5 Warren Buffett & Charlie Munger Quotes to Live By Today

Warren Buffett and Charlie Munger like to share their philosophies on life and investing. And because of this, they have many interesting quotes that we would like to share with you today.

Five of our favorites include:

  1. In regards to looking at the glass half-full – when Charlie Munger was asked about the insurance premiums for older adults, and why healthy elders have to pay more money in insurance, he said “you find you’re not deteriorating as fast as your contemporaries. You may be paying an unfair price for your auto insurance, but it’s a good trade-off.”
  2. In regards to picking a spouse – Munger said, “Look for someone with low expectations.”
  3. In regards to being liked – the two men were asked by a young boy how they get people to like them. Charlie Munger said, “Get very rich and generous.” And then Warren Buffett added, “People see all sorts of virtue when you’re writing a check.”
  4. In regards to philanthropy – when Warren Buffett was asked about pledging to donate 99% of his wealth, he said “There’s no Forbes 400 in the graveyard.” And then he added more about his equity holdings having “no utility to me, but have enormous utility around the world.”
  5. In regards to succeeding – “We’ve now watched a lot of other people get started. The ones who follow [Benjamin] Graham have done pretty well.” And continued Munger, “Avoid being a perfect idiot.”

Berkshire Hathaway Growth Driven By Buyout and Business Mix

The Berkshire Hathaway conglomerate consists of nearly 90 subsidiaries and has businesses that range from ice cream to insurance to locomotives.

Although the company runs many different types of businesses, its causality and property insurance business is its main source of income. This overall segment has provided a huge moat for Berkshire Hathaway, making the many acquisitions that the company has enjoyed over the past several years possible.

Some of the economically sensitive noninsurance businesses at Berkshire Hathaway, including manufacturing, retail, service, utilities and energy, are performing quite well and are looking to do so continuously as the economy improves. In particular, Berkshire Hathaway is seeing exponential growth in the energy and utilities sectors led by additional revenue from Burlington Northern Santa Fe railroad, which they acquired back in February 2010.

The finance and financial products segment of Berkshire Hathaway have nicely handled the challenges that came their way due to a soft housing market in the recent past. We expect that trends will improve in this segment since the housing market is rebounding and finally catching up.

With Warren Buffett at the helm of this company, Berkshire Hathaway has created great value for its shareholders over the last few years. With a strong capital position and the unique skills that Warren Buffett possesses, he has made Berkshire Hathaway a huge conglomerate that has an equity stake in many large companies and owns close to 90 subsidiaries.

With so much cash at its disposal, the company is currently contracted for 31 additional bolt on acquisitions that will likely cost in the neighborhood of $7.8 billion. The transactions themselves are in the range of $400,000 to $2.9 billion. During the first quarter of 2015, Berkshire Hathaway purchased controlling interest in Van Tuyl Group. The big acquisitions certainly provide unique business opportunities for Berkshire Hathaway, but the bolt on acquisitions help to improve earnings of the existing businesses.

Some Billionaires Not Meeting Giving Pledge Promises

Warren Buffett and Bill Gates first created the Giving Pledge five years ago, and in that time they were able to convince 193 people to promise to give away over half of their fortune at some point in their life or upon their death. 16 more people joined the initiative last week, including Hamdi Ulukaya – the Chobani yogurt founder and Ian Wood – the Scottish oil baron.

By signing your name to the pledge you’ll experience glowing media coverage, video testimonials from billionaire Bill Gates, as well as invitations to conferences that take place annually that are held in luxurious resorts with other fellow billionaires including Pierre Omidyar and Ray Dalio.

A less publicized fact is that ultimately, the giving pledge is subjective. Nobody that has signed the giving pledge is under any legal obligation to donate half of their money – or any money at all for that matter – and in some instances the individuals making the pledge never come close to giving away half of their net worth. Estate Law and Charity regulations certainly block public disclosures, and Bill Gates and Warren Buffett do not ask the pledgers to prove anything.

“It’s really thinking about how iconic figures providing inspiration and support can inspire and serve as a model for society,” said Robert Rosen. He coordinates the giving pledge and is the director of philanthropic partnerships for the Bill & Melinda Gates Foundation. “We aren’t looking to add any additional complexity,” said Rosen.

We have learned from the 10 deceased billionaires that signed the giving pledge that fulfilling the pledge varies widely based on public disclosures of lifetime and estate giving. Out of the 10, only two that have signed the pledge have given away more than $1 billion, and they made these donations before the initiative even began.

