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Learn More. By Jonathan Burton. Comment icon. Text Resize Print icon. By Jonathan Burton Asst. Colombia, Peru to snap up Latin America's growth Young populations, growing middle classes and dynamic economic expansion are helping these countries grab a bigger share of the region's growth and attract more money from investors.

Jonathan Burton. Stocks Exchange Traded Funds. MarketWatch Partner Center. Most Popular. Advanced Search Submit entry for keyword results. Volume Berkshire Hathaway Inc. Buffett has been a supporter of index funds for people who are either not interested in managing their own money or don't have the time.

Buffett is skeptical that active management can outperform the market in the long run, and has advised both individual and institutional investors to move their money to low-cost index funds that track broad, diversified stock market indices. Buffett said in one of his letters to shareholders that "when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. By , the index fund was outperforming every hedge fund that made the bet against Buffett.

In , Buffett was infatuated with a young woman whose boyfriend had a ukulele. In an attempt to compete, he bought one of the diminutive instruments and has been playing it ever since. Though the attempt was unsuccessful, his music interest was a key part of his becoming a part of Susan Thompson's life and led to their marriage. Buffett often plays the instrument at stock holder meetings and other opportunities. His love of the instrument led to the commissioning of two custom Dairy Queen ukuleles by Dave Talsma, one of which was auctioned for charity.

They had three children, Susie , Howard and Peter. The couple began living separately in , although they remained married until Susan Buffett's death in July Their daughter, Susie, lives in Omaha, is a national board member of Girls, Inc. Buffett Foundation. In , on his 76th birthday, Buffett married his longtime companion, Astrid Menks, who was then 60 years old—she had lived with him since his wife's departure to San Francisco in All three were close and Christmas cards to friends were signed "Warren, Susie and Astrid".

Buffett disowned his son Peter's adopted daughter, Nicole, in after she participated in the Jamie Johnson documentary The One Percent about the growing economic inequality between the wealthy and the average citizen in the United States. Although his first wife referred to Nicole as one of her "adored grandchildren", [] Buffett wrote her a letter stating, "I have not emotionally or legally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or a cousin. This act was a break from his past condemnation of extravagant purchases by other CEOs and his history of using more public transportation.

Buffett is an avid bridge player, which he plays with fellow fan Gates [] —he allegedly spends 12 hours a week playing the game. Modeled on the Ryder Cup in golf—held immediately before it in the same city—the teams are chosen by invitation, with a female team and five male teams provided by each country. He is a dedicated, lifelong follower of Nebraska football , and attends as many games as his schedule permits. He supported the hire of Bo Pelini , following the season , stating, "It was getting kind of desperate around here". The series features Buffett and Munger, and teaches children healthy financial habits.

Buffett was raised as a Presbyterian , but has since described himself as agnostic. Buffett's speeches are known for mixing business discussions with humor. Each year, Buffett presides over Berkshire Hathaway's annual shareholder meeting in the Qwest Center in Omaha , Nebraska , an event drawing over 20, visitors from both the United States and abroad, giving it the nickname "Woodstock of Capitalism".

Berkshire's annual reports and letters to shareholders, prepared by Buffett, frequently receive coverage by the financial media. Buffett's writings are known for containing quotations from sources as varied as the Bible and Mae West , [] as well as advice in a folksy, Midwestern style and numerous jokes. In April , Buffett an avid Coca-Cola drinker and investor in the company agreed to have his likeness placed on Cherry Coke products in China.

Buffett was not compensated for this advertisement. On April 11, , Buffett was diagnosed with stage I prostate cancer during a routine test. Buffett has written several times of his belief that, in a market economy, the rich earn outsized rewards for their talents. He once commented, "I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing".

Buffett joined the Gates Foundation's board, but did not plan to be actively involved in the foundation's investments. This represented a significant shift from Buffett's previous statements, to the effect that most of his fortune would pass to his Buffett Foundation. In addition to political contributions over the years, Buffett endorsed and made campaign contributions to Barack Obama 's presidential campaign. I have no problem in releasing my tax information while under audit.

