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Warren Edward Buffet — biography

Warren Edward Buffet

Warren Edward Baffet (this article is in Russian[ru] - Уоррен  Баффет) — the guru of America[ru], the most well-known investor of last time. On the second place for 2002 according to journal Forbes. Sign of the zodiac - Virgo.

Warren Baffet crowded on August, 30th 1930, in Omaha. His father - Howard Baffett, the stock broker and the republican congressman. In total at Baffet's was four children, and Warren has appeared among them the unique boy. The grandfather of Warren kept a grocery bench in which present partner Baffeta Charlie Munger worked in Omaha. Still the boy Warren found out magnificent memory on numbers, surprising the friends. It easily remembered a population of set of the American cities.

The first bargain young Baffet has made at the age of six years. In shop of the The grandfather he has purchased on pocket money six tin "Coca-Cola" on 25 cents a piece and Has sold them on 50 cents to members of the family. And at the age of 11 years Warren Baffet Has started to show interest to a line of business of the father. In that year The future great investor year having united with elder sister Doris and having taken money On credit from the father has purchased first three shares Cities Service Preferred in cost on 38 dollars each. After purchase their price has immediately fallen to 27$, but through pair Days it was established on 40 dollar mark. Young Baffet has decided not to risk and Has sold shares, having earned on operation the first 5 dollars. What was it Affliction when shares of the same company within a week have flied up to 200$ for Piece! It was the first lesson of patience for Baffet.

In 13 years young Warren has undertaken delivery of newspaper Washington Post and has earned on It of $175 a month. Inspired with success, it has surprised all relatives, having declared, that If by 30 years does not become the millionaire will jump off from a roof of the highest Buildings in Omaha. Native were consoled in thought, that to this age Warren will mature Also will grow wiser. Their hopes were justified, but not how they assumed. Baffet Has safely overcome a 30-year-old mark, and first million dollars Has earned, when to it 31 year was executed.

The teenager was the tireless businessman. That will purchase shares will sell any The stale goods, and at the age of 14 years Baffet purchase for 1,200$40 acres Farmland of the State of Nebraska which there and then demises to the farmer. And business Grows.

After the higher school termination in 1947 Warren Baffet has entered the university The State of Pennsylvania on faculty of the finance. Having conducted two years at this faculty, Baffet has passed in university of the State of Nebraska where in 1950 has received degree The bachelor. After that it has passed, as a matter of fact, in main high school of the life – in University of district of Columbia, in a business school.

Warren has got acquainted with Benjamin Grema's book "Intellectual investor", Its bible which has become on that moment. This book advised to investors to ignore Tendencies which cover Woll Street, and instead to hunt for shares, Which are sold much more low to their actual value.

In a choice of objects for investments Warren Baffet adheres exclusively The fundamental analysis, - he chooses shares on financial and industrial Indicator of the companies-emitters. He purchases not ordinary shares, and successful business, Which stands up for these securities. Thus Baffet prefers those assets, Which, in its opinion, at the moment of purchase are underestimated.

Detection of the depreciated shares - business not from lungs. For this purpose it is required huge Patience and intensive statement analysis of many companies. Here here also has needed Mathematical memory Baffet. After reception of higher education of Warren Baffet reject in Harward Business - to School. Not despairing, Warren continues To make the way to New York, thereby achieving a place under a wing of the author of the bible Benjamin Grema at University of Colombia. After reception of degree of the master in To economy, it at last accept, and its direct chief Becomes itself Grem.

Grem approached to the market from the point of view of profit. Really, to put means In the underestimated quotations is a usual, correct approach, but Baffet it is fast Has felt borders of rules Grem. Warren starts to ask a question, that More favourably: to purchase good business on an equitable price or dying affairs on The order is cheaper?

In 1957 Warren Baffet comes back to Omaha and creates the first Investment association. It is interesting, that it could convince the whole group Investors of Omaha, each of which has handed over it on 25 000 dollars each. Baffet For that moment could place only 100$ the capital. It nominate The general manager of the company, and business starts. Warren starts to buy up shares, Favourable from its point of view. Aim it to itself has delivered the minimum: to beat growth Dow Jones the averages of 10 % in a year. When association have dismissed in 1969, Investments Baffet have grown for 29,5 percent (compare with Dow which for same Time has grown all for 7,4 percent).

In 1962 W. Baffet starts to buy shares in New Bedford, Mass, to be exact, it the textile factory under name Berkshire Hathaway with the price less than 8 dollars for the share interested. For that moment the American textile industry withered under the impact of foreign production, but Baffet it has not confused, it has started to develop capital of Berkshire, including insurance. The scent has not made the investor, account was justified also this enterprise became a nucleus of the future financial empire.

