Here is Warren Buffett's $100 billion mistake
Warren Buffett: In 1964, I made 'a monumentally stupid decision' over $0.125
In Warren Buffett's 2014 letter to Berkshire Hathaway shareholders, the Oracle of Omaha looks back at his 50 years at company.
He recalls an event that he characterized as "a monumentally stupid decision."
Believe it or not, it was the aggressive takeover of Berkshire Hathaway, a textile factory that was basically doomed to fail.
The "decision" occurred in 1964 when Buffett, then an owner of just 7% of Berkshire, had the opportunity to sell his stake in the company at a quick profit.
On May 6, 1964, Berkshire Hathaway, then run by a man named Seabury Stanton, sent a letter to its shareholders offering to buy 225,000 shares of its stock for $11.375 per share. I had expected the letter; I was surprised by the price.
Berkshire then had 1,583,680 shares outstanding. About 7% of these were owned by Buffett Partnership Ltd. (“BPL”), an investing entity that I managed and in which I had virtually all of my net worth. Shortly before the tender offer was mailed, Stanton had asked me at what price BPL would sell its holdings. I answered $11.50, and he said, “Fine, we have a deal.” Then came Berkshire’s letter, offering an eighth of a point less. I bristled at Stanton’s behavior and didn’t tender.
That was a monumentally stupid decision.
Warren Buffett's entire legacy would've been quite different if he had swallowed that eighth of a point ($0.125) discount and just sold. The $11.275 Stanton was offering was a massive 50% return relative to the $7.50 he paid just two years before in December 1962.
Buffett describes how the New England textile industry was spiraling. His initial rationale for buying shares, however, was that it was selling at a steep discount to its working capital per share and book value per share.
Surprisingly, it seemed as though Buffett allowed his emotions to take over even as the value disappeared.
"Irritated by Stanton's chiseling, I ignored his offer and began to aggressively buy more Berkshire shares," Buffett said.
After 20 years of ups and downs, Buffett pulled the plug on Berkshire's textile business.
"But stubbornness – stupidity? – has its limits," he said. "In 1985, I finally threw in the towel and closed the operation."
And yet, Buffett keeps the name Berkshire. Perhaps it serves as a reminder of what not to do.
Well, honestly, that guy can go ahead and make a $100 billion dollar mistake... and pretty much not notice.
Being a Hillary cheerleader, he will get that "back" in no time at all when his protege becomes a president (regardless of what "Guccifer" made public)
Being a Hillary cheerleader, he will get that "back" in no time at all when his protege becomes a president (regardless of what "Guccifer" made public)
:):)
At least she will make a nice war in Greece so that her daughters hubby regains what he lost there
Mmmm.... I am a fan of Buffet and Gates. Not because I admire the greed, but the opposite. I think (excess) money must have a higher pourpose.
Buffet and Gates have committed 90% of their total fortune to the Bill and Belinda Gates Foundation, effective at the moment of their dead. The foundation is investing in key areas to improve the life of millions, better environment handling and fight disease and poverty.
That´s the way money should be working.
That is nice, but that reminds me of the "Après moi, le déluge" ("After me, the flood") saying by Lous XV.
Why don't they do it now? Why waiting till they are dead? Are they going to lack anything if that is done now (I mean, are they going to be hungry)? Imagine how many life could be saved or made better. People that need help need it now not in 20 years (with the wonders of medicine that they can buy, Buffet and Gates will last at least that long)
Warren Buffets father : Howard Buffett - Wikipedia, the free encyclopedia
Does anybody needs additional information on where some information used by the "biggest investor in history" came from? There is a saying "Death and taxes". There should be a saying "Politics and insider trading"
And don't forget who had access to fundamental data and news in advance (Buffett’s Business Wire ends feeds to high-speed traders - Financial Times ) for half a century and selling that same data in advance to HFT companies when they started their "honest HFT business". He stated that they will stop selling data in advance only last year (when the HFT lost its political support) but they (he) still have access to that data in advance
There are no wonder traders ... Period.
Warren Buffets father : Howard Buffett - Wikipedia, the free encyclopedia
Does anybody needs additional information on where some information used by the "biggest investor in history" came from? There is a saying "Death and taxes". There should be a saying "Politics and insider trading"
And don't forget who had access to fundamental data and news in advance (Buffett’s Business Wire ends feeds to high-speed traders - Financial Times ) for half a century and selling that same data in advance to HFT companies when they started their "honest HFT business". He stated that they will stop selling data in advance only last year (when the HFT lost its political support) but they (he) still have access to that data in advance
There are no wonder traders ... Period. :):)
I should have known it
:):):) I should have known it
There are some economists that are arguing that Buffet did what he did based on luck. Actually he did not. But knowing that he knew all the news for the last 50 years before the regular Joes and combined that with the "impartiality" of his dads colleagues from the Congress, it is easy to add 2+2. There was time when I thought that he must be a very clever guy. Now I wonder why nobody (and I mean nobody) mentions the "2+2" possibility when all the necessary information is there (and none of it was denied - since it can not be denied)
________________________
That reminds me of a Billy gates fairy tale : guys got together in a garage, made a DOS operating system, sold it to IBM and the rest is history ... Except that :
Does the upper need explanation?
Or this :
No fairy tales guys.
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Warren Buffett's 50th annual letter to Berkshire Hathaway shareholders is out.
In it, Buffett talks about the company's successes, but also its mistakes. (Mistake #1, in fact, was buying Berkshire Hathaway.)
Buffett's next mistake, however, ended up costing him and his partners $100 billion.
Here's the deal:
In 1967, Buffett bought Omaha-based insurer National Indemnity Company for $8.6 million. Except instead of buying this company for Buffett Partnership Ltd., Buffett's investing vehicle through which he was investing at the time and which held most of his personal wealth, he bought this company through recently acquired Berkshire Hathaway.
Buffett knew he wanted to be in the insurance business, and he knew the NICO deal would be a long-term success. But how he executed the deal was a huge mistake.
"Jack Ringwalt, the owner of NICO, was a long-time friend who wanted to sell to me – me, personally," Buffett wrote.
"In no way was his offer intended for Berkshire. So why did I purchase NICO for Berkshire rather than for BPL? I’ve had 48 years to think about that question, and I’ve yet to come up with a good answer. I simply made a colossal mistake."
And so because Buffett bought this company through his Berkshire holding, and not BPL, NICO became 39%-owned by Berkshire's legacy shareholders, to whom Buffett says he and his partners had no obligation.
"Despite these facts staring me in the face, I opted to marry 100% of an excellent business (NICO) to a 61%-owned terrible business (Berkshire Hathaway), a decision that eventually diverted $100 billion or so from BPL partners to a collection of strangers."
Even so: Berkshire's return over the last 50 years? 1,826,163%
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