Neither would Mr. Trump -- at least he would have no legal problem. Buffett described the health care reform under President Barack Obama as insufficient to deal with the costs of health care in the US, though he supports its aim of expanding health insurance coverage. Buffett faults the incentives in the United States medical industry , that payers reimburse doctors for procedures fee-for-service leading to unnecessary care overutilization , instead of paying for results. Buffett favors the inheritance tax , saying that repealing it would be like "choosing the Olympic team by picking the eldest sons of the gold-medal winners in the Olympics".

Buffett believes government should not be in the business of gambling, or legalizing casinos , calling it a tax on ignorance.

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He predicted that the US dollar will lose value in the long run, as a result of putting a larger portion of ownership of US assets in the hands of foreigners. In his letter to shareholders in March , he predicted that in another ten years' time the net ownership of the U. The trade deficit induced Buffett to enter the foreign currency market for the first time in He substantially reduced his stake in as changing interest rates increased the costs of holding currency contracts. Buffett remained bearish on the dollar, stating that he was looking to acquire companies with substantial foreign revenues.

Buffett has been critical of gold as an investment based primarily on its non-productive nature. In a address at Harvard, Buffett said:. It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Stocks are probably still the best of all the poor alternatives in an era of inflation — at least they are if you buy in at appropriate prices. Buffett invested in PetroChina Company Limited and in a rare move, posted a commentary [] on Berkshire Hathaway's website stating why he would not divest over its connection with the Sudanese civil war that caused Harvard to divest.

He sold this stake soon afterwards, sparing him the billions of dollars he would have lost had he held on to the company in the midst of the steep drop in oil prices beginning in the summer of This was Buffett's worst investment in China. I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty.

Speaking at Berkshire Hathaway Inc. I would not like to have a significant percentage of my net worth invested in tobacco businesses. The economy of the business may be fine, but that doesn't mean it has a bright future. The cancellations came in the wake of pressure from regulators and citizen groups. Native American tribes and salmon fishermen sought to win support from Buffett for a proposal to remove four hydroelectric dams from the Klamath River. He already owned wind farms.

He has been a strong proponent of stock option expensing on corporate income statements. At the annual meeting, he lambasted a bill before the United States Congress that would consider only some company-issued stock options compensation as an expense, likening the bill to one that was almost passed by the Indiana House of Representatives to change the value of Pi from 3.

When a company gives something of value to its employees in return for their services, it is clearly a compensation expense. And if expenses don't belong in the earnings statement, where in the world do they belong? In May , Buffett said he had avoided buying stock in new social media companies such as Facebook and Google because it is hard to estimate future value. He also stated that initial public offering IPO of stock are almost always bad investments. Investors should be looking to companies that will have good value in ten years.

In an interview with CNBC in January , Buffett said that the recent craze over Bitcoin and other cryptocurrencies won't end well, adding that "when it happens or how or anything else, I don't know. In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending. Aside from countless television appearances on various news programs, Buffett has appeared in numerous films and TV programs, both documentary and fiction.

From Wikipedia, the free encyclopedia. Warren Buffett. Omaha, Nebraska , U. Susan Thompson m. Astrid Menks m. Bridge is such a sensational game that I wouldn't mind being in jail if I had three cellmates who were decent players and who were willing to keep the game going twenty-four hours a day. Play media. See also: Buffett Rule. Retrieved April 21, Retrieved January 28, Incademy Investor Education. Harriman House Ltd. Archived from the original on November 20, Retrieved November 20, The College Investor. Retrieved May 11, Retrieved March 11, Retrieved March 6, Archived from the original on October 22, International Herald Tribune.

Retrieved May 9, The University of Oxford. Retrieved June 27, Both acquire concentrated positions with a focus on long-term business fundamentals, a disinclination towards discriminatory costs, and an ethical disposition towards fellow shareholders". August 4, Retrieved September 6, August 30, USA Today. Retrieved May 23, Business Insider. Retrieved May 15, Wiley Publishers. Retrieved May 6, Retrieved July 7, March 6, Retrieved May 20, About Money. Retrieved April 30, The Christian Science Monitor.

Retrieved January 4, Archived from the original on July 14, Retrieved November 28, Miles Warren Buffett wealth: principles and practical methods used by the world's greatest investor. John Wiley and Sons. Retrieved January 2, Retrieved December 13, Financial Post. Retrieved March 4, Buffett: The Making of an American Capitalist. Intelligent Investor. October 15, Retrieved May 7, CBS News. Bantam Dell. Buffett, 72, Dies; Wife of Billionaire Investor". The Washington Post. Retrieved July 13, Retrieved October 20, Retrieved October 1, November 6, October 18, Kogan Page Publishers.

