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The Most Common Cause Of Low Prices Is Pessimism - Some Times Pervasive, Some Times Specific To A Company Or Industry. We Want To Do Business In Such An Environment, Not Because We Like Pessimism But Because We Like The Prices It Produces. It's Optimism That Is The Enemy Of The Rational Buyer.

-Warren Buffett

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The Most Common Cause

Warren Buffett

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The Most Common Cause Of Low Prices Is Pessimism - Some Times Pervasive, Some Times Specific To A Company Or Industry. We Want To Do Business In Such An Environment, Not Because We Like Pessimism But Because We Like The Prices It Produces. It's Optimism That Is The Enemy Of The Rational Buyer.

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I Mean, We'll Be Pounding On The Guy's Chest, You Know, On The Floor, And You Know, He's Not Going To Just Jump Up All Of A Sudden. So It Makes It Tough. I Mean, It's Tough To Be In The Legislature, You Know, And Vote For Something And Then People Say, Well, You Voted All This Money And You Know, It's All Getting Spent. It Isn't Getting Spent. It's Getting Invested. But It's All Getting Spent. Nothing's Happening.

You Can't Help Some Increase From This Point. I Don't Want Any Viewer To Go Away Think A Magic Wand Exists In Congress. So They're Going To See Some More Bad News. But If We Do This, We're Doing The Right Thing.

If You Invested In A Very Low Cost Index Fund - Where You Don't Put The Money In At One Time, But Average In Over 10 Years -you'll Do Better Than 90% Of People Who Start Investing At The Same Time.

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Investment Ideas, Like Women Are Often More Exciting Than Punctual.

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In One Way, I'm Sympathetic To The Institutional Reluctance To Face The Music. I'd Give A Lot To Mark My Weight To 'model' Rather Than To 'market.'

If You Understood A Business Perfectly And The Future Of The Business, You Would Need Very Little In The Way Of A Margin Of Safety. So, The More Vulnerable The Business Is, Assuming You Still Want To Invest In It, The Larger Margin Of Safety You'd Need. If You're Driving A Truck Across A Bridge That Says It Holds 10,000 Pounds And You've Got A 9,800 Pound Vehicle, If The Bridge Is 6 Inches Above The Crevice It Covers, You May Feel Okay, But If It's Over The Grand Canyon, You May Feel You Want A Little Larger Margin Of Safety.

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One’s Objective Should Be To Get It Right, Get It Quick, Get It Out And Get It Over. Your Problem Won’t Improve With Age.

Valuing A Business Is Part Art And Part Science.

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We Need A Tax System That Essentially Takes Very Good Care Of The People Who Just Really Aren't As Well Adapted To The Market System But Are Nevertheless Doing Useful Things In The Society.

If Some Institution Wants To Sell You A Billion Dollars Worth Of Mortgages, They Might Have To Sell 100 Million In The Market, And Then You'll Buy The Other 900 Million On The Same Terms. Now, The Very Fact That This Has Been Authorized Or Will Be Authorized, I Hope, Will Firm Up The Market To Some Degree. And That's Fine. But You Don't Want To Have Artificial Prices Being Paid.

My Wealth Has Come From A Combination Of Living In America, Some Lucky Genes, And Compound Interest.

I Try To Buy Stock In Businesses That Are So Wonderful That An Idiot Can Run Them. Because Sooner Or Later, One Will.

Investing Money

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Take The Job You Would Take If You Were Independently Wealthy. You're Going To Do Well At It.

I Think That Both Parties Should Declare The Debt Limit As A Political Weapon Of Mass Destruction Which Can't Be Used. I Mean, It Is Silly To Have A Country That Has 237 Years Building Up Its Reputation And Then Have People Threaten To Tear It Down Because They're Not Getting Some Other Matter.

The Woman That Comes In, Takes The Wastebasket Away, She's Paying 15.3 Or Whatever It Is On Payroll Tax Alone. I Mean It Is - I Never Had It So Good.

Mr. Market Is Your Servant, Not Your Guide.

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Risk Is A Part Of God's Game, Alike For Men And Nations.

It's A Good Idea To Review Past Mistakes Before Committing New Ones.

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I Always Knew I Was Going To Be Rich. I Don't Think I Ever Doubted It For A Minute.

We Don't Have To Be Smarter Than The Rest. We Have To Be More Disciplined Than The Rest.

Successful Investing

When Forced To Choose, I Will Not Trade Even A Night's Sleep For The Chance Of Extra Profits.

You Can't Produce A Baby In One Month By Getting Nine Women Pregnant.

Investing Money

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I Buy Expensive Suits - They Just Look Cheap On Me.

