Live Forex Rates

Live Forex Rates

FOREX TRADING STRATEGIES IN A NUTSHELL

FOREX TRADING STRATEGIES IN A NUTSHELL


What you need to know about Forex trading strategies and how to trade currency। Simply put, Forex Trading is buying and selling of international currencies. The US dollar is almost always the base currency against which other currencies are bought and sold in real Forex trading. Of course, one's local currency can also be used as a base currency. In such a case it will be called a CROSS TRADE. Cross trading is then an exchange of two currencies where US dollar is not involved.

How to trade currency
Say, you got a tip or you suspect that the Japanese Yen might appreciate in value against US dollar in near future. The current exchange rate is ¥ 120 to a US dollar. You go to the bank and exchanged US$ 10,000 for ¥ 1,200,000.00
US$ 1।00 = ¥ 120.00 US$ 10,000.00 = (120*10,000) You will get: ¥ 1,200,000.00

Profit

Later on, as expected, the Yen appreciates by Five Yen to ¥ 115 to a US dollar. You then take your Yens back to the bank and exchanged them into US dollars. You will get US$ 10,434.78. This extra US$ 434.78 will then be your profit on top of your initial investment of US$ 10,000.
¥ 115.00 = US$ 1.00 ¥ 1,200,000.00 = (1/115)*1,200,000 = US$ 10,434.78
Initial Investment was: = US$ 10,000.00
Your PROFIT: = US$ 434।78

Loss

On the other hand, instead of appreciating, the Yen further weakens. After all, it was only an expectation that the Yen will appreciate, not a guaranty. Say, it weakens by Five Yen to ¥ 125 to a US dollar. Of course you now have a choice to either hold on to your Yens until it appreciates or exchange them back into US dollars. Suppose, you want to exchange them back into dollars for fears of further Yen weakness. You then take your Yens back to the bank and exchanged them into US dollars. You will get US$ 9,600.00. Your loss is US$ 400.00. Now your initial investment of US$ 10,000 is reduced to US$ 9,600.
¥ 125.00 = US$ 1.00 ¥ 1,200,000.00 = (1/125)*1,200,000 = US$ 9,600.00 Initial Investment was: = US$ 10,000.00 Your LOSS: = (-US$ 400.00)
Forex Trading is neither gambling nor should it be perceived as such. In gambling, once you place a bet you cannot withdraw from a losing situation. You either win or loose. On the other hand, with Forex trading, you decide how much you are prepared to lose or wait until you are in profit. Forex trading strategies provide several means to accomplish just that.
Hence, one can trade Forex euphorically or in an organized manner. The tools and techniques are there to help you learn how to trade currency, it's up to you to use them for your best interest.

Day Trading Forex Currencies

Day Trading Forex Currencies.
The world of The Day Trader has become especially popular in recent years। But those who engage in Day Trading FOREX Currencies are some of the most highly skilled and most profitable traders on the market. But beware; Day Trading FOREX Currencies is not for the faint of heart.

First consider a typical trading day। The day begins on Monday in Sydney, Australia and ends on Friday. It runs twenty four hours a day for the entire business week. Couple this with the aspects of foreign denomination currencies, and social and political influences affecting the global community, and you will see why Day Trading FOREX Currencies can be a fast-paced, if not dangerous environment to move and manipulate fortunes with.

While many National Banks and Large Corporations engage in FOREX Trading, the arena of Day Trading FOREX Currencies is left to the medium and smaller traders। These individual and small houses are practically built for the speed of thought and quick reflexes required to make huge, quick profits Day Trading FOREX Currencies. The larger entities move too slowly and thus, generally avoid Day Trading FOREX Currencies.

But before you get started it might be wise to make sure you have the financial backing and risk loss ability to even consider Day Trading FOREX Currencies। Fortunes must be waged and are lost on a constant basis. So before Day Trading FOREX Currencies, make sure (as every wise investment counselor will tell you) that you have the money to gamble.

In Day Trading FOREX Currencies, you will find that you’re going to need a fast computer, up-to-the-minute telecommunications equipment, and a thorough knowledge and understanding of the global community. It pays big if you know your target and subjects, as Day Trading FOREX Currencies deals with a wide variety of foreign entities and the research level for this can be exhaustive in nature. So before Day Trading FOREX Currencies, make sure you’ve got your ducks in a row, as the old saying goes.

Value investing

Value investing

From Wikipedia, the free encyclopedia
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Value investing is a style of investment strategy from the so-called "Graham & Dodd" School. Followers of this style, known as value investors, generally buy companies whose shares appear underpriced by some forms of fundamental analysis; these may include shares that are trading at, for example, high dividend yields or low price-to-earning or price-to-book ratios.
The main proponents of value investing, such as Benjamin Graham and Warren Buffett have argued that the essence of value investing is buying stocks at less than their intrinsic value[1]. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.
However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.

Contents[hide]
1 History
1.1 Benjamin Graham
1.2 Further evolution
2 Value Investing Performance
2.1 Performance, value strategies
2.2 Performance, value investors
3 Well Known Value Investors
4 Other Notable Value Investors
5 References
6 See also
7 Formative Value Investing Books
8 Value Investors at Wikiquote
9 External links
//

[edit] History

[edit] Benjamin Graham

Benjamin Graham
Value investing was established by Benjamin Graham and David Dodd, both professors at Columbia University and teachers of many famous investors. In Graham's book The Intelligent Investor, he advocated the important concept of margin of safety — first introduced in Security Analysis, a 1934 book he coauthored with David Dodd — which calls for a cautionary approach to investing. In terms of picking stocks, he recommended defensive investment in stocks trading not far from their tangible book value as a safeguard to adverse future developments often encountered in the stock market.

[edit] Further evolution
However, the concept of value (as well as "book value") has evolved significantly since the 1970s. Book value is meaningful only in some traditional stable industries where the value of an asset is well defined. When an industry is going through fast technological advancements, the value of its assets is not easily estimated. Sometimes, the production power of an asset can be significantly reduced due to competitive disruptive innovation and therefore its value can suffer permanent impairment. One good example of decreasing asset value is a personal computer. An example of where book value does not mean much is the service and retail sectors. One modern model of calculating value is the discounted cash flow model (DCF). The value of an asset is the sum of its future cash flows, discounted back to the present.

[edit] Value Investing Performance

[edit] Performance, value strategies
Value investing has proved to be a successful investment strategy. There are several ways to evaluate its success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks. These studies have consistently found that value stocks outperform growth stocks and the market as a whole.[2] [3] [4]

[edit] Performance, value investors
Another way to examine the performance of value investing strategies is to examine the investing performance of well-known value investors. Simply examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech that was published as The SuperInvestors of Graham and Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett's conclusion is identical to that of the academic research on simple value investing strategies--value investing is, on average, successful in the long run.

[edit] Well Known Value Investors
Benjamin Graham is regarded by many to be the father of value investing. Along with David Dodd, he wrote Security Analysis, first published in 1934. The most lasting contribution of this book to the field of security analysis was to emphasize the quantifiable aspects of security analysis (such as the evaluations of earnings and book value) while minimizing the importance of more qualitative factors such as the quality of a company's management. Graham later wrote The Intelligent Investor, a book that brought value investing to individual investors. Many of Graham's students, such as William J. Ruane, Irving Kahn, Walter Schloss, and Charles Brandes went on to become successful investors in their own right.
Graham's most famous student, however, was Warren Buffett, who ran successful investing partnerships before closing them in 1969 to focus on running Berkshire Hathaway. Charlie Munger joined Buffett at Berkshire Hathaway in the 1970s and has since worked as Vice Chairman of the company. Buffett has credited Munger with encouraging him to focus on long-term sustainable growth rather than on simply the valuation of current cash flows or assets.[5]
Another famous value investor is John Templeton. He first achieved investing success by buying shares of a number of companies in the aftermath of the stock market crash of 1929. He went on to become famous for investing in global equity markets.
Many successful value investors have gained fame recently. Joel Greenblatt is widely renowned for achieving annual returns at the hedge fund Gotham Capital of over 50% per year for 10 years from 1985 to 1995 before closing the fund and returning his investors' money. He is known for investing in special situations such as spin-offs, mergers, and divestitures. Edward Lampert is the chief of ESL Investments. He is best known for buying large stakes in Sears and Kmart and then merging the two companies.
[edit] Other Notable Value Investors

Mario Gabelli

Michael Price
Scott Black
Shelby Davis
David Dreman
Mario Gabelli
Benjamin Graham
Seth Klarman
Joel Greenblatt
Mason Hawkins
Irving Kahn
Irwin Michael
Bill Miller
John Neff
Monish Pabrai
Michael Price
Eric Schleien
Martin J. Whitman
John Burr Williams