The New York Times , March 19, Broadcasting , March 25, Archived from the original on June 18, The Balance.

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Retrieved March 3, The Motley Fool. Retrieved September 5, Google Finance. The Rational Walk. January 21, Retrieved August 16, Buffett February 21, Berkshire Hathaway. Bloomberg Businessweek. In fact, we are still earning those types of returns on some of our smaller investments. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today's environment because information is easier to access. You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map - way off the map.

You may find local companies that have nothing wrong with them at all. I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them. No one will tell you about these ideas, you have to find them. The answer is still yes today that you can still earn extraordinary returns on smaller amounts of capital.

For example, I wouldn't have had to buy issue after issue of different high yield bonds. Having a lot of money to invest forced Berkshire to buy those that were less attractive. With less capital, I could have put all my money into the most attractive issues and really creamed it. I know more about business and investing today, but my returns have continued to decline since the 50's. Money gets to be an anchor on performance. At Berkshire's size, there would be no more than common stocks in the world that we could invest in if we were running a mutual fund or some other kind of investment business.

Attractive opportunities come from observing human behavior. In , people behaved like frightened cavemen referring to the Long Term Capital Management meltdown. People make their own opportunities. The point is I got rich looking for stock with strong earnings. Human behavior allows for success if you are able to detach yourself emotionally.

In , I got out of school at 20 years old. I recently bought a copy of the Moody off of Amazon. A couple of years ago I got this investment guide on Korean stocks. I began looking through it. It felt like all over again. Look here at this company It earned 12, won previously. It currently had a book value of , won and was earning 18, won.

It had traded as high as 43, and as low as 35, won. At the time, the current price was 40, or 2 times earnings. In 4 hours I had found 20 companies like this. The point is nobody is going to tell you about these companies. There are no broker reports on Dae Han Flour Company. When you invest like this, you will make money. Sure 1 or 2 companies may turn out to be poor choices, but the others will more than make up for any losses. Not all of them will be good, but some will and those will make you rich.

These opportunities will be there in the next 30 years. The Wall Street analysts are brilliant people; they are better at math, but we know more about human nature. I know more about human nature; these were MIT grads, really smart guys, and they almost toppled the system with their highly leveraged trading. I was misquoted in that article. I get together with about 60 people every couple years and get their expectations of returns.

There is no better way to make managers understand how valuable capital is than to charge them for it. The amount charged to them can depend on elements such as the history of the subsidiary and the level of interest rates, and has varied from 14 to 20 percent at times. If you've got two suitors who are eager to have you, but one is way better than the other, you're going to choose that one rather than the other.

That's the way we filter stock buying opportunities. Our ideas are so simple. People keep asking us for mysteries, but all we have are the most elementary ideas. We know instantly whether a business is something we're going to understand, and whether it's a business that's going to have a sustainable edge, and that gets rid of a very significant percentage of opportunities. I'm sure people regard me and Charlie as very arbitrary--in the middle of the first sentence, we'll say, "We appreciate the call, but we're not interested.

We can sometimes tell by who we're dealing with, whether a deal is ever going to work out or not. I mean, if there's an auction going on, we have no interest in talking about it. If someone is interested in doing that with their business, then they're going to want to sit down and renegotiate everything with us all over again after the deal is done We don't want to listen to stories all day, and we don't need brokerage reports. There's other things to do with your time. And there are signs, like flags, waving over the awful people.

And generally speaking, those people are to be avoided. In regards to the financial information and the business overall what factors do you look at? Filter 1 — Can we understand the business? What will it look like in years? Take Intel vs. We invest within our circle of competence. Coke has increased per capita consumption every year it has been in existence. Filter 2 — Does the business have a durable competitive advantage?

I will buy soft drinks and chewing gum.

Warren Buffett’s Shareholder Letters

This is why I bought Gillette and Coke. Since we have made no change in the marketing, process etc. You have to look at the brand as a promise to the customer that we are going to offer the quality and service that is expected. We link the product with happiness. We are at the Thanksgiving Day Parades though. Well, it depends whether they are going to be an active investor. Graham distinguished between the defensive and the enterprising and that. So if you are going to spend a lot of time on investment, you know I just advise looking at as many things as possible and you will find some bargains.

