The Buffett Blog

Maybe they'll do a concert together someday. Cousin Jimmy and Mr. B did once, so there is hope... Bono and Buffett hung out together recently in Omaha after the U2 concert, as Forbes reports here, in an attempt to solve some of the world's problems. Buffett has said that he is paying more attention to philanthropy these days, trying to solve the big problems which don't have a natural constituency. Bono and Susie Buffett were the ones who first hit it off, testimony being that Bono flew in to Omaha for the private funeral last year to sing. There was a lovely tribute to Susie at the Annual Meeting last year -- with a great excerpt from a Charlie Rose interview. Perhaps Buffett wouldn't have made it this far without her.

Looking for reading material? Start here, which contains a variety of gems. Greenwalt's Value Investing, Taleb's Fooled and Cialdini's Influence are my favorites. I call Cialdini my $60k book, since I think I learned more from it than most of business school (no gripes on Chicago, but testimony to the book). The annual letters of course are a must read, as are the Lowenstein on Buffett, Lowe on Charlie, and the Almanack (which is on my xmas reading list, having sat unread since the annual meeting -- what have I been wasting my time on? who knows --)

Happy holidays.

Buffett has famously suggested recently (last annual report/meeting?) that most investors would be better off over time in an index fund. I wonder if he'll endorse some of the smart indexing currently being offered by Powershares and their competitors. If he doesn't, in my opinion he should, because it is smarter. They'll never be able to identify the great business with pricing power that doesn't require capital (think See's Candies -- I myself am surprised by how many professionals don't really get this 'candy conundrum' either, so rare but so desirable -- the anti-tech). A very good summary of what is currently on offer in the smart indexing space is here. I'll continue to go on record about Japan, and recommend the new Japan fund that comes out tomorrow from Powershares. As soon as our stock market turns down the books with silly titles like 'Asian Kings' and 'SuperInnovative Japanese' and 'Hardworking Chinamen' will hit the shelves again, with content as high-minded as the culturally sensitive titles I suggest, just like 1988. I ought to start writing one now...

Never say Buffett doesn't understand incentives. Pizza and beer at Borsheim's. Susan Jacques is a lady after my own heart, here. Do you think they cleared this with Charlie first? The answer surely would have been "yes".

The holidays come early for Charlie Munger fans: Kiplinger sits down with Charlie for a short interview, and as with pretty much everything he writes/says, it is absolute must read material. Some of the highlights:

What are your work styles like?
We have certain things in common. We both hate to have too many forward commitments in our schedules. We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business. We do that because we like that kind of a life. But we've turned that quirk into a positive outcome for ourselves.

What would a good investor's portfolio look like? Would it look like the average mutual fund with 2% positions?
Not if they were doing it Munger style. The Berkshire-style investors tend to be less diversified than other people. The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification. Because I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results. But why would you get on the bandwagon like that if somebody didn't make you with a whip and a gun?

Should people be investing more abroad, particularly in emerging markets?
Different foreign cultures have very different friendliness to the passive shareholder from abroad. Some would be as reliable as the United States to invest in, and others would be way less reliable. Because it's hard to quantify which ones are reliable and why, most people don't think about it at all. That's crazy. It's a very important subject. Assuming China grows like crazy, how much of the proceeds of that growth are going to flow through to the passive foreign owners of Chinese stock? That is a very intelligent question that practically nobody asks.

Ibbotson finds 10% average returns back to 1926, and Jeremy Siegel has found roughly the same back to 1802.
Jeremy Siegel's numbers are total balderdash. When you go back that long ago, you've got a different bunch of companies. You've got a bunch of railroads. It's a different world. I think it's like extrapolating human development by looking at the evolution of life from the worm on up. He's a nut case. There wasn't enough common stock investment for the ordinary person in 1880 to put in your eye.

Great Stuff. I think Charlie and Mr. Burns are the only people who still use the word Balderdash.

For the real Charlie die-hards, a Ben Franklin museum exhibit is beginning to make the rounds.

More is out on the fee-filled Mini-Berkshire shares that Wachovia is creating.

University of Kansas students get ready to pitch businsess to Warren.

Although Mr. Buffett opined to us in May that his friend Bill wanted to "kill" Google, see the following two posts for the most fascinating item I've read on Google in a long time, and the attempt to claim the value chain on the internet.

Like Bill claimed the value in between the keyboard and the CPU where no one else saw it (IBM gave it away), GOOG seems to be doing same in between our finger tips and the internet. What is the internet anyway, a big coffeeshop library? Who is the Starbucks? Msft or GOOG? Articles following argue GOOG. Grab a Bud while you read them, here and here. Don't know how it stacks up against MSFT Live.

Anyone care to opine?