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Berkshire Hathaway Inc. Message Board

  • GoodGuy001 GoodGuy001 Apr 17, 1998 4:44 PM Flag

    Roth or not to Roth ....that is the ques

    Needing help from the most experienced and intelligent board on Yahoo. Considering converting IRA to Roth. All of last 12
    years of 401K and profit sharing in this self determined...and 98% in BRK.B. 10 to 15 years till I retire. I see the
    change to Roth as a no-brainer (unless income tax changed to sales tax). Especially since I intend to leave this money in BRK.B
    until the end and enjoy the no tax when taken out. Also, thinking of moving it to reg account at 59 1/ take advantage of
    margin purchases - yes, this would be taxed. Please...needing serious help to a muddled mind.

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    • i encourage everyone to sell all their berkshire. That way i can pick it up at a reasonable price.

    • When Buffett was much younger his investment
      philosophy closely parallelled Ben graham. However, as the
      years went buy it became very difficult, in my opinion,
      for "pure" Graham followers to find stocks trading at
      less than book value, for example, especially in the
      large cap universe. It became necessary for Buffett to
      invest in larger companies as BRKA grew. A pure value
      investor in the Ben Graham mode would not be able to find
      one largecap stock today that would meet his/her
      criteria. Even a Tweedy Browne (a firm that adhered to
      Graham's philosophy longer than most) can't find real
      value plays today in larger stocks. As Buffett aged his
      strategy showed more characteristics associated w/ Mr.
      Fisher's writings. Munger, whose philosophy is closer to
      Fisher's, also impacted Buffett immensely. Buffett became
      willing to pay up for fantastic monopoly-like businesses
      and recognized the great value of a brand franchise.
      It is extremely interesting to study Buffetts
      transgression from Graham-type investing to Fisher/Munger
      types. Given the size of his investment portfolio and
      the changes that have taken place since Graham wrote
      Security Analysis, I don't think Buffett had an
      alternative to his transformation.

    • Has anybody read Common Stocks, Uncommon Profits
      written by Fisher? Seems to me that WB philosophy leans
      more toward him than Ben Graham even though Graham is
      his foundation. In this book, Fisher states "Don't
      stress over diversification." BRK is very diversified
      and so to are its shareholders because of it. Just
      curious about Fisher cause I don't see him mentioned on
      this board, yet his writings are so Buffetesque.

    • Thanks for the Morningstar connection. During our
      visit Sunday, we found Borsheim's price tags on
      selected pieces rather humurous..."Price of 1 'A' Share,"
      "Price of 4 'B' shares," etc. Most expensive item we saw
      was about $850,000 (less 30%!); but there was
      probably something we missed!

      Even though it
      occurs each year, it's still surprising to see the
      buying frenzy that goes on during the weekend. Some
      people spend HUGE sums of money! Buffet tables and bars
      serving champagne, wine, Coke products (free, of course)
      were set up in the mall center for all shareholders to

      Reportedly, Borsheim's is second only to
      Tiffany's Fifth Avenue in single store sales volume and
      first in the independent store Omaha, NE
      of all places!

    • Another of Buffett's major themes is that you
      should invest in businesses with high returns on equity
      (ROE). His favorite kind of business is one that
      produces a high return without requiring a lot of capital;
      the worst kind is one where you have to invest a lot
      of capital for a low rate of return. Though he had
      many good things to say about McDonald's, Buffett
      hinted that one reason he reduced his holdings in that
      company is that it owns most of its restaurants, and is
      thus more capital-intensive than Dairy Queen, which
      owns a much smaller fraction of its stores. When asked
      whether he thought there were bargains to be had in the
      Japanese stock market, Buffett replied that the low prices
      there are justified, because of the low ROEs of
      Japanese companies. As he noted, "It's hard to get rich
      with a low ROE."

      Still another favorite idea
      that Buffett repeatedly emphasized on Monday is
      quality, both in the company itself and in the people
      running it. When Berkshire Hathaway buys a business, they
      buy the management as well. One key question they ask
      about top managers is: does this person love the
      business, or do they love money? They look for people who
      love the business first, and so far they've had a
      pretty good batting average. Extending the baseball
      analogy, Buffett also said that he doesn't tinker with his
      managers' "batting styles," as long as the business is
      successful. He never imposes decisions from the top and has
      no formal system for tracking what his managers do,
      since he realizes that they know a lot more about their
      business than he ever could. As Charlie Munger put it, "We
      have decentralized power to a point just short of
      total abdication."

      The particular investment
      decisions Warren Buffett has made are not necessarily for
      everybody, as he would be the first to admit. Each
      investor's goals and areas of expertise are different. But
      the basic principles Buffett uses are based mainly on
      common sense: Concentrate on what you know best, and
      look for quality companies to invest in. In a field
      often ruled by irrationality and a herd mentality, a
      little common sense can go a long way.

