Shadowing Practice: Warren Buffett On Investment Strategy | Full Interview Fortune MPW - Learn English Speaking with Video
Choose a practice mode
Each mode opens a full-screen practice room.
539 sentences
If sentences are too short or too long, click Edit to adjust them.
1
Good morning all.
2
After a spectacular night, thank you Warren.
3
And I'm going to be asking some questions as usual
4
and we will go to the audience a little bit later so get your questions.
5
Warren, I'm going to start unusually with current events
6
because last week you announced that you were buying the fifth largest auto insurance auto dealership in the country,
7
Van Tile Group of Phoenix.
8
Now there may even be some people in the audience who think of the car business as ethically challenged,
9
but at any rate what I'd like you to do is spend a
10
a paragraph or two talking about what by Buffett standards is a good business.
11
And then go into why does the car dealership business look like a good business to you?
12
A good business is the one that earns a high rate of return on tangible assets.
13
Very simple.
14
That's pretty simple, yeah.
15
And the very best businesses are the ones that earn a high rate of return on tangible assets and grow.
16
But even ones that don't grow, if they are in a high return on tangible assets, and then of course if you don't pay too much,
17
they can be a good investment.
18
They're a good business to start with by the high returns.
19
If you pay too much for them, you can turn a good business into a bad investment.
20
But if you pay an appropriate price, you can do all right.
21
Now the big mistake which we made in the early years was to try
22
and buy a bad business at a really cheap price.
23
And it took me about 20 or 30 years to figure out that wasn't a good idea.
24
But this is the car dealership business, if run well, can be a very good business.
25
You have no receivables to speak of.
26
You floor plan your inventory.
27
You can lease your real estate.
28
We don't do that well, only 95 % of our real estate.
29
So you can have very little capital actually invested in the business.
30
And you do a large volume, Van Tile, which we bought, has 78 dealerships.
31
They'll average over $100 million a dealership.
32
So you can work on fairly narrow margins
33
and still earn a high return on capital if you don't tie up much capital into $100 million a business.
34
And how many car dealerships are there in total in the United States?
35
There are over 17 ,000 car dealerships in the United States.
36
And the interesting thing is if you go back 40 or 50 years, there were in the 30 ,000.
37
So while the country has grown dramatically, and actually the number of nameplates in the car business have grown,
38
you've cut the dealerships almost in half.
39
So the average dealer now does far greater volume than when I was growing up.
40
Well, by all means, visit a Berkshire Hathaway car dealership in the next year and report back.
41
Now, Ed, let's go from that to some entirely different industry, the big banks of the United States.
42
Right.
43
And the question of whether they are good businesses and the question of what's happened to that in the last few years.
44
Are they as good a business as they were a few years ago?
45
No, no. The banks earn on assets.
46
They don't earn on net worth.
47
You know, you calculate it eventually as to what they earn on equity or net worth.
48
But assets are the earning factors and they've changed the rules
49
so that you have to have more net worth per dollar of assets.
50
And obviously, if you have more net worth per dollar assets and you're earning a constant amount on assets, your earnings on net worth go down.
51
Now, they were ungodly profitable, the better ones were, back 15 years ago or 10 years ago even,
52
when they had high ratios of assets to net worth.
53
And some of them even cheated in terms of having even more assets than the regulators would have allowed.
54
And you had these CIVs, as they were called, Citigroup had a whole bunch of them.
55
So they were off balance sheet ways of even controlling more assets.
56
But all of that sort of thing has been terminated
57
and now they've got much lower limits as to the assets to net worth ratios.
58
And the bigger the bank, to some extent, the bigger the bank, the lower that ratio can be.
59
So what was a very profitable business has been turned into a good business if executed well.
60
It's a pretty simple business.
61
I mean, you get your money cheap, very cheap.
62
Wells Fargo will have a trillion dollars roughly or close to
63
that of depositors money and it's probably costing around 10 basis points now.
64
Most people think you get a trillion dollars of money and pay a tenth of 1 % for it,
65
would find some way to do something profitable.
