That lovable old man was interviewed by Becky Quick (who has just returned from maternity leave) on CNBC yesterday, there is a whole host of videos that you can watch (if you want) to see the whole interview. And there is also the transcript, not the best in the world, but obviously the software is working on it. Check out the summary, where Becky gives a little insight into the interview with the Oracle of Omaha and Buffett's Bet on Big Blue. The Big Blue being IBM, he revealed the significant size of the purchase on CNBC for the first time yesterday.
There was a point in the interview where I sat up and took notice, he said that the world was always uncertain. Which is true, Donald Rumsfeld tried to articulate that and now we have the English term, the unknown unknown. Here is the Rumsfeld quote -> "But there are also unknown unknowns - the ones we don't know we don't know.". I finally managed to find the bits and pieces on the uncertainty quote from the CNBC videos section, thanks guys:
"The world is always uncertain. The world was uncertain on December 6, 1941. The world was uncertain on October 18th, 1987. We just didn't know it. The world was uncertain on September 10, 2001, we just didn't know it. There are always uncertainties. The question is what do you do with your money? If you leave it in your pocket, it will become worth less, not worthless, but worth less over time. That's almost certain."
This uncertainty bit is amazing, and so true, business TV and business media, and all the collective participants are always anxious about the next "thing", and you just never know what is going to happen tomorrow. So do not be anxious about the unknown, rather just own the quality. He continued about what you can do with your money:
"Can you put it in bonds and then you get a certain 2% for ten years and that's almost certain to be less than the decline in the purchasing power? You can put it in farms and the farms will probably keep growing corn and soy beans and they'll grow it whether Italy has trouble tomorrow or not. It's very interesting to me. If you own a farm and somebody said, you know, Italy's got problems, do you sell your farm tomorrow? If you own a good business in Omaha and they say Italy has problems tomorrow. Do you sell your business? Do you sell your apartment... house? No, but people think if they own wonderfully businesses they have to make a decision every five minutes."
Got it.
Serious problems come and go, quality investments remain quality investments. So whether Italy has issues or not, he is still looking at quality companies to buy. And talking of a quality company, here is the bit where he reveals that Berkshire has been buying IBM. And what struck me was that he (Buffett) had been reading the IBM annual report, cover to cover, for 50 years. 50 years people. And suddenly he had a light bulb moment. It took the man fifty years of reading about the same company before he eventually decided to buy over ten billion Dollars worth, and he said he was five years late on it. Incredible. Here is the video where
Buffett reveals that Berkshire bought a whole lot more IBM.
He talks about getting the IBM annual report:
"I have probably -- I've had two interesting incidents in my life. This year the report came in on a Saturday. I read it. And I got a different slant on it. But I -- I just -- I run it through a different lens."
He looked at it differently. And now he is happy that he bought a whole lot of stock, well obviously, he goes through the rationale of the light bulb moment:
"And incidentally, the company laid it out extremely well. I don't think there is any company that's -- that I can think of, big company that has a better job of going out where they're going to go and then having gone there. They laid out a road map. I should have paid more attention to it five years ago when they go in the five years ending in 2010. Now they laid out another road map for 2015. They have an incredible job."
My take away is that the greatest investor of all time has gotten used to the nature of the company, compares them more to a utility company. That is my sense of the investment. Plus, IBM is a great company. An amazing company. SO, I think that he will reward both himself and his fund holders. We checked and saw that the Berkshire market cap was 188 billion Dollars. So roughly this investment in IBM is about 5 percent of the Berkshire market cap. And around the same amount in IBM. Are you amazed that IBM and Berkshire have similar sized market capitalizations? I am.
I like the patience theme that he oozes. I like the fact that he acknowledges all these crises, but at the same time knows that the issues often (almost always) are resolved in a better fashion than people thought at the time. I would rather listen to him than the people who he describes who look at the stock price every five minutes. Investing is not about that. Thanks Buffy. This blog post ties really nicely into the whole argument of people who have short term bias, often it depends from what era they are from, check it out ->
Investor anthropology and the hegemony of technical analysis.