October 25, 2007
Inscrutable Businesses at Unreasonable Prices
Buffett Says Investors Should Be `Cautious’ on China
“We never buy stocks when we see prices soaring. We buy stocks because we’re confident of the company’s growth. People should be cautious when they see prices rising. If you understand a business and buy at a reasonable price, there’s no risk. We’ve never realized a loss because we understand the businesses that we buy in.'’
I gave up counseling “caution” about 3,000 Index points ago. You can’t do battle with the combination of animal spirits and captive capital.
(And what’s this about “never realizing a loss,” Warren? Selective memory, old age, hubris? Which is it?)
Cat: | Time: 11:18 am (utc+8)
October 25th, 2007 at 9:19 pm
It’s all of the above for WEB. I can name a half-dozen big losses in the last few years. Some of them were “unrealized” like the Coca-Cola stock that he didn’t offload when it had a 99+ P/E ratio, some were realized, like his anti-dollar bet a year and a half ago, also several of his company purchases (a reinsurer comes to mind) were sold off at losses.
But by posting this, I guarantee we’ll have 5-10 sycophantic Buffett defenders on this thread!!
He’s a trader. A very good one. The best ever? Doubtful, even if it could be measured. Infallible? Certainly not.
October 25th, 2007 at 9:54 pm
The main problem I see is not the great performance but the fact that most stock buyers in China have no clue what they are doing. They pick stocks based on their symbol (in China, the stocks are denoted by numbers). Needless to say, a lot of them pick stocks with the number 8 in them.. LOL
They do stupid things like wear a red jacket when they buy a stock, or they like the “sound” of the company’s name, etc.
quote From http://lcmarket.blogspot.com/2007/10/nice-article-in-wsj-about-china-bubble.html
October 25th, 2007 at 11:35 pm
“We’ve never realized a loss because we understand the businesses that we buy in.”
Buffet is playing lawyer with the words… he’s realized losses before when he DIDN’T understand the businesses that he was buying. If he does understand it (meaning his reason for buying was validated), he doesn’t sell when price goes down (though he might sell if the price goes up).
October 26th, 2007 at 1:59 am
“Buffet is playing lawyer with the words” I don’t agree. If he had substitued “when” for “because” then I might buy it. He has lost substantial money (realized losses) in currencies, and the entire issue of “understanding a business” is moot when playing ForEx.
October 26th, 2007 at 7:46 am
Bill: He made money shorting the dollar … can you cite any source for these “realized losses” in his currency trading? I was thinking he had conveniently forgotten about USAir.
October 26th, 2007 at 8:13 am
The short in 2005.
http://www.forbes.com/free_forbes/2005/0110/036.html
He upped his bearish dollar bet to $20 billion in Jan 2005. The dollar rose over 12% in 2005 and WEB covered a good portion of it, at a loss.
October 26th, 2007 at 8:33 am
Bill: Didn’t he add to a very profitable trade? Even if he covered “a good portion” (vague and source?) of the total position, even after a 12% rise against him, it wasn’t a loss, right?
October 26th, 2007 at 10:16 am
I believe at the time it was characterized as a loss; perhaps I am mistaken on that one….
October 26th, 2007 at 11:20 am
Warren says i don thave time to chat - i gotta get my taxes done at H&R Block before they go BK. :)