Tuesday, September 20, 2005

Katrina, Carol Loomis, Rating Agencies, and Sequoia

In the news, Berkshire expects to take down 3-5% of Katrina's damage.

A great article by Carol Loomis, one of the best business journalists out there and Buffett's annual report editor, about her 51 years at Fortune. She writes specifically about her relationship with Warren here.

Interesting piece from BusinessWeek on the rating agencies. I don't think Moody's moat is going away anytime soon.

And finally, a must read for value investors, the transcript of Sequoia's annual meeting. Includes some extensive Berkshire discussion...a quick summary of the case for the compounding machine:

"I think one of the interesting things about evaluating Berkshire is just considering
that you’ve got the smartest investor of all time, as far as I know — Keynes or somebody might
give me an argument on that — but you have Warren carrying a portfolio of $105 billion that
yields less than 3% after taxes. And here’s a person who historically has averaged a total
return of about 21% after taxes. When we tell you Sequoia’s total return is 16%, that’s before
taxes. Warren will not make a 21% return in the future. But if you ask me, is he capable and
healthy enough, etcetera, to make a return of 10% or 12% over the next ten years — and I think the insurance tables might lead you to think that he could live that long — well, I am making a bet that he will. And then you take the difference between the 3% and the 10%, and
you come up with a fairly large number that is potential earning power just sitting there
waiting for the right opportunity."

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