Habits of the Master Investors

Habit: Have Infinite Patience

Master investor Warren Buffett tells us that if you have stringent investment criteria, there naturally will be extended periods of time when you can't find anything to invest in.

In February of 1973, the U.S. economy was in recession and the Dow had fallen by 40% from its highs. Stock in the Washington Post Company had fallen so far that Wall Street valued the company at only $80 million.

Buffett estimated that if the company sold its newspaper and magazine businesses to a private publisher, it would get around $400 million, so he began buying shares at an average price of $22.75 per share.

However, the price of the stock kept falling, and it took two years before Buffett got back to his original purchase price. Even so, he didn't care how long he had to wait and his stake now is worth around $2 billion.


Lesson: It's not necessary to always be doing something in the market. As an investor, you get paid for being right, not for actively trading!

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Thoughts On the Business of Life

"Nothing is more conducive to peace of mind than not having any opinion at all."

-Georg C. Lichtenberg


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The Fight For Rio Tinto

Well, isn't $147 billion enough?

That's the price offered by mining giant BHP Billiton on February 6th, for rival Rio Tinto, which had scoffed at BHP's original bid - and then quickly rejected this new bid as well!

The 13% boost came days after Chinese aluminum maker Chinalco and Alcoa paid $14 billion for a 12% stake in Rio.

Now BHP hopes to persuade 50% of Rio's shareholders as well as get regulatory clearance from Australia and the EU.

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Something To Think About

"Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment."

-Albert Einstein


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Where Have All The iPhones Gone?

There is a wide gap between Apple's reported sales and its carrier partners' figures on the number of phone activations.

The biggest reason: By the end of 2007, as many as 1 million iPhones had been unlocked, and may have been linked with rival wireless systems.

What this means is that Apple likely is missing out on $240 million from its cut of monthly charges with its partners.

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Meanwhile, Down In The Pits ...

Chicago is not the least bit shy when it comes to flaunting its global dominance in the futures arena. The Chicago Mercantile Exchange is moving to buy the New York Mercantile Exchange, one of the world's oldest commodities bourses, for $11 billion.

But the January 28th announcement of preliminary talks could lure in more bidders, including from overseas, and may speed the drive to create alternative markets.

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Problems With Yahoo!

Yahoo! isn't giving investors much to get excited over. On January 29th, the Internet portal said that fourth-quarter sales rose 14%, to $1.4 billion (excluding commissions to marketing partners), but profits sagged 23%, to $206 million.

What troubled the Street was a 2008 forecast for slowing sales and further falling profits despite savings expected from eliminating 1,000 jobs.

The stock fell 8.5% on January 30th.

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But What About the Consumer?

If all those multi-billion dollar write-downs weren't enough, investors got something else to worry about last week with a huge surge in defaults on credit-card debt and auto loans.

Along with Citigroup's other bad news, the bank added $4 billion to a reserve account for future losses on consumer loans. The following day, JPMorgan Chase also warned about consumers falling behind on credit cards and upped its reserve to cover such losses by $2.3 billion.

All this helped to further spook the Street, leaving the S&P 500 down 6.48% this year as of January 16.

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Thoughts On the Business of Life

In Mexico, an air conditioner is called a politician because it makes a lot of noise, but doesn't work very well.

-Len Deighton


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