Heh

Although Berkshire has built up a fairly deep bench in recent years, Mr. Sokol was seen as the frontrunner.

NYT, Friday, April 1, 2011, reporting on the abrupt departure of  Buffett exec David Sokol accused of, er, frontrunning.  "The Heir Who Won't Be King," Sec. B1, B7.  

Appreciation: Morris on Soros, Buffett and Volcker

Charles R. Morris' The Sages: Warren Buffett, George Soros and Paul Volcker (2009) really should not be a good book at all. To all appearances a quick-and-dirty threefer bio of a trio of finance celebreties, you might expect something more or less on the level of Us Magazine. What saves it are two things: one, Morris' remarkable feel for the treacherous landscape of some important financial issues, particularly macro policy The other is his extraordinary skill at exposition. Here, for example, Morris summarizes what Soros called "the Imperial Circle"--the unstable state of the macro-world in the mid-80s:

After runaway inflation was crushed in 1982, the economy veered into a peculiar growth stage that most economists regarded as highly unstable. ... an unusual blend of strong growth and a strong dollar, but with big trade and budget deficits. According to conventional wisdom, it was unsustainable--strong currencies don't coexist with big deficits. But the circle was squared by high American interest rates. High rates sucked in capital from abroad, so financed the U.S. trade deficits. At the same time, the depressive effect of high interest rates at home was offset by ... big bueget deficits. So, while high dollar interest rates imposed crushing burdens on developing countries like Brazil and Mexico, they hepled America live comfortably beyond his means.

-- Charles R. Morris The Sages:
Warren Buffett, George Soros and Paul Volcker (2009)

If you think this is ho hum, let me tell you--as one who, as a penny-ante investor, lived through the time while trying to figure out this maelstrom from himself, I think Morris has captured in a paragraph more than any other commentator could capture in no less. He is able to do that for just about every critical macro juncture in the book.

Aside from sheer celebrity, it may be difficult to understand why one would bother to put these three in the same book. Soros and Buffett are both investors but Volcker is primarily the creator of an investment climate. As an investor, Buffett has made his billions by ignoring (as far as he can) the transitory swirls and eddies of the market, while Soros has succeeded in bringing off what so much investment advice tells us we should not do: trying to identify trends and to ride them for all the are worth.

Even the likeability factor may require some justification. Buffett and Volcker probably pass the test--they are two of a tiny number whose reputations remain largely undiminished by the late uproar. Soros is a somewhat different matter. At least in part because of his involving himself in American domestic politics, he has had to bear a certain amount of demonization as a foreigner and a "speculator" (= a Jew?). This line of critique clearly does not impress Morris, who gives it scarcely a glance. He is much more impressed by a Soros who broke as government monopoly on information surveillance in Hungary by flooding the place with copy machines.

But I shouldn't make this review longer than the book. It is a decent evening's read, and a pleasure on every page. Highly recommended.

Who's The Lucky Fellow?

From a report on the Berkshire shareholder's meeting:

To illustrate the challenges the nation faced last year, Buffett showed a sales receipt for $5 million in U.S. Treasury bonds that Berkshire sold in December for $90.07 more than face value, ensuring a negative return for the buyer. Buffett said he doesn't think most investors will see negative returns on U.S. bonds again in their lifetimes.

Link. Have heard it said that a lot of Japanese lendindg in the 90s was de facto negative, as banks struggled to blind themselves to the parlous reality. But may we know the name of the lucky fellow who has enough money to buy a bond but can't afford a Posturepedic?

H/T: Aaron.

Buffett's Banker

Joel finds this account of Warren Buffett's favorite (only?) banker. Guy sounds a lot like, well, like Warren Buffett. Wonder if there is any chance that he is the designated successor.

What Would Warren Do? A Valediction

Here's a farewell message to the students in my law school basic finance class:

A backward-glance reflection, as the semester winds down. I've enjoyed teaching this class this year (I usually do), but there is one systematic problem. That is: some students come in here every year hoping they'll find out how to get rich investing. And I always have to tell them: look, I don't really know how to get rich investing. Getting rich investing is hard work. Unless you are willing to be disciplined and systematic and pretty much full time (and it probably helps to have a knack), you are better off not trying. Stick to low-cost mutual funds--maybe index funds--with diversified portfolios. This is a game for professionals, and in a game for professionals, amateurs are going to get beat up. Just think of the "outsiders" who win poker championships: they don't just drop through the transom, they have worked and worked and worked to polish their skills. Tastes differ, but my mortgage is paid, and my retirement is (more or less!) secure--I'd rather read a book, or go to the opera.

You don't believe me? Okay, believe Warren Buffett. There's a wonderful new interview with Warren in the current Fortune. Here's the takeaway paragraph (link):

What advice would you give to someone who is not a professional investor? Where should they put their money?

Well, if they're not going to be an active investor - and very few should try to do that - then they should just stay with index funds. Any low-cost index fund. And they should buy it over time. They're not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and wrong stock. You just make sure you own a piece of American business, and you don't buy all at one time.

Footnote: I see that Warren thinks "we've got three unusually good candidates this time." Hm, maybe I ought to pay attention (link).

A Simple Man

I guess I had known that Warren Buffett still lives in the same home that he moved into in 1958. I believe I had heard that he paid $31,500 which, when you stop and think about it, was a fair penny in its time (my first home, in 1965, cost me $13,500). I did not know it was ungated.

And I did not know that that it is 5,830 square feet, which is about the square footage of all the homes I ever owned, cumulative (link). Apparently you get a lot of house for $31,500 in Omaha, if your timing is right.

Reading note: I'd still say that Roger Lowenstein's bio of Buffett is about the best single business book I've ever read (link).