It appeared a classical course of Warren Baffet. At that time assurance companies were better invested, than others. Insurance instalments are payments forward so, inflow of a cash for the further creation of various funds was supplied. Such funds were called "floating", and to make Berkshire there were soon millions dollars. The mechanism has worked, and it has appeared the biggest news after an unconscious condition of the country since 1930. Baffet did not calm down and always was in searches of other values, continuing to do purchase, filling in the portfolio shares of the firm companies which were lifted in cost, it was necessary to restore their support.

Sometimes, Baffet compare with Terminator. Such style at it. Having purchased the next company, it reconstructs its business. If business does not bring profit, it liquidates it. It is taken by profitability, instead of social problems.

When Warren Baffet became the legendary investor, its private life developed far not so successfully. His wife, Susan T. Baffet, accompanying it in almost all public occurrences as worked in board of Berkshire and simultaneously was one of the largest shareholders of firm. But actually the pair does not live together since 1977 when Susan - then still the singer of a cabaret and the passionate advocate of the rights of women on abortion (artificial interruption of pregnancy) - moving from Omaha to headquarters in San Francisco, has presented to husband Astrid Menks (Astrid Menks), the Latvian waitress from Cafe French in Omaha. It also became its partner and the friend. Henceforth even the gifts sent to friends and relatives were signed precisely from "Warren, Susan and Astrid".

Relations with its three children too were not from lungs and hardly corresponded to high standards. Baffet with children was equally tightfisted. When his son Howard has told to the father the idea of purchase of a farm, Warren has suggested to help the son though the help was original: Warren Baffet purchases a farm, and the son leases this farm at the father and pays percent to the father. Howard agreed any conditions if only to begin work. His father has visited a farm only twice for six years.

And it is far not a unique example of chariness of Warren Baffet. Once, when his daughter Sjuzi has asked for it money to collect the car from airport garage, he has forced it to write it the receipt for 20 dollars lent at it.

Such relation characterises Baffet as the misanthrope. Despite its huge The personal riches, Baffet especially do not love charity. Despite the fact that, That, when it seems, that the life approaches to a decline, set of magnates attend Charity, Warren Baffet is not going to divide their sights. Therefore It very often criticise and name the miser. Its political views are close to Liberal party. In the end of 60-s' it it has appeared involved in problems of the rights on Abortions also worked over association of rural clubs of Omaha. But fund Baffet, which Has been founded in the middle of 1960, receives pennies from its riches, no more than 11-12 Millions dollars a year. Though Warren of three children, his wife also has - Unique while the successor of all its treasures. And that more recently Warren Has declared, that 99 % of the riches intend to bequeath to the fund, which after Such gift becomes one of the most influential in the country.

Really, sooner or later the biggest investor will leave this world. Also what then happens with Berkshire Hathaway? For certain it will be one of the greatest dramas Voll Strit. The Seller's price of shares of the company directly depends on the biggest holder of the block of shares as it supports working capacity of the company. Also it is not known, whether someone can replace adequately Baffet on this post. Warren has declared, that has found the equivalent successor but who it, it and has not opened: whether its old partner Charli Munger, whether Lu Simpson, chairman Government Employees Insurance Co.

All the same, there will be something with Berkshire Hathaway or not, but the lesson given by Warren, already is studied in all corners of the world, and the following for the present small "Baffetы" already introduces the investment in development of school of investment.

Remember Donald and Mildred Has died off from Brooklyn, modestly lived a life, but appeared well supplied? "It not unique modest pair, is much more of them", - has declared Baffet in interview ' New York Times' in 1998. - "It is much more Such pairs, and at times they even more richly modest Otmer".

Donald and Mildred Otmer

Donald and Mildred Othmer were usual pair. He is a professor of chair of chemistry Polytechnical University in Brooklyn with small consulting business On the party. She is a teacher teaching art criticism in New York. Children at They were not.

In a word, anything outstanding. But when Donald and Mildred Othmer have died (it - in 1995, and it in 1998), it has appeared, that they were rather and rather uneasy people. When the Polytechnical University has appeared on the verge of bankruptcy, is unexpected at it there was a support in 175 million dollars. And yet all - in general nothing remarkable pair bequeathed it more than 340 million dollars of a various sort to charitable Brooklyn establishments.