It is quite clear that the giving pledge emphasizes that this is a moral pledge. There is a very real legal purpose to this distinction: it eliminates the possibility that signers of the giving pledge can sue fellow billionaires who do not act accordingly and give, we learn according to David Scott Sloan, a lawyer and the national head of the estate law practice at Holland & Knight.

“When I give money to charity and I pledge to pay it over five years, I actually sign a contract,” said Sloan. “These are people who sign lots of pledges like that and wanted, I’m sure, to make it very clear it’s a moral direction as opposed to a legal direction.”

Rosen mentions that Buffett and Gates, and the effort that they put forth, is done so as an effort to reset the levels of giving on a long-term level.

“The conversation continues to evolve with what’s expected and what becomes the norm of generosity, both in terms of impact and the impact it has – that’s our true North Star,” said Rosen. “People do it in different ways and at different times because it’s such a personal decision.”

The Low Bar

Warren Buffett and Bill Gates are leading this effort by example. They are the two richest Americans and they have a combined net worth of more than $156 billion, according to the Bloomberg Billionaire Index. Also according to the index, the two have combined to put more than $46 billion into the Gates Foundation. Michael Bloomberg, as well as the other three cofounders of Bloomberg LP, who own Bloomberg News, have all signed the giving pledge.

In an interview in 2010, Bill Gates said to Fortune Magazine that the “low bar” was giving away just half of one’s fortune. But it’s difficult to define what makes up half, which is a point that is clearly exemplified when looking at the estate of Albert Ueltschi.

A pilot of Swiss ancestry and born in Kentucky, he became a billionaire by selling his pilot training school named FlightSafety to Warren Buffett’s Berkshire Hathaway for stock that was valued at nearly $2 billion when he passed away. He also had developed a very close friendship with Bill Gates.

Ueltschi did not hesitate to join the giving pledge when asked by Bill Gates and Warren Buffett. He had pledged to give away most of his fortune in order to fight blindness.

“I have never seen a hearse pulling a U-Haul trailer. You can’t take it with you,” wrote Ueltschi in his Giving Pledge letter that was dated September 18, 2012.

At the age of 95, he passed away just one month later.

Warren Buffett Lunch Auction Goes for $2.3 Million

A gaming company in China won the charity auction this year and has the opportunity to have lunch with Warren Buffett. They also have a great sense of humor because their final bid was $2,345,678. This is not a record-setting amount by any means, but it is one of the highest amounts that Warren Buffett fans have paid over the last few years.

Da Lian Zeus Entertainment Co. is an online gaming company that is based out of Beijing, and they are the winner of the 16th annual lunch auction that is set up to help benefit the Glide Foundation based out of San Francisco. The Glide Foundation helps to provide funds for the homeless and poor in the city of San Francisco.

This year’s winning bidders did so on behalf of the company instead of on behalf of a specific individual. And since the winning bid came from China, it proves that Berkshire Hathaway and Warren Buffett have made many Chinese fans in recent years. Last month in Omaha, more than 200 Chinese investors attended the annual meeting held for Berkshire Hathaway.

The winning bid did not succeed the highest ever winning bid which was for $3,456,789 made by an anonymous bidder in 2012. But it is higher than the amount that Andy Chua of Singapore paid last year at $2.16 million.

Buffett Stays with American Express

Recently, American Express has been going through a tough time. Due to rising competition from large banking conglomerates including J.P. Morgan and a tough US dollar, the company missed analyst expectations for revenue by $260 million during the first quarter. American Express even lost one of their large sources of credit card sign ups due to ending a partnership with Costco. Because of all of the challenges that the company faces, American Express has recently underperformed the market. Year to date, the stock is down by 12%, and it is currently one of the worst performers on the Dow Jones Industrial Average.

Although American Express stock has recently underperformed, Warren Buffett, the company’s biggest investor, is still on their side. American Express is one of the four big positions in Berkshire Hathaway and Warren Buffett’s portfolio, and the company currently owns more than 151 million shares of American Express. There’s no question that Buffett knows a thing or two about investing in financial companies. He bought preferred shares of Goldman Sachs when everybody believed that the financial system was on the verge of collapse. He bought shares of Bank of America for seven dollars in 2011 when everyone was down on the company. He made billions of dollars on each of these investments in banks. The greatest investor in the world, Warren Buffett, recently had much praise for American Express; saying that the company is “one special company” that historically has been very successful when it comes to adapting financial innovation in the banking sector.

Many other investors agree with Warren Buffett. Many hedge funds own significant stakes in American Express. Fisher Asset Management owns 11.3 million shares, while First Eagle Investment Management also owns 11.7 million shares. According to recent filings, American Express insiders certainly like the company. Ronald Williams, an American Express director, recently purchased 13,585 shares at the average price of $80.98 per share.

