quarter, and even if Buffett is okay with paying higher taxes, we know he does not want to see his almost perfect legacy wither, wilt, and die in his waning years.
Other recent Buffett investments in Goldman Sachs (GS) and General Electric (GE) have underperformed as well, and both of those companies will survive this wickedly panicked market.

3) The financial sector could begin to stabilize as it shrinks. The S&P is heavily weighted with oversold financials.  Approximately 20% of the S&P value lies in financials, so be cautious. Regional banks could begin bouncing with 50%+ buy-out premiums. Rumors abound that Citigroup (C) is very close to bidding for a regional bank with government TARP money.
Story here

This would ignite a type of forest fire under financials, forcing many perma bears to cover their seemingly bullet proof short positions.

We will take advantage of what we view as monopoly money about to be used to boost stocks like Regions Financial (RF) and/or Suntrust Bank (STI).

4) Intel's (INTC) (see MarketClub's latest prediction here, ed note) report of lowering numbers after hours creates the perfect set-up for hedge funds to close or enter new positions before they step foot on Capital Hill, Thursday. Please remember these managers are either long, short, or in cash at this point, so we expect the INTC news to shake out the wounded, weak, and desperate long herd, and flush out the dynamic kings of cash, specifically Steven Cohen and Paul Jones: Story here

These managers are patiently waiting to take over your shares when your fear factor boils over Thursday, turning their greed gauge on auto pilot in search of inexpensive generals. Will you allow them that satisfaction?

Four examples of best-in-breed generals at these levels are: Apple (AAPL), America Movil (AMX), Chicago Mercantile Exchange (CME), and Google (GOOG).

POTC feels the S&P index could settle above 1,000 by Thanksgiving, and as the bear rally gains momentum from one or two other positive developments mentioned above, then 1,100 on the S&P could well be reached before we wish you a Happy New Year.

Psychologyofthecall.com