Those the few who knew Othmerов, guessed: whence at usual citizens such money? After all after death of a couple their condition was equaled approximately 750 million dollars. More observant person will think, that a native city of pair - Omaha. And Omaha, as is known to any investor - headquarters of Warren Baffet, the largest investor of the share market of present time. On coincidence of circumstances it was also old friend Othmer. In far 60 years the couple has risked to entrust the congestions in 25000 dollars to nobody known then to Warren Baffetу which has there and then put up money in Berkshire Hathaway Inc. And, as it is visible now, was not mistaken. Under sensitive management Baffet and its companies have been conducted investments and shares in cost in 42 dollars for the share are purchased. By 1995 when Donald Othmer has died, cost of each share has jumped up to 30000$ per item. And it yet a limit - at present the same share costs already 68000 dollars.

Family Othmerov has served as the proof of one of often repeated legends: if you have placed 10000 dollars in Berkshire Hathaway when Baffet has taken a working control, to be exact in 1965 now you already would have more than 50 million $.

Strategy Baffet is stated in 13 principles of a corporate governance formulated by it in 1983. First, Warren Baffet considers itself, other company executives Berkshire and shareholders of the company not as the bargain parties on purchase and sale of shares, and the partners in common investing the means in the share. The letter to shareholders Baffet once admitted, that 99 % of its personal condition are enclosed in share Berkshire Hathaway. Its nearest colleague Charli Manger invested 90 %. Shares in Berkshire Hathaway members of families of directors of the company, their friends and acquaintances also possess.

According to Warren Baffet, such approach justifies itself as high diversity investments Berkshire essentially reduces their riskiness. Besides, Baffet asserts, that such strategy of investment underlines a principle of partnership of directors and shareholders of holding – if incur losses the shareholders, proportional losses bear also the director of the company.

In board of directors Berkshire Hathaway there are 11 places. Its structure includes, in particular, associate Baffet Charli Manger and the son - Howard Baffet. In 2004, after death of wife Baffet, Susan, the structure of board of directors Berkshire Hathaway included Bill Gates, one of shareholders of the company and the friend to the great investor.

Very important principle Baffet – non-interference to an operative management of the purchased companies. "The oracle from Omaha" as name Warren - purchases the company which seems to it attractive, and the unique operative decision which it accepts - appointment or reassignment of the general director of the company and definition of the size and an order of its compensation. As a rule, compensation provides reception by managing directors of share options of the company at achievement of certain results. All other decisions remain on conscience of the managing director. In overwhelming majority of cases such approach of besides justifies – aspiring to raise own compensation, managing directors raise also company capitalisation that achieves Baffet.

Minimisation of risks – one of corner stones of strategy Baffet. By its own recognition, he will refuse interesting acquisition without delay, rather than will go on increase in debt burden of the company. Not casually its holding Berkshire Hathaway is now one of only seven emitters having the maximum credit rating under the version of agency Moody's – AAA. The high credit rating supplies Baffetу low cost of the capital. Baffet believes, that one of the main harms, causing a damage to modern economy, the wrong system of distribution of compensations among participants of the financial market is. In its opinion, the significant part of transactions on equity market is recommended and is made for the sake of personal enrichment of intermediaries – a various sort of brokers and traders. Would be quite reasonable to limit number of the allowed transactions for each person during all his life. Baffet results figure 10 – no more than ten transactions in a life for each of participants of the financial markets.

However, Warren Edward Baffet is mistaken even. In 2005 he expected for dollar downing, and the volume of short items on dollar to a close of the year made 21,4 billion Dollars. On accounts Baffet, the dollar should fall to 1,40$ for euro. Instead of it, thanks to campaign of toughening of monetary policy FRS, the dollar has grown on 14 %, and exchange losses Berkshire Hathaway have made 955 million dollars. Together with Baffetом, by the way, have lost the investments such large players, as the legendary American businessman and financial genius George Soros and Bill Gates.

To honour Baffet it is necessary to tell, that since 2002 on the end of 2005 profit Berkshire Hathaway on currency transactions has made 2 billion dollars. By the way, that in 2002, for the first time in a life, it has started to invest in a foreign exchange, Baffet has informed in the letter to shareholders in March, 2004. At least, one shareholder Berkshire very much was surprised, having learnt about currency transactions Baffet. This shareholder, That Russo (Tom Russo), the partner in Gardner, Russo and Gardner, was present on annual meetings Berkshire within 15 years. As he said, each time when to Warren Baffetу asked a question on dollar or currency trade, answer Baffet was invariably reduced to the following: "you cannot earn money, doing rates against the United States of America".