[edit] References
^ The Intelligent Investor, Benjamin Graham, Ch.20
^ The Cross-Section of Expected Stock Returns, by Fama & French, 1992, Journal of Finance
^ Firm Size, Book-to-Market Ratio, and Security Returns: A Holdout Sample of Financial Firms, by Lyon & Barber, 1997, Journal of Finance
^ Overreaction, Underreaction, and the Low-P/E Effect, by Dreman & Berry, 1995, Financial Analysts Journal
^ Warren Buffett's 1989 letter to Berkshire Hathaway shareholders

[edit] See also
Index investing
Growth investing
Socially responsible investing
Ethical investing
Appreciation
Capital accumulation
Financial economics
Magic Formula Investing
Investment management
Investor profile
Investor relations
Return on investment
Saving
Speculation
Stock investor
Value (economics)
Value averaging
List of Marketing Topics
List of Management Topics
List of Economics Topics
List of Accounting Topics
List of Finance Topics
List of Economists

[edit] Formative Value Investing Books
The Theory of Investment Value (1938), by John Burr Williams. ISBN 0-87034-126-X
The Intelligent Investor (1949), by Benjamin Graham. ISBN 0-06-055566-1
Security Analysis (1934), by Benjamin Graham. ISBN 0-07-144820-9
The Essays of Warren Buffett (2001), edited by Lawrence A. Cunningham. ISBN 0-9664461-1-9.
You Can Be a Stock Market Genius (1997), by Joel Greenblatt. ISBN 0-684-84007-3.
The Little Book That Beats the Market (2006), by Joel Greenblatt. ISBN 0-471-73306-7.
Contrarian Investment Strategies: The Next Generation (1998), by David Dreman. ISBN 0-684-81350-5.
The Little Book of Value Investing (2006), by Chris Browne. ISBN 0-470-05589-8.
Rule #1 (2006), by Phil Town. ISBN 0-307-33613-1.

[edit] Value Investors at Wikiquote
Warren Buffett
Benjamin Graham
Joel Greenblatt

[edit] External links
Warren Buffett's Letters to his Shareholders
Superinvestors of Graham and Doddsville
The Evolution of the Idea of "Value Investing": From Benjamin Graham to Warren Buffett
What has Worked in Investing

http://en.wikipedia.org/wiki/Value_investing

Warren Buffett gives away his fortune

Warren Buffett gives away his fortune

FORTUNE EXCLUSIVE: The world's second richest man - who's now worth $44 billion - tells editor-at-large Carol Loomis he will start giving away 85% of his wealth in July - most of it to the Bill & Melinda Gates Foundation.

By Carol J. Loomis, FORTUNE editor-at-large
June 25, 2006: 1:42 PM EDT
NEW YORK (FORTUNE Magazine) - We were sitting in a Manhattan living room on a spring afternoon, and Warren Buffett had a Cherry Coke in his hand as usual. But this unremarkable scene was about to take a surprising turn.
"Brace yourself," Buffett warned with a grin. He then described a momentous change in his thinking. Within months, he said, he would begin to give away his Berkshire Hathaway fortune, then and now worth well over $40 billion.

This news was indeed stunning. Buffett, 75, has for decades said his wealth would go to philanthropy but has just as steadily indicated the handoff would be made at his death. Now he was revising the timetable.
"I know what I want to do," he said, "and it makes sense to get going." On that spring day his plan was uncertain in some of its details; today it is essentially complete. And it is typical Buffett: rational, original, breaking the mold of how extremely rich people donate money.
Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett's (a connection that began in 1991, when a mutual friend introduced Buffett and Bill Gates).

The Gateses credit Buffett, says Bill, with having "inspired" their thinking about giving money back to society. Their foundation's activities, internationally famous, are focused on world health -- fighting such diseases as malaria, HIV/AIDS, and tuberculosis -- and on improving U.S. libraries and high schools.

Up to now, the two Gateses have been the only trustees of their foundation. But as his plan gets underway, Buffett will be joining them. Bill Gates says he and his wife are "thrilled" by that and by knowing that Buffett's money will allow the foundation to "both deepen and accelerate" its work. "The generosity and trust Warren has shown," Gates adds, "is incredible." Beginning in July and continuing every year, Buffett will give a set, annually declining number of Berkshire B shares - starting with 602,500 in 2006 and then decreasing by 5% per year - to the five foundations. The gifts to the Gates foundation will be made either by Buffett or through his estate as long as at least one of the pair -- Bill, now 50, or Melinda, 41 -- is active in it.
Berkshire's price on the date of each gift will determine its dollar value. Were B shares, for example, to be $3,071 in July - that was their close on June 23 - Buffett's 2006 gift to the foundation, 500,000 shares, would be worth about $1.5 billion. With so much new money to handle, the foundation will be given two years to resize its operations.

But it will then be required by the terms of Buffett's gift to annually spend the dollar amount of his contributions as well as those it is already making from its existing assets. At the moment, $1.5 billion would roughly double the foundation's yearly benefactions. But the $1.5 billion has little relevance to the value of Buffett's future gifts, since their amount will depend on the price of Berkshire's stock when they are made. If the stock rises yearly, on average, by even a modest amount - say, 6% - the gain will more than offset the annual 5% decline in the number of shares given. Under those circumstances, the value of Buffett's contributions will rise.

Buffett himself thinks that will happen. Or to state that proposition more directly: He believes the price of Berkshire, and with it the dollar size of the contributions, will trend upward - perhaps over time increasing substantially. The other foundation gifts that Buffett is making will also occur annually and start in July. At Berkshire's current price, the combined 2006 total of these gifts will be $315 million. The contributions will go to foundations headed by Buffett's three children, Susan, Howard, and Peter, and to the Susan Thompson Buffett Foundation.
This last foundation was for 40 years known simply as the Buffett Foundation and was recently renamed in honor of Buffett's late wife, Susie, who died in 2004, at 72, after a stroke. Her will bestows about $2.5 billion on the foundation, to which her husband's gifts will be added.

The foundation has mainly focused on reproductive health, family planning, and pro-choice causes, and on preventing the spread of nuclear weapons. Counting the gifts to all five foundations, Buffett will gradually but sharply reduce his holdings of Berkshire (Charts) stock. He now owns close to 31% of the company-worth nearly $44 billion in late June - and that proportion will ultimately be cut to around 5%. Sticking to his long-term intentions, Buffett says the residual 5%, worth about $6.8 billion today, will in time go for philanthropy also, perhaps in his lifetime and, if not, at his death.

Because the value of Buffett's gifts are tied to a future, unknowable price of Berkshire, there is no way to put a total dollar value on them. But the number of shares earmarked to be given have a huge value today: $37 billion.

That alone would be the largest philanthropic gift in history. And if Buffett is right in thinking that Berkshire's price will trend upward, the eventual amount given could far exceed that figure.
So that's the plan. What follows is a conversation in which Buffett explains how he moved away from his original thinking and decided to begin giving now. The questioner is yours truly, FORTUNE editor-at-large Carol Loomis. I am a longtime friend of Buffett's, a Berkshire Hathaway shareholder, and a director of the Susan Thompson Buffett Foundation.

http://money.cnn.com/2006/06/25/magazines/fortune/charity1.fortune/index.htm

The Warren Buffett You Don't Know

The Warren Buffett You Don't Know
Ace stockpicker, of course--and now, an empire-builder

Warren Buffett is returning to the U.S. from Europe in a private jet. As his plane nears its destination, the flight attendant gives out landing cards and a warning to all eight passengers aboard. ''The customs inspector here is utterly humorless,''

she says, ''so no wisecracks or he will tear the plane apart from fore to aft.'' Buffett, who quips as reflexively as he breathes, takes his card without comment.In the terminal, a surly looking man with a crewcut and a pistol on his hip sits behind a small table. Buffett hands over his passport and landing card to the inspector, who does not seem to realize that the professorial-looking 68-year-old standing before him is America's second-richest man. Or perhaps he just gets a kick out of trying to take the high and mighty down a peg.

''You left some things blank,'' the inspector says peevishly. ''Do you have $10,000?''The question could have launched a dozen snappy retorts, but Buffett restrains himself. ''I have what I left with,'' he says carefully. The inspector furrows his brow--was that some kind of joke?--but does not press the issue. He asks Buffett if he has any anything to declare.

