Margaritaville

It has yet to be determined whether Warren Buffet and Jimmy Buffet are related.  The two certainly have taken divergent paths in life, and yet they share one similarity that is undisputable:  Both have amassed wealth far beyond what the average American can fathom.
 
The two Buffets also share another characteristic:  humility.  Whether it’s Jimmy crooning about “Wastin’ away in Margaritaville,” or the self-deprecating, folksy tone of Warren’s shareholder letters, the Buffets have their way with words.
 
And so, as Jimmy says, “if you’re living on sponge cake … and there’s booze in your blender,” why not take a little time to consider the following key message points from Warren Buffet’s most recent musings in his 2008 shareholder letter for Berkshire Hathaway.
 
“By year end, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.”
 
“The watchword throughout the country became the creed I saw on restaurant walls when I was young: ‘In God we trust; all others pay cash.’”
 
“The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.”
 
“In poker terms, the Treasury and the Fed have gone ‘all in.’”
 
“Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.”
 
“Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.”
 
“Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”
 
“During 2008 I did some dumb things in investments.”
 
“Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.”
 
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
 
“We like buying underpriced securities, but we like buying fairly-priced operating businesses even more.”
 
“Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income.”
 
“Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition.”
 
“Beware of geeks bearing formulas.”
 
“We never want to count on the kindness of strangers in order to meet tomorrow’s obligations.”
 
“Beware of the investment activity that produces applause; the great moves are usually greeted by yawns.”
 
“Derivatives are dangerous.”
 
“Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”

 

Evan Pondel, epondel@pondel.com
 
 

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