"Lower on that specific page was possibly a paragraph that should be open to interpretation, Buffett never gives an exact multiple, being too staid and rigid with too many parameters can deeply dent your longer term returns: 'From my perspective, though, Charlie's most important architectural feat was the design of today's Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.'"
To market, to market to buy a fat pig. What are your options? I mean, what are your investing options as an individual? If you are working in formal employment, you no doubt have pension savings, more often than not outsourced nowadays. The whole idea would have been that if I work for x company for 30 years (or a series of companies for that time) I would have enough savings to retire. Remembering that if you are in formal employment, you are then in a different class altogether from entrepreneurs and unemployed people of course. Not everyone is "lucky" enough to be on a formal salary with a formal contribution towards retirement. The question then remains, how do you get the best out of all of the years of your contributions?
In other words, do you think that for all of the salary that you have saved over a period of formal employment that you are in a position to retire at the same "rate" as before? Or not? Studies show mostly not, i.e. people are not in a position to provision properly over their working lifetime. [I would like to know from your personal experiences, just to get a sense of what to avoid and what to do.] In the end saving and investing is pretty much like anything else in life, planning, protecting and patience, as well as great will power to continue and persevere. I often tell folks who continually add to their investments that they should hope for low prices over their lifetime of savings, obviously they would want the companies to grow profits and pay more dividends to you, the shareholder. Lower prices mean you can buy more shares for the same initial investment.
The two never go hand in hand, you would not add to your investments if they did not do well (stick that in inverted commas), although you should continue to buy good companies at reasonable prices over the years. Always be adding is my mantra, always be in accumulation mode, I am of course at an age that is either old (if you are a child) or terribly young and inexperienced (if you are in retirement). What is a good company at a good price? Michael had a read through the same Buffett slash Berkshire annual chairman letter that I had from a couple of weeks ago, this last one, and the looking back over time segment and it suddenly struck us that there is no right or wrong way. Be flexible when making investment calls:
See the Charlie Straightens Me Out segment on page 26, with this paragraph specifically: "In addition, though marginal businesses purchased at cheap prices may be attractive as short-term investments, they are the wrong foundation on which to build a large and enduring enterprise. Selecting a marriage partner clearly requires more demanding criteria than does dating"
Lower on that specific page was possibly a paragraph that should be open to interpretation, Buffett never gives an exact multiple, being too staid and rigid with too many parameters can deeply dent your longer term returns: "From my perspective, though, Charlie's most important architectural feat was the design of today's Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices."
Obviously trying to figure out what is a fair price is extremely tricky. If you pay todays price and the business falls on worse times, totally unanticipated by yourself, then you are left wondering (often procrastinating) about the bum deal that you made. Equally, if you do not pay up for the quality, you invariably never will. The same people who tell me that Aspen is too expensive at 400 Rand, told me the same thing at 200 Rand and 100 Rand. And at 40 Rand. If you cannot own or buy quality and are only looking for what Buffett calls a marginal business at a cheap price, good luck with that.
Of course this can go horribly wrong. You could have paid 120 times for Microsoft or Cisco at the height of the last NASDAQ bubble. You still would not be making money, they might be paying you a dividend now (not back then), still, you would feel like you have owned a t_rd for 15 years. That is of course presuming that you had not sold any, or whether you had not bought some more at the bottom at the market in March 2009. You could have bought it at one-fourth of what you paid in March 2000. A blended price would see you up comfortably over that time. Be flexible is what Warren is trying to say I think. Of course you can always cherry pick from the same information to strengthen your argument, it is however something to think about. Think about it deeply in fact. I thought we all needed that!
Company corner snippets
I am always reminded that ones own experiences and reality is certainly not what everyone else experiences. The simple things, convenience and access to certain services and products may be "normal" for you, it certainly is not the case for different people in different parts of the world. The reason I was thinking along these lines is that in a Google alert I saw that MTN had their mobile licence renewed in Cameroon, for another 15 years, that is good news and expected, I would guess. That was not what struck me, it was rather that MTN and Orange had been granted a 3G and 4G licence by the government of Cameroon. Yes. Whilst you swear at your smartphone for not being able to download the latest Taylor Swift or Beyonce album, other people are wrestling with a 2G Edge connection. They did have to pay 125 million Dollars for the privilege of offering people quicker internet, amazing, right? Your reality is not that of someone else, your daily speeds are quicker than some, much slower than you would want them to be.
I picked up the story that Lonmin, the share price, in London yesterday touched an all time low. See the Bloomberg story: Lonmin at Record Low as Metal Drop Compounds Glencore Exit. We also noted a story from the Paris mayor, Anne Hidalgo, on emissions controls: Paris, France to control diesel truck entry into the city due to pollution.
Hmmmm .... Obviously this could be interpreted as either good or bad news for the platinum industry, all diesel cars made after 2011 could be on the road, all those before, sorry. Most diesel cars are set to be banned by 2020, or so that is what is being proposed. That hardly sounds like good news for the platinum industry, sounds better for the palladium industry. South Africa is still a huge palladium producer, around one third, however, the Russians produce more than half. I cannot imagine that they are more desirable than ourselves as a proper trading partner. In the meantime I read this David McKay article from MiningMx: Lonmin, Impala may return to debt, equity markets.
We're reading this, you should too.
Another avenue that Google is moving - Google opens its first ever store
A look at how South Africa's rich are distributed - Over 2000 South Africans have $10m or more. As people get richer there is a trickle down effect to those on the lower LSM rungs. Not very comforting if you are in the bottom LSM groups, a bigger pies is better for everyone though.
There are many factors that effect the oil price, production, storage and rig numbers are some of them - Oil Prices Fall as U.S. Storage Continues to Fill Up for Ninth Straight Week. Given all the moving parts it is hard to make an accurate forecast for the oil price but given the size of inventory build up you would assume that prices are not going to rise much.
Here is another moving part when it comes to oil, OPEC - History Suggests OPEC's Days Could Be Numbered
What if? - What If Apple Had Entered Dow in 2008?. This highlights the reason why the Dow is largely irrelevant now days, the index has too few companies and it is too subjective on which companies form part of the index.
Home again, home again, jiggety-jog. Markets are in positive territory, there is something that you haven't heard for a few days now!! The Rand is stronger, the resurrect complex is bouncing quite hard after a torrid time.
Sasha Naryshkine, Byron Lotter and Michael Treherne
Follow Sasha, Byron and Michael on Twitter
087 985 0939
No comments:
Post a Comment