Another Buffett Lunch

It's always amazing to me how much people pay for lunch with Buffett given that he is very transparent about the causes of past investment failures and successes.

Yet, perhaps due to tax write-offs, really liking the work Glide is doing in the community, or advertising for one's own fund (in a way that is sure to at least have some tangible result), people continue to pay millions for a lunch with the Oracle of Omaha.

This year's lunch was purchased for $2.11 million by Zhao Danyang. You can read some excerpts about what was said at the meeting here.

The one thing in the whole piece that I found interesting was what the manager of Pureheart Asset Management didn't share--Buffett's view on the USD--and in particular why he kept that a secret: it is too controversial.

Review of Einhorn's Book

In preparation for writing a review of Fooling Some of the People All the Time, I read all 16 reviews (from mostly major publications) listed at its site, and others besides.

With a few exceptions, most did not actually review the book--showing what it said and why what it says is important. I set out to write a review that did do these things. And I did. You can read the opening paragraphs of it here, at The Objective Standard.

Note, for the curious, this is partly why my posts here are going to be few and far between. I decided to focus on doing a few in-depth, quality articles or reviews rather than the many posts I've been putting up here these past few months.

Re: Morningstar Conference

Leading up to the Morninstar Investor Conference I had this to say about it:

As fund managers trying to cope with redemptions, there is likely to be a lot of people talking their book and a bit less candor than usual can probably be expected from each manager too. That said, the other managers are likely to be less polite about their differences--in both style and positions--and that could lead to some very interesting, educational conversations. If I had to bet, I'd say the conference is undervalued.

Haven't seen much more on the conference than the bit that follows (from the WSJ), but if this was all that was said, reading the annual reports for free would have been far better.

The participants of a panel of value-focused managers, including Marty Whitman of Third Avenue Funds, were defiant about their losses last year. Mr. Whitman's Third Avenue Value Fund was down 46% in 2008.

"It was a market fleeing from the asset class, and not correcting or rebalancing at all," said Bill Nygren, manager of Oakmark Fund. "[Value managers] don't add value in that market."

More than one manager called last year's crisis "irrational," caused by forced selling, particularly among hedge funds and quantitative managers, and overstated fears. The value managers said they haven't changed how they approach their stock-picking strategies, despite last year's losses.

One question frequently asked among financial advisers and investment professionals at the Morningstar conference is whether the crisis will push funds to make wholesale changes. Yet many managers see business as usual once the recovery gets under way, with estimates ranging from either later this year or in early 2010, but some did see a possibility of different times ahead.

Note: the posting forecast for the next couple months will be dominated by sporadic showers of wit that you can use to help you invest better (as opposed to the usual 5-day posting schedule).

Greenlight: History Behind the Name

I previously posted the somewhat complicated history behind Leucadia's name. For the curious, the history of how Greenlight Capital got it's name is pretty simple. It was given by Einhorn's wife.

As he explains it in Fooling Some of the People All The Time:

"In early 1996 ... Cheryl named the firm, giving me the green light. When you leave a good job to go off on your own and don't expect to make money for a while, you name the firm whatever your wife says you should."

Recap of the Ira Sohn Research Conference

Bloomberg does a good recap here of what David Sokol-- of MidAmerican Energy Holdings--and David Einhorn--of Greenlight Capital--had to say at the most recent Ira Sohn Research Conference.

Sokol said, talking about the economy, that "we are not seeing any green sprouts" and that the "shadow backlog" of home foreclosures will last until 2011.

Einhorn said that the Obama administration is just like the Bush administration--it is trying to take us back to 2006 and get everyone to lever up again.

The banks don't need to lever up. In fact, according to Einhorn, they still need to write down their assets. Quoting directly: "For the economy to recover, these underwater entities [i.e., banks] need to restructure their balance sheets."

The Warren Buffett Quiz

So you call yourself a Warren Buffett fan? Think you know the Oracle of Omaha like the back of your own hand? Take the below quiz, then answer the above two questions again.

1. What two virtues do Warren Buffett and his business partner Charlie Munger prize most highly?

a. justice and productivity
b. humility and integrity
c. rationality and honesty
d. integrity and generosity

2. Buffett routinely refers to his work at Berkshire as analogous to...

a. taking candy from babies
b. painting the Sistine Chapel
c. dancing the Charleston
d. writing for the New York Times

3. In the early days of the Buffett Partnership, Buffett would read...

a. Moody's Manuals exclusively--and from cover to cover--which could be up to 10,000 pages.
b. Business Week, Moody's Manual and Barron's. He didn't have resources beyond that, though he did talk to management teams a lot, as well as other investors.
c. Balance sheets of the leading companies of the day, written in stone, and brought down from Mt. Sinai by Benjamin Graham.
d. The Pink Sheets, one of his favorite sources, and the National Quotation book, which listed companies too minuscule to even make it onto the Pink Sheets. These were in addition to a variety of other sources.


4. In school, Buffett would often...

a. Graciously put up with stupid questions that came from all the pretty girls.
b. Doodle Mae West's name, always surrounded by a heart, in the margins of his notebook.
c. Impress students by quoting long passages from the textbook, along with page numbers. He also would correct teachers on their text citations--telling one, "You missed a comma."
d. Ignore the teachers, focusing instead on the latest Moody's Manual or Wall Street Journal edition.

5. In a class he himself taught on stocks...

a. Students would toss out names of stocks, asking him whether to buy or sell, and Buffett would speak from memory for about five to ten minutes on any stock they named, giving them a clear--but conservative--answer.
b. Buffett used a biography of Mae West as a supplementary textbook.
c. Buffett was said to be terribly shy by students at the start of the course and supremely confident at the end.
d. Students learned above all that it was the quality of companies one bought that mattered most.

6. Warren Buffett's childhood nickname was...

a. Tornado
b. Whirlwind
c. Firebolt
d. Brains

7. During the early Buffett Partnership days, the kind of companies Buffett researched were often in the...

a. 1-10 million dollar range
b. 10-50 million dollar range
c. 50-100 million dollar range
d. 1-10 billion dollar range

8. Buffett thinks about his time...

a. as the common person does--and gives freely to any person who makes a claim of it.
b. selfishly. He's often a "lousy sport" at doing anything he doesn't want to do and he never lets others waste his time.
c. on earth as a preparation to enjoy the riches waiting for him--and everyone--in another life.
d. comfortably. He often fills in his Franklin Covey planner while getting a back massage from his wife Astrid and a foot massage from his best friend Bill Gates.

9. Buffett would finish the sentence "you are neither right nor wrong because people agree with you" by saying...

a. you are right because the stock market says so.
b. you are right because your reasoning is correct.
c. you are right because your margin of safety is large enough.
d. you are right because your facts and your reasoning are right.

10. Buffett accumulated a portfolio of great companies and great friends by...

a. learning and thinking about all kinds of companies and people, focusing on the promising one's (as determined by the context) and holding on to the great one's.
b. giving money to companies that had proven poor allocators of it and giving compliments to people that did not at first deserve them.
c. sheer luck. He is an Outlier, and his success in both areas is analogous to a coin-flipping monkey.
d. being free with his time, never wasting the time of another, and--as he himself would say--getting a little lucky at the right times.

Answers are in the comments section. But don't peak before you've written down your own, slackers!