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Focus Alone Is Not Enough; Putting In The Time To Commit Is Also Crucial To Achieve Success.

We Will Continue To Ignore Political And Economic Forecasts, Which Are An Expensive Distraction For Many Investors And Businessmen. Thirty Years Ago, No One Could Have Foreseen The Huge Expansion Of The Vietnam War, Wage And Price Controls, Two Oil Shocks, The Resignation Of A President, The Dissolution Of The Soviet Union, A One-day Drop In The Dow Of 508 Points, Or Treasury Bill Yields Fluctuating Between 2.8% And 17.4%.

If You Can Tell Me Who Your Heroes Are, I Can Tell You How You're Going To Turn Out In Life.

It Is More Important To Say "no" To An Opportunity, Than To Say "yes".

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Market Price, While Used Exclusively To Value Our Investments In Minority Positions, Is Not A Relevant Factor When Applied To Our Controlling Interests.

A Fool And His Money Are Soon Invited Everywhere.

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I Don't Want To Be On The Other Side Of The Table From The Customer. I Was Never Selling Anything That I Didn't Believe In Myself Or Use Myself.

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Never Test The Depth Of River With Both The Feet.

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[w]e Think The Very Term 'value Investing' Is Redundant. What Is 'investing' If It Is Not The Act Of Seeking Value At Least Sufficient To Justify The Amount Paid? Consciously Paying More For A Stock Than Its Calculated Value -- In The Hope That It Can Soon Be Sold For A Still-higher Price -- Should Be Labeled Speculation (which Is Neither Illegal, Immoral Nor -- In Our View -- Financially Fattening).

The Dumbest Reason In The World To Buy A Stock Is Because It's Going Up.

Traditional Wisdom Is Long On Tradition And Short On Wisdom.

If You Own The Only Newspaper In Town, Up Until The Last Five Years Or So, You Have Pricing Power And You Didn't Have To Go To The Office.

If Horses Had Controlled Investment Decisions, There Would Have Been No Auto Industry.

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It's Us Fun Being A Horse When The Tractor Comes Along, Or The Blacksmith When The Car Comes Along.

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Activity Is The Enemy Of Investment Returns.

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If You Have More Than 120 Or 130 I.q. Points, You Can Afford To Give The Rest Away. You Don't Need Extraordinary Intelligence To Succeed As An Investor.

As Far As You Are Concerned, The Stock Market Does Not Exist. Ignore It.

Bad Terminology Is The Enemy Of Good Thinking.

The Greatest Enemies Of The Equity Investor Are Expenses And Emotions.

If I Got Any Good Ideas Out Of That Or I Think They're Good Ideas, I'll Be Glad To Contribute Them But The System Will Probably Overdo Some Other Things.

It's A Nightmare To Administer Some Of This Sort Of Thing, But I Want To Tell The Shareholders Of Berkshire, To The Percent We Own Marketable Securities Or Things For Which There Are Market, Even If Those Markets - I Want To Tell Them What It's All About.

If You're Extremely Rich, And You Have Got Children, My Theory Was, You Give Them Enough So They Can Do Anything, But Not Enough So They Can Do Nothing.

It's The Deleveraging That's Going On Right Now That Has Caused The Credit Crisis.

We've Actually Been Pretty Good On Exports. I Mean We Are Exporting 12% Of Our Gdp Now Roughly.

A Public-opinion Poll Is No Substitute For Thought.

We've Used Derivatives For Many, Many Years. I Don't Think Derivatives Are Evil, Per Se, I Think They Are Dangerous.

What Motivates Most Gold Purchasers Is Their Belief That The Ranks Of The Fearful Will Grow. During The Past Decade That Belief Has Proved Correct. Beyond That, The Rising Price Has On Its Own Generated Additional Buying Enthusiasm, Attracting Purchasers Who See The Rise As Validating An Investment Thesis. As 'bandwagon' Investors Join Any Party, They Create Their Own Truth - For A While.

I Put Heavy Weight On Certainty. It's Not Risky To Buy Securities At A Fraction Of What They're Worth.

Interest Rates Are To Asset Prices What Gravity Is To The Apple. When There Are Low Interest Rates, There Is A Very Low Gravitational Pull On Asset Prices.

The Key To Success Is Emotional Stability.

Accounting Consequences Do Not Influence Our Operating Or Capital-allocation Decisions. When Acquisition Costs Are Similar, We Much Prefer To Purchase $2 Of Earnings That Is Not Reportable By Us Under Standard Accounting Principles Than To Purchase $1 Of Earnings That Is Reportable.

It's Never Paid To Bet Against America. We Come Through Things, But Its Not Always A Smooth Ride.

Inactivity Strikes Us As Intelligent Behavior.

