Okay, so I couldn’t think of a good title… but think about it after reading these helpful articles. 😉 I’m including some excerpts I like, but I would highly recommend reading each piece in its entirety. Good stuff.
Warren Buffett: Buy American. I Am.
So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.
Of course, I don’t remember him ever writing an Op-Ed saying “Be 100% Bonds, I am”, or “Hedge Against The Dollar, I Am”. However, I do agree that if you are going to buy stocks, now is a fine time to buy. I am maintaining my asset allocation, and I’m not even doing it grudgingly – I’m doing it happily.
Hedge Fund Manager Andrew Lahde’s Goodbye Letter
I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.
This guy bet big on the collapse on the subprime mortgage market and got great returns the last few years for his small hedge fund. He brings an interesting point of what drives people to super-duper-richness. I would probably do the same as Lahde, but others would keep reaching for more. Buffett’s new biography The Snowball also goes in the family life sacrifices/choices he made. The end part about hemp… is there a hidden correlation?
Bogle & Bodie On Wise Diversification
Jack Bogle: I am a believer in diversification. You buy index funds for stocks, and your bond portion should equal your age. This is how I invest, so I know how little it’s hurt me to have a substantial position in U.S. bonds. I’m in half Treasuries, half corporates.
[…]In recent years, international investing has had a higher correlation with the U.S. market than was traditional. If you invest internationally, you have to invest in foreign companies not as diversifiers but wealth producers. If you like international, get in gradually, maybe with 20% of your portfolio, half in developing markets and half in emerging markets. Europe looks a lot like us, so it’s at least possible you might get a better return out of emerging markets. I don’t invest internationally myself.
Zvi Bodie: […] And then there is insuring or hedging. That’s when you’ve got a safe asset and to my mind that is Treasury Inflation-Protected Securities, or TIPS. One way to protect yourself is to combine a diversified portfolio of risky assets with the safe asset. We teach students that you only need two mutual funds—the risky assets and the safe asset—to generate the entire set of risk-and-reward trade-offs.
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Buffett has definitely repeatedly said he believes the dollar will fall in value: 2006 letter to shareholders – talking the investment decision since 2001, 2007 letter “The U.S. dollar weakened further in 2007 against major currencies, and it’s no mystery why…“, etc..
Jonathan, this is off-topic, but i’m curious to know what you think about Ing accounts now that it appears the bank is capital-deficient. No FDIC protection there right? I kept my money in WAMU without any worries, but i think i’ll be transferring funds out of all my Ing accounts now…into my WAMU accounts.
I’m pretty sure that ING Direct, FSB (the bank, not the conglomerate) is FDIC-insured up to the same limits as all other insured banks.
John – Yes, but my point was that he didn’t submit a full-page editorial to the NY Times about the subject, directing common investors (not BRK shareholders) to follow suit.
and speaking about Pot.. Lahde makes an interesting observation.
“Ah, the female. The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers.”
If you ask me I believe him!
We’re hedged by shorting the 30-year bond and in some Yen right now. It has ups and downs, yes, but it’s a hedge, I’m not leveraged into it, so I can live with the ups and downs. If the dollar sinks slowly, or heaven forbid crashes, I should be protected somewhat.
Holy my lord…Jonathan are you trying to cause a panic!?
YES, ING Direct is FDIC insured!
http://home.ingdirect.com/faqs/faqs.asp?s=FDIC#002
http://www2.fdic.gov/idasp/confirmation_outside.asp?inCert1=35489
Josh Friedlander… any chance you went to NMH?
if so… let me know. wangooroo@gmail.com
John Hunter – The dollar has already tanked vs. other currencies over the last few years, and Buffett has changed his position on the dollar now from what it was earlier…time changes things. He made money shorting the dollar while the money was there to be made. The sentiment now is that US will weather the downturn much better than other markets. As US consumption tails off and worldwide capital tightens, exporting economies will suffer heavily and their currencies are expected to fall against the dollar. In turn, more money will be poured into the US as the dollar is considered the safe bet relative to the other currencies.
If gold prices start shooting up (and based on current demand that’s the only way i see it going over the next year) i think the high price of gold will make the US$ look even more attractive relative to other currencies. But then, that’s just mho.
@ Josh, that was me causing the Ing panic. I looked up governance on Ing instead of Ing Direct, forgetting as i always do to add the “Direct” onto Ing. Until i bookmarked the Ing Direct website, it would always take me a while to find the login page when i first opened my Ing Direct account.
I think the real reason Lahde quit is because he’s ahead and doesn’t want to lose his winnings because if he keeps playing he will, marijuana or no mariguana. All of these hedge fund guys only have one thing in common, they are all gamblers. Some of them are better than others. But if they play long enough they will lose. So don’t follow their advise. As for guys like Buffet, he’s really an investor but he does take on more risk them most.
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”
Ouch, that was painfully honest.
I certainly agree with the first part. Nothing makes me more fearful than greedy people. The consequences are usually horrendous. Take for instance, the crashing economy Mr. I-Am-The-Richest-Person-Alive is responding to.
And what a way to admit the nature of Capitalism: not only are Capitalists feeding on others misery, but being greedy with it in order to enrich themselves. Considering his admission of being greedy, and that that ought to be feared, and considering what we know about the consequences of greedy folk like Buffett it is also telling of Capitalism how those consequences don’t mix into his “rule.” The vicious cycle continues; fear the greed and get greedy with the fear. This certainly is a noble system.
As it stands, 0.2% of Warren’s annual income (which is a hundred times less than his net-worth) is taxed for social security – most Americans, like myself are taxed 100%. Once he is done being greedy with the fearful maybe he can drop that down to 0.1% while social security recipients, like my octogenarian grandparents, struggle to make due.
So write this admission down next to Bush’s “money trumps peace” because this one was a whopper of an admission.
— Michael McGehee
Social Security tax paid is limited, because the actual benefit is limited. Even Buffett’s SS check will be a couple thousand a month at most.
However, it is ironic that you chide Buffett on this, as he has repeatedly called for higher taxes on high income earners like himself.
Does anyone else think Buffett is being asked to voice his optimism to the American public?
He comes across rather disingenuous. He’s just talking. Let’s see him walk the talk.
If Warren Buffet was really concerned about paying JUST 17%, why didn’t he send in more? The IRS would be glad to take his money. They even have a form for it. Because he doesn’t like the government wasting his money any more than the rest of us. Iraq war, bail-out plans, we never asked for that.
Warren has his own ideas of course, but let’s say government policy involved real democratic participation and the majority decided to take 90% of the wealth of the wealthiest and distribute it in social programs, deciding democratically what to do with it. Would Warren go along with that?
You know that Buffett is also buying in Asia right? MidAmerican, one of his companies just sank a bunch of money into a Chinese battery maker.