Buffet Letters 2013 – My Notes “A bull market is like sex. It feels best just before it ends.”

Buffet Letters 2013 – My Notes

 “A bull market is like sex. It feels best just before it ends.”

Buffet recently made two big investments in Capex intensive business – Railroads and energy utility ….and his rationale is below. 

“Our confidence is justified both by our past experience and by the knowledge that society will forever need massive investments in both transportation and energy. It is in the self-interest of governments to treat capital providers in a manner that will ensure the continued flow of funds to essential projects. It is meanwhile in our self interest to conduct our operations in a way that earns the approval of our regulators and the people they represent.”

The above is of utmost importance for the government and politicians in india to understand ..to bring back a healthy environment of investment.  Multiple industries like Telecom, Mining, Utilities are in a mess because of scams and overhang of Regulatory changes at times Retrospective in nature.  Basically – the government has had little or NO respect for CAPITAL PROVIDERS – be it TATAs or BIRLA or VODAFONE or NOKIA.  While, corporates have also been at fault…but to regina trust this time the initiative has to come for the govt.

Also Buffet valuation advise for the financial community – Dont look at EBITDA for interest coverage or Valuations….especially so in Capex intensive business. Something i cannot agree more wrt to Telecom Spectrum were the Cost of Spectrum present & future hide below the EBITDA. 

“Our definition of coverage is pre-tax earnings/interest, not EBITDA/interest, a commonly-used measure we view as seriously flawed.)

When Wall Streeters tout EBITDA as a valuation guide, button your wallet.”

Quotes/Gems I liked 

At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business; it’s better to have a partial interest in the Hope diamond than to own all of a rhinestone.

Woody Allen stated the general idea when he said: “The advantage of being bi-sexual is that it doubles your chances for a date on Saturday night.” Similarly, our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for our endless gusher of cash.

Many insurers pass the first three tests and flunk the fourth. They simply can’t turn their back on business that is being eagerly written by their competitors. That old line, “The other guy is doing it, so we must as well,” spells trouble in any business, but in none more so than insurance.

You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.


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