''I was given two books,'' Buffett says. ''Well, you have to put it down, then,'' snaps the agent, who fills in the blank himself.Buffett shows not a flicker of annoyance at being treated like a misbehaving child. He stands mute and impassive before the inspector, who, after a few more curt remarks, can think of nothing else to do but let ''the Oracle of Omaha'' be on his way.

***************


Has there ever been a less pompous billionaire than Warren Edward Buffett? Hollywood might cast him in the role of an amiable teacher at a Midwestern college or a sweet-tempered, wisecracking inventor who eventually wins a Nobel prize and gets the girl besides. To hear Buffett sing his beautifully artless rendition of Ain't She Sweet to his own ukulele accompaniment is to wonder not only how such a man came to measure his net worth in billions but also whether he might not be a time-traveler from a more innocent age.

If Buffett had a business card, it would identify him as chairman and chief executive of Berkshire Hathaway Inc. (BRK.A) But he is far better known--indeed, world-famous--as the greatest stock market investor of modern times. The figures, though often cited, still astound: Had you put $10,000 into Berkshire when Buffett bought control of it in 1965, you'd have $51 million now, vs. just $497,431 if the money were invested in the Standard & Poor's 500-stock index.The numbers don't lie, but the story they tell is out of date. Buffett has not added a major position to Berkshire's bulging stock portfolio since amassing 4.3% of McDonald's Corp. (MCD) in 1995. In the meantime, he has transformed what long has been a sideline at Berkshire--the acquisition of entire companies--into the main event.

Over the past three years, Berkshire has spent $27.3 billion to buy seven companies in industries as disparate as aviation, fast food, and home furnishings. The $22 billion purchase of reinsurer General Re Corp., which closed late last year, was Buffett's largest ever.The effect has been dramatic: In short order, Berkshire has been transformed from a closed-end fund in corporate drag to a bona fide operating company. At the start of 1996, the company's famous stock portfolio accounted for fully 76% of Berkshire's $29.9 billion in assets. But by the end of 1999's first quarter, the figure had plummeted to 32% as assets quadrupled, to $124 billion. Today, Buffett's company employs 47,566 workers, double the number in 1995.And he isn't done yet.

''I'd love to make a $10 billion to $15 billion acquisition, and we could go bigger than that if I really like the company,'' says Buffett, who holds $15 billion in cash and is sitting on top of an additional $30 billion in unrealized gains in Berkshire's stock portfolios.It's all there in black and white in Berkshire Hathaway's famously literate annual reports, but somehow the company's transformation has gone not just unheralded but unnoticed. Berkshire is ''possibly the most talked about and the least understood company in the world,'' contends Alice Schroeder, a PaineWebber Inc. insurance analyst who in January published one of the few comprehensive studies of the company ever undertaken by a brokerage house.MISUNDERSTOOD. The common view is that Berkshire shares fetch a premium because of Buffett's reputation as a latter-day Midas.

The ''Buffett premium'' undoubtedly is real in the sense that if the man died today, the stock would plunge tomorrow. In Schroeder's view, though, Berkshire's stock is already trading at a sizable discount to its true value, which she estimates at $91,000 to $97,000 per A share. The A shares lately have been trading at about $70,000. The basic problem, Schroeder says, is that the world continues to misperceive Berkshire as little more than the sum of the stocks it holds in its $37 billion portfolio. In other words, the market tends to overreact to news about the seven stocks that form the core of Berkshire's holdings (table). Over the past 12 months, Berkshire has fallen by about 17%, from a high of $84,000 in June, 1998. In Schroeder's view, the main cause of this decline is the plunging value of Buffett's colossal stakes in Coca-Cola Co. (KO) and Gillette Co (G).

The radical recent shift in Berkshire's corporate profile does not reflect a radical change in Buffett's thinking. In most ways, he remains true to the conservative precepts of value investing. In essence, Buffett continues to prefer today's sure thing to the next big thing, no matter how spectacular its potential. Forget Internet stocks: Buffett still will not invest in even such well-seasoned high-tech companies as Microsoft Corp. (MSFT) or Hewlett-Packard Co. (HWP) because he doesn't believe that anyone can predict how much they will earn over the next decade or two. ''I can't do it myself,'' he says. ''And if I don't know, I don't invest.''Even in his stock-picking heyday, Buffett preferred owning businesses to passive minority investment. Until recently, though, Berkshire's acquisitions have been few and far between because Buffett insisted on buying top-quality businesses at discount prices. What has changed is that he is now willing to pay a premium for one-of-a-kind businesses.

Why this is so is not completely clear. The Buffett psyche is notoriously labyrinthine. ''I could easily spend a lot of time trying to analyze Warren if I didn't consciously try not to,'' says Olza M. Nicely, CEO of auto insurer GEICO Corp., one of Berkshire's largest subsidiaries. ''There are certain mysteries you just have to accept.''In Buffett's view, he is putting the finishing touches on his masterpiece. ''Berkshire is my painting, so it should look the way I want it to when it's done,'' he says.In an era in which most CEOs at least mouth the platitudes of good corporate governance and shareholder rights, Buffett, in his good-natured way, is a throwback to a time when a mogul was a mogul and did as he damn well pleased. ''Berkshire is the company I wanted to create. It's not the company Alfred P. Sloan wanted to create. It fits me,'' he says.

''I run it with our investors and managers in mind, but it is designed to fit me.'' To be blunt, Buffett stands revealed as a driven, even monomaniacal corporate empire-builder.For all his offhand charm, Buffett is pretty much all business all the time. Aside from an addiction to luxury air travel, he is a man of simple tastes and frugal habits. He neither spends his money nor gives much of it away. Philanthropy, the renascent vogue of America's superrich, interests him peripherally at most. Buffett intends to take his fortune to the grave--and to keep adding to it until the day he dies. ''The problem I've got with doing anything else except what I'm doing is that there is nothing remotely as fun as running Berkshire,'' he says. ''I'm selfish that way.''So far, Berkshire's legendarily devoted shareholders would not have it any other way. In May, some 15,000 of them flocked to Omaha to sit at the feet of the master during Berkshire's three-day festival of an annual meeting, which Buffett calls ''Woodstock for Capitalists.'' Of course, Buffett and his wife, Susan T. Buffett, are the largest Berkshire shareholders by far:

Their 38.4% stake is worth about $40 billion.The highest circle of management power at Berkshire has always been tight, but it has shrunk in recent years--to Buffett alone. Charles T. Munger, Buffett's longtime vice-chairman and business alter ego, continues to enliven the annual meeting by playing the part of drolly laconic sidekick to Buffett's ebullient master of ceremonies. Behind the scenes, though, his influence has waned. ''Charlie and I don't talk a lot anymore,'' acknowledges Buffett, who says he did not even bother to consult his vice-chairman before making the epochal Gen Re acquisition.By all accounts, including their own, Munger and Buffett have not fallen out. But while Buffett is wholly devoted to building Berkshire, Munger, 75, now spends his time chairing a not-for-profit hospital and serving as a trustee of a private high school. ''Charlie is broader in his interests than I am,'' Buffett says. ''He doesn't have the same intensity for Berkshire that I have. It's not his baby.'' Munger concurs: ''Warren's whole ego is poured into Berkshire.''

***************

In mid-April, Buffett led a small entourage on a whirlwind European tour to promote one of Berkshire's latest acquisitions, Executive Jet Aviation. I went along for the ride (on one of EJA's Gulfstream IV-SP jets) and got an unusual chance to observe the notoriously press-shy Buffett at close range against a kaleidoscopic backdrop of private airports, luxury hotels, and banquet halls stretching from London to Frankfurt to Paris.Buffett survived a demanding regimen of midmorning coffees, two-hour luncheons, 90-minute press conferences, and four-course banquets. ''I never get tired,'' he told reporters in London, ''except for my voice.''

Actually, Buffett was ashen with fatigue midway through the third day but soldiered gamely on, answering even the lamest questions with the same expansiveness and wit the fifth time he heard them as he did the first.Only once did Buffett show annoyance. During a press conference at the Frankfurt airport, Richard Santulli, EJA's normally understated chief executive, let his admiration of Buffett overflow. ''People say that he's the most astute investor of the 20th century,'' he said. ''I say ever.''Buffett, who was sitting at Santulli's side, gave a little snort. ''Why not?'' he said sourly. ''I'm sitting right here.''Like any mogul, Buffett has his special needs. On this trip, he indulged two of them, listed here in reverse order of importance:

red meat (at lunch and dinner) and Coca-Cola (all the time).Whenever I lost track of Buffett, Coke often appeared to guide me--a carbonated version of the proverbial trail of crumbs. In London, our party went from airport to hotel in separate cars. When I arrived at the Berkeley Hotel, I did not have to wonder for long whether Buffett had preceded me. A bellhop approached with a shopping bag. ''Is this yours?'' he asked. Inside were two six-packs of Cherry Coke. Two days later, I was in the crowded lobby of the Schlosshotel Kronberg near Frankfurt, following a white-gloved waiter bearing aloft a single bottle of Coca-Cola on a silver tray.Buffett bought Executive Jet in mid-1998 for $725 million. Although this is a pittance compared with what Berkshire paid for General Re, the EJA deal was no less a milestone in its way. EJA, which pioneered the fractional ownership of business jets, is the first true emerging-growth company that Buffett has ever owned.

