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The interview with Warren Buffett in 1974

June 18, 2011 | About:
In the US, investors won’t forget the market collapse of 1973, 1974. In 1973, DJIA declined 16.6%, and the next year, it continued to drop 27.5%. This occurred during the height of the inflationary crisis that crippled the US economy in the early 70s. During that time, Forbes had featured the interview with the legendary investor of all time, Warren Buffett.

At the time he felt "like an oversexed guy in a harem. This is the time to start investing”. Around 5 years before that, late in 1969, he liquidated Buffett Partnership and gave his clients their money back. The reason he quitted was mainly because he found the game no longer worth playing. Good Companies were valued by the market at very high multiples, the “go-go boys” were “performing”. He advised the clients that they would do better in tax-exempt bonds than in the stock market at the current level. "When I got started," he said "the bargains were flowing like the Johnstown flood; by 1969 it was like a leaky toilet in Altoona."

It is often said that the stock market was habit performing, and investors could always persuade themselves that there were bargains around. He left the market from 1969 to 1974. If he had stuck around, he admitted, he would have had mediocre results.

"I call investing the greatest business in the world," he said, "because you never have to swing." “You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it."

If anyone still remember Phil Carret, one legendary investor, and is appraised by Buffett, "the best long term investment record of anyone I know", when being asked what the most important thing in investment, Phil answered: “patience”. Buffett couldn’t agree more "You're dealing with a lot of silly people in the marketplace; it's like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be OK.”

He recommended people to buy stocks that sell at ridiculously low prices, low but in what standard, net worth, book value, liquidation value or going concern value? The most important thing is to stick with what investors know, shouldn’t get too fancy. “Draw a circle around the businesses you understand and then eliminate those that fail to qualify on the basis of value, good management and limited exposure to hard times”. “Buy into the company because you want to own it, not because you want the stock to go up.”

Then he listed some fields that he thought he could understand. “A water company is pretty simple, so is a newspaper, or a major retailer.” And he has mentioned Polaroid “At some price, you don’t pay anything for the future, and you even discount the present. Then, if Dr. Land has some surprises up his sleeve, you get them for nothing.”

He advised that people should have faith in their own judgements. Do not be influenced by every opinion you hear and every suggestion you read. Benjamin Graham once said: “ You are neither right or wrong because people agree with you.”

A lot of people often asked that if the stock market never comes back. Even Buffett once asked Benjamin Graham about that. Ben just shrugged and said the market always eventually did come back. On Wall Street, we often heard “Yes, it’s cheap, but it’s not going to go up.” That’s silly. In the past, people have been very successful investors because they’ve stuck with successful companies. “Sooner or later, the market mirrors the business.”

"Look, I can't construct a disaster-proof portfolio. But if you're only worried about corporate profits, panic or depression, these things don't bother me at these prices."

And his final comment “Now is the time to invest and get rich”

Those are some of very basic and simple ideas of value investment that we should really see the its common sense and learn by heart. Buying a stock is actually buying a piece of the business, and what we should care about is the businesses’ performance overtime, then the stock would reflect the true worth of the business.

Anh HOANG

About the author:

Anh HOANG
Money manager into global equities, especially with US and Vietnam markets. CFA level 3 candidate. Lecturer for Stalla - CFA course in Vietnam

Visit Anh HOANG's Website


Rating: 4.0/5 (23 votes)

Comments

AlbertaSunwapta
AlbertaSunwapta - 3 years ago
An old but good OID article on Phil Carret here:

http://www.oid.com/public/html/CarretMemorial/CarretMem1.html


More from OID on Phil Carret:

"12 Commandments of Investing"

http://www.oid.com/public/html/Carret90/OIDCarret90_07.html

"SOME TIMELESS PRINCIPLES

FROM A TRULY LONG-TERM INVESTOR."

http://www.oid.com/public/html/Carret90/OIDCarret90_01.html

.
ken_hoang
Ken_hoang - 3 years ago
Thanks AlbertaSunwapta for the link [url=http://www.gurufocus.com/ic/space.php?uid=17423][/url]
Jose Vasquez
Jose Vasquez - 3 years ago

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