Vegas & The Aftermath - Diary

[tikay]

Oh my, Warren on Twitter. He must be well into his eighties.

Love the profile - 317,122 followers, and 2 Tweets!

The main man. Will deffo follow, great find thanks Aaron.

I thought you'd like that.

I assumed from what I'd read on your diary that Warren must have written lots of books, but from what I can see he's only published his essays in book form.

If I were to read one book about Warren Buffett what should it be?

His collected essays are unbelievably good.

His annual speech at the Berkshire Hathaway shareholders meeting, usually attended by 30,000 or more, are like little pearls of wisdom. I'll find a link for you shortly. They are all collated on an Adobe document thing.

Best book about him is probably "Snowball". Will find the ISBN for you shortly, bear with me please. He fell out with the authoress of Snowball after the book was published, and they have never spoken since.

Thanks.

Found it, a 976 page behemoth of a book!  Ordering it will be the easy part, I hope it's a real page-turner.

http://www.amazon.co.uk/gp/product/0747591911

Yes, I should have warned you, it is a huge book.

[tikay]

There you go Aaron, Wiki Page & everything.



http://en.wikipedia.org/wiki/The_Snowball:_Warren_Buffett_and_the_Business_of_Life

It might well be sub-titled........

The really important thing is to find wet snow and a really long hill

.....which is a metaphor of course.

[tikay]

Numerous books have been written about Warren Buffett and his investment strategies. In October 2008, USA Today reported that there were at least 47 books in print with Buffett's name in the title. The article quoted the CEO of Borders Books, George Jones, as saying that the only other living persons named in as many book titles were U.S. presidents, major world political figures, and the Dalai Lama. Buffett said that his own personal favorite is a collection of his essays called The Essays of Warren Buffett, which he described as "a coherent rearrangement of ideas from my annual report letters" as edited by Larry Cunningham.

[tikay]

Berkshire Hathaway collected Shareholder Letters.


http://www.berkshirehathaway.com/letters/letters.html

These are not what you may expect in a Shareholders Letter or Report.


Credit GEICO – and its brilliant CEO, Tony Nicely – for our stellar insurance results in a disasterridden
year. One statistic stands out: In just two years, GEICO improved its productivity by 32%.
Remarkably, employment fell by 4% even as policy count grew by 26% – and more gains are in store.
When we drive unit costs down in such a dramatic manner, we can offer ever-greater value to our
customers. The payoff: Last year, GEICO gained market-share, earned commendable profits and
strengthened its brand. If you have a new son or grandson in 2006, name him Tony.



As you can see from the two tables, the comparative growth rates of Berkshire’s two elements of
value have changed in the last decade, a result reflecting our ever-increasing emphasis on business
acquisitions. Nevertheless, Charlie Munger, Berkshire’s Vice Chairman and my partner, and I want to
increase the figures in both tables. In this ambition, we hope – metaphorically – to avoid the fate of the
elderly couple who had been romantically challenged for some time. As they finished dinner on their 50th
anniversary, however, the wife – stimulated by soft music, wine and candlelight – felt a long-absent tickle
and demurely suggested to her husband that they go upstairs and make love. He agonized for a moment
and then replied, “I can do one or the other, but not both.”

[tikay]

There are thousands - literally - of Buffett quotes, but here are a handful. He is, in every way, a legend, and a hero of mine.  Oh to have one millionth of his wisdom.

Someone's sitting in the shade today because someone planted a tree a long time ago.


 
It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently

 


It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.


 
You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.


 
Price is what you pay. Value is what you get.


 
Risk comes from not knowing what you're doing.


 
Only when the tide goes out do you discover who's been swimming naked. (After the Credit Crunch exposed so many).


When you combine ignorance and leverage, you get some pretty interesting results.



A public-opinion poll is no substitute for thought.


 

[tikay]

His first business love is Insurance, & Re-Insurance, mainly because of something known as "float".


