Warren Buffett Video

Warren Edward Buffett, legendary value investor, turned an ailing textile mill into a financial engine that powered what would become the world’s most successful holding company.

Known as the “Oracle of Omaha” for his investment prowess, Buffett has amassed a personal fortune in excess of $62 billion, making him top dog on Forbes’ World’s Billionaires list in 2008. He inspires legions of loyal fans to make a yearly trek to Omaha for an opportunity to hear him speak at Berkshire’s annual meeting, an event ironically dubbed the “Woodstock of Capitalism”.

The Early Years
Buffett was born to Howard and Leila Buffett on August 30, 1930, in Omaha, Nebraska. He was the second of three children, and the only boy. His father was a stockbroker and four-term United States congressman. Howard served non-consecutive terms on the Republican ticket, but espoused libertarian views.

Making money was an early interest for Buffett, who sold soft drinks and had a paper route. When he was 14 years old, he invested the earnings from these endeavors in 40 acres of land, which he then rented for a profit. At his father’s urging, he applied to the University of Pennsylvania and was accepted. Unimpressed, Buffett left after two years, transferring to the University of Nebraska. Upon graduation, his father once again convinced him of the value of education, encouraging him to pursue a graduate degree. Harvard rejected Buffett, but Columbia accepted him. Buffett studied under Benjamin Graham, the father of value investing, and his time at Columbia set the stage for a storied career, albeit one with a slow start.

Upon graduation, Graham refused to hire Buffett, even suggesting that he avoid a career on Wall Street. Buffett’s father agreed with Graham, and Buffett returned to Omaha to work at his father’s brokerage firm. He married Susan Thompson, and they started a family. A short while later, Graham had a change of heart and offered Buffett a job in New York.

The Foundation of Value
Once in New York, Buffett had the chance to build upon the investing theories he had learned from Graham at Columbia. Value investing, according to Graham, involved seeking stocks that were selling at an extraordinary discount to the value of the underlying assets, which he called the “intrinsic value”. Buffett internalized the concept, but had an interest in taking it a step further. Unlike Graham, he wanted to look beyond the numbers and focus on the company’s management team and its product’s competitive advantage in the marketplace.

In 1956, he returned to Omaha, launched Buffett Associates, Ltd., and purchased a house. In 1962 he was 30 years old and already a millionaire when he joined forces with Charlie Munger. Their collaboration eventually resulted in the development of an investment philosophy based on Buffett’s idea of looking at value investing as something more than an attempt to wring the last few dollars out of dying businesses.

Along the way, they purchased Berkshire Hathaway (NYSE:BRK.A), a dying textile mill. What began as a classic Graham value play became a longer-term investment when the business showed some signs of life. Cash flows from the textile business were used to fund other investments. Eventually, the original business was eclipsed by the other holdings. In 1985, Buffett shut down the textile business, but continued to use the name.

Buffett’s investment philosophy become one based on the principle of acquiring stock in what he believes are well-managed, undervalued companies. When he makes a purchase, his intention is to hold the securities indefinitely. Coca Cola, American Express and the Gillette Company all met his criteria and have remained Berkshire Hathaway’s portfolio for many years. In many cases, he purchased the companies outright, continuing to let their management teams handle the day-to-day business. A few of the better-known firms that fit into this category include See’s Candies, Fruit of the Loom, Dairy Queen, The Pampered Chef and GEICO Auto Insurance.

Buffett’s mystique remained intact until technology stocks became popular. As a resolute technophobe, Buffett sat out the incredible run-up in technology stocks during the late 1990s. Sticking to his guns and refusing to invest in companies that didn’t meet his mandate, Buffett earned the scorn of Wall Street experts and was written off by many as a man whose time had passed. The tech wreck that occurred when the dotcom bubble burst bankrupted many of those experts. Buffett’s profits doubled.

On the Personal Side
Despite a net worth measured in billions, Warren Buffett is legendarily frugal. He still lives in the five-bedroom house he bought in 1958 for $31,000, drinks Coca Cola and dines at local restaurants, where a burger or a steak are his preferred table fare. For years, he eschewed the ideas of purchasing a corporate jet. When he finally acquired one, he named it the “Indefensible” – public recognition of his criticism about money spent on jets.

He remained married to Susan Thompson for more than 50 years after their 1952 wedding. They had three children, Susie, Howard and Peter. Buffett and Susan separated in 1977, remaining married until her death in 2004. Before her death, Susan introduced him to Astrid Menks, a waitress. Buffett and Menks began living together in 1978 and were married in August of 2006.

