Warren Buffett Advocates Buying

[al_bundy]

Don't be fooled by commodities. Even though the stocks are down the earnings are still high. Stocks are down based on growth, but many commodities are in high demand. As I stated there may be a flat trend but in five years time those who don't average in now will be sorry. Regarding banks, Canadian banks are still making money as they make most of their cash from inside the country and they have a monopoly...I don't own any US stocks.

Regarding financial earnings for US banks...moving forward they will have better growth than you think because all their bad debt will be gone...they will raise the spreads on loans and increase bank charges like Canadian banks. Canadian banks will be the model and you will be surprised on the earnings growth. There will be a huge consolidation within the US banking sector on the Canadian model.

take a look at the chart for Citi for 1987 - 1994. dead money.

commodity earnings are high because 2Q it was still the peak prices. for some reason most commodity companies aren't giving forward guidance for the 4th quarter.

 

[al_bundy]

we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin

 

[Dawg52]

we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin

I get the feeling you are shorting the market.

 

[Zathras]

we'll call this Prechter vs Buffet

Bob Prechter is predicting the Dow will bottom around 3000 in the next year or two. no prediction yet on the recovery.

Both have been right more times than they have been wrong, let the battle begin

Both could easily be right.
Buffet is not saying the market won't go down. He stated he has no idea where the market will be in a year, could be up, could be down more.
What he IS saying is that long term, now is a great time to be buying for the long term.

 

[Lsbcal]

Buffet generally does not buy the market. He buys specific stocks like JNJ (for Berkshire) and I would assume that is what he is doing with his private accounts which is what he was talking about. He repeatedly said he did not know where the market was going near term -- near term being probably (my guess) the next year. But farther out he's a bull and he likes to keep his stocks forever. Also he said that inflation was likely to kick up. He and Templeton guessed too high on inflation in the 80's but that didn't hurt their investment performance because they probably didn't bet the house on those guesses.

I'd be interested in his specific stock selections but I doubt we will hear about those since he probably will not have to file anything as this is for his private account and not a large percentage of an individual company's stock. I'd bet he bought JNJ though. It was in the 50's a few days ago and he bought some a few years ago for Bershire in the low 60's.

 

[al_bundy]

it will be interesting to see what the consumer staples do. in the last 5-7 years the trend has been to repackage their products into single easy to use gadgets where you sell 1/10 the cleaning product for 10 times the price. if things get bad we'll see if people switch back to the cheaper versions that take a little more work

 

[Nords]

Hey, no problem criticizing Buffett, he's been wrong before.

You guys who think he's doing the wrong thing should put your money where your mouth is-- go short the S&P500, go commodities, buy land, whatever. Over the next five years we'll compare your Schedules D to his Berkshire Hathaway annual reports and see how everyone did.

Nothing personal, but we're going to hold onto our Berkshire shares.

 

[happy2bretired]

A little off topic, but Buffet recently purchased preferred shares of GE and Goldman Sachs. Can anyone tell me why preferred shares and not common?

 

[wildcat]

Whether the market could drop a little further or not, I do think it would be hard to imagine cash outperforming stocks over the next 10 year cycle as Buffet suggests.

He has put a large chunk of money in a railroad. Hard to imagine him thinking we will be worse off by doing so and he hasn't made a large bet with Berskhire money in a while.

To me, most of his bets in recent years have been in effort to make some return better than just holding cash.

I will take WEB's advice and thought over the rest of Wall St any day of the week. I think he is a pretty decent person.

 

[al_bundy]

A little off topic, but Buffet recently purchased preferred shares of GE and Goldman Sachs. Can anyone tell me why preferred shares and not common?

the preferred shares pay him 10% or so dividend

and the ones he bought were specially issued just for him

 

[unclemick]

the preferred shares pay him 10% or so dividend

and the ones he bought were specially issued just for him

-soooo even G.E. needs a little walking around money.