Let’s now talk about our four sectors and start with insurance, our core business. What counts
here is the amount of “float” and its cost over time.
For new readers, let me explain. “Float” is money that doesn’t belong to us but that we
temporarily hold. Most of our float arises because (1) premiums are paid upfront though the service we
provide – insurance protection – is delivered over a period that usually covers a year and; (2) loss events
that occur today do not always result in our immediately paying claims, because it sometimes takes many
years for losses to be reported (asbestos losses would be an example), negotiated and settled. The $20
million of float that came with our 1967 entry into insurance has now increased – both by way of internal
growth and acquisitions – to $49 billion.
Float is wonderful – if it doesn’t come at a high price. Its cost is determined by underwriting
results, meaning how the expenses and losses we will ultimately pay compare with the premiums we have
received. When an insurer earns an underwriting profit – as has been the case at Berkshire in about half of
the 39 years we have been in the insurance business – float is better than free. In such years, we are
actually paid for holding other people’s money. For most insurers, however, life has been far more
difficult: In aggregate, the property-casualty industry almost invariably operates at an underwriting loss.
When that loss is large, float becomes expensive, sometimes devastatingly so.
In 2004 our float cost us less than nothing, and I told you that we had a chance – absent a megacatastrophe
– of no-cost float in 2005. But we had the mega-cat, and as a specialist in that coverage,
Berkshire suffered hurricane losses of $3.4 billion. Nevertheless, our float was costless in 2005 because of
the superb results we had in our other insurance activities, particularly at GEICO.
* * * * * * * * * * * *
While our brand strength is not quantifiable, I believe it also grew significantly. When Berkshire
acquired control of GEICO in 1996, its annual advertising expenditures were $31 million. Last year we
were up to $502 million. And I can’t wait to spend more.

[tikay]

OK, I'll shut up going on about Warren now.

[RED-DOG]

I wish I'd discovered him when I was 20

[Skippy]

His first business love is Insurance, & Re-Insurance, mainly because of something known as "float".


Let’s now talk about our four sectors and start with insurance, our core business. What counts
here is the amount of “float” and its cost over time.
For new readers, let me explain. “Float” is money that doesn’t belong to us but that we
temporarily hold. Most of our float arises because (1) premiums are paid upfront though the service we
provide – insurance protection – is delivered over a period that usually covers a year and; (2) loss events
that occur today do not always result in our immediately paying claims, because it sometimes takes many
years for losses to be reported (asbestos losses would be an example), negotiated and settled. The $20
million of float that came with our 1967 entry into insurance has now increased – both by way of internal
growth and acquisitions – to $49 billion.
Float is wonderful – if it doesn’t come at a high price. Its cost is determined by underwriting
results, meaning how the expenses and losses we will ultimately pay compare with the premiums we have
received. When an insurer earns an underwriting profit – as has been the case at Berkshire in about half of
the 39 years we have been in the insurance business – float is better than free. In such years, we are
actually paid for holding other people’s money. For most insurers, however, life has been far more
difficult: In aggregate, the property-casualty industry almost invariably operates at an underwriting loss.
When that loss is large, float becomes expensive, sometimes devastatingly so.
In 2004 our float cost us less than nothing, and I told you that we had a chance – absent a megacatastrophe
– of no-cost float in 2005. But we had the mega-cat, and as a specialist in that coverage,
Berkshire suffered hurricane losses of $3.4 billion. Nevertheless, our float was costless in 2005 because of
the superb results we had in our other insurance activities, particularly at GEICO.
* * * * * * * * * * * *
While our brand strength is not quantifiable, I believe it also grew significantly. When Berkshire
acquired control of GEICO in 1996, its annual advertising expenditures were $31 million. Last year we
were up to $502 million. And I can’t wait to spend more.

I've often wondered why poker sites and online bookies don't do the same thing with their float- invest it and hope everybody doesn't try and withdraw at once. (the answer probably is "because they are not allowed to")

[tikay]

I wish I'd discovered him when I was 20

If you had done so, & squirrelled away a few shares in Berkshire Hathaway, you'd be a very rich man indeed now.

Their Class A  shares closed last night at $162,950.....EACH.

In the period 2000 - 2010 they increased in value by 76%, against a broad fall in the S & P of 11%.