We're Still In A Recession. We're Not Gonna Be Out Of It For A While, But We Will Get Out.

I Have Worked With Investors For 60 Years And I Have Yet To See Anyone - Not Even When Capital Gains Rates Were 39.9 Percent In 1976-77 - Shy Away From A Sensible Investment Because Of The Tax Rate On The Potential Gain.

Only When The Tide Goes Out Do You Discover Who's Been Swimming Naked.

Look At Market Fluctuations As Your Friend Rather Than Your Enemy; Profit From Folly Rather Than Participate In It.

Investment Success

For Example: (1) As If Governed By Newton's First Law Of Motion, An Institution Will Resist Any Change In Its Current Direction; (2) Just As Work Expands To Fill Available Time, Corporate Projects Or Acquisitions Will Materialize To Soak Up Available Funds; (3) Any Business Craving Of The Leader, However Foolish, Will Be Quickly Supported By Detailed Rate-of-return And Strategic Studies Prepared By His Troops; And (4) The Behavior Of Peer Companies, Whether They Are Expanding, Acquiring, Setting Executive Compensation Or Whatever, Will Be Mindlessly Imitated.

Two Rules: 1. Preserve The Principal 2. When In Doubt, See Rule #1.

If Knowing History Made You Rich, Librarians Would Be Billionaires.

That Which Is Not Worth Doing At All Is Not Worth Doing Well.

You Need A Lot Of Curiosity For A Long, Long Time.

You Don't Want 300 Million Americans Putting Their Money Under The Mattress.

I Have Three Boxes On My Desk: In, Out, And Too Hard.

You Don't Need To Be A Rocket Scientist. Investing Is Not A Game Where The Guy With The 160 Iq Beats The Guy With 130 Iq.

Investment Success

There's Always A Mismatch. I Mean, You Know, As The Economy Evolves, It Reallocates Resources. Now, The Real Problem, In My View, Is - This Has Been - The Prosperity Has Been Unbelievable For The Extremely Rich People. If You Go To 1982, When Forbes Put On Their First 400 List, Those People Had $93 Billion. They Now They Have $2.4 Trillion, 25 For One. That Is - This Has Been A Prosperity That's Been Disproportionately Rewarding To The People On Top.

I Make Plenty Of Mistakes And I'll Make Plenty More Mistakes, Too. That's Part Of The Game. You've Just Got To Make Sure That The Right Things Overcome The Wrong Ones.

The Big Question About How People Behave Is Whether They've Got An Inner Scorecard Or An Outer Scorecard. It Helps If You Can Be Satisfied With An Inner Scorecard.

We Have Usually Made Our Best Purchases When Apprehensions About Some Macro Event Were At A Peak. Fear Is The Foe Of The Faddist, But The Friend Of The Fundamentalist.

Asset Values And Earning Power Are The Dominant Factors Affecting The Valuation Of A Controlling Interest In A Business. Market Price, Which Governs Valuation Of Minority Interest Positions, Is Of Little Or No Importance In Valuing A Controlling Interest.

It Is Obvious That The Performance Of A Stock Last Year Or Last Month Is No Reason, Per Se, To Either Own It Or To Not Own It Now. It Is Obvious That An Inability To "get Even" In A Security That Has Declined Is Of No Importance. It Is Obvious That The Inner Warm Glow That Results From Having Held A Winner Last Year Is Of No Importance In Making A Decision As To Whether It Belongs In An Optimum Portfolio This Year.

The Advice "you Never Go Broke Taking A Profit" Is Foolish.

Generally Speaking, Investing In Yourself Is The Best Thing You Can Do. Anything That Improves Your Own Talents; Nobody Can Tax It Or Take It Away From You. They Can Run Up Huge Deficits And The Dollar Can Become Worth Far Less. You Can Have All Kinds Of Things Happen. But If You’ve Got Talent Yourself, And You’ve Maximized Your Talent, You’ve Got A Tremendous Asset That Can Return Ten-fold.

Market Prices For Stocks Fluctuate At Great Amplitudes Around Intrinsic Value But, Over The Long Term, Intrinsic Value Is Virtually Always Reflected At Some Point In Market Price.

Intrinsic Value

I Do Know That When I Am 60, I Should Be Attempting To Achieve Different Personal Goals Than Those Which Had Priority At Age 20.

You Are Neither Right Nor Wrong Because The Crowd Disagrees With You.

All Day You Wait For The Pitch You Like; Then When The Fielders Are Asleep, You Step Up And Hit It.

It Will Be Good For Us In The Long Run, And I Mean There Are, You Know, Six And A Half Billion People In This World. And It's Great For 300 Million To Keep Enjoying More And More Property, But I Think It's Terrific If, You Know, The Remainder Do.

