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A Lesson From Buffett: Doubt Yourself

May 5, 2013

A Lesson From Buffett: Doubt Yourself

There was no big news at Berkshire Hathaway Inc.’s annual meeting this past weekend, but there was one great lesson for investors: Perhaps the most important thing you can do when everything seems to be going right in your portfolio is to listen to somebody who insists you are wrong. To spice up the annual ritual, Berkshire’s chairman, Warren Buffett, invited someone who has placed a bet against the stock—short-seller Doug Kass of hedge fund Seabreeze Partners Management—to join the panel of analysts posing questions to Mr. Buffett and vice chairman Charles Munger. Carp, if you will, that it didn’t take much bravery for Mr. Buffett to give air time to one skeptic among the more than 35,000 worshippers who would trample their grandmothers to kiss Mr. Buffett’s feet if he took his socks off. Complain, as many already have, that Mr. Kass’s questions weren’t all that tough. Then ask yourself: When is the last time the management of a major U.S. company sought out unrestricted criticism from someone betting against the stock? To get a sense of how unusual it was for Mr. Buffett to invite a bear to ask questions freely, consider a survey of more than 500 companies by the National Investor Relations Institute in 2011. The research found that 80% placed limits on who can ask questions during the quarterly ritual of the earnings conference call. Nearly 25% of the companies took questions only from “pre-approved lists” of callers. Only 11% permitted individual investors to ask questions; just 12% said the floor is open to everyone. What is more, 76% of companies prepared scripted answers to the questions they expected to get. According to the NIRI survey, the prepared comments by top executives that open the typical earnings conference call are prerecorded by about one out of 12 companies, but more than 80% of them don’t disclose that the remarks have been prerecorded. But before you start comparing U.S. corporate management to a closed system like, say, North Korea, ask yourself another question: When is the last time I tried as hard as possible to find someone to refute my own investing ideas? Mr. Buffett is “self-confident, but he’s not afraid of a challenge,” Mr. Kass told me last week. “I believe he enjoys challenges.” A deliberate, lifelong effort to find people to tell him why he might be wrong is one of the keys to Mr. Buffett’s success. It doesn’t come naturally to most investors. Mr. Buffett once noted about the scientist Charles Darwin that “whenever he ran into something that contradicted a conclusion he cherished, he was obliged to write the new finding down within 30 minutes. Otherwise his mind would work to reject the discordant information, much as the body rejects transplants. Man’s natural inclination is to cling to his beliefs, particularly if they are reinforced by recent experience.” Read more of this post

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Warren Buffett and Bill Gates Looking Intense While Tossing Newspaper

Bill Gates Looks Super Intense While Throwing This Newspaper

Joe Weisenthal | May 4, 2013, 12:45 PM | 7,632 | 7

At the Berkshire Hathaway annual shareholder meeting, billionaire, Warren Buffett-buddy, and Berkshire board member Bill Gates participated in the annual, folksy tossing of the newspapers. From Reuters: Berkshire Hathaway CEO Warren Buffett (R) watches friend Microsoft Chairman Bill Gates throw a newspaper in a competition just before the Berkshire annual meeting in Omaha May 4, 2013. Buffett and the board of his conglomerate Berkshire Hathaway Inc are “solidly in agreement” on who should be the company’s next chief executive, he said at Berkshire’s annual shareholder meeting on Saturday. And here’s Warren, also looking incredibly focused post-toss.bill-gates-warren-buffett-newspaperwarren-buffett-28

Buffett Has No New Investment Plan in China, Says There’s No Competitive Advantage; The pessimistic remarks about China came as a strong contrast with five years ago when he said China has huge growth potential

Buffett Has No New Investment Plan in China, Says There’s No Competitive Advantage

05-06 13:58 Caijing

The Buffet-backed BYD in March reported a drop of over 94% in net profit for the year 2012 largely due to weakening demands in the world’s second largest economy amid a downturn.

Warren Buffett, the Berkshire Hathaway CEO, said he has no new plans to invest in China, as the Oracle of Omaha remained conservative about competitive edges of the world’s second largest economy, following disappointing performance of his once favored investment in Chinese auto-maker BYD. There’s no competitive advantage in China, said the billionaire in taking up a question from a shareholder from Shanghai as the annual meeting of Berkshire Shareholders was drawing to a close in Omaha on May 4th. The pessimistic remarks about China came as a strong contrast with five years ago when he invested in a new plant of Iscar Metalworking Companies (IMC) in Dalian, a coastal city in northeast China, saying China has huge growth potential.  Buffett purchased 1.3% stake in PetroChina, China’s largest oil and gas producer, with $488million between 2002 and 2003 before selling all the shares in November, 2011, which gained the investor as much as $4billion. Berkshire Hathaway bought 225million shares of BYD, a Chinese auto and battery maker, or just under 10% of the company’s stock at 8 HKD a share before it soared to over 80HKD in 2010. The company, however, had seen slumping businesses since then with its shares dropping as much as over 80% to 12.44HKD in October, 2011. The Buffett-backed BYD in March reported a drop of over 94% in net profit for the year 2012 largely due to weakening demands in the world’s second largest economy amid a downturn. Buffett said he would prefer Chinese companies that export quality goods, especially consumer goods at last year’s annual shareholder’s meeting for Berkshire Hathaway. Berkshire vice chairman Charlie Munger said China has a huge auto market which is BYD’s main focus, and the number of cars he expected BYD to sell in the U.S. would be very small.