What's more, the very idea of investing in business aviation would have been considered downright sacrilegious throughout most of Berkshire's history.For years, Buffett mocked corporate ownership of jets as a wasteful executive perk. But in 1986, he bought a small used plane for Berkshire, then traded up to a more expensive model a few years later. He named the jet ''The Indefensible'' and made sport of its purchase in his 1989 report to shareholders: ''Whether Berkshire will get its money's worth from the plane is an open question, but I will work at achieving some business triumph that I can (no matter how dubiously) attribute to it.''The truth is, Buffett had fallen in love with his plane but could not yet admit it. In 1995, he was introduced to Santulli by the head of one of Berkshire's operating companies and bought a one-quarter share of a Hawker for personal use. His wife, who has become a frequent flier, called the new plane ''The Richly Deserved.'' (Not to be outdone, Buffett renamed Berkshire's jet ''The Indispensable.'') Santulli offered to sell his company to Buffett when Goldman, Sachs & Co. (GS), a founding minority investor, began pressuring him to float a public stock offering.

Executive Jet in no way resembles the sort of business on which Buffett cut his teeth as an apprentice to the late Benjamin Graham, co-author of the value-investing bible, The Intelligent Investor. Graham's method emphasized creating a ''margin of safety'' by investing only in stocks trading at two-thirds of net working capital. He called them ''cigar butts''--companies the stock market had discarded but that still held a puff or two of value to extract.Buffett was Graham's most accomplished disciple. But as the pupil established himself, he began to feel constrained by the mentor's method. For Graham, a business was an abstraction wholly defined by a set of numbers on a page; he had no interest in its products, its management, its personality. But Buffett's boundless curiosity and enthusiasm were not satisfied by the ghoulish exercise of profiting from the last dying gasps of derelict companies.

Buffett's yearnings and dissatisfactions did not begin to coalesce into an investment philosophy of his own until he met the blunt-spoken Munger in 1959. The two, closely matched in intellect and outlook, quickly became the closest of partners. Munger urged his friend to leave the cigar butts in the gutter and think of value in more expansive terms. Says Buffett: ''Charlie kept pushing me back to the idea that what we really needed to own was the wonderful business.''Even so, it took Buffett a long time to tailor Graham's straitjacket conservatism to the more generous dimensions of his own personality. His $11 million purchase of Berkshire Hathaway in 1965 was a costly case in point. Initially, Buffett saw the floundering old-line company as a classic Graham play. But then the textile manufacturer rallied unexpectedly, and Buffett sank more money into it on the belief that this cigar butt had a future after all. It did indeed, but not in textiles.Buffett did not come fully into his own until he and Munger collaborated on the $25 million acquisition of See's Candies in 1972. The San Francisco maker of boxed chocolates was the first business of any sort for which Buffett paid more than book value--three times book, in fact.What, in Buffett's view, makes a business wonderful? It starts with ''a sustainable competitive advantage.'' Underline sustainable.

Buffett will not invest in a business unless he feels reasonably certain how much it will earn over the next 20 to 25 years. But for all of Buffett's cerebration, he does not feel truly comfortable unless a business ties into his own everyday experience. His favorite companies tend to traffic in elementally appealing brand-name products that Buffett not only uses himself but also invests with almost totemic meaning: a bottle of Coca-Cola, a Gillette razor blade, a box of See's candy, and, yes, even a Gulfstream jet.Buffett has always been especially partial to companies that can sustain a competitive edge without tying up much capital. Consider Scott Fetzer, which makes a variety of industrial and consumer products, including Kirby vacuum cleaners and Quikut knives. Since 1986, when Berkshire paid $315 million for Scott Fetzer, its earnings have risen by only 5.5% a year on average. Yet Buffett repeatedly has praised it as a model of capital efficiency. In 1998, Scott Fetzer netted $96.5 million after taxes on its $112 million in equity, a return on equity of 86%. This is all the more breathtaking considering that Buffett has been milking it for 13 years, extracting more than $1 billion all told.Ever since Berkshire's 1967 acquisition of National Indemnity Co., insurance has held double appeal for Buffett. Not only does he like the economics of the business--or parts of it, anyway--but a well-run underwriter also generates a steady flow of low-cost investment dollars, or ''float,'' as a matter of course. The 1996 acquisition of GEICO, now the sixth-largest U.S. auto insurer, doubled Berkshire's float at one stroke, and the Gen Re buy nearly tripled it, to $21 billion.In Buffett's view, the quality of a company's management is integral to its value as a business. And when acquiring companies, Buffett is as concerned with the motives of the selling CEOs as he is with their abilities. ''What I must understand is why someone will continue to get out of bed in the morning once they have all the money they could want,''

Buffett says. ''Do they love the business, or do they love the money?''No less an authority than John F. Welch, CEO of General Electric Co., considers Buffett a superb judge of managerial talent. Buffett and Welch have gotten to know each other over the years as golf partners and as rivals in auto insurance and other businesses. ''Take 20 people you know quite well but Warren has just met casually,'' Welch says. ''If you ask Warren his opinion about them, he'll have each one nailed. He's a masterful evaluator of people, and that's the biggest job there is in running a company.''In 34 years, Berkshire has never lost an operating chief except to death. In fact, the great majority of its subsidiaries are still run by the same executive who brought them to Berkshire in the first place. The operating head of longest tenure is Charles N. Huggins, who has been president of See's Candies since Buffett acquired it. Huggins is 74 years old now, but he's not Berkshire's oldest manager. That would be 85-year-old Harold Alfond, who founded Dexter Shoe Co. in 1956 and sold to Buffett in 1993 for Berkshire shares now worth $1.5 billion.Berkshire's operating ranks contain a second octogenarian billionaire: 82-year-old Albert L. Ueltschi, chairman and CEO of FlightSafety International Inc., a pilot-training concern Berkshire bought for $1.5 billion in 1996. An ex-pilot, Ueltschi founded the company in a LaGuardia Airport hangar in 1951. ''I'm like Warren,'' says Ueltschi, who has no plans to retire. ''I like what I do so much that I don't consider it work.''

***************

Somewhere between Frankfurt and Paris, Buffett gets up and walks back to the airplane's pantry to fetch a box of Swiss Sprungli chocolates an admirer had given him in Germany. Buffett makes his way slowly up the aisle of the plane in his shirtsleeves, offering the candy to each passenger aboard.A half-empty box of See's chocolates rests on the table where I'm sitting. Buffett pops a piece in his mouth. I ask him whether he thinks he could identify See's in a blind taste test against other brands. ''Of course,'' he says. ''I can also tell Coke from Pepsi. The thing is, most Americans prefer Pepsi to Coke because it is 4% sweeter, but Coke still outsells Pepsi by a huge margin.''As Buffett continues in this vein, he starts staring at the box of Sprungli he carries. He shifts it to one hand as if he were about to choose a piece, then seems to change his mind. ''It's a showy sort of candy, isn't it?'' he says and then falls silent. He gazes raptly at the Sprungli for a full 45 seconds as the conversation continues around him.