I Think What People Understand There Probably - Well, They Were Hoping The Private Sector Would Do It [rescuing Aig ].

After 25 Years Of Buying And Supervising A Great Variety Of Businesses, Charlie [munger] And I Have Not Learned How To Solve Difficult Business Problems. What We Have Learned Is To Avoid Them. To The Extent We Have Been Successful, It Is Because We Have Concentrated On Identifying One-foot Hurdles That We Could Step Over Rather Than Because We Acquired Any Ability To Clear Seven-footers.

I Would Rather Sustain The Penalties Resulting From Over-conservatism Than Face The Consequences Of Error, Perhaps With Permanent Capital Loss, Resulting From The Adoption Of "new Era" Philosophy Where Trees Really Do Grow To The Sky.

I Learned To Go Into Business Only With People Whom I Like, Trust, And Admire.

My Job Is Essentially Just Corralling More And More And More Facts And Information, And Occasionally Seeing Whether That Leads To Some Action.

Diversification Is A Protection Against Ignorance. It Makes Very Little Sense For Those Who Know What They're Doing.

A Prediction About The Direction Of The Stock Market Tells You Nothing About Where Stocks Are Headed, But A Whole Lot About The Person Doing The Predicting.

Always Invest For The Long Term.

I Bought My First Stock In 1942, In The Summer Of '42. I Was 11 Years Old. And So 75 Years Have Gone By. And I Have Never Known What The Market's Going To Do The Next Day. And That's Not My Game. My Game Is To Decide Whether I'm In The Right Economy, Which America's Definitely Been Ever Since That Time. The Dow Has Gone From 100 To 21,000 During That Time. And No Matter What The Headlines Say, Or Terrible Things Are Happening - We Were Losing The War In The Pacific When I First Bought Stocks.

I Choose To Work With Every Single Person That I Work With. That Ends Up Being The Most Important Factor. I Don't Interact With People I Don't Like Or Admire. That's The Key. It's Like Marrying.

A Lot Of Great Fortunes In The World Have Been Made By Owning A Single Wonderful Business. If You Understand The Business, You Don't Need To Own Very Many Of Them.

In A Difficult Business, No Sooner Is One Problem Solved Than Another Surfaces - Never Is There Just One Cockroach In The Kitchen.

Problems In A Company Are Like Cockroaches In The Kitchen. You Will Never Find Just One

You Do Things When The Opportunities Come Along. I've Had Periods In My Life When I've Had A Bundle Of Ideas Come Along, And I've Had Long Dry Spells. If I Get An Idea Next Week, I'll Do Something. If Not, I Won't Do A Damn Thing.

Investing Money

The Truth Is, Everything That Has Happened In My Life... That I Thought Was A Crushing Event At The Time, Has Turned Out For The Better.

I Mean, You May Be Very Mad At Some Guy That Walked Away With A Huge Golden Parachute, But That Really Isn't The Important Thing.

Do Not Save What Is Left After Spending, But Spend What Is Left After Saving.

I Think You'll Have Plenty Of Scrutiny As How The Money's Invested. I Mean, Just Like The Rfc. When The Rfc Operated, People Knew Which Institutions They Were Buying Preferred Stock In. And It Worked Very Well.

Does Management Resist The Institutional Imperative?

The [stock] Market,like The Lord, Helps Those Who Help Themselves. But, Unlike The Lord, The Market Does Not Forgive Those Who Know Not What They Do.

An Investor Should Act As Though He Had A Lifetime Decision Card With Just Twenty Punches On It.

You Should Look At Stocks As Small Pieces Of Business.

Successful Investing Takes Time, Discipline And Patience. No Matter How Great The Talent Or Effort, Some Things Just Take Time: You Can't Produce A Baby In One Month By Getting Nine Women Pregnant.

Investing Money

Would Your Reply Possibly Be This? Well, It All Depends On What My Tax Rate Will Be On The Gain You're Saying We're Going To Make. If The Taxes Are Too High, I Would Rather Leave The Money In My Savings Account, Earning A Quarter Of 1 Percent. Only In Grover Norquist's Imagination Does Such A Response Exist.

Cultivate Curiosity And Strive To Become A Little Wiser Every Day.

The Most Common Cause Of Low Prices Is Pessimism - Sometimes Pervasive, Sometimes Specific To A Company Or Industry. We Want To Do Business In Such An Environment, Not Because We Like Pessimism But Because We Like The Prices It Produces.

If I Knew Where I Was Going To Want To Live The Next Five Or 10 Years I Would Buy A Home And I'd Finance It With A 30-year Mortgage... It's A Terrific Deal.

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Jerome Lawrence

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