You can generate significant alpha by following the picks of company insiders and hedge funds. Recent research shows that the 15 most popular small-cap stock picks among hedge funds have actually outperformed the market by close to a percentage point per month between 1999 and 2012. These stocks have managed to return an average of more than 132% in the last 2 ½ years, and they have even outperformed the S&P 500 index by close to 80%.

American Express already has a turnaround plan in place. They have every intention to offer better rewards to customers in order to compete with companies like J.P. Morgan Chase. They also plan to increase their merchandise acceptance rate in order to have a way to better compete with Visa and MasterCard. American Express is currently turning to cost-cutting and financial engineering as a way to shore up the stock price. Management has every intention to reduce the workforce by 6%, and this is an effort to lower SG&A expenses. Once all of these money-saving efforts are put into place, American Express then has a plan to buy back more than 150 million shares of its stock, which comes to about 1.5% of the float. Lastly, they even plan to use some of this money in order to fund a dividend increase to reach a per quarter amount of $0.29 per share.

It’s probably not the best idea to bet against American Express for the long-term. The company is certainly going through a soft patch at this time, but American Express has a large moat and a 28.6% return on equity. There are also many loyal American Express customers, and the AMEX card is still one of the most widely held credit cards in households with $1 million or more in investable assets. With the United States economy steadily recovering and the stock market at its all-time high, management and American Express will most likely have plenty of time to implement new policies that will get profits at the financial institution growing once again.

If management does succeed in growing revenue and profits again, American Express is currently a good buy. The company could very well trade for a forward PE of 17, if the turnaround is a success, instead of the current forward PE of 14.2. That gives 19% upside to the American Express stock.

Summary Points

  • American Express stock is currently down by 12% year to date and lags the market.
  • Warren Buffett still strongly believes in American Express, and Berkshire Hathaway currently owns 151 million shares.
  • Warren Buffett believes that American Express will have no problem adapting to the new financial environment, just as the company has done throughout other points during its history.

Berkshire Hathaway Names New NetJets CEO

On Monday, NetJets – Berkshire Hathaway’s luxury aviation company – said that its current CEO Jordan Hansell will step down as chief executive officer and chairman, and this is taking place right in the middle of a contract dispute that has lasted for more than two years.

The 44-year-old CEO has been in charge of the company since 2011, just two years after joining as general counsel at the Columbus, Ohio-based NetJets.

The 44-year-old Adam Johnson was just promoted as CEO and chairman effective immediately, and moves up from his role as president.

Bill Noe, 50 years old, has rejoined the company and has taken his place once again as president and COO. Noe held these positions not that long ago before leaving for General Electric Co.

It’s uncertain as to why Hansell left the company, and a spokesperson at NetJets refused to comment.

“For his hard work and his success in leading NetJets through a very tumultuous economic period, Jordan has earned our sincerest thanks and best wishes for his next endeavors,” said Johnson in a statement.

Net Jets is currently one of the smaller units at Berkshire Hathaway, and only generates around 2% of the overall revenue at the Omaha, Nebraska conglomerate, according to regulatory filings.

Berkshire Hathaway currently owns more than 80 businesses in industries including consumer goods, railroads, energy and insurance.

Buffett Could Have Been Worth $102 Billion

Warren Buffett is currently the third richest person in the world. But the truth is that he could actually be even richer.

Bloomberg news reported on Tuesday that Amancio Ortega recently passed Buffett as the second richest person in the world. For those who don’t know, Ortega is a Spanish fashion magnate.

Currently, according to Bloomberg, Warren Buffett’s net worth stands at $70.2 billion. But it is estimated that Warren Buffett’s net worth would be $102 billion if it wasn’t for his philanthropic endeavors. That would have made Buffett the richest person in the world.

On the other hand, board member of Berkshire Hathaway Bill Gates, according to the Bloomberg Billionaire Index, is currently the richest person in the world at $86 billion. Ortega is currently worth $71.5 billion.

Gates and Buffett have both signed the Giving Pledge, which is a pledge to give away at least half of their wealth to charity or philanthropy throughout their life or in their will.

Buffett Charity Lunch Auction Already Over $1 Million

At this time, there is an online auction going on for the chance to enjoy lunch with billionaire investor Warren Buffett. The auction is also there to help raise money for a charity based out of San Francisco that Warren Buffett is strongly tied with. So far the top bid has already surpassed $1 million, and this has happened in less than a single day.