Then he abruptly sets the box down and returns to his seat without a word.Later, I recount this to Chuck Huggins, See's president, who chuckles knowingly. ''Yeah, that's Warren. Brand-loyal.''The office next to Buffett's is occupied by Michael Goldberg. A former McKinsey & Co. consultant, Goldberg was hired in 1981 to bring order to Berkshire's far-flung insurance interests and essentially functioned as chief operating officer for the next 11 years. The single-minded intensity Goldberg brought to the job created friction in the ranks--and gave him a bad case of burnout. In 1993, Buffett reassigned Goldberg to ''special projects'' and eliminated his old position.The line managers who once reported to Goldberg, now 53, have reported directly to Buffett ever since--as do the chiefs of all 22 of Berkshire's operating companies. Buffett essentially lets the chiefs of the companies that Berkshire acquires run their businesses as before, except that he requires them to transfer their excess cash to Omaha and clear capital-spending plans with him. Buffett, who thinks of his role as Berkshire's ''capital allocator,'' collects the enormous cash flow that the subs produce--$13.4 billion last year--and uses the money to buy more businesses, either in whole or in part, through the stock market.Buffett tends not to initiate contact with his operating executives: He waits for the phone to ring. ''Let me know about any bad news as soon as possible,'' he tells his subordinates, ''but otherwise, you are free to call me as often or as seldom as you like.'' Buffett's managerial passivity should not be mistaken for indifference. Some operating chiefs say he nearly memorizes the monthly reports they send to Omaha.During holiday seasons, Buffett requests daily sales reports from See's and Borsheim's, Berkshire's huge upscale jeweler in Omaha, because the ebb and flow of retailing hold an enduring fascination for him.

Year-round, he speaks to two execs almost every day: Richard Santulli and Ajit Jain, who runs Berkshire's reinsurance business in Stamford, Conn.Berkshire's homegrown insurance group offers a variety of property-and-casualty coverage in certain U.S. markets. But its chief business is a high-risk, high-reward specialty that Jain developed over the past decade in reinsuring ''super-catastrophes''--earthquakes, hurricanes, floods, and such. Buffett found the economics of ''super-cat'' seductive: Berkshire has made at least $865 million pretax in underwriting profits since 1991. But it was the complexities of analyzing super-cat risk that hooked him. Says Jain, 47: ''Warren and I might have had a 30-second conversation or a 30-minute one, but he has been involved in every piece of business I have done.''As for Santulli's business, Buffett is intrigued not just by the novel challenges posed by EJA's rapid growth but also the logistical complexities of the fractional-shares business. ''He likes the mental challenge of it,'' says Santulli, a former mathematics professor. ''He calls it 3-D chess.'' Even so, Buffett is careful not to impinge on Santulli's operating authority. EJA's chief once asked Buffett for advice in making a decision and was rebuffed. ''Don't bother with that,'' Buffett told him. ''Just decide.''Buffett's laissez-faire management style has been tested most severely in recent years by Berkshire's misadventures in shoes. From 1991 to 1993, Buffett laid out $650 million to buy three old-line makers of midprice shoes:

H.H. Brown, Lowell, and Dexter. In essence, he was betting that his companies would benefit as the appeal of imports waned and U.S. consumers returned to home brands. Buffett hasn't made many fundamental strategic errors, but this was a doozy: Imports now account for 95% of domestic shoe purchases, vs. 70% in the early 1990s. Since 1994, operating profits of Berkshire's shoe group have plummeted 57% on an 18% decline in revenues.Dexter has fared much worse than Brown, which absorbed Lowell and has buoyed itself by shifting much of its production offshore. Although Dexter now does some manufacturing in Puerto Rico, it has placed overriding emphasis on maintaining full employment at its four factories in its home state of Maine.

By all accounts, Buffett has played no part in this divergence in basic strategy--and performance--between H.H. Brown and Dexter except to countenance it by his silence. ''It's amazing how little he bothers you,'' says Francis Rooney, chairman and CEO of H.H. Brown. ''He never even comments.''The deference Buffett shows Berkshire's subsidiaries is all the more remarkable because it does not come naturally to him. ''With almost every one of the companies Berkshire owns, I think I would do something different if I was running them--in some cases, substantially different,'' Buffett says. The reason he doesn't impose his views, he adds, ''is simply that I am not inclined to make myself unhappy. I sort of accept things as they come.''It's not that simple. Buffett knows the sort of self-motivated, hands-on exec he covets wouldn't tolerate being pushed around by Omaha. And Buffett's respectful treatment of his managers has instilled in them an ambition to ''make Warren proud,'' as one puts it. ''Somehow, Warren has been able to keep a diverse cast of characters working harder for him than they did for themselves,'' Goldberg says. ''I see it every day--and I still don't know how he does it. But I do know that all of us feel this incredible responsibility to him.''
***************

We arrive late to Paris, touching down in a freakish, near-gale-force windstorm that both thrills and alarms our pilot. In four cars, we race as fast as rush-hour Paris traffic allows from Le Bourget to Dassault Aviation Group's magnificent 19th century chateau--familiarly known as Le Rond Point--on the Champs Elysees. EJA is the largest commercial customer of Dassault Aviation, Europe's leading manufacturer of business jets. Serge Dassault, the company's chairman, is hosting tonight's gala reception and dinner in Buffett's honor. By the time we arrive, the reception is in full swing. But Buffett takes a few steps into the foyer and hustles up a flight of stairs. It will be a good 35 minutes until he descends and joins the party.Downstairs, the guest of honor's whereabouts is Topic A among Dassault's distinguished guests. It might puzzle them to learn that Buffett is on a transatlantic call to one of his employees. The matter he is discussing with Ajit Jain this evening is not urgent. But it is Buffett's custom to speak with Jain every evening. If that means keeping 200 of France's richest people waiting, then c'est la vie.In mid-May, Buffett moderated a panel on Internet commerce at Microsoft's annual CEO summit in Seattle. As Buffett tells it, the assignment reflected William H. Gates III's sense of humor. But the Microsoft chairman and CEO, a friend of Buffett's since 1991, says it was no joke: ''Every principle that Warren holds about business and business value will still apply in this new world we're going into.

'' Gates, who owns Berkshire stock in his personal account, adds that he has learned more about business from Buffett than from anyone else. ''People really underestimate what he has created in Berkshire,'' he says.Unlike most megacorporations, Berkshire was not erected on the foundation of a single great business. Buffett began with a dying textile maker and parlayed its dwindling cash flow into ownership of a massive portfolio of enduringly profitable operating businesses. By the end of 1998, Berkshire had amassed shareholder equity worth $57 billion. This is a staggering sum, putting Berkshire well ahead of General Electric, Microsoft, and every other U.S. corporation and ranking it second in the world to Royal Dutch/Shell Group. Buffett could retire tomorrow and be confident of his place in business history not only as stock investor extraordinaire but as a corporate builder of the first rank.LIMITS OF SCALE. Instead, of course, he is still in there pitching, to borrow one of the baseball metaphors that so delight him. From 1965 through 1998, Berkshire's book value per share rose 24.7% a year on average--trouncing the 12.9% average annual gain in the S&P 500.

For some time now, Buffett has warned that the company's sheer bulk will prevent it from matching its breathtaking historical average in the future. His avowed goal is to increase its worth at an average of 15% a year. It's a modest aspiration only by comparison, for it implies adding $58 billion of shareholder equity over the next five years.Except for the shoe group, Berkshire appears to be in fine fettle. Executive Jet is by no means its only hope for growth. GEICO, Berkshire's largest subsidiary in terms of revenue, has been wresting market share from rivals at an impressive rate and yet still has only 3.5% of the vast U.S. auto-insurance market. Like EJA, Gen Re is planning to expand in Europe and around the world. At the same time, Borsheim's, Scott Fetzer, See's Candies, and other Berkshire companies are experimenting with E-commerce. ''The No. 1 topic Warren and I talk about now is whether retail selling is going to move over to the Internet,'' says Ralph E. Schey, Scott Fetzer's chairman and chief executive.The pursuit of accelerated growth carries added risk. In 1998, Berkshire had a banner year, posting a 48% increase in net earnings, to $2.8 billion, on revenues of $13.8 billion. But net income dropped 25%, to $541 million in the first quarter, largely because of earnings declines at GEICO and Gen Re. While both insurers were hurt by intensifying price competition, a German subsidiary of Gen Re's also took an embarrassing $275 million pretax loss on a workers' compensation pool. The down quarter did not seem to faze Buffett, who is famous for taking the long view.If Berkshire were in fact a painting, it would look like a Jackson Pollock: an idiosyncratic product of inspired improvisation.

