I agree that in many countries, companies'
financials are not cooked any more than they are here.
They might be different in how they account for
earnings (cash vs. accrual) or in how they make reserves
for bad debt, repairs etc, or how they depreciate
their stuff, or how they account for intangibles, or
stock options. So it is important to know the
differences, but generally many countries have trustable
What Munger (and I) have a problem with is the culture
of why a company exists, with their raison d'etre.
In Japan they might exist to make their motherland a
stronger country, to support all kinds of bullshit
non-value-adding activities. Or they may be cross-owned by each
other and form some kind of a unpenetratable crony
Or they may be pushed around by the
government (who may be a significant shareholder) to give
too many perks to customers and keep prices low. See
this happen here if Social Security money is invested
This stuff is hard to change.
Really sticky and annoying.
I don't feel like
investing into this kind of bullshit. I contemplated
investing into some Russian companies with P/Es of 2
(that's TWO) or less, unless I realized two
1) No one knows what the true E is
2) No one know
how much of that true E will be stolen or diluted by
management, or wasted by the unpredictable government. I did
not know how much but I knew it was going to be "a
lot". Enough to make me uncomfortable. And I do like to
be comfortable and easy going.
Same is with
BRK, only in the opposite direction. I do not know how
much value Buffett adds, but I know that it is "a
lot". Enough to make me feel at ease when the price
goes over 30% above my conservative value. There is
still plenty of "margin of safety" created by the
institutional dynamics of BRK.
You mentioned Japan.... let me tell you my
experience with one quite famous electronics company....
I've seen them 'cook' their books by selling products
from their main Tokyo office to their US sister
company. It is registered as a sale, while it sits in
inventory on the US side. Pages and pages of nice
financials on the annual report on earnings, and not a peep
about inventory in the US warehouses.... Investors only
find out about it much later when the subsitudary
finally writes it off a year or two later when the
product is obsolete....
How can you invest with
confidence when you really don't know for sure if a company
has effected a turnaround,... or did they just 'take
it off the books'.....
stay away from any country where the government shows
signs of corruption, including Japan. You wanna invest
overseas? Take WEB/CM's advice... buy G, KO, etc.
........."My philosophy.... stay away from any
country where the government shows signs of corruption,
including Japan."..........ain't THAT the truth......sadly,
as DumpBill mentions, American taxpayers are
presently "investing" thru the IMF in some bad overseas
deals.......Clinton and his acolytes, busy worshipping the golden
calf of Globilization have got even bigger
plans.......NAFTA for Africa..........we'll be lining the pockets
of sub-Saharan despots soon enough......of course
any politician with the stones to oppose this will be
labeled a "racist" don't ya know......the beat goes
Regarding your point about oversea investments.
Asia is a good place to start. Its tailspin which
still seems to have some way to fall is a good case.
The greed of locals and foreigners along with plain
old corruption especially in Indonesia really bring
home the case for staying away.
I feel a better
way may be through companies with global presence
such as Unilever or Nestle who have a presence in most
parts of the world.
How much cash is Berkshire
sitting on currently?
......."I don't feel like investing into this
kind of bullshit. I contemplated investing into some
Russian companies with P/Es of 2 (that's TWO) or less,
unless I realized two things:
1) No one knows
what the true E is
2) No one know how much of that
true E will be stolen or diluted by management, or
wasted by the unpredictable government. I did not know
how much but I knew it was going to be "a lot".
Enough to make me uncomfortable. And I do like to be
comfortable and easy going."..................
can one say about Russia?......they managed to fail
at both Communism AND Capitalism..........this
summer the IMF pumped $50 billion into Moscow to
"stabilize" the country........and then I'll be
damned......$50 billion mysteriously flows out of Russia into
Swiss banks.......the beat goes on.......
I bought some GAZPROM
Analysts say it is 750 time cheaper as
German Ruhrgas AG has a stake of 2.5% now and and an
option up to 4%!
Maybe it is a new MSFT during
the next ten
Actually I think that Russia is doing better than
it seems to you. It is just that the minority
investors will get screwed no matter what. But capitalism
actually works there pretty well, given the short time it
had to develop. A 100% owner of some businesses is
likely to do reasonably well in the long run.
agree though that lending money to Russia is stupid.