Disclaimer

DISCLAIMER: The foregoing has been prepared solely for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any thought or instrument or to participate in any particular thought process. I am not a seminarian, an economist or a politician, but this blog may contain thoughts that may pertain to any of the above, and these are just my thoughts on the date of record. I reserve the right to change my opinion or thoughts based on new information, new misinformation or life experiences. Although not all thoughts may necessarily be original (after all, there is "nothing new under the sun"), I will do my best to point out where I have borrowed other's thoughts and ran with it. WARNING: Continued reading may result in headaches, apparent loss of intelligence or apparent gain in intelligence, or initial annoyance at the writer of this blog. This blog is not intended for the weak at heart, the ill-tempered, or people who already know it all. Read at your own risk, and only post or email comments to me in a friendly manner if you really expect or desire a response. Consult your family therapist before reading this blog. If the views of this blog are overly offensive to you, seek immediate attention. The thoughts provided are not meant to raise your blood pressure - just to get you thinking, but in certain cases, may require an increase in blood pressure in order to get you thinking. Clark's Thoughts may not be suitable for all people.

Tuesday, May 5, 2009

The Oracle of Omaha

I just returned from the Annual Berkshire Hathaway shareholders meeting. This year witnessed a record attendance – approximately 35,000 people from around the globe flocked to Omaha, Nebraska to have the opportunity to hear some words of wisdom from the "Oracle of Omaha," Warren Buffett, and his partner and long-time sidekick Charlie Munger.

In case you are not familiar with Warren, Warren is the world’s wealthiest person. Depending on the quarter, he is neck-and-neck with Bill Gates and Mexican telecommunications giant, Carlos Slim Helu, but as of last year, I believe Warren was still in first place. How did he get there? Hard work making money, and then working hard to make his money work for him.

One of the best Buffett books that I have read, and I am by no means a Buffett expert, was the The Snowball: Warren Buffett and the Business of Life by Alice Schroeder, published last year. The Snowball explains how Buffett was an entrepreneur at an extremely young age, and as he accumulated assets, the book details how he gradually invested his money, and other people’s money, to propel him to the wealthiest human on the planet.

Warren is undoubtedly the most famous investor in the world, and plenty of people flocked to see him last weekend. At one point during the conference, I was within a few feet of multiple billionaires, including Bill Gates, Charlie Munger, and himself, Warren Buffet. At one point in time, I literally bumped into Warren. What do you say when you have about 1/10th of a second to have a conversation with the world’s wealthiest person? In a blink of an eye, I knew exactly what to say. "Hi, Warren!" I said gleefully as he passed by. "Hi, how are you doing?" he responded with a smile, and hurried through the crowd to take his seat.

Not much, I know, but it was the extent of my conversation with Warren, nonetheless. But soon the shareholders Q&A meeting would get started, and I would have the opportunity to hear some valuable insight from this brilliant investor.

This year, three journalists would ask questions that were chose from thousands of different shareholders, and some shareholders present were selected from a lottery system to ask the questions. Both Warren and Charlie are known for their words of wisdom. During the meeting, Warren would routinely take 5 minutes to answer a 1-minute question, and Charlie, who always batted second, would take 1 minute to answer a 10-minute question.

All sorts of questions were asked of the two, from the economy to any other question regarding Berkshire Hathaway’s holdings or operations. Buffett, who is a well known Democrat, and Munger, who is a Republican, both had the same view from the measures the government has taken recently to stimulate the economy: What they did wasn’t perfect, but it beat doing nothing.

When asked about Government Bonds, Buffett was clear that fixed income investors were going to lose purchasing power over time. Munger was a little more direct, saying that one "should become a brain surgeon and invest in Coca-Cola rather than government bonds."

On Inflation: "The best protection against inflation is your own earnings power," according to Buffet. In other words, excel in your chosen career path. Be the best you can be, and you will be able to earn more and more. The second best protection against inflation is the "earnings power of a wonderful business," especially ones that do not require heavy capital outlay.

Buffett and Munger mentioned several times that it is important to have emotional stability when being an investor, and slammed investors and analysts that try to "outsmart" the system. According to Buffett, "it is much better to have an IQ of 130, than to think you have an IQ of 160, when it is only 150." High IQ’s can get you into trouble. "Investing is simple, but it isn’t easy." You don’t have to be a brain surgeon to make money in the market.

Over the years, there have been thousands of words of wisdom from Buffett, 78, and Munger, 85. "You should invest in a business that even a fool can run, because someday a fool will," and two rules, "#1. Never lose money. #2. Never forget rule No. 1," both attributed to Buffett. Munger’s wisdom is equally revered: "Bull markets go to people’s heads. If you’re a duck on a pond, and it’s rising due to a downpour, you start going up in the world. But you think it’s you, not the pond, "and "People calculate too much and think too little."

Whether or not you like Warren Buffett and Charlie Munger or their politics, there is no doubt they will go down as two of the absolute best investors this world has ever known. Of course these are just my thoughts – Clark’s Thoughts.