Investors having tough time copying Buffett’s strategies these days; Sage of Omaha’s transition to master financier baffles some, but homey advice still rings true

Investors having tough time copying Buffett’s strategies these days

Sage of Omaha’s transition to master financier baffles some, but homey advice still rings true

BY JOSH FUNK

AP MAY 6, 2013

Israel’s inverted economic pyramid and how to flip it

Israel’s inverted economic pyramid and how to flip it

The opposing examples of IDB Group and Iscar indicate a pressing need to shift the economic narrative from financiers who specialize in gimmicks toward businessmen who build something of real value.

By Sami Peretz | May.03, 2013 | 2:20 PM

Over a hundred years ago, the socialist Zionist leader Dov Ber Borochov defined the structure of Jewish labor in the Diaspora as an inverted pyramid. The narrow base consisted of a few productive workers employed in industry and agriculture and, above them, in a much wider layer, were those dealing in “airy-fairy” jobs (“luftgescheft” in Yiddish), such as middlemen, small merchants and moneylenders.

At that time, the inverted pyramid was the result of Jews being denied access to other jobs and thus pushed into these professions by default. The need, therefore, to transform the Jew from a person dealing with such impractical or insubstantial work into a productive, industrial person was deeply embedded and an integral part of the drive to create a Jewish national home in Israel. A hundred years later, the financial news from this week may confirm this Zionist ideal.

On one hand, we have the Wertheimer family, founders of Iscar, a shining example of a productive industrial business, which just sold another 20 percent stake in the company to Warren Buffett for $2 billion, a deal that reflected a total company worth of $10 billion. On the other hand, a court has nominated an observer to supervise activity at IDB Development, one of the companies in Nochi Dankner’s collapsing pyramid.  Read more of this post

Korean chaebol forced to reduce cross-affiliate deals

2013-05-05 10:48

Chaebol forced to reduce cross-affiliate deals

Regulations feared to drive large firms out of country
By Lee Hyo-sik
05-06-22-0105-06-22-03
President Park Geun-hye’s pledge to penalize inter-subsidiary dealings has been troubling Korea’s family-controlled conglomerates. She has vowed to curb business transactions among chaebol affiliates in the name of “economic democratization,” which her advisors say seeks to correct unfair business practices by large family-run groups, as well as protect small businesses.

The government expects the National Assembly will approve the revised Fair Trade Act in July, designed to discourage intra-group transactions by imposing fines on and prosecuting those orchestrating them.

Policymakers and civic groups argue that generating the bulk of revenues from exclusive dealings with affiliated companies is tantamount to unfair business practices. Such transactions, they say, deprive unrelated firms, most of which are small- and medium-sized enterprises, of potential business opportunities.

They also say the exclusive intra-group dealing is misused, serving to boost the wealth of offspring and other family members of group chairmen. These family members often hold substantial stakes in the benefiting entities. Read more of this post

More chaebol children stock-rich

2013-05-05 6:49 p.m.

More chaebol children stock-rich

By Cho Mu-hyun

The number of parents and grandparents transferring stocks worth more than 100 million won ($ 91,300) to childrens names has soared to a record high, according to a report released Sunday.Chaebul.com, which tracks large conglomerates and their owners said, as of April, there were 118 102 children under the age of 12 who had stocks worth 100 million won The figure was a year ago, thirty one such offspring had stocks worth more than 1 billion won, and two had more than 10 billion won The richest child in Korea is the 12-year-old son of Huh Yong-soo, senior vice president of GS Energy and cousin of GS Group Chairman Huh Chang-soo. The boy had 42.9 billion won worth of stocks. Huhs son topped the list last year as well, when his stocks were valued at 45.3 billion won. He received 259,000 of stocks GS Holdings when he was four years old in 2004, and currently has 740,341 His nine-year-old younger brother was runner-up with 17.4 billion won worth of stocks Relatives Lim Sung-Gi, chairman and CEO of Hanmi Pharmaceutical, hold seven spots in the top ten aged between five and ten, they each own stocks valued at more than 8.44 billion won in the company’s subsidiaries Hanmi Science and Hanmi Pharm LB Investment CEO Koo Bon-chuns two sons, aged 12 and 10, had stocks worth 6.05 billion won and 55.5 billion won. The elder son first appeared on the annual list two years ago, when his stocks were worth 7.5 billion won. Koo is the son-in-law of Lee Sang-deuk, a former lawmaker of The Saenuri ruling Party and the elder brother of former President Lee Myung-bak, Seoul Pharma CEO Hwang Woo-sungs two 9-year-old sons both had stocks valued at 4.25 billion won four of the grandchildren of Hankook Tire Chairman Cho Yang-rae appeared on the list. The 7-year-old son and 10-year-old daughter of sis son and Hankook Tire President Cho Hyun-bum, who is also the son-in-low of former president Lee Myung-bak, owned stocks worth 810 and 800 million won, respectively, there are also stock-rich Infants The granddaughters of Koo and the Korea Watos Chairman Song Gong-suk, both just turned 1 who own stocks valued at 160 and 100 million won Critics say owners of conglomerates have been transferring stocks larger to relatives so they can accumulate fortunes by receiving dividends or making it easier for them to control their BUSINESSES One example is the Hyosung Group, whose Chairman Cho Suk-Raes three grandchildren owned stock in the company worth around 80 million won in 2008. When the stock price quadrupled in 2010, it was sold for a profit of 300 million won each. Another advantage of the ploy includes avoiding heavy taxes.

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