Categorized | chew on this

Some Warren Buffett nibblies

If Warren Buffett has any literary ambition (which I’m sure he does in spades), it’s to be remembered as the Ben Franklin of corporate business writing. James Joyce in the novel Ulysses once encapsulated Shakespeare in the pithy phrase, “A quote a day.” Well, that’s the Franklin (and Buffett) aesthetic, as well.

And so I present a modest little appetizer tray of Buffett’s “chew-on-this” nibblies from the Berkshire annual report.

On business and investment bandwagons: “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

And again: “Approval . . . is not the goal of investing.”

On the downturn: “By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.”

On investment opportunity in a downturn: “When investing, pessimism is your friend, euphoria the enemy.”

On the credit crunch: “The watchword throughout the country became the creed I saw on restaurant walls when I was young: “In God we trust; all others pay cash.”

On the bailouts: “Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.”

On being too big to fail in order to guarantee government aid: “. . .The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.”

On the distortions in the credit market caused by government bailouts: “At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.”

On leverage: “When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”

On the mortgage crisis: “. . . borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent.”

Common-sense home-buying: “Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.”

On the complexity of derivatives: ” . . . our feelings about the business mirrored a line in a country song: “I liked you better before I got to know you so well.”

And again: “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”

On financial models: “CEOs who have concocted their own valuations for esoteric financial instruments have seldom erred on the side of conservatism.”

And again: “Beware of geeks bearing formulas.”

On the fallacy of using historical models in finance: “If merely looking up past financial data would tell you what the future holds, the Forbes 400 would consist of librarians.”

And finally: “At age 78, I’ve concluded that speed afoot is a ridiculously overrated talent.”

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