66
But the banks have always gotten in trouble on the asset side.
67
They've never gotten in trouble on the liability side basically.
68
But they really haven't gotten in trouble too much on the expense side.
69
But they go crazy occasionally on the asset side.
70
And what they do is they start copying what their dumb competitors are doing.
71
That happens in every business, but that's particularly virulent in the banking business.
72
John Stumpf once said, he said,
73
I don't know why we keep looking for new ways to lose money when the old ones were working so well.
74
But they do, and they copycat.
75
That's a great danger in any business.
76
I warn our managers against it all the time.
77
If anybody comes to me and says we want to do this because the other guy is doing it,
78
you know, I say go back to square one and come up with a better reason.
79
But human nature is such that you do want to do what others are doing.
80
I one time was at a director's meeting where a leading property casualty insurance manager, a very well -known guy,
81
was making a presentation to buy a life insurance company.
82
He was going through all these kind of silly reasons why they should do it.
83
And he realized that the crowd was kind of catching on to the fact these reasons were too good.
84
So finally, he just threw up his hands and said, said, oh, all the other kids have one.
85
And basically, there's a lot of business decisions made because all the other kids have one.
86
OK, now let's move to the stock market, a subject of great interest to everyone here, I'm sure.
87
Over the years, you've generally been reluctant to frame a big cosmic position on the stock market.
88
I've done it about five times.
89
I know.
90
But I think last spring, if I'm remembering correctly, and correct me if I'm not, you said that stocks were either greatly expensive or really cheap.
91
Right.
92
What would you say now about stocks?
93
And in answer, you might also mention what people are now calling the Buffett standard.
94
I didn't even know that.
95
A statistical comparison that
96
Fortune has used and promoted over the years.
97
And tell us how things rank there.
98
Well, I did use in a talk I gave 15 years ago at Sun Valley and got reprinted in Fortune,
99
a standard of total market capitalization to GDP.
100
And that, I use that because it showed at that time how extreme things had gotten.
101
I think they'd gone from like, yeah, they'd gotten from 40 % of GDP, which had been kind of standard over the years.
102
They'd gotten up to like 170 % or something.
103
So it wasn't designed to be a fine tuning type of valuation, but it showed things that really changed in a big way.
104
A very high percentage of the time, stocks are in what I call a zone of reasonableness.
105
This is not something, you know, we all know that pi is 3 .14159,
106
and little kids can sometimes give it out to hundreds of decibel places.
107
But the stock market is not like that.
108
There's a range of reasonableness, and most of the time throughout my lifetime, it's sold in the range of reasonableness.
109
That range changes over time as earnings accumulate and interest rates change and all that sort of thing.
110
There's only been about five times in my life,
111
I think, that I've actually spoken out publicly to say it was outside the range in one direction or another.
112
The most recent one being in October, I was early in October of 2008, and I said stocks were cheap,
113
and I wrote an op -ed in the New York Times.
114
But I'll probably have some chance once every five or ten years to make a definitive statement.
115
There is a big zone of reasonableness.
116
Anybody thinks they can pinpoint it is crazy.
117
It's not that precise.
118
And fortunately, you don't need to.
119
If you buy good businesses at reasonable prices and hold them, you're going to make a lot of money.
120
And that's true of stocks as a group.
121
It's true of individual companies.
122
So you're saying that right now they are in a zone of reasonable.
123
They are in a zone of reasonable.
124
Okay.
125
Okay.
126
All right.
127
We're going to move sharply to another direction, to politics.
128
A question of very great interest to this audience.
129
Is Hillary going to run?
130
Now, let me give you a background on Hillary, because in 2008, Warren promised support to both Hillary and Barack Obama.
131
And then when he found out that he'd done that sort of, he said, well, okay, I'll just be a bigamist.
132
So he did back both of them.
133
The only time I've been a bigamist.
134
And so, okay, tell us, is Hillary going to run?
135
Hillary's going to run.
136
Hillary's going to run.
137
How soon is she going to announce it?
