The Half-Told Story of Warren Buffett

I have been having some entertaining conversations lately (in email and elsewhere) about super-investor Warren Buffett. The main reason? The release last weekend of his annual letter to investors in the Berkshire Hathaway report.

Rather than diving into his over-dissected letter, however, I’d like to hit the high points of my recent discussions with various smart folks. The essence? That Buffett is a fine and wealthy fellow, not to mention a great investor, but his story only gets half-told. He is, for example, a much more active trader than the value-investing mythos around him would suggest. He is also a more active user of options than his periodic anti-option rants about the subject would make you think.

Buffett is, in other words, a mess of contraditions. While that is interesting, it also means he gets something of a free ride, including being allowed to “talk his book”. For example, rather than thinking he is a fine fellow for complaining every year that stocks are over-valued, it would be more useful if reporters and others pointed out that Buffett just might be trying to talking stocks down because he has a multi-billion stash of cash and wants to invest it. If he could convince people to sell then he’d have more luck investing.

Instead of hitting every one of these examples, I’d like to point people to an interesting new book out by James Altucher (obDisclosure: A friend) on the subject of the real Warren Buffett, called “Trade Like Warren Buffett”. There is a chapter here, and the following is an excerpt on how Buffett really traded and made his money:

Buffett achieved much of his early success from arbitrage techniques, short-term trading, liquidations, and so on, rather than using the techniques that he became famous for with stocks like Coca-Cola or Capital Cities. In the latter stages of his career he was able to successfully diversify his portfolio using fixed income arbitrage, currencies, commodities, and other techniques.


  1. says:

    BRK will go straight up when he dies because new management will return cash to shareholders, split up the company, take on leverage, and issue a dividend. Why he doesn’t issue a dividend is a mystery.

  2. I recently Amazonned the James Altucher book on Buffett. Sitting on my coffee table until I finish the Stan Weinstein book, and maybe a Michael Crichton book for fun. Heck.
    Buffett still own Coke? Seen the chart on that one? Kind of looks like New Coke tastes.
    Are there two “n’s’ when you use Amazon as a verb? Amazonning? Amazonned?
    In 2005, Buffett just has guru status. It doesn’t matter if he ever makes another good investment or not. Kind of like Donald Trump in that one.

  3. Don’t forget his market timing skills — he closed up shop in ther late 60’s just before a long recession, and has frequently been in and out of markets.
    He’s quite the timer . . .