      Kathman, editorial analyst for StockIdeas, an electronic
      newsletter accompanying Morningstar StockTools , wrote this
      article. If you�ve got thoughts or questions about this
      column, you can send him an e-mail at .

    • For one weekend every May, Omaha, Nebraska
      becomes the investing capital of the world. That's when
      Warren Buffett and Charlie Munger hold the Berkshire
      Hathaway shareholders' meeting, which over the years has
      evolved into a three-day celebration of Buffett and his
      folksy but influential investment wisdom. This year's
      meeting attracted 11,000 of the Berkshire faithful to
      Omaha for minor league baseball, Borsheim's jewelry,
      Dairy Queen, and, of course, plenty of Buffett.

      Most of Berkshire's shareholders are individuals
      rather than institutions, and Buffett said during the
      meeting that he prefers it that way. He likes knowing
      that his investment decisions make a difference in
      people's lives, and he feels a sort of kinship with this
      group of people who share his outlook on investing. The
      shareholders, in turn, showered Buffett with adulation during
      the weekend, cheering him wherever he appeared. He
      spent several hours talking to people and signing
      autographs Saturday night at the Omaha Royals baseball game,
      then again Sunday night at Dairy Queen. One journalist
      at the packed Sunday press conference likened this
      reception to that normally given to rock stars, which
      prompted Buffett to quip that he's no Mick Jagger.

      Of course, everyone wanted to know what Buffett and
      Munger thought about a multitude of issues. The duo
      obligingly answered all questions thrown at them, both in a
      half-hour press conference on Sunday and in the six-hour
      Q&A session that made up the bulk of the actual
      meeting on Monday. Some of the questions were
      predictable. Buffett and Munger were repeatedly asked where
      the market is headed, and they just as repeatedly
      said they don't know. Three different people asked
      Buffet whether he would buy Berkshire Hathaway's stock
      at its current price (around $69,000 a share), and
      each time he politely but firmly said he doesn't make
      buy/sell recommendations. But plenty of people asked
      incisive questions, and Buffett's answers provided some
      new twists on the same general themes he's been
      emphasizing for years.

      First and foremost, Buffett
      says you should stick with what you know. Charlie
      Munger pointed out that there's no credit for "degree of
      difficulty" in investing, as there is in diving, so you might
      as well go with the investments that you feel
      comfortable with. Buffett cheerfully admitted that plenty of
      people have made money on computers and the Internet,
      and said he admires Bill Gates of Microsoft and Andy
      Grove of Intel. But he just doesn't understand
      technology very well, and so he's content to let others make
      the money there. He prefers to invest in businesses
      where he knows what they're going to look like in ten
      years, and technology is changing so fast that it's hard
      to look that far ahead with any confidence.


    • ( con't)
      See's Candies for example? [Note:
      See's, which specializes in boxed chocolates, is another
      Berkshire subsidiary.]
      Buffett: We�ve tried 50 different
      ways to put money into See�s. We actually bought a $13
      million or $14 million building in Los Angeles--350,000
      square feet--last year. If we knew a way to put
      additional money into See�s and produce returns a quarter of
      what we�re getting out of the existing business, we
      would do it in a second. We love it. We play around
      with different ideas, but we don�t know how to do it.
      We do know how to do it at GEICO, and we know how to
      do it at FlightSafety. But with some businesses we
      haven�t figured it out yet.�

      Munger: By the way,
      we really shouldn�t complain about this because
      we�ve carefully selected a bunch of businesses that
      just drown in money every year.

      That's why we
      wondered what you do with all that money!
      That�s our job, and right now we�re not doing much with
      that job.

      Do you ask your operating managers
      to think about these questions?
      Buffett: Oh
      sure. I just sent out a report to one of them at
      another company who�s done a great job making small
      add-on acquisitions. We want them to do it. But we don�t
      want them to do it at any cost and just to feel that
      it�s a blanket mission. We do want them to be alert to
      that sort of thing. Any time they can make a small
      deal that enhances their position at a reasonable
      price, we write them a check that day.�

      Can we
      ask you a question on corporate governance? You've
      been very vocal about shareholder rights and
      shareholders thinking like owners. Morningstar's very well
      known for mutual funds, so I wonder if you have any
      observations about mutual-fund shareholders, their rights, and
      the way they're been treated?
      Buffett: I think the
      independent directors have been anything but independent.
      They wrote the Investment Company Act in 1940 and made
      these provisions for independent directors on the
      theory that they would be the watchdog for all these
      people pooling their money. The behavior of independent
      directors in aggregate since 1940 has been to rubber stamp
      every deal that�s come along from management--whether
      management was good, bad, or indifferent. Not negotiate for
      fee reductions and so on. I�m a huge admirer of John
      Bogle and what he�s written. A long time ago an
      attorney said that in selecting directors for mutual
      funds, the management companies were looking for Cocker
      Spaniels and not Dobermans. I�d say they found a lot of
      Cocker Spaniels out there.