138
She's going to announce it as late as possible.
139
Uh -huh.
140
Well, how late is, late as possible?
141
Well, I'm giving a direct quote.
142
Okay.
143
All right, next question.
144
Who's going to be your opponent?
145
Who would you get?
146
I don't know.
147
The interesting thing is that
148
Romney's getting more interested.
149
Right, right. But it...
150
Her opponent will be whoever wins the Republican primary, and there's going to be a lot of people who want to do it.
151
Well, some people say that if Jeb Bush runs, that Mitt Romney won't.
152
Do you believe that's the case?
153
I think once they have the political bug, anybody will run that they think has a chance, and who thinks they can raise the money?
154
Okay.
155
That's called the Buffett's Law.
156
Now, final question on that.
157
Is Hillary going to win?
158
Hillary's going to win.
159
Yeah.
160
Well, I know...
161
I've heard just in the last few days that some of the political pundits like Ed Rollins are saying that,
162
that it really, that it is going to be true.
163
I will bet money on it.
164
I mean, yeah, yeah, yeah.
165
You will bet money.
166
I don't do it that easily.
167
Anybody in the audience who would like to come on the other side of Warren Buffett,
168
I want to tell you it's not too good a deal.
169
We did that on silver one time.
170
I was selling short and you were buying on silver.
171
That was right.
172
Okay, now a business issue that is constantly in the press is the security of corporate data.
173
Has Berkshire had, or have you had personally, any security problems?
174
I don't have anything to hack.
175
I'm the only person without any email.
176
So that, and I'm groping here to pull out my, this is the latest I've gotten in technology.
177
Gee, this is my little...
178
I really feel kind of with it, carrying that around.
179
I don't know how to use it, understand, but I like to pull it out on occasion just to impress people.
180
And wasn't there an occasion where you didn't look at it for kind of a year?
181
Well, there was a famous case where during the Lehman weekend, I received a call on Saturday night.
182
I was in Edmonton, Alberta, very late at night.
183
And, well, I first arrived there for a social event at 6 o 'clock
184
and I got a call from Bob Diamond of Lehman, or Bob Diamond of Barclays who was trying to buy Lehman.
185
And they wanted, the British government had just told Lehman, or told Barclays, I'm sorry, told Barclays they could not buy Lehman
186
and expose themselves to a loss of greater than 3 billion pounds without getting shareholder approval.
187
And they would need at least a month to get shareholder approval.
188
So Bob Diamond said to me, what would you charge to ensure all the parties doing business with us,
189
that their contracts would be fulfilled between when we make the deal
190
and when we have a chance to have a shareholders vote approving it, which would have been at least 30 days, probably 60 days.
191
And I said, well, I've never heard of a contract like this.
192
How much do you want the indemnity before?
193
He said, I want it to be unlimited.
194
Well, unlimited was not a great word in the fall of 2008.
195
So I said, I'm going to this party.
196
I'll come back about midnight.
197
Fax me how much you'll pay, how you'll define the terms of the contract.
198
But tell me how much you'll pay and I will get back to you no matter what hour it is.
199
This is a couple of hours later in New York and I'll let you know whether I'll do it.
200
So I went to the party and I came back at midnight and there was no fax.
201
I went down to the desk and I said, where's the fax?
202
And they said, we don't have a fax.
203
So I stayed up for another hour or two.
204
Finally, I gave up. That was September 2008.
205
In July of 2009, I was going to Sun Valley.
206
And we got off the plane, and I opened this very modern contraption I have in my pocket.
207
And it said, message waiting or something like that.
208
And I don't know how to work that part of it.
209
So I gave it to my daughter, who's here.
210
And I said, tell me what this message is on here.
211
And so she pulled it up and handed it to me, and I started listening.
212
And she started talking to me.
213
I said, quiet, I'm trying to listen to this.
214
And it turned out that it was a message from that night in September
215
telling me that they would call me on Sunday, and we'd try to work out all this thing.
216
So if you really want to know the story of why Lehman failed.
