Warren Buffet's 2010 Letter to Shareholders

This is one of the "must read's" of the year.

The Annual Letter to Shareholders of Berkshire Hathaway written by Warren Buffet. 

The 2010 letter was just released and if you have never treated yourself to this well written and easy to understand annual report by the world's now 3rd wealthiest individual, is the time.

It is 19 pages, with financial stuff here and there but worth the hour spent.

Read it here

The World's Richest, and it's not Bill

An interesting week if you had your eye on being the wealthiest person in the world. Only for the 2nd time since 1995, Bill Gates is not at the top of the annual Forbes' list of richest , released this morning.

Carlos Slim, Mexican telecoms tycoon came in at number one. He's net worth is a staggering $53.5 billion.

Bill is not that far behind at $53 billion. Only $500 million separates him and the first non-American to top the list since 1994.

All could change with a 3.4% increase in Microsoft's share price. But who keeps score?

Warren Buffet is in 3rd place with a net asset value of $47 billion. To put this in perspective: The South African Government collected $88.5 billion in the previous fiscal year.

Some interesting facts on this year's list:

It is all about the return

Until we delisted from the find an advisor website, we were annoyed with phone calls from asset managers nearly every week. Excluding the Namibian funds, an investor have close to 700 funds to choose from, according to Morningstar.

The list is available on the Amedco website.

Each fund on the Morningstar list have their year-to-date, 1 month, 3 months, 6 months, 12 months, two year, three years, five years, seven years and ten years respective return published.

Who will be in Majorca?

This week I received two warnings. The first from Chubb Security Services, advising me not to flash at vehicles with no headlights. It might be a gang who will turn around and kill me. The other (if I can recall) from homeland security, advising me not to open Michael Jackson e-mail as it may be a computer virus.

These e-mails are well intended, sent by concerned friends. The odds of occurrence? Relatively low.

Today, I am issuing a warning. One that I hope you will forward to your friends, as this may probably be the longest running scam in South Africa. It is called Term Policies.

Dear Mr. Jacob Zuma

Did you notice that The President of the United States happens to be a black guy?

That is right. I am playing the race card in the first sentence of this open letter to you and now that it's out of the way, I can get right to the crux of the matter, hopefully, without being labelled a racist.

Spaar: 'n Riemtelegraaf

As dit nie vir Allan Gray was nie, het ek ook nie geweet dat Julie Spaar-maand in Suid-Afrika is nie. Blykbaar, is daar ook iets soos die Suid Afrikaanse Spaar Instituut. Dit is egter te verstane dat die Oktoberfest meer betekenis het as Bewahrenzeit as jy na die syfers kyk.

Suid-Afrika Spaar Nie

In 'n onlangse uitgawe van GrayIssue, skryf Rob Formby van Allan Gray Bate Bestuurders dat die spaarkoers van die land op 'n all-time low is.

Hoe meer verdien word, hoe minder gespaar word.

The Greater Depression

What new research is showing us

This week I received an interesting e-mail from Chris Botha of Stanlib Asset Managers. It was an astonishing chart that compare the World Industrial Output between the Great Depression of 1929 and our current state of affairs that started in April 2008.

I simply could not believe the similarities and set out to search for the source.

The authors of this chart turns out to be Barry Eichengreen, Professor of Economics and Political Science at the University of California (also a senior policy adviser at the IMF) and Kevin H. O'Rourke, Professor of Economics at the Trinity College in Dublin.

The Hot Hand Fallacy

And how asset managers may mislead you.

Can you predict on which side the coin will fall looking at the following sequence: Heads (H) or Tails (T)

HHH TTT HHH TT?

or

HTH TTH THH TH?

Most people may erroneously believe that the coin in the first sequence will land on tails. This is a very wrong assumption. The fact is that it appears as a sequence, but is actually just as random as the second sequence. Even more important is to realise that most people will perceive casual regularity of this sort as ‘n sequence of events.

Less (hindsight) is more (profit)

This is the third article in our series on Investor Psychology. It is loosely based on research done by Daniel Kahneman (Ph.D) who published "Aspects on Investor Psychology" in 1998 as well as other interesting finds on the subject.

It is well documented that people can rarely reconstruct what they thought was going to happen just before the event occurred. Most people exaggerate their earlier estimate of the probability that an event may occur. This manifestation is called hindsight biases.

It's all in the mind - part II

Optimism

In the previous post I wrote about overconfidence. Another aspect that influences investor behavior, and closely related to overconfidence, is optimism.

How good driver are you compared to others on the road?

The research by Kahneman (Aspects of Investor Psychology by Daniel Kahneman, PhD) and other articles I found on the Internet, suggests an overwhelmingly percentage (80%) of people believe that their driving skills are above average. Although I could not find any statistics on driver abilities (I conclude that it must be very difficult to measure), you have to agree that this is a typical illustration of optimism.

Quote of the year

“Bob has been smart to shop his situation around to several planners, ... Yet in doing so, he has become further confused in realizing that financial planning is more an art than a science.” Marc Freedman

Wanneer laas was jy in Durban?

Ek was 10 jaar laas in Durban. As ek Natal toe kom, haas ek my na die huurmotor en jaag verwoed na 'n beskaafde plek soos Umhlanga

Toe iemand my so paar jaar gelede se dat hy 'n woonstel in Durban gekoop het, het ek byna in my bier verstik.

Die enigste beeld wat ek van Durban gesien het, is jaar-na-jaar op die 8uur nuus van 1 Januarie.
Dan wys die TV gewoonlik hoe daar triljoene op Durban se hoofstrand toesak en byna die see-homself verstop.

Wat is 'n wereld-inkomste?

Ek het nog altyd gewonder wat is die inkomste van burgers in eerste wereld lande.

Die burgers van lande in Europa en die VSA het tog 'n lekker lewe! Een van die opvallendste dinge wat ek in die buiteland opgemerk het is die tydperk wat verloop tussen sogenaamde "refurbishment" van geboue.

Niks word toegelaat op oud te word nie! (behalwe die gebou wat reeds oud is). Ek het baie gesien hoe hulle lugversorgers, meubels en rekenaars vervang met beter infrastruktuur, plasma skerms en dies meer. In Suid-Afrika sal jy mos nie sommer jou matte elke 4 jaar vervang nie.

Of sal jy?

Alles hang af van jou inkomste. Time Magazine het onlangs 'n studie gepubliseer van die gemidelde Amerikaner.

Daarvolgens, verdien 50% van alle Amerikaners minder as R220 000 per jaar.

90% Van Amerikaners maak minder as R733 000 per jaar (ek neem aan voor belasting).

Dit beteken, om dit baie eenvoudig te stel, dat as jou inkomste meer is as R733 000 per jaar, jy jouself kan ag as 'n ware wereld burger!

Laat ons dadelik aan die werk spring!

Die ongemaklike waarheid

Ek kan nie glo dat daar iets is soos eerlike politici nie, maar dit lyk my Al Gore, die Amerikaanse Demokraat, wil aanspraak maak op die status.

Hy speel die hoofrol in 'n film oor aardverwarming: An Inconvenient Truth.

Dit wys tans by die Cinema Nouveau in Brooklyn.

Gaan kyk dit!

Ek dink almal moet weet wat die mens besig is om aan te vang met Die Planeet. Die film het 'n lekker tempo en genoeg humor om aanklank te vind by meeste mense.

Dit is maklik die beste film vir 2006.

Sien die voorskou op http://www.climatecrisis.net/