And when you find them, you have to act. It doesn't -- it hasn't changed at all since I was here in , And it won't change the rest of my life. You start turning pages. When I got out of school, I turned every page in Moody's 10,some pages twice, looking for companies. And you have to find them yourself.

The world isn't going to tell you about great deals.

You have to find them yourself. And that takes a fair amount of time. So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over a long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing.

Most of you don't look like you are overburdened with cash anyway. Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don't want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it. You had always kept the cash word around, too. We always keep enough cash around so I feel very comfortable and don't worry about sleeping at night. But it's not because I like cash as an investment. Cash is a bad investment over time.

But you always want to have enough so that nobody else can determine your future essentially. The worst -- the financial panic is behind us. The economic spillout which came to some extent from that financial panic is still with us. It will end. I don't know if it will end tomorrow or next week or next month. Or maybe a year. But it won't go on forever. And to sit around and try and pick the bottom, people were trying to do that last March and the bottom hadn't come in unemployment and the bottom hadn't come in business but the bottom had come in stocks.

Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow. We're not positioning ourselves. We just try to do smart things every day, and if there's nothing smart, then we sit on cash. Well, good things would have happened with following either party. Graham obviously had more influence on me than Phil. I worked for Ben, I went to school under him, and his three basic ideas: look at stocks as businesses; have a proper attitude toward the market; and operate with a margin of safety--they all come straight from Graham.

Phil Fisher opened my eyes a little more toward trying to find a wonderful business. Charlie did more of that than Phil did, but Phil was espousing that entirely, and I read his books in the early 60s. Phil's still alive, and I owe Phil a lot, but Ben was one of a kind. That's the natural outcome--as Milton said, "If I've seen a little farther than other men, it's by standing on the shoulders of giants.

No doubt somebody will come along and do a lot better than we have. I enjoyed making money more than Ben. With Ben it really was incidental, at least by the time I knew him. The process, the whole game, didn't interest him more than a dozen other things may have interested him. With me, I just find it interesting, and therefore I've spent a much higher percentage of my timing thinking about investing, and thinking about businesses.

I probably know way more about businesses than Ben ever did. He had other things that interested him. I pursued the game quite a bit differently than he did, and therefore comparing the record is not proper. You don't need another Ben Graham. You don't need another Moses. There were only Ten Commandments; we're still waiting for the eleventh. His investing philosophy is still alive and well.

Pick Winning Stocks and Fatten Your Portfolio

There are disciples of him around, but all we are doing is parroting. I did read Phil Fisher later on, which showed the more qualitative aspects of businesses. Common stocks are part of a business. Markets are there to serve you, not to instruct you. You can often find a couple of companies that are out of line.

Find one; get rich. Most people think that what the stock does from day to day contains information, but it doesn't. It isn't just something that wiggles around. The stock market is the best game in the world. You can take advantage of people who have no morals. Businesses don't change in value that much.

That is simply crazy. There are extreme degrees of fluctuation, and Mr. Market will call out the prices. Wait until he is nutty in one direction or the other. Put in a margin of safety. Don't find a bridge that says no more than 10, pounds when you have a pound vehicle. It isn't a function of IQ, but receptivity of the mind.

When investing you don't have to invest in all 10, companies available, you just have to find the one that is out of line. Market is your servant. Market is your partner and wants to sell the business to you everyday. Some days he is very optimistic and wants a high price, others he is pessimistic and will sell at a low price. You have to use this to your advantage. The market is the greatest game in the world.

There is nothing else that can, at times, get this far out of line with reality. Negotiated transactions are less volatile. Some get this; others don't. Just keep your wits about you and you can make a lot of money in the market. Buffett: I had 49 university groups, in clumps of six, [visit me] last year.

Start with a small circle of competence, things you can understand. You need to understand accounting, which has enormous limitations. Learn that the market is there to serve you, not instruct you. In the investing business, if you have an IQ of , sell 30 points to someone else. You do not need to be a genius. Reducing the nonsense would be a good goal. Buffett: [My experience] has given me a jaundiced view of academia generally.

