Archives For Warren Buffett

Saw this on Forbes:

Warren Buffett’s Secretary Likely Makes Between $200,000 And $500,000/Year

Not sure how accurate the author’s numbers are. I’m fairly certain that those who are using tax rates for effect, are probably including payroll taxes. If that’s the case, his numbers are off.

One thing I find amusing about Buffett and his tax situation is that he’s the boss and he COULD pay himself a much larger salary and pay the income taxes on it accordingly. He doesn’t do that, though. Oh, and if he really did desire to pay more taxes, he could always write the IRS a check. My respect for Warren has soured over the last few years.

A couple of bad years can really bring down your average annual rate of return.

Check out this graphic I posted nearly two years ago:

Now here’s that same graphic updated through 2009:

What a difference two years can make.

It is important to note that Berkshire is currently trading at 122,537 per share, which is up 23.53% so far in 2010. That brings the average annual rate of return back up to 22.89% over the last 42.19 years.

The question is: what will the stock return in the future? I’m not an analyst by any means but I would have to say that it would be tough for Berkshire to notch the kind of gains it has in the past. We have already seen this happen over the last several years. For instance, here is a comparison of Berkshire’s average annual returns over the first 5, 10, 15, and 20-year periods (beginning in 1968) and it’s last 5, 10, 15, and 20-year periods:

The bigger they grow, the harder it is for them to continue that growth. Each investment is a smaller and smaller piece of the pie.

If you haven’t had a chance to read it yet, you need to read Warren Buffett’s editorial, Buy American. I Am. that was in last week’s New York Times (thanks to AFM reader, Tom, for sending this to me). It’s a short read. In the editorial Buffett makes the following comment:

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Of course, not everybody agrees. Alan Abelson in this week’s Barron’s had this to say (sorry to paste so much but I had to in order to get the point across):

We needn’t go through the obligatory obeisance to Buffett’s investment prowess and peerless common sense. We think he’s great. And sure, we believe the country will survive and prosper in the future. No argument most stock prices are down sharply. But we don’t agree this is the time to dive headlong into the market.

For one thing, Buffett can afford to be patient as long as he chooses. Most investors don’t have that luxury. For another, the economy is in the early stage of unraveling and we don’t think the market decline has discounted the havoc this unraveling may wreak by a long shot.

As to the shining prospects he summons up for the long term, they’re not apt to help us all that much if tomorrow’s troubles prove as harsh as we suspect they will. Then, too, as another wise man, John Maynard Keynes, famously observed, in the long run we’re all dead.

Most of all, Buffett despite his long experience and savvy hasn’t run into a crisis quite like this one because, pure and simple, it has no true precedent. That alone anyone should give anyone with fewer resources than Buffett, intellectually and otherwise, pause. Contrary to what he’s saying, we can’t remember anything that deserves to be called a bull market that had to be caught early and it certainly wasn’t true of the last two we’ve enjoyed.

As to his allusion to robins in the spring — a nice play on it’s the early bird that catches the worm — as someone has noted, it’s the second mouse that gets the cheese.

I’m not quite sure who Abelson is talking about when he says “we” because later on in the issue of Barron’s comes a rather bullish cover story ($) by Gene Epstein.

Also, I would like to compare Abelson’s net worth to Warren Buffett’s. LOL! I think it’s funny whenever Buffett says anything, there’s all these so-called experts to tell us how wrong he (Buffett) is. No he’s not always right but he’s been a lot more right than most people.