Thursday, March 5, 2009

The Oracle Speaks

OR·A·CLE - person or agency considered to be a source of wise counsel or prophetic opinion; an infallible authority, usually spiritual in nature. WIKIPEDIA

In certain respects, Warren seems like a pretty ordinary guy.

He lives in the same house he bought in 1958 for $31,500.

He does not carry a cell phone, nor is there a computer sitting at his desk.

His annual salary is pegged at $100,000 and his hobby of choice is playing cards. Warren invests about a dozen hours a week working on his bridge game. A self-made man from Nebraska, he calls those born with proverbial spoons of silver, growing up in wealthy circumstances, "members of the lucky sperm club".

But Warren is extraordinarily different in many other respects.

There have been at least 47 books published with his name in the title. Each year, he presides over a shareholder meeting that attracts over 20,000 visitors, earning his hometown event the nickname, "Woodstock of Capitalism".

Named the richest American by Forbes magazine in October 2008, he transformed a failing textile maker into a $120 billion company with businesses ranging from ice cream to power plants. He is arguably the most successful investor ever, with a record of achieving an above 20% compounding annual return for the last 40 years

His net worth is in the 50-60 billion dollar range.

When he speaks, people in the financial markets hang on his every syllable.

Meet the "Oracle of Omaha".

Earlier this week, Warren Buffet looked up from his crystal ball long enough to pronounce the economy will be “in shambles” this year. Perhaps longer. However, the chairman of Berkshire Hathaway maintains stocks will rebound and better days are ahead for the U.S. economy. In his annual letter to shareholders Feb. 28, Buffet said, “Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”

Back in January, Warren offered a preview of what he told his shareholders, when he had a chance to sit down and share ideas with Tom Brokaw on Dateline NBC.

By his own admission, 2008 was Warren Buffet's worst-year ever.

"The tennis crowd would call my mistakes 'unforced errors,'" Buffet wrote in his annual letter to shareholders, released this past weekend. According to Buffet, “the credit crisis, coupled with tumbling home and stock prices, produced a paralyzing fear that engulfed the country. Fear led to business contraction, and that in turn led to even greater fear.” In retrospect, Warren thought the government needed prevent the collapse of financial firms including Bear Stearns, calling the rescue effort essential to avoid a total breakdown of the financial system. “Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”

Looking ahead, Buffet predicts government bailouts will cause “unwelcome aftereffects” including inflation. “Major industries have become dependent on federal assistance, and they will be followed by cities and states bearing mind-boggling requests,” he said. “Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.”

"In the business world, the rearview mirror is always clearer than the windshield"

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