Efficient market theory—that everything is priced appropriately—is bunk. I think it's almost impossible to do well investing over time without this. If the market closed for years, we wouldn't care. Would still keep making Sees candy, Dilly bars, etc. If you focus on the price, you're assuming that the market knows more than you do. That may be the truth, but in that case you shouldn't own it. The stock market is there to serve you, not to instruct you.

Focus on price and value. If a stock gets cheaper and you have some cash, buy more. We sometimes stop buying when prices goes up. When we're buying something, we want the price to go down and down and down. You only have to be right one or two times a year. I used to handicap horses. You can come up with a very profitable decision on a single company.

You only have to be right a few times in your lifetime, as long as you don't make any big mistakes. They hire lots of people, evaluate Merck vs. You can't do it. Very few people have adopted our approach. Ted Williams, in his book The Science of Hitting, talked about how he carved up the strike zone into different zones and only swung at pitches that were in his sweet spot. Investing is the same way. Charlie and I have seen it. The whole world in the late s went a little mad in terms of investments. How could that happen? Temperament is the ability to not be swayed by the market. See what you are supposed to see.

To sell the business is written in the ground rules. Never going to be a takeover or sell business because street thinks unfocused. I don't quite agree with Fisher, think can ride some stocks forever. Almost never sell operating businesses, and if we do, we do so because they can't fix their problem. There could be something that happens by I think the chances are almost nil. So what we really want to do is buy businesses that we would be happy to own forever.

It is the same way I fell about people who buy Berkshire. I want people who buy Berkshire to plan to hold it forever.

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  • They may not for one reason or the other but I want them at the time they buy it to think they are buying a business they are going to want to own forever. I measure Berkshire by how little activity there is in it. If I had a church and I was the preacher and half the congregation left every Sunday. Terrific turnover I would rather go to church where all the seats are filled every Sunday by the same people. Well that is the way we look at the businesses we buy. We want to buy something virtually forever. And back when I started, I had way more ideas than money so I was just constantly having to sell what was the least attractive stock in order to buy something I just discovered that looked even cheaper.

    But that is not our problem really now. So we hope we are buying businesses that we are just as happy holding five years from now as now. And if we ever found a huge acquisition, then maybe we would have to sell something. Maybe to make that acquisition but that would be a very pleasant problem to have. We never buy something with a price target in mind. That is not the way to look at a business. The way to look at a business is this going to keep producing more and more money over time? We are best at evaluating businesses where we can come to a judgment that they will look a lot like they do now in five years.

    Iscar will be better — maybe a lot bigger — in five years, but the fundamentals will be the same. Charlie says we have three boxes: In, Out and Too Hard. I was virtually there at the birth of Intel. Some businesses are very, very hard to predict. Do you have an explanation? Look for simple businesses. They have share of mind. What about Oracle?

    Too hard. Too many variables.

    Buffett Partnership Letters Complete Set 1957-70

    Investment knowledge is cumulative, and things you learn will make you better in the future. Stick to things you understand. How do you beat Bobby Fisher? Play him in anything except chess. Charlie and I went to Memphis to look at a chewing tobacco company. My view is that energy production should move to nuclear. Berkshire Hathaway has and will buy what trades, but will not buy companies that engage in certain behaviors. If they did not own it, someone else would. They protest investment in Chinese companies though.

    We just finished looking for someone. The Board has 3 candidates to replace me as CEO and 4 candidates to replace me as investor. In , I wound up my partnership and I had to help people find someone to manage their money.

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    The problem with guys that do well is they attract so much money that it neutralizes their advantage. Buffett: All investing is laying out cash now to get some more back in the future. He knew a lot, but not that [he lived in] BC. What is the discount rate? Et cetera. It should be obvious. It should shout at you, without all the spreadsheets. We see something better. The higher math was false precision. The markets saw it in the Long-Term Capital Management [hedge fund] in It only happens to people with high IQs.

    Buffett: Opportunity costs have been in the forefront of our minds during the last 18 months. Tougher and possibly more profitable. We got lots of calls [for potential investments]—most we ignored. We never want to get dependent on banks. Our definition of comfortable is very comfortable.

    I have 2 views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. The economy will do fine over time. If you have a harem of 40 women, you never really get to know any of them well. Charlie and I operated mostly with 5 positions. I told investors they could pull their money out. None did. Later in , LTCM was in trouble. If I like a business, then it makes sense to buy more at 20 than at The question is about diversification.

