Wednesday, July 16, 2008

What Warren Thinks...

Happened to stumble upon an article ( by Fortune on what Warren Buffett thinks about the current economy, the credit crisis and much more.

Have quoted a few FAQs from the article which I felt are meaningful:

Q: I know you had a paper route. Was that your first job?
A: Well, I worked for my grandfather, which was really tough, in the [family] grocery store. But if you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do. It might be wonderful to be head of GE, and Jeff Immelt is a friend of mine. And he's a great guy. But think of all the things he has to do whether he wants to do them or not.
Seane Lynch: Warren doesn't or probably never aspire to be a CEO of a very complex company. His whole life is spent on doing what he really likes and do at best - investment.

Q: How do you get your ideas?
A: I just read. I read all day. I mean, we put $500 million in PetroChina. All I did was read the annual report. [Editor's note: Berkshire purchased the shares five years ago and sold them in 2007 for $4 billion.]
Seane Lynch: Warren can just read annual reports, talk to management and close a deal with a price he sees right. That easy?

Q: What should we say to investors now?
A: The answer is you don't want investors to think that what they read today is important in terms of their investment strategy. Their investment strategy should factor in that (a) if you knew what was going to happen in the economy, you still wouldn't necessarily know what was going to happen in the stock market. And (b) they can't pick stocks that are better than average. Stocks are a good thing to own over time. There's only two things you can do wrong: You can buy the wrong ones, and you can buy or sell them at the wrong time. And the truth is you never need to sell them, basically. But they could buy a cross section of American industry, and if a cross section of American industry doesn't work, certainly trying to pick the little beauties here and there isn't going to work either. Then they just have to worry about getting greedy. You know, I always say you should get greedy when others are fearful and fearful when others are greedy. But that's too much to expect. Of course, you shouldn't get greedy when others get greedy and fearful when others get fearful. At a minimum, try to stay away from that.

Q: By your rule, now seems like a good time to be greedy. People are pretty fearful.
A: You're right. They are going in that direction. That's why stocks are cheaper. Stocks are a better buy today than they were a year ago. Or three years ago.

Q: But you're still bullish about the U.S. for the long term?
A: The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.
Seane Lynch: So, you think the Malaysian economy is going to do fine? If yes, should you go into stocks now?

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