Legacy
What do you do with your money when you are the world’s most successful investor? If you’re Warren Buffett, you give it away. Buffett stunned the world in June of 2006 when he announced the donation of the vast majority of his wealth to the Bill & Melinda Gates Foundation, which focuses on world health issues, U.S. libraries and global schools. It is on of the world’s largest transparent charities.

Buffett’s donations will come in the form of Class B shares of Berkshire Hathaway stock. His total donation to the Gates Foundation is 10 million shares. It will be given out in 5% increments until Buffett’s death or until the foundation fails to meet the spending stipulation or the stipulation that either Bill or Melinda Gates remain actively involved in the foundation’s activities. Buffett’s 2006 donation was 500,000 shares, valued at approximately $1.5 billion.

At a June 2008 share value, the entire donation to the Gates Foundation is worth about $37 billion. Buffett expects stock price appreciation to increase that amount over time. Another stock donation of more than 1 million shares will be evenly divided among three charities run by Buffett’s children. An additional 1 million shares will go to a foundation run in honor of his first wife.

While the donation to the Gates Foundation was certainly a big surprise, Buffett’s charitable endeavors are nothing new. He’d been giving money away for 40 years through the Buffett Foundation, renamed as the Susan Thompson Buffett Foundation. This foundation supports pro-choice family planning causes and works to discourage nuclear proliferation.

Buffett has always planned to give the bulk of his wealth to charity, but insisted that it would occur posthumously. The change of heart is quintessential Buffett – rational, decisive, maverick and blazing a path all his own. “I know what I want to do, and it makes sense to get going,” he’s famous for saying.

Conclusion
The future looks to hold an increase in the amount of money that Buffett will continue to give. His own words on the subject are: “I am not an enthusiast of dynastic wealth, particularly when the alternative is six billion people having that much poorer hands in life than we have, having a chance to benefit from the money”

Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he’s forecasting the future.

Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.

Of course, it helps when you can give your predictions plenty of time to come true. That’s one reason Buffett’s favorite holding period for investments in “outstanding businesses with outstanding managements” is “forever.”After all,”We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.”

With that in mind, here are Warren Buffett Watch’s ‘timeless’ predictions.

Recessions Can’t Be Avoided Forever

As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the “dominoes” will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. “It is the nature of capitalism to periodically have recessions. People overshoot.” (He told Becky she’s young enough to expect to see 6 or 7 or them.)

We’ll Survive Current and Future Recessions Just as We’ve Survived Past Problems

As Buffett told us in August, 2007, (and repeated throughout 2008 and 2009): “We’ve got a wonderful economy… There’s never been anything like that in the history of the world. We live seven times better than the people did a century ago on average… We’ve had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well.”

Recessions Will Create Opportunities

“I made by far the best buys I’ve ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap.”

All Stocks Won’t Be Cheap

Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn’t happen every day. “What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out.” You get in trouble, Buffett says, when you listen to the crowd chanting “Swing, batter, swing!”

The Crowd Will Make Mistakes

Buffett cites this piece of advice from his mentor Benjamin Graham: “You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right-and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.”

Investors Will Mistakenly Think Falling Stock Prices Are Bad

“If they reduce the price of hamburgers at McDonald’s today I feel terrific. Now I don’t go back and think, gee, I paid a little more yesterday. I think I’m going to be buying them cheaper today. Anything you’re going to be buying in the future, you want to have get cheaper.”

Good Times Will Prompt Bad Decisions

In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. “They know that overstaying the festivities – that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future – will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, “The world went mad. What we learn from history is that people don’t learn from history.

Warren E. Buffett has two cardinal rules of investing. Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.

Well, a lot of old rules got trashed when the financial crisis struck — even for the Oracle of Omaha.

At 79, Mr. Buffett is coming off the worst year of his long, storied career. On paper, he personally lost an estimated $25 billion in the financial panic of 2008, enough to cost him his title as the world’s richest man. (His friend and sometime bridge partner, Bill Gates, now holds that honor, according to Forbes.)

And yet few people on or off Wall Street have capitalized on this crisis as deftly as Mr. Buffett. After counseling Washington to rescue the nation’s financial industry and publicly urging Americans to buy stocks as the markets reeled, in he swooped. Mr. Buffett positioned himself to profit from the market mayhem — as well as all those taxpayer-financed bailouts — and thus secure his legacy as one of the greatest investors of all time.

When so many others were running scared last autumn, Mr. Buffett invested billions in Goldman Sachs — and got a far better deal than Washington. He then staked billions more on General Electric. While taxpayers never bailed out Mr. Buffett, they did bail out some of his stock picks. Goldman, American Express, Bank of America, Wells Fargo, U.S. Bancorp — all of them got public bailouts that ultimately benefited private shareholders like Mr. Buffett.

