Warren Buffett's advice for his wife

Glen_Clark

_CC_ wrote: »

I'm sure his true advice would be to hold Berkshire stock, but that would probably come across as pushing his own interests.

When she gets this money he will be dead, so how would buying Berkshire stock be pushing his interests? As I understand it, this advice to his wife was not intended to become public knowlege.
In any case WB is old, with more than enough money to fund his modest lifestyle, and can well afford to give millions away and say what he thinks. Like he said 'My class, the rich class, started the class war and we are winning'

Eco_Miser

_CC_ wrote: »

I'm sure his true advice would be to hold Berkshire stock, but that would probably come across as pushing his own interests.

As an investment strategy for his widow - to invest in a company that has just lost its investment genius?
Not really.

dunstonh

I would say a clear case of a multi-asset fund. I wouldnt say whether managed or passive has a clear case either way as that is just opinion. However, if you wanted totally lazy, then you should go passive multi-asset as every managed fund should be reviewed periodically.

_CC_

Glen_Clark wrote: »

When she gets this money he will be dead, so how would buying Berkshire stock be pushing his interests? As I understand it, this advice to his wife was not intended to become public knowlege.

It was in his annual letter and has been reported across the world :huh:

Glen_Clark

_CC_ wrote: »

It was in his annual letter and has been reported across the world :huh:

I don't know, I just heard it first came out when someone saw his will.:huh:

Scarpacci

Eco_Miser wrote: »

As an investment strategy for his widow - to invest in a company that has just lost its investment genius?
Not really.

I don't know. That seems like exactly the sort of time Warren Buffett might buy a stock - when there's blood in the streets, but the underlying businesses are in tact. Whether he's just paying lip service, he's been very clear he thinks Berkshire Hathaway can continue to be a successful company after he dies (of course, who would say otherwise while they're still in charge?). The investment portfolio isn't the largest part of the business now, so they're not necessarily as dependent on him being able to allocate capital.

In fact, one could make the argument his death will likely lead to the company paying a regular dividend, which would be attractive for many investors - especially widowers. Even if paying a dividend is basically an admission they won't be able to put the large cashpile to work as effectively as Warren Buffett might have been able to.

Linton

Is Berkshire Hathaway the type of business that Warren Buffet would invest in? Its looks like an old fashioned conglomerate consisting of a very varied of assortment of companies that WB could buy cheap and turn-around. Without Warren Buffet what is Berkshire Hathaway's USP? Why shouldnt it be split up?

Scarpacci

Linton wrote: »

Is Berkshire Hathaway the type of business that Warren Buffet would invest in? Its looks like an old fashioned conglomerate consisting of a very varied of assortment of companies that WB could buy cheap and turn-around. Without Warren Buffet what is Berkshire Hathaway's USP? Why shouldnt it be split up?

Berkshire Hathaway certainly doesn't have the clear purpose a company like Coca Cola or American Express has, but he did of course buy all the subsidiaries himself so the idea it's a hodge-podge of businesses doesn't necessarily preclude it from being a company Warren Buffett would buy. He saw attractive investment opportunities in the regulated utilities and railways, so he added those to BH. They wouldn't themselves cause it to be a business he would ignore, but it's true that BH doesn't really resemble any of the well known companies in its share portfolio.

There is a question over some of those regulated industries in that I think they were only attractive to Berkshire Hathaway because of its sheer size and its inability to find attractive returns on its huge amount of capital. When it was much smaller and if it were to be again, I don't think they would be drawn to railways and utilities in the same way. Those are businesses to put large amounts of capital at clearly established but fairly low returns. It's where you invest your last billion, not your first.

There would certainly be an argument that one of the key tenets of Berkshire success, which is the tax efficient exchange of capital from certain businesses (namely the insurance business) to and from other subsidiaries and a portfolio of listed shares would be less lucrative if there isn't a skilled capital allocator at the top. That said, it would still be the case that the insurance company at the heart of Berkshire would offer huge float in need of attractive investments, which those other industries can provide.

On the possibility of split-up perhaps it would become the sort of business that a younger Warren Buffett would have bought? Maybe its parts are worth more than the whole or could well be valued as such in the event of his death. In that case, perhaps it goes back to being the sort of value stock he first became rich investing in?

racing_blue

This article claims that in 2012 the "global market portfolio" looked like this:



If there was a single, low cost, passive ETF which tracked this I would put half my money in it. I'd hedge bets by actively managing the other half, or letting others actively manage it.

Of course, I'm not Warren Buffet's wife in which case I'd go 90% US stocks...

Linton

This states it is be based on an average investor who invests in bonds and equities according to the average total global market proportions from 1959 to 2012. One could argue whether this was a meaningful thing to do but lets accept it. More interestingly, what does this average investor look like? Well s/he's not a private investor building a pension. Only a minority of equities are owned by private investors and an even smaller minority of bonds. So this average investor is more likely to be an insurance company or a bank. Many of these sort of investors with commitments to provide a steady income flow to their customers are far more interested in security of return than its size. Insurance companies want to ensure that their annuities can continue to be paid. Bonds guarantee this. Higher average returns from equities would be of little use as a large equity downturn could bankrupt the company. The cost of the low return from safe bonds is passed directly to the customer who pays higher annuity rates. So I dont see the relevance of the "average investor" to the private long term investor saving for a pension.