217
Well, wasn't there...
218
Send smoke signals to me if you have anything important to say.
219
So you haven't had any security problems.
220
I don't think Merkshire has had any security problems.
221
How about, didn't your wife lose her credit card?
222
Won your first wife lose her credit card once?
223
Oh, yeah.
224
Oh, yeah.
225
Yes.
226
When my first wife lost her credit card, I made no attempt to get it back because the guy was spending less than she was.
227
OK. So OK.
228
Okay, now one other current event issue,
229
a fascinating trial is going on in Washington in which AIG's former CEO,
230
Hank Greenberg, is contending that Washington's regulators not only acted wrongly in 2008 in taking over AIG,
231
That was right after Lehman failed, but also wrongfully imposed onerous conditions on AIG,
232
charging at sky -high interest rates, for example.
233
What's your opinion about the issues in that trial?
234
Well, I know certain aspects of it.
235
I don't know others.
236
We had been looking at AIG over that same weekend when I was up at Edmonds, and I came back.
237
And AIG had first engaged us.
238
Well, they tried to engage us numerous times.
239
They first engaged us on Friday, preceding my going to Canada for that social affair.
240
And on Friday, I went down to the office on Friday night,
241
and they faxed me a whole bunch of material on the property casualty operations of AIG.
242
They also had a lot of life operations, and unfortunately they had AIG financial products, which had a whole lot of derivative operations.
243
That was at the parent, toward the parent company.
244
And I had to know whether the property casualty company's been contaminated by any cross guarantees between AIG Financial Products, and they assured me they hadn't.
245
So I went to the office and they sent me all this material.
246
And I looked at it for about an hour, and then I called Bob Wilmstedt and I said,
247
look, don't waste your time on me because there is no way
248
that I can come up with a number that'll be of any help to you
249
and besides i can't make i i wouldn't be sure of
250
that number even because it's such a mess of spaghetti basically and uh
251
and don't you know you've got to you've got to come up with a solution by early next week
252
so spend your time on somebody else
253
but nevertheless they kept pulling in another fellow a jeep chain
254
and on sunday he was working on everything
255
so we had some vague picture of it
256
and then i got a call on either monday
257
or tuesday from tim geithner who i never met before and tim said that they were contemplating lending $85 billion,
258
the New York Fed was, to AIG.
259
And in my opinion, was there enough in the way of value there to warrant such an $85 billion loan?
260
And I said, nobody could know.
261
Under the circumstances of that day, there wasn't anything that was worth $85 billion or anything like it.
262
I mean, it was total chaos.
263
But I thought that if they had staying power and if there weren't things there that I didn't know about,
264
which there could be, probably the underlying subsidiaries would bring $85 billion in a normalized market.
265
And that was that.
266
I would say this, that it's been proven that in a stabilized situation
267
where people were not worried about the survival of AIG because the government was behind it,
268
those subsidiaries have been proved to be worth a lot more than $85 billion.
269
But I will also say this, if the New York Fed had not put the money in within 24 hours,
270
unquestionably AIG would have been walking over to a federal judge's quarters with a petition of bankruptcy.
271
They were gone and they did not, they had a downgrade coming on their credit, where they would have had to put up way more collateral
272
on a bunch of things they'd done in the financial product subsidiary.
273
So they were totally gone.
274
Now, it's up to a judge to determine the propriety of all these things.
275
But the one thing I'm clear on is that there would have been,
276
AIG would have been in bankruptcy the activity of the New York Fed within 48 hours of when Gettner called me.
277
I see, so that's a big central point.
278
Well, it's a central point, but there's questions about the terms and all of that which are going to be adjudicated, or being adjudicated right now.
279
And I just don't know the law on that.
280
But there was no other option for AIG at that point.
281
And there was nobody that would have lent them the money
282
or invested on terms that were twice as onerous as the ones imposed by the New York Fed.
283
It was, for those of you who may have missed the main show in 2008, it was a period like we've never had it.
284
And one of the things during a period like that, it really is like the fog of war.