If Mr. Buffett picked well — and, so far, it looks as if he did — his payoff could be enormous. But now, only a year after the crisis struck, he seems to be worrying that the broader stock market might falter again. After boldly buying when so many were selling assets, his conglomerate, Berkshire Hathaway, is pulling back, buying fewer stocks while investing in corporate and government debt. And Mr. Buffett is warning that the economy, though on the mend, remains deeply troubled.

“We are not out of problems yet,” Mr. Buffett said last week in an interview, in which he reflected on the lessons of the last 12 months. “We have got to get the sputtering economy back so it is functioning as it should be.”

Still, Mr. Buffett hardly sounded shellshocked in the wake of what he once called the financial equivalent of Pearl Harbor. (An estimated net worth of $37 billion would be a balm to anyone’s psyche.)

“It has been an incredibly interesting period in the last year and a half. Just the drama,” Mr. Buffett said. “Watching the movie has been fun, and occasionally participating has been fun too, though not in what it has done to people’s lives.”

Investors big and small hang on Mr. Buffett’s pronouncements, and with good reason: if you had invested $1,000 in the stock of Berkshire in 1965, you would have amassed millions of dollars by 2007.

Despite that formidable record, the financial crisis dealt him a stinging blow. While he has not changed his value-oriented approach to investing — he says he likes to buy quality merchandise, whether socks or stocks, at bargain prices — Buffettologists wonder what will define the final chapters of his celebrated career.

In doubt, too, is the future of a post-Buffett Berkshire. The sprawling company, whose primary business is insurance, lost about a fifth of its market value during the last year, roughly as much as the broader stock market. While Berkshire remains a corporate bastion, it lost $1.53 billion during the first quarter, then its top-flight credit rating. It returned to profit during the second quarter.

Time is short. While he has no immediate plans to retire, Mr. Buffett is believed to be grooming several possible successors, notably David L. Sokol, chairman of MidAmerican Energy Holdings at Berkshire and also chairman of NetJets, the private jet company owned by Berkshire.

After searching in vain for good investments during the bull market years, Mr. Buffett used last year’s rout to make investments that could sow the seeds of future profits.

Justin Fuller, author of the blog Buffettologist and a partner at Midway Capital Research and Management, said the events of the last year, while painful for many, provided Mr. Buffett with the opportunity he had been waiting for.

“He put a ton of capital to work,” Mr. Fuller said. “The crisis gave him the ability to put one last and lasting impression on Berkshire Hathaway.”

For the moment, however, Mr. Buffett seems to be retrenching a bit. Like so many people, he was blindsided by the blowup in the housing market and the recession that followed, which hammered his holdings of financial and consumer-related companies. He readily concedes he made his share of mistakes. Among his blunders: investing in an energy company around the time oil prices peaked, and in two Irish banks even as that country’s financial system trembled.

Mr. Buffett declined to predict the short-run course of the stock market. But corporate data from Berkshire shows his company was selling more stocks than it was buying by the end of the second quarter, according to Bloomberg News. Its spending on stocks fell to the lowest level in more than five years, although the company is still deftly picking up shares in some companies and buying corporate and government debt.

Among the stocks Mr. Buffett has been selling lately is Moody’s, the granddaddy of the much-maligned credit ratings industry. Berkshire, Moody’s largest shareholder, said last week that it had reduced its stake by 2 percent.

The shift in Berkshire’s investments suggests Mr. Buffett is starting to worry, said Alice Schroeder, the author of “The Snowball,” a biography of Mr. Buffett.

But Ms. Schroeder said Mr. Buffett was also growing anxious about how he would be remembered. He wants to remain relevant in the twilight of his career, she said, and is taking a more prominent role on the public stage. That shift means ordinary investors are getting a chance to hear more of his sage advice, but it also carries some risk.

“Before, he always made sure to dole out the wisdom with an eyedropper,” Ms. Schroeder said. In the past, Mr. Buffett “said it was a mistake to believe that if you are an expert in one area that people will listen to you in others,” she said.

Whatever his recent missteps, many people, from President Obama down, listen to what Mr. Buffett has to say. He is important in his own right as a billionaire businessman but also because millions of ordinary investors follow his homespun aphorisms, copy his investing strategies and await his pronouncements on the markets.

Mr. Buffett refused to be drawn out on where stocks are headed, but he warned about the dangers of investing with borrowed money, or leverage, which proved disastrous when the crisis hit.

As for regrets, he has a few. His timing was bad, he concedes. He should have sold stocks sooner, before the markets tumbled. Then he served up a Buffettism that any investor might heed:

Asked if anything was keeping him awake at night, he said there was not. “If it’s going to keep me awake at night,” Mr. Buffett said, “I am not going to go there.”