    I have a dual answer to that. If you are not a professional investor. If your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification. All they are going to do is own part of America. And they have made a decision that owning a part of America is worthwhile. That is the way they should approach it unless they want to bring an intensity to the game to make a decision and start evaluating businesses.

    Once you are in the businesses of evaluating businesses and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree. I got asked that question the other day at SunTrust. If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into a seventh one instead of putting more money into your first one is gotta be a terrible mistake.

    Very few people have gotten rich on their seventh best idea. But a lot of people have gotten rich with their best idea. So I would say for anyone working with normal capital who really knows the businesses they have gone into, six is plenty, and I probably have half of what I like best. I call him Noah, he has two of everything. You will see things where it would be a mistake not to act.

    WB: You just had a good banker. I saw things in in junk bonds that would have been worth going heavily into. You could have bought Cap Cities in — selling for one-third the property value, with the best manager, and in a good business. CM: Students learn corporate finance at business schools. They are taught that the whole secret is diversification. But the exact rule is the opposite. The goal of investment is to find situations where it is safe not to diversify. Very seldom do we get to buy as much of any good idea as we would like to. Buffett: We will not be spinning off any companies.

    We have a real advantage in allocating capital—moving money around. When we buy companies from people, we buy them for keeps. People can trust us to keep our word on this. Munger: Wall Street sells that stuff [spin-offs] for fees. Buffett: We have listened to presentation after presentation by investment bankers, but there is always a fee. If we lose confidence or conditions change, we sell. When in doubt, we keep holding. If we were wrong, we sell. The answer is: nothing.

    Our peculiarity is our commitment to buy for keeps. I asked Graham the same question. Graham lived a life of sharing. He may have had more money hoarding, but lived happier because of it. At age 11 I started investing, purchasing three shares of Cities Service Preferred. I was really into charting and technical analysis. Did Ben lose because I read his book? The reason gets down to temperament. Charlie and I have educated competitors. GEICO still has enormous possibilities for growth.

    That being said, I advise you to pay off your credit card. This is a good life lesson: getting the right people into your system is the most important thing you can do. We think first in terms of business risk. The key to Graham's approach to investing is not thinking of stocks as stocks or part of the stock market. Stocks are part of a business. People in this room own a piece of a business. If the business does well, they're going to do all right as long as long as they don't pay way too much to join in to that business. So we're thinking about business risk.

    Business risk can arise in various ways. It can arise from the capital structure. When somebody sticks a ton of debt into a business, if there's a hiccup in the business, then the lenders foreclose. It can come about by their nature--there are just certain businesses that are very risky. There are certain businesses that inherently, because of long lead time, because of heavy capital investment, basically have a lot of risk. Commodity businesses have a lot of risk unless you're a low-cost producer, because the low-cost producer can put you out of business.

    Our textile business was not the low-cost producer. We had fine management, everybody worked hard, we had cooperative unions, all kinds of things. But we weren't the low-cost producers so it was a risky business. The guy who could sell it cheaper than we could made it risky for us. We tend to go into businesses that are inherently low risk and are capitalized in a way that that low risk of the business is transformed into a low risk for the enterprise.

    The risk beyond that is that even though you identify such businesses, you pay too much for them. That risk is usually a risk of time rather than principal, unless you get into a really extravagant situation. Then the risk becomes the risk of you yourself--whether you can retain your belief in the real fundamentals of the business and not get too concerned about the stock market.

    The stock market is there to serve you and not to instruct you. That's a key to owning a good business and getting rid of the risk that would otherwise exist in the market. You mention volatility--it doesn't make any difference to us whether the volatility of the stock market is a half a percentage of a point a day, or a quarter percent a day, or five percent a day. In fact, we'd probably make a lot more money if volatility was higher because it would create more mistakes in the market. Volatility is a huge plus to the real investor. Ben Graham used the example of Mr.

    Ben said that just imagine that when you bought a stock you in effect bought into a business where you have this obliging partner who comes around every day and offers you a price at which he'll either buy or sell and that price is identical. No one ever gets that in a private business, where daily you get a buy-sell offer by a party. But you get that in the stock market, and that's a huge advantage.