In building his company virtually from scratch over the past quarter-century, Buffett conjured no overarching strategic vision, followed no master plan other than to buy good businesses at the right price. Even when he erred--a rare occurrence--he enfolded his purchases in an embrace intended to be permanent. ''We buy everything, even a stock, with the idea that we will hold it forever,'' he says.It is hugely important to Buffett that his corporate handiwork outlast him. In fact, it is his hope that Berkshire--his masterpiece in progress--survive him in exactly the form it exists upon his death, like a painting framed and hung on a museum wall. But might there not come a time when his successor might be smart to sell some of Berkshire's weaker units? ''I don't think so,'' Buffett says. ''I hope whoever follows me would behave pretty much as I would if I were to live forever. I feel I owe it. I owe it to the people who sold me their businesses. They didn't have to sell to me. If I die tonight, I want them to get what they were expecting.''MYSTERY HEIRS. Buffett says he already has picked a successor--two of them, actually: one to manage the stock portfolio, the other to oversee the operating companies. Their identities have not been disclosed to shareholders or, for that matter, to the heirs apparent themselves, because Buffett reserves the right to change his mind. He says he might eventually settle on a single successor.Munger, who has most of his own billion-dollar net worth in Berkshire stock, professes optimism about the company's post-Buffett prospects. ''The corporate culture of Berkshire is more durable than that of the average corporation. That will go on,'' Munger says. ''The one place a death will hurt us is we're not likely to get as good an allocator of capital as Warren in the next CEO, whoever that is. But it will still be one hell of a business.''In a company as decentralized as Berkshire Hathaway, the operating businesses need not suffer an immediate loss of momentum from Buffett's passing. On the other hand, it is not clear that a holding company with a grand total of 12 employees can be said to have a corporate culture. Without question, Berkshire's operating chiefs are united in their admiration of Buffett and his principles. But most of them barely know one another, and none is remotely Buffett's equal in terms of breadth of knowledge or personal authority. With its challengingly eccentric mix of businesses and its loose, informal structure, Berkshire Hathaway fits Buffett to a T but might well prove unwieldy for lesser mortals--especially ones constrained by loyalty to Buffett's preservationist credo.The outlook for Buffett's personal fortune is no less problematic. His wife is his sole heir, but she is 67 years old and might not outlive him. The Buffetts have three children--Susan, 46; Howard, 44; and Peter, 41. Howard and Susan are directors of Berkshire, but none of the Buffett progeny is involved in the management of the company.

FAMILY PLAN. Buffett has said that it is his wish that 99% of the money he has made eventually go to the Buffett Foundation, to be distributed to worthy causes under the direction of Allen Greenberg, 42, the ex-husband of his daughter Susan A. Buffett. Greenberg works out of a one-person office in the same building that houses Berkshire. The foundation was set up in the mid-1960s but operates with a scanty endowment. Currently, it disburses $11 million to $12 million a year, with the bulk of the funds going to groups that provide family-planning services, including abortions. When the foundation comes into its full endowment, it is likely to rank as the world's largest philanthropy.Buffett is often criticized--privately, to be sure--as a tightwad. But he insists that he is holding tight to his Berkshire stock not out of greed but out of a desire to ensure that control of the company passes to his heirs. ''I think I could control it with as little as 1% of the stock,'' Buffett says. ''With 35%, my wife could carry on, but not with 1%. I'd view it as a tragedy if someone whose achievement was issuing the most junk bonds or having the silliest stock price took over the company and all that we've built evaporated.''It would indeed be a tragedy in the classical sense if the specialness of Buffett's great gifts contains the seeds of his empire's eventual undoing. For just as no one other than Buffett could have created Berkshire Hathaway, it may well come to pass that no one other than Buffett can make it work.BY ANTHONY BIANCO

http://www.businessweek.com/1999/99_27/b3636001.htm

Warren Buffett 2/2

Warren Buffett

Warren Edward Buffett was born in Omaha in 1930, the son of Howard Buffett, a stockbroker and Republican congressman. As a youngster, Warren had an affinity for numbers, impressing his friends by memorizing the population of scores of U.S. cities. At age 11, he began marking the board at his father's brokerage; that same year, he bought his first stock, three shares of Cities Service Preferred at $38 a share. The price immediately dropped to $27, but then recovered to $40, at which point the young Buffett sold -- making a $5 profit, but missing the company's subsequent rise to $200 a share. It was Buffett's first lesson in patience.

As an adolescent, he was a tireless entrepreneur. At the age of 14, with savings from his two paper routes, he spent $1,200 on 40 acres of Nebraska farmland, which he leased to a tenant farmer. But Buffett truly caught the investment bug as a senior at the University of Nebraska, when he read Benjamin Graham's "The Intelligent Investor." The bible of the so-called value investors, Graham's book advised investors to ignore the trends that sweep Wall Street and instead hunt for stocks that trade far below their actual value. He called them "cigar butts" -- companies the stock market had discarded but that still had a few "puffs" of value left in them.
Finding such companies isn't easy. It requires tremendous patience and intense balance-sheet analysis. But the challenge appealed to Buffett's mathematical skills. After graduating, Buffett was rejected from Harvard Business School, so he instead moved to New York to study with Graham at Columbia University. After earning a masters in economics, he began working for his mentor.

But if Graham's approach was lucrative, it wasn't a whole lot of fun. By its very nature, value investing means saying no a lot more than saying yes, and Buffett soon felt constrained by Graham's strict rules. He began to wonder if it made as much sense to buy good businesses at a fair price, rather than dying businesses on the cheap. So in 1957, he returned to Omaha and started his first investment partnership. A group of Omaha investors handed him $25,000 each. Buffett put in $100 of his own money, appointed himself general partner and began to purchase stocks. His goal was to beat the Dow Jones Industrial Average by an average of 10 percent a year. When the partnership dissolved in 1969, Buffett's investments had ballooned at a compound rate of 29.5 percent, compared to just 7.4 percent for the Dow.

In 1962, Buffett began purchasing stock in a struggling New Bedford, Mass., textile mill called Berkshire Hathaway. With a price of less than $8 a share, Berkshire was a classic cigar butt. But it turned out that this old stogie had more than a few puffs of life in it. As the U.S. textile industry withered in the face of foreign competition, Buffett began redeploying Berkshire's capital into an array of other businesses, including insurance.

It turned out to be a classic Buffett move. While some insurance companies are better investments than others, all of them are good investment vehicles. Policyholders pay premiums up front and claims are only paid out later, providing insurers with a steady stream of low-cost cash to play with. Such funds are known as "float," and soon, Berkshire was generating millions of dollars of it. As it happened, the insurance-generated cash came along just as the financial markets went into their deepest swoon since the 1930s. Buffett, always on the lookout for values, went on a shopping spree, filling his portfolio with solid companies that began to rise once the market regained its footing.

Of course, the same qualities that have made Buffett a legendary investor have played havoc with his personal life. His wife, Susan T. Buffett, accompanies him on almost all of his public appearances, serves on Berkshire's board and is one of the firm's largest shareholders. But in fact, the couple have not lived together since 1977, when Susan -- a sometime cabaret singer and passionate abortion-rights activist -- moved from Omaha to an apartment in San Francisco. Making things even weirder, it was Susan who introduced her husband to Astrid Menks, a Latvian-born waitress at the French Cafe in Omaha, who ended up moving in with Buffett and has been his companion ever since. Susan and Astrid remain friends, and the three send presents to relatives from "Warren, Susie and Astrid."

His relations with his three children -- all of whom have had difficulties living up to their father's high standards -- have been equally unusual. His children have hardly been the typically spoiled scions of the ultra rich. When his son Howard told his father he wanted to purchase a farm, Buffett offered to help, albeit under the same exacting terms he might offer a business partner -- he told Howie he would buy the farm and rent it to him, requiring his son to fork over a percentage of his farm income and pay the taxes. Howie agreed to the terms. But even then, his father visited the farm only twice in six years. And that's far from the only example of Buffett's tightfistedness. Once, when his daughter Susie needed $20 to get her car out of the airport garage, he made her write him a check.

That same attitude characterizes Buffett's approach to philanthropy. Despite his immense personal wealth, Buffett has not been particularly charitable -- even now, late in his life, a time when many moguls, with their eyes on the history books, seem suddenly to develop an urge to share. He often is criticized as a tightwad. Politically, he seems to be a liberal. In the late 1960s, he became involved in abortion rights issues and worked to integrate Omaha's segregated country clubs. But the Buffett Foundation, which was established in the mid-1960s, disburses a pittance of his wealth -- just $11 million to $12 million a year, mostly to family-planning clinics. Although he has three children, his wife is his sole heir, and Buffett has said that he intends for 99 percent of his money to eventually go to his foundation, which will likely become the largest endowment in the country.

Indeed, even the world's greatest investor will die someday. And what happens to Berkshire Hathaway in his absence is certain to be one of Wall Street's great dramas. The company's lofty share price, after all, has as much to do with its bottom line as it does with the so-called Buffett premium. Buffett claims to have chosen a successor, but he has told neither the public nor his anointed. Most expect the top spot to go to his longtime associate Charlie Munger or Lou Simpson, chairman of Government Employees Insurance Co., or GEICO, which Buffett invested in for decades before buying the company outright in 1996.