      Thank you very much.

      P o s t e d :�� 0 5 - 0 6 - 9 8
      Haywood Kelly,
      editorial analyst for Morningstar StockInvestor,
      transcribed this interview. He can be reached at

    • Morningstar is the greatest...

      A Quick Q &
      A With Warren Buffett

      The day before
      Berkshire Hathaway�s annual meeting, Warren Buffett and
      Charlie Munger headed to Borsheim's, the massive Omaha
      jewelry store owned by Berkshire. They answered
      questions, mingled with shareholders, and signed autographs.
      (As Buffett noted in Berkshire's latest annual
      report, Charlie only smiles if the paper he signs is a
      Borsheim's sales ticket.) After an afternoon press
      conference, Buffett and Munger slipped into the office of
      Susan Jacques, the CEO of Borsheim's, for some
      one-on-one interviews. Morningstar quizzed the two men on
      their investment philosophy.

      What is it that
      really piques your interest in a stock? What tells you
      that it could be interesting?
      Buffett: We�re so
      limited now because we can only go into very big
      companies. Charlie and I are probably familiar with every
      company in the United States--in a general way--that we
      can have the kind of position we would need to have
      [to make a difference in Berkshire Hathaway�s
      performance]. We look for the ones where we think we know what
      they�re going to look like in 10 years. If the price gets
      attractive and we know a little about the management, and
      we�re quite sure--within a range--what they�re going to
      look like in 10 years, we�re in our area. We buy them
      when the prices are right, like Coca-Cola was some
      years back.

      Do you have advice for the
      individual investor to help them narrow the stock universe?

      Buffett: They ought to think about what he or she
      understands. Let�s just say they were going to put their whole
      family�s net worth in a single business. Would that be a
      business they would consider? Or would they say, �Gee, I
      don�t know enough about that business to go into it?�
      If so, they should go on to something else. It�s
      buying a piece of a business. If they were going to buy
      into a local service station or convenience store,
      what would they think about? They would think about
      the competition, the competitive position both of the
      industry and the specific location, the person they have
      running it and all that. There are all kinds of
      businesses that Charlie and I don�t understand, but that
      doesn�t cause us to stay up at night. It just means we go
      on to the next one, and that's what the individual
      investor should do.

      So if they're walking through
      the mall and they see a store they like, or if they
      happen to like Nike shoes for example, these would be
      great places to start? Instead of doing a computer
      screen and narrowing it down?
      Buffett: A computer
      screen doesn�t tell you anything. It might tell you
      about P/Es or something like that, but in the end you
      have to understand the business. If there are certain
      businesses in that mall they think they understand and
      they�re public companies, and they can learn more and
      more about them.... We used to talk to competitors.
      To� understand Coca-Cola, I have to understand Pepsi,
      RC, Dr. Pepper.

      Munger: And Cott. Cott is the
      one you have to understand more than anything else.
      [Note: Cott is a Canadian company specializing on
      low-priced, private-label soft drinks.]���

      The next
      question has to do with reinvesting capital. You take
      pretty much 100% of the cash flow out of the businesses
      you own...
      Buffett: We have a lot of money coming

      ...and you reallocate the capital.
      Especially since it is so difficult to find new companies to
      add to the portfolio, why not reinvest more in some
      of the existing companies you have in order to
      Buffett: That�s the best thing to do. If you�re talking
      about the operating businesses, we�re pouring it into a
      company like FlightSafety, for example, in terms of
      [buying flight] simulators. We�re pouring it into
      promotion at GEICO. [Note: FlightSafety, a subsidiary of
      Berkshire Hathaway, provides training to operators of
      planes and ships. GEICO is the seventh largest auto
      insurer in the United States.] But for a lot of them
      there�s not much w

    • Check out
      They have
      two cover articles today, from an analyst and an
      exclusive interview.

      Good luck finding a transcript.
      Last year, the closest analysis was the one done by, you can still get to in the research archives,
      under Berkshire Hathaweek - the Capitalist's Woodstock
      (many like to say they were there...some even are
      telling the truth.)

      My wife says I can go next
      year, but we need to drive from Washington, DC and go
      through her birthplace of Newton, Iowa.
      Which brings
      to mind a good company for WB, Maytag.

      stream of consciousness blathering.

    • Can anyone out there direct me to a site featuring a transcript of the Q& A at Monday's Annual Meeting?

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