In total, in Warren Buffett’s prior 15 annual auctions for the charity Glide – based out of the Tenderloin district in San Francisco that provides health care, rehabilitation, food and more services for the poor – he has already raised $17.8 million for the organization.

As of Monday, June 1, 2015 at 2:30 PM, the top bid was for $1,000,100 on the auction taking place on eBay. This auction will end on Friday at 10:30 PM Eastern daylight Time.

The $1,000,100 bid is a match for the seventh highest amount that was ever paid, and this took place in 2013, so it’s quite possible that the bid will rise much higher in value. Typically, during a Buffett lunch and auction, the bids begin flying and soar during the last hour. This auction began on Sunday with a $25,000 minimum bid.

“We’re very happy, very happy,” said Rev. Cecil Williams, one of the cofounders of the Glide foundation, in an interview on the phone. “We expected the bidding to take off, but $1 million coming this early is somewhat surprising.”

The winner this year is allowed to bring as many as seven friends to dine with Warren Buffett at Smith and Wollensky, a Manhattan steakhouse.

Some of the winners in the past chose to dine in Omaha, Nebraska, at a local steakhouse, near Berkshire Hathaway, the company run by Warren Buffett.

Andy Chua of Singapore, last year’s winner, bid $2,166,766 in order to win the auction. The highest bid of all time, anonymously submitted in 2012, was for $3,456,789.

Ted Weschler, a past winner, ended up becoming a portfolio manager and working for Warren Buffett after winning two auctions in 2010 and 2011 for a combined $5.25 million.

This auction began back in 2000 after Warren Buffett’s first wife, Susan Buffett, introduced him to the Glide foundation. She died in 2004.

“Nobody who’s donated to Glide has ever felt short-changed,” said Buffett in a statement last month.

Cecil Williams, Glide Memorial United Methodist Church pastor and community leader, said that he met with Buffett in Omaha two weeks ago in order to discuss the work that Glide does.

“We want to empower our people and find resources to help us pull this off, and touch the lives of people who are hurting most,” said Williams.

He also added that Warren Buffett’s involvement helps. “When Mr. Buffett speaks, people listen,” said Williams. “He is a man of deep conviction.”

Warren Buffett is currently worth an estimated $70.4 billion, and this makes him the fourth richest person in the world, according to Forbes magazine.

Buffett Invests $22.5 Million into Israeli Cellphone Technology Company

Berkshire Hathaway, Warren Buffett’s investment firm, has recently invested $22.5 million into eVolution Networks. This company has developed a specific technology to use cellphone base stations in a more efficient way to save energy, reported The Times of Israel on Thursday.

“With its Smart Energy Solution (SES) technology, eVolution conducts both a thorough radio coverage analysis and a deep study of typical daily traffic patterns for each existing base station across the network and creates individual traffic and radio profiles for each. The information allows the network to list the stations that can be safely deactivated while still maintaining coverage and service integrity.”

Base stations do require the use of a large amount of energy, so shutting them down at times when they are not needed is a significant way to save energy. Cellular networks typically spend one third of their operating costs on electricity.

Buffett first invested in Israel back in 2006, and recently he said just two years ago that Israel is the “most promising investing hub” outside of the US.

Buffett Feels the Poor Shouldn’t Blame the Rich for Inequality

According to Warren Buffett, the third richest person in the world, people need to quit blaming the wealthy for income inequality in the United States of America.

Warren Buffett, in a Wall Street Journal opinion piece, and is estimated to be worth roughly $71.3 billion by Forbes Magazine, depressingly claims as fact that “the poor are most definitely not poor because the rich are rich.”

Citing Steve Jobs and Henry Ford as examples of innovation, Warren Buffett says that the rich are certainly not undeserving and that “most of them have contributed brilliant innovations or managerial expertise,” to the economy in America.

Warren Buffett also makes claims that minimum wage will not solve the inequality problem by raising the hourly rate to $15 an hour. He also believes that improving the quality of education will not make a difference.

Warren Buffett’s proposed solution is to increase the Earned Income Tax Credit, which the United States government currently provides to millions of low-wage workers, with the stipulation that as the payments go down, wages will increase.

Buffett says that the widening gap is an “inevitable consequence” of a market-based economy that is so advanced, and he also says that pay first started to become unequal because people are incapable of doing the same jobs.

Buffett said: “No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich. Nor are the rich undeserving.

“Most of them have contributed brilliant innovations or managerial expertise to America’s well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.

“It is simply a consequence of an economic engine that constantly requires more high order talents while reducing the need for commodity like tasks.”