Whatever happens to Berkshire Hathaway, Buffett's legacy is bound to live on in ways the investor never intended. Even in these speculative times, his investment decisions are scrutinized by would-be Buffetts the world over. And then there are the tens of thousands of Berkshire shareholders out there who owe a hefty chunk of their personal wealth to the man's investing acumen.
Remember Donald and Mildred Othmer, the modest-living but financially well-endowed couple from Brooklyn? They're not alone -- not by a longshot. "There are more coming," Buffett told the New York Times in 1998. "There are going to be some bigger ones than this."salon.com Aug. 31, 1999

Warren Buffett 1/2

The Oracle of Omaha -- the world's greateststock market investor -- lives in a house he boughtfor $31,500, dines on burgers and quotes Mae West.He's worth $36 billion ... give or take a few mil.

- - - - - - - - - - - -By Larry Kanter
Aug. 31, 1999 Donald and Mildred Othmer were hardly a remarkable couple. He was a professor of chemical engineering at Polytechnic University in Brooklyn, with a small consulting business on the side. She was a former teacher who spent most of her time volunteering for New York civic and arts organizations. They had no children.

But when Donald and Mildred Othmer died -- he in 1995, she in 1998 -- it turned out they were quite remarkable indeed. Polytechnic University, which once faced bankruptcy, unexpectedly found itself heir to $175 million. Planned Parenthood received $65 million. All told, the couple bequeathed $340 million to several perennially cash-strapped Brooklyn institutions.

Few who knew the Othmers had any idea of their enormous wealth, which totaled some $750 million. But the couple's hometown -- Omaha, Neb. -- offered a clue. Omaha, as any investor knows, is the headquarters of Warren Buffett, the greatest stock market investor of modern times. He also happened to have been an old friend of the Othmers. After investing $25,000 each in a Buffett-led investment partnership in the early 1960s, in 1970 the couple received thousands of shares of Berkshire Hathaway Inc., Buffett's insurance and investment holding company, at $42 a share. By the time Donald Othmer died in 1995, the stock had soared to $30,000 a share. Too bad for Brooklyn he didn't live a few years longer -- Berkshire Hathaway currently trades at an astonishing $68,000 a share.

The Othmers were proof of one of the investment world's oft-repeated legends: Had you put $10,000 into Berkshire Hathaway when Buffett bought control of it in 1965, you'd have more than $50 million today, compared to the just under $500,000 you'd have if you'd invested in the Standard & Poor's 500 stock index.

Thanks to an ability to spot undervalued companies and purchase them on the cheap, the so-called Oracle of Omaha has made many people very wealthy over the course of his five-decade career. Buffet's own 38 percent stake in Berkshire Hathaway gives him a net worth of more than $36 billion, making him the second-wealthiest man in the world, behind his friend Bill Gates, and one of the few who has amassed such astonishing riches solely through stock market investments.
Yet in many ways, Buffett remains more like the Othmers than the super-rich. With his tousled white hair and thick, tortoise-shell glasses, his appearance and countenance is most often described as grandfatherly. His annual salary as Berkshire Hathaway's chairman and CEO is $100,000. At the age of 68, he continues to live on Farnam Street in Omaha, in the same gray stucco house he purchased four decades ago for $31,500. He eats burgers or steaks for lunch and dinner, always washing down his meals with Coca-Cola -- a company in which he has invested since 1988. His sole extravagance seems to be a fondness for luxury air travel. In typically self-deprecating style, the frugal Buffett calls his Gulfstream IV-SP jet "The Indefensible."

If Buffett's lifestyle seems out of step, so is his investment strategy. At a time when day traders bid up stocks based on nothing but rumor and momentum, when bond investors place pricey and complex bets on such arcane financial instruments as interest-rate futures, it's hard not to think of Buffett as a kind of museum piece. His approach is simple, even quaint. Ignoring both macroeconomic trends and Wall Street fashions, he looks for undervalued companies with low overhead costs, high growth potential, strong market share and low price-to-earning ratios, and then waits for the rest of the world to catch up.
As often as not, Buffett's business instincts become conventional wisdom. Consider Coca-Cola Co. In 1988, when Buffett started buying the global soft-drink giant, it was a Wall Street wallflower, trading at $10.96. But Buffett saw two things that were not reflected in the balance sheet: the world's strongest brand name and untapped sales potential overseas. As Coca-Cola's earnings grew, so did investor interest. In less than five years, the stock soared to $74.50. Buffett's current stake is valued at some $13 billion.

Americans tend to revile their billionaires as much as they respect them (just look at Gates or Michael Eisner). But somehow, Buffett has managed to emerge as a kind of American folk hero. His famously literate dispatches in Berkshire Hathaway's annual reports -- in which he is as likely to quote the Bible and John Maynard Keynes as Yogi Berra and Mae West -- are read as much for their gee-whiz Midwestern wit as they are for their business insights. Berkshire's Web site is a modest affair, with a few links to some Berkshire-owned businesses and a message from Buffett, a self-described "technophobe," asking for suggestions how the site might be improved. Dozens of books and hundreds of Web sites dissect his investment decisions. And then there are Berkshire Hathaway's annual shareholder meetings in Omaha, which Buffett's biographer Ron Lowenstein compares to "an Elvis concert or a religious revival," and which Buffett himself calls "Woodstock for Capitalists." Investors have been known to purchase a single Berkshire share just for the opportunity to pick the master's brain each spring.
The most recent meeting was held in May. More than 14,000 people crowded into Omaha's Aksarben ("Nebraska" spelled backward) Coliseum for a six-hour question-and-answer session with Buffett and Berkshire Hathaway Vice Chairman Charles Munger. The news this year, while hardly disastrous, was not nearly as good as Berkshire investors have come to expect. Although the company had posted earnings of $2.8 billion, Berkshire shares were up just 11.4 percent for the year, compared to 20.1 percent for the S&P 500 and 36.1 percent for the technology-heavy NASDAQ Composite Index. The Internet stocks, meanwhile, were on fire. America Online was up more than 600 percent. Amazon.com had risen ten-fold.

Nonetheless, Buffett informed shareholders that he was sticking with companies like Coca-Cola and Gillette, despite the fact that both stocks had taken a beating in recent months. "I think it's much easier to predict the relative strength that Coke will have in the soft drink world than Microsoft will in the software world," Buffett said. "That's not to knock Microsoft. If I had to bet on anyone, I'd bet on Microsoft. But I don't have to bet."
That's Buffett in a nutshell. Amazingly, the world's savviest investor has sat out the entire stampede over technology stocks, backing away even from proven players like Microsoft or Hewlett-Packard. As for Internet stocks, forget it. Buffett says he won't invest in a company unless he can "see" it, unless he can imagine what its balance sheet might look like in a decade or two -- a shockingly long view, especially at a time when many investors hold stocks for just days, or even minutes, at a time. Such behavior would get many contemporary fund managers fired, but it's hard to argue with a man whose own holdings have outpaced the Dow Jones Industrial Average for more than 40 years.

Top 10 Warren Buffett Books and Resources

Top 10 Warren Buffett Books and Resources

From Joshua Kennon,Your Guide to Investing for Beginners.

Warren Buffett has made a name as the most successful investor of the twentieth century. A student and friend of Benjamin Graham, the father of value investing, Buffett has managed to amass one of the largest fortunes in history through his company, Berkshire Hathaway. Using these books and resources you can now find out about his biography, investing techniques, and thoughts on business.

1) The Essays of Warren E. Buffett: Lessons for Corporate America
In this second-edition compilation, Professor Lawrence Cunningham arranges Warren Buffett's writings and comments based on topics such as dividend payout policy, goodwill, preferred stock, zero coupon bonds, executive pay, and acquisitions. An excellent resource for business owners, financial professionals, and lay investors alike. An excellent book for any exective's library.
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2) Buffettology: The Previously Unexplained Investing Techniques of WB
In her book, Mary Buffett, former wife of Warren's son, Peter, discusses the investing techniques the Oracle of Omaha uses when selecting stocks and bonds. Includes interesting annecdotes and previously unknown material.


3) Buffett: The Making of an American Capitalist
Roger Lowenstein's book, "Buffett: Making of an American Capitalist" is by far the most definitive and useful biography of Warren Buffett in print. The author researches and gives details concerning Buffett's childhood, college years, early investment partnership, and acquisition of Berkshire Hathaway. A must-read for anyone interested in value investing or Buffett himself.

