A sit down with Warren Buffett
Posted 7 March 2008, 18:57 in Personal Finance Business Leave a Comment
If you did not know this by now, Warren Buffett is the world’s richest man alive, according to Forbes. At 77, he is the largest shareholder and CEO of Berkshire Hathaway, a holding company that owns the gecko at Geico, the fruits at Fruit of the Loom, and all the lactose at Dairy Queen. Buffett’s wealth came in the form of great investments into public companies such as American Express, Coca-Cola, and Gillette. He is admired by many, which is why 25 thousand investors make their way to Omaha, Nebraska to attend Berkshire Hathaway’s annual shareholder meeting.
A few lucky business students were invited to meet the man himself in a Q&A session (the entire Q&A session is linked below under related links). Below are some tidbits that I found interesting…
Why do you think that despite making your methods publicly available, that relatively few people have been able to emulate your success?People want to make money fast, but it doesn’t happen that way. Graham’s philosophy doesn’t promise enough for many people. You don’t know when it will happen, but you just wait for the fat pitches within your circle of competence. It’s not as exciting as guessing whether the stock price will go up the next day. Most investors in internet companies didn’t know the market cap. They were buying because they thought the stock would move, but if you asked them to write “I would buy XYZ company for $6 billion because”, they wouldn’t get halfway through the sentence. It’s the classic tortoise versus hare, bound to work over time. Charlie and I have educated competitors. Most don’t compete with us, though. It’s fine, we have more than enough money.
Given your business success, your immense fortune, and your celebrity status, how do you stay so down to earth and humble? Are there specific people or lessons you have learned throughout your life that enable you to maintain this outlook?I was lucky to have the right heroes. Tell me who your heroes are and I’ll tell you how you’ll turn out to be. One of your most important jobs in life will be raising your children. They will learn more from you than they will in graduate school. My father was a huge influence, and later on Graham came along. I was also never let down by my heroes.
What importance do you give to balance as it pertains to work and life and what do you do to maintain your appropriate balance?I have so much fun that it’s not work. In my own life I did virtually no social functions or meetings that I didn’t want to do. In my adult business life I have never had to make a choice of trading between professional and personal. I have simple pleasures. I play bridge online for 12 hours a week. Bill [Gates] and I play, he’s “chalengr” and I’m “tbone.”
There you have it: there is no such thing as quick money in the stock market, find the right heroes in life, and find a job that you enjoy so much that it does not become “work.”
Related Links: Notes from Buffett Meeting | About Warren Buffett | Berkshire Hathaway
Related Articles: Gates No Longer World’s Richest Man
Checking your bank or credit union's financial rating
Posted 29 February 2008, 06:00 in Personal Finance Leave a Comment
If you do business with any financial institution, they will undoubtedly check your credit score. Why not do the same to them?
Not all banks are created equal. And although your money is insured for up to $100,000 through the FDIC (NCUA for credit unions), anything over that amount is at risk. Even if you do not have that much money in your bank account, knowing that your money is in good hands is a nice thing to know.
A quick search on any bank’s rating yielded Bankrate.com’s safe and sound service:
Bankrate.com’s Safe & Sound® service is a proprietary system designed to provide information on the relative financial strength and stability of U.S. commercial banks, savings institutions and credit unions. The system employs a series of twenty-two tests to measure the capital adequacy, asset quality, profitability, and liquidity (CAEL) of each rated financial institution.
There are two types of rating system that Bankrate displays. The first is CAEL, which is an analysis of financial data that is submitted to the government on a quarterly basis. The second is Bankrate’s star system, which is basically the CAEL number translated into stars. A CAEL rating of 1 will translate to 5 stars, or superior rating. A CAEL rating of 2 will translate to 4 stars, or sound rating, and so forth.
Hawaii top financial institutions, 3rd Quarter 2007.
I did a comparison between Hawaii’s largest banks and credit unions and found that both have similar safe and sound ratings with the exception of one bank.
First Hawaiian Bank is rated 4 stars, which means that it has a “sound” financial rating. For quarter ending September 2007, FHB’s ROI was 1.68%, compared to the bank industry’s average of 1.0% return. This is good because First Hawaiian Bank is making sound investment decisions and its return is above the industry’s par. On the other hand, American Savings Bank is the only bank that rated below its peer group, with a “performing” rating as a result of measly 0.70% return on investment (at least it was not negative).
HawaiiUSA Federal Credit Union is rated 4 stars, which also means they have a “sound” financial rating. For quarter ending September 2007, HawaiiUSA’s return on investment was slightly less than FHB’s at 1.27%, which is still above par to the credit union industry’s 0.8% return.
I chose to compare banks with credit union only to show that banks are not necessarily better than credit unions. In fact, in terms of services provided, credit unions provide the same type of service as banks but for less. So the next time you are on a hunt for a financial institution, be sure to check out their financial rating to be sure that your money is safe and sound.
Related Links: Bankrate.com Safe & Sound | FDIC: Failed Bank List
A fast way to earn credit card reward points
Posted 15 February 2008, 22:56 in Personal Finance Leave a Comment
A few days ago, UPS delivered a package that was worth $200, and it did not cost me a dime.
Thanks to the American Express membership rewards program, I was able to redeem $200 worth of gift cards to the Cheesecake Factory in a matter of months. In my opinion, American Express has one of the best credit card rewards programs out there. For every dollar that you charge, you earn a point. And for every 2,500 points earned, you can redeem a $25 gift card.
So how did I manage to earn over 20,000 points in a matter of months? By pooling points. As a Blue credit card holder, I am entitled to issue additional cards to anyone that I trust. It is much easier to pool points rather than to charge $20,000 on your own.
A few guidelines to pooling points:
Pay it off! For any credit card rewards program to work, you will need to be sure to pay it off every month. You do not want to go into debt just for gift cards — it is not worth it. Therefore, it is imperative that you pay off your balance every month.
Trust. An agreement is made between each card holder that I authorize under my account. They must have the means necessary to pay off their balance every month. You will also need to trust your authorized card holders (siblings in my case) that they will not charge extravagant things without having the funds to pay for it the following month. Remember that you are responsible for every charge that your authorized card holder makes, so handing additional cards to anyone should not be taken lightly. Or else, your credit score will be affected.
Share the reward. What better way to use your reward than to have a family gathering at a fancy restaurant paid for by American Express? Although you could use the points all for yourself, it does not give the incentive for your card holders to use your credit card. It is also an awesome way to have a nice family outing without the expense.
I stress that reward programs are only good if you pay off your balance every month. You as well as your card holders need to be discipline in charging only what they are willing to pay at the end of the month. Only then will you benefit from pooling points.
Related Links: Membership Rewards Program | Blue from American Express | Cheesecake Factory