It's good to have friends.

heh heh heh -

 

[happy2bretired]

Hmmm...bummer....I like that 10% dividend perk.

 

[Nords]

Hmmm...bummer....I like that 10% dividend perk.

I'm pretty sure the same favorable terms are available to anyone with a few billion to invest.

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

Preferred Stock

 

[Gone4Good]

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

In Buffett's case, he got 10% preferreds that are non-callable for 3 years. After 3 years they can be taken out at a 10% premium. He also got warrants to buy shares at a 13% discount to then prevailing market prices.

Nice deal if you can get it.

 

[saluki9]

I'm pretty sure the same favorable terms are available to anyone with a few billion to invest.

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

Preferred Stock

Go tell that to the Lehman or Wamu preferred holders.

There are plenty of preferred shares out there that Are yielding upwards of 10%

 

[Nords]

Go tell that to the Lehman or Wamu preferred holders.

"Higher" is a relative term when you're standing on a pile of crap!

 

[al_bundy]

Go tell that to the Lehman or Wamu preferred holders.

There are plenty of preferred shares out there that Are yielding upwards of 10%

except that Goldman and GE are the cream of the crop and are very unlikely to go under.

back in the 1800's JP Morgan was king of Wall Street. Goldman Sachs has had that role for something like 20 years now if not longer

 

[clifp]

I'm pretty sure the same favorable terms are available to anyone with a few billion to invest.

Preferred shares have a higher priority during bankruptcy proceedings and in some cases are convertible into common stock shares.

The British government is getting 12% on the preferred shares it issued to British banks. Uncle Sam is getting ~12% from AIG for a loan which are ahead of preferred shareholders.

 

[saluki9]

except that Goldman and GE are the cream of the crop and are very unlikely to go under.

back in the 1800's JP Morgan was king of Wall Street. Goldman Sachs has had that role for something like 20 years now if not longer

Uh no. "cream of the crop" is when you don't have to accept payday loan terms in order to raise emergency equity. Actually, you could argue that "cream of the crop" if when you never have to raise emergency capital at all.

As for being a premier company, yada yada yada... There are several of the largest banks in the UK that have been around for hundreds of years and without their injection of capital last week they wouldn't be here this week.

 

[al_bundy]

so why didn't lehman get any emergency funding? goldman had a lot of CP outstanding and that created a problem for them

 

[Gone4Good]

so why didn't lehman get any emergency funding? goldman had a lot of CP outstanding and that created a problem for them

Lehman was an experiment to determine the extent of actual "systemic" risk. Plenty of people (several of them on this board, too) were advocating a "let them all go bankrupt and the market will sort it out" philosophy. The free market disciples in power were largely sympathetic to this view and were groping for a place to draw the line. Lehman was it.

Many now believe that letting Lehman go was a huge mistake as all manner of unintended consequences emerged (not least of which the potential collapse of the CP and money market). Now the world's governments understand that the entire financial system is at stake, not just individual companies. And thus we've moved to a global systematic bailout.

 

[DblDoc]

so why didn't lehman get any emergency funding? goldman had a lot of CP outstanding and that created a problem for them

Apparently Lehman had insufficient assets to allow a gov't bailout per the rules in place at the time. Private funding didn't materialize because they saw the problem as a dominoe effect. They'd bail out Lehman and next weekend there would be another imminent failure asking for them to intervene again.

DD

 

[MichaelB]

so why didn't lehman get any emergency funding? goldman had a lot of CP outstanding and that created a problem for them

Sec. Paulson didn't work for Lehman, he did work for GS.

 

[al_bundy]

paulson didn't work for aig, fannie or freddie or an auto company either. when robert rubin was sec treasury they had a plan to do the same thing to the banks we are doing now and he worked for GS as well

 

[saluki9]

so why didn't lehman get any emergency funding? goldman had a lot of CP outstanding and that created a problem for them

Not enough collateral