Recently Baffet has reduced volumes of investments in currencies. It compensated this step buying shares of the foreign companies nominated in foreign exchanges, or the American companies receiving the basic part have arrived abroad. Warren Baffet it is still rather pessimistic concerns a condition of the current account position of the USA. Besides deficiency of foreign trade which reaches recently record significances, the balance of the income of investments, under forecast Baffet, also soon becomes negative. Thus Baffet recognises, that the economy of the USA in a condition to sustain these negative consequences, however is short. In the future if not to solve this problem, it can become rather and rather painful, the great investor warns.

Among the companies on which share the greatest share in 47-milliard assets Berkshire as of December, 31st 2005 had - American Express (AXP), Ameriprise Financial (AMP), Anheuser-Busch (BUD), Coca-Cola (KO), M&T Bank (MTB), Moody's (MCO), PetroChina (PTR), Procter & Gamble (PG), Wal-Mart (WMT), Washington Post (WPO), Wells Fargo (WFC), White Mountains Ins. (WTM). These data contain in annual report Berkshire Hathaway for 2005. Following the results of 2005 profit Berkshire Hathaway has grown on 16,6 % to 8,5 billion dollars, or 5538 dollars in recalculation on the share. In 2004 the profit has made $7,31 billion, Or $4753 on the share. For a year 5 bargains on absorption have been initiated. Balance Stock value Berkshire has grown on 6,4 %.

Annual reports and messages to shareholders whom Warren Baffet writes about activity Berkshire Heathaway, are recognised far outside of investment community. In February 2005, the National commission on literary products for the American families, schools and colleges has noted contribution Baffet to literary art. In comments to award of the award for 2005 the commission has indicated on "clearness, deep vision and wit", inherent in reports W.Baffet, and their big influence on business America.

In a daily life Warren Baffet is conservative enough and economical. Prefers to purchase those companies which production uses itself. To shareholders Berkshire Hathaway he admitted one of letters, that daily drinks on five tin "Cherry Coke". He declared as, that will not be re-elected on a post of chairman of board of directors Coca-Cola to have possibility to concentrate on other directions of work Berkshire. However to sell the share in the company (by the current moment – 8,4 %) it does not gather. To pass to drinks from Pepsi, probably, - too.

Baffet it is rather economical if not to tell – it is avaricious. He lives in the house on Farnhem-strit in Omaha, purchased in 1957 for $31500. He drives the car, saving on the salary to the driver. Even the licence plate by its car represents the plate with an inscription "Economical". To eat У Baffet prefers hamburgers, not changing the principle even in gastronomic questions – its share in company McDonalds (MCD) makes 4,3 %.

Though Baffet approvingly responds about the companies working in the field of high technologies, he does not hurry up to put up in them money. During boom of the Internet[ru] companies many reproached him that it loses good opening for investment of capital. However "Oracle" sceptically concerns the companies which production does not use itself. By the way, Internet Baffet was connected to a network only in 1997 – but only to play on a network in poker. And it in spite of the fact that one of friends Baffet and its constant partner in a golf is president Microsoft Bill Gates.

Warren Baffet – rather not ordinary person, and many experts believe, that company Berkshire Hathaway is obliged by the successes, first of all, to its personal charisma and abilities.

The opinion of Buffett about the reliability of his fund after his own death[ru]:

After my death, the structure of personal ownership of Berkshire will change, but will not affect anything that is detrimental to the company's operations. First, only about 1% of my shares will be sold in order to cover the costs of the legacy of a legacy of movable property and the amount of taxes; Secondly, my own shares will pass to my wife Susan in case she survives me, or, otherwise, into a family fund. At any outcome, Berkshire will continue to have a majority shareholder holding the same philosophy and the same goals that have determined our course so far ...

You can be just as sure that the principles that we used to guide the Berkshire activities will firmly lay the foundation for the work of managers that they will take my place. In order not to end on a sad note, I also want to assure you that I have never felt better than now. I like to manage Berkshire, and if the love of life contributes to longevity, the record of Methuselah * may be in jeopardy.

* Methuselah - in the Old Testament: grandfather of Noah, who lived 969 years.

Charlie and I can not exactly tell what your results will be. But we can guarantee that your financial success will go strictly with ours, no matter how long you decided to be our partner. We are not interested in high fees, options or other things through which you could have an "advantage" in front of you. We express the desire to make money exactly as long as our partner wishes, and in an absolutely equal proportion. Moreover, if I make a miscalculation, I would like you to find some kind of consolation in the fact that my financial suffering is proportional to yours.

The famous quotes from Warren Buffett

Warren Buffett's Investment Rules

Buffett is willing to share ideas with the world. Here is a list of principles that Warren Buffett relies on when choosing securities:

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