The book value of BH has increased by an average of 20% per year for the last 48 years.

By an odd coincidence, as Aaron raised the topic last night, today, in Omaha Nebraska, is the Berkshire Hathaway Annual Shareholders Meeting, expected to be attended by over 20,000 "fans".

And Mr Buffett's salary? $100,000 per annum. And he does not take any other salary payment from BH, or share dividends.

[tikay]

His first business love is Insurance, & Re-Insurance, mainly because of something known as "float".


Let’s now talk about our four sectors and start with insurance, our core business. What counts
here is the amount of “float” and its cost over time.
For new readers, let me explain. “Float” is money that doesn’t belong to us but that we
temporarily hold. Most of our float arises because (1) premiums are paid upfront though the service we
provide – insurance protection – is delivered over a period that usually covers a year and; (2) loss events
that occur today do not always result in our immediately paying claims, because it sometimes takes many
years for losses to be reported (asbestos losses would be an example), negotiated and settled. The $20
million of float that came with our 1967 entry into insurance has now increased – both by way of internal
growth and acquisitions – to $49 billion.
Float is wonderful – if it doesn’t come at a high price. Its cost is determined by underwriting
results, meaning how the expenses and losses we will ultimately pay compare with the premiums we have
received. When an insurer earns an underwriting profit – as has been the case at Berkshire in about half of
the 39 years we have been in the insurance business – float is better than free. In such years, we are
actually paid for holding other people’s money. For most insurers, however, life has been far more
difficult: In aggregate, the property-casualty industry almost invariably operates at an underwriting loss.
When that loss is large, float becomes expensive, sometimes devastatingly so.
In 2004 our float cost us less than nothing, and I told you that we had a chance – absent a megacatastrophe
– of no-cost float in 2005. But we had the mega-cat, and as a specialist in that coverage,
Berkshire suffered hurricane losses of $3.4 billion. Nevertheless, our float was costless in 2005 because of
the superb results we had in our other insurance activities, particularly at GEICO.
* * * * * * * * * * * *
While our brand strength is not quantifiable, I believe it also grew significantly. When Berkshire
acquired control of GEICO in 1996, its annual advertising expenditures were $31 million. Last year we
were up to $502 million. And I can’t wait to spend more.

I've often wondered why poker sites and online bookies don't do the same thing with their float- invest it and hope everybody doesn't try and withdraw at once. (the answer probably is "because they are not allowed to")

I would imagine that some do. There is a huge mountain of money on deposit at the Online Gaming sites.

[Simon Galloway]

Some online poker sites have done in the past and probably do today.  The depositors usually expect the sites to have all deposits in a segregated way such that they cannot be used for operational purpose.

There isn't really any difference with a high street bank though.  The only difference was that, years ago, the banks could be trusted to only use a sufficiently small portion of deposits such that they could reasonably expect to stand any run on the bank made by depositors looking to withdraw en masse.

Given recent banking bail-outs, it seems that those banks (and regulators) were very capable of making exactly the same mistakes and misappropriations that a start-up poker skin ran by one guy sat in his shed might make.

[Lucky]

Are we agreed on Hey Mr Tambourine Man?


I'm unavailable for most of today, so this will have to do for now.

Before I forget, the clip of Frank and Bing. Are you into musicals in any way, Tikay? Not even the classics?

If not, any idea what connects that clip, Tom Hanks and a cheese spread? A nice easy starter for ten.

Philadelphia

[Tal]

Are we agreed on Hey Mr Tambourine Man?


I'm unavailable for most of today, so this will have to do for now.

Before I forget, the clip of Frank and Bing. Are you into musicals in any way, Tikay? Not even the classics?

If not, any idea what connects that clip, Tom Hanks and a cheese spread? A nice easy starter for ten.

Philadelphia

Good man.

High Society was the musical version of the Philadelphia Story.

[Machka]

I knew a Warren Buffett question would get you on a roll. 

I'm definitely going to get The Snowball and his two essay collection books.

Then it's just a long wait until your book comes out...