4) How to Pick Stocks Like Warren Buffett
Relatively short and easy to read, How to Pick Stocks Like Warren Buffett is an excellent introduction to the world of value investing. The author, Timothy Vick, is a senior analyst at Arbor Capital Management. The book is relatively short and should provide a satisfying read.

5) How to Think Like Benjamin Graham and Invest Like Warren Buffett
After reading this book, the new to medium-level investor should be able to calculate return on equity, inventory and receivable turnover, and leverage ratios. A useful tool for those wanting to start learning to analyze financial statements.
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6) The Warren Buffett CEO
Everyone knows Warren Buffett is a brilliant investor. Now, thanks to "The Warren Buffett CEO", readers can get a glimpse of his brilliance as a business manager. This book contains the biographies of the various executives of Berkshire Hathaway, all of whom have thrived under Buffett's "hands-off" management policy. Great for managers and entrepreneuers.

7) The World's Greatest Investment: 101 Reasons to Own Berkshire Hathaway
An investor who purchased $10,000 of Berkshire Hathaway stock when Warren Buffett took over, would have seen his shares climb in value to more than $51 million by the end of the 1990's. This book chronicles some of the things that have made Berkshire so successful, including a shareholder-oriented management, a diversified collection of fine businesses, and little or no debt.

8) Of Permanent Value: The Story of Warren Buffett, Updated and Expanded
For the true Buffett fanatic, this book offers never-before-heard anecdotes of Warren's life, investment partnership, and company, Berkshire Hathaway. It includes information on the Oracle's various investments, including writing stock options for Coca-Cola [an apparently uncharacteristic move]. An absolute must-have.

9) Warren Buffett Speaks
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ." - Warren Buffett. Janet Lowe uncovers the Buffett's wit and wisdom in this excellent collection of quips and comments such as the one above from the Oracle. An excellent book to have around.

10) Thoughts from Chairman Buffett
A small, chock-full book of Warren Buffett's most famous and insightful comments ranging on everything from running a business to purchasing stocks. Definitely a great [and very affordable] gift.

http://beginnersinvest.about.com/cs/toppicks/tp/aatp071802a.htm

Warren Buffett Timeline 3/3

Warren Buffett Timeline
From Joshua Kennon,Your Guide to Investing for Beginners.

A Chronological History of the Oracle of Omaha: 1977-1989
1977: Berkshire indirectly purchases the Buffalo Evening News for $32.5 million. He would later be brought up on antitrust charges by a competing paper.
1977: Susie leaves Warren, although not officially divorcing him. Warren is crushed.
1978: Susie introduces Warren to Astrid, who eventually moves in with him.
1979: Berkshire trades at $290 per share. Warren's personal fortune is approximately $140 million, but he was living solely on a salary of $50,000 per year.
1979: Berkshire begins to acquire stock in ABC.
1981: Munger and Buffett create the Berkshire Charitable Contribution plan, allowing each shareholder to donate some of the company's profits to his or her personal charities.
1983: Berkshire ends the year with $1.3 billion in its corporate stock portfolio.
1983: Berkshire begins the year at $775 per share, and ends at $1,310.
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Warren's personal net worth is $620 million. He makes the Forbes list for the first time.
1983: Buffett purchases Nebraska Furniture Mart for $60 million. It turns out to be one of his best investments yet.
1985: Buffett finally shuts down the Berkshire textile mills after years of sustaining it. He refuses to allow it to drain capital from shareholders.
1985: Warren helps orchestrate the merger between ABC and Cap Cities. He is forced to leave the Board of the Washington Post [Federal legislation prohibited him sitting on the Boards of both Capital Cities and Kay Graham's Washington Post.
1985: Buffett purchases Scott & Fetzer for Berkshire's collection of businesses. It costs around $315 million, and boasts such products as Kirby vacuums and the World Book Encyclopedia.
1986: Berkshire breaks $3,000 per share.

1987: In the immediate crash and aftermath of October, Berkshire loses 25% of its value, dropping from $4,230 per share to around $3,170. The day of the crash, Buffett loses $342 million personally.
1988: Buffett begins buying stock in Coca-Cola, eventually purchasing up to 7 percent of the company for $1.02 billion. It will turn out to be one of Berkshire's most lucrative investments.
1989: Berkshire rises from $4,800 per share to over $8,000. Warren now has a personal fortune of $3.8 billion.

http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrentimeln_3.htm

Warren Buffett Timeline 2/3

Warren Buffett Timeline

From Joshua Kennon,Your Guide to Investing for Beginners.

A Chronological History of the Oracle of Omaha: 1957-1974
1957: Buffett adds two more partnerships to his collection. He is now managing five investment partnerships from his home.
1957: With Susan about to have her third child, Warren purchases a five-bedroom, stucco house on Farnam street. It cost $31,500.
1958: The third year of the partnership completed, Buffett doubles the partner's money.
1959: Warren is introduced to Charlie Munger, who will eventually become the Vice Chairman of Berkshire Hathaway, and an integral part of the company's success. The two get along immediately.
1960: Warren asks one of his partners, a doctor, to find ten other doctors who will be willing to invest $10,000 each into his partnership. Eventually, eleven doctors agreed to invest.
1961: With the partnerships now worth millions, Buffett made his first $1 million dollar investment in a windmill manufacturing company.
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1962: Buffett returns to New York with Susie for a few weeks to raise capital from his old acquaintances. During the trip, he picks up a few partners and several hundred thousand dollars.
1962: The Buffett Partnership, which had begun with $105,000, was now worth $7.2 million. Warren and Susie personally own over $1 million of the assets. Buffett merges all of the partnerships into one entity known simply as Buffett Partnerships, Ltd. The operations are moved to Kiewit plaza, a functional but less-than-grand office, where they remain to this day. The minimum investment is raised from $25,000 to $100,000.
1962: Buffett consults Munger on Dempster, the windmill manufacturing company. Munger recommends Harry Bottle to Warren; a move that would turn out to be very profitable. Bottle cut costs, laid off workers, and caused the company to generate cash.
1962: Warren discovers a textile manufacturing firm, Berkshire Hathaway, that is selling for under $8 per share. He begins to buy the stock.
1963: Buffett sells Dempster for 3x the amount he invested [The almost worthless company had built a portfolio of stocks worth over $2 million alone during the time of Buffett's investment].
1963: The Buffett partnerships becomes the largest shareholder of Berkshire Hathaway.
1964: Due to a fraud scandal, American Express shares fall to $35. While the world is selling the stock, Buffett begins to buy shares en masse.
1965: Warren's father, Howard, dies.

1965: Buffett begins to purchase shares in Walt Disney Co. after meeting with Walt personally. Warren invested $4 million [which was equal to around 5% of the company].
1965: The American Express shares which were purchased shortly before are selling for more than double the price Warren paid for the them.
1965: Buffett arranges a business coup - taking control of Berkshire Hathaway at the board meeting and naming a new President, Ken Chace, to run the company.
1966: Warren's personal investment in the partnership reaches $6,849,936.
1967: Berkshire pays out its first and only dividend of 10 cents.
1967: In October, Warren writes to his partners and tells them he finds no bargains in the roaring stock market of the '60s. His partnership is now worth $65 million.
1967: Buffett is worth, personally, more than $10 million. He briefly considers leaving investing and pursuing other interests.

1967: American Express hits over $180 per share, making the partnership $20 million in profit on a $13 million investment.
1967: Berkshire Hathaway acquires National Indemnity insurance at Buffett's direction. It pays $8.6 million.
1968: The Buffett Partnership earns more than $40 million, bringing the total value to $104 million.
1969: Following his most successful year, Buffett closes the partnership and liquidates its assets to his partners. Among the assets paid out are shares of Berkshire Hathaway. Warren's personal stake now stands at $25 million. He is only 39 years old.
1970: The Buffett Partnership is now completely dissolved and divested of its assets. Warren now owns 29% of the stock outstanding in Berkshire Hathaway. He names himself chairman and begins writing the annual letter to shareholders.
1970: Berkshire makes $45,000 from textile operations, and $4.7 million in insurance, banking, and investments. Warren's side investments are making more than the actual company itself.
1971: Warren [at his wife's request], purchases a $150,000 summer home at Laguna Beach.
1973: Stock prices begin to drop; Warren is euphoric. At his direction, Berkshire issues notes at 8%.
1973: Berkshire begins to acquire stock in the Washington Post Company.
1974: Due to falling stock prices, the value of Berkshire's stock portfolio began to fall. Warren's personal wealth was cut by over 50%.
1974: The SEC opens a formal investigation into Warren Buffett and one of Berkshire's mergers. Nothing ever comes of it.

http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrentimeln_2.htm