285
I mean, if you're Paulson or Bernanke, you know, or Sheila Bearer, the, you're getting reports from all these different fronts.
286
Some of them are somewhat inaccurate, you know, some of them have a bias to them based on what the parties want you to do.
287
It is total mass confusion.
288
And, on the other hand, you have to navigate through it.
289
And you have to navigate through it to some extent in cooperating with other people, particularly Congress.
290
And it was an ungodly, I've never seen anything like it.
291
I don't think I'll ever see anything like it again.
292
And I give great credit to Paulson and Bernanke and Geithner
293
and Sheila Bear for what I give credit to President Bush for the way they handled it.
294
You can criticize what might have been done leading up to it.
295
But when Pearl Harbor happened, they did the right thing.
296
And my final question here, what about the political deadlock in Washington?
297
Do you see any hopes?
298
Do you see how we get out of that?
299
Well, we'll get out of it somehow because we, you know, I always say that buy stock in a business that's
300
so good that an idiot can run it because sooner or later one will.
301
Now, if you want to, you can make a mental jump on that over to governments and so on.
302
We do have a country that works over time.
303
I mean, it's an unbelievable, and it will continue to work.
304
It will get people, we had a civil war here in this country.
305
We have all kinds of problems in the past.
306
But this country, it's unbelievable what's happened since 1776 and the game isn't over.
307
So I'm an optimist about it getting solved.
308
But if you asked me how it was going to happen, I would say I don't have the faintest idea.
309
It's a terrible situation, whether it's in a family, in a business, in a government,
310
when a significant portion of the people involved don't even really want to succeed, they want the other person to fail.
311
And that's a, you never want to bring that, you know, into any activity.
312
I mean, but a significant percentage of people in Congress really want the president to fail.
313
Right.
314
And that is not good for the country and we'll get past it one way or another.
315
But it has been a pretty ugly show in recent years.
316
But don't ever do it.
317
That should not affect in any way your business decisions.
318
Charlie Munger and I have been making stock decisions and business decisions one way or another together now for 55 years.
319
We have never let, well, the macro doesn't enter into it, nor does political.
320
We have not made decisions differently because one party or the other's in power.
321
We have not made decisions based on whether we thought interest rates were going to go up
322
or down or what was going to happen with labor negotiations someplace.
323
You don't want to give up what you know how to do
324
because of opinions which which you don't know whether right or not and which are going to be transitory in any event.
325
So you really go out there every day and do whatever makes the most sense.
326
So when we buy the auto dealerships last week, we don't factor in anything about the Fed, about the deadlock in politics,
327
about what's going on around the world.
328
Those are all important things, but they don't affect whether those dealerships, which we're buying to own 100 years,
329
they don't affect whether they're going to make money in the year 2024 or 2034 or 2035.
330
And the important thing is whether we get a good business with good management at a sensible price.
331
Now, let me turn to the audience where it's always hard to see up here.
332
But if you'll raise your hand, other people will help me.
333
Anything over here?
334
Hi, Warren.
335
It's Catherine Keating from JPMorgan.
336
I want to ask you about your view on the economy.
337
You know, a lot of economists have claimed coming out of the crisis that we have a prolonged period of slower growth.
338
And yet you're investing in car sales, home sales, trains, transportation, things deeply sensitive to the economy.
339
I'd love to hear your view about where you see us today.
340
Yeah.
341
Since the fall of 2009, five years ago now, we have seen both in our own businesses, and we've got 75 or more businesses.
342
We've really got a lot more than that, but it's because some of them own other ones.
343
But we're across the board in everything.
344
We're now in planes, trains, and automobiles, among other things.
345
But we're in all kinds of businesses and they interact with all kinds of businesses.
346
We have seen since 2009 really a rather steady, not at the rate people hope, but a rather steady increase in business right straight through.
347
We've heard talk and you've heard talk during that period about double dips and all these things and acceleration.
348
We have not seen it accelerate much or decelerate much ever from say a 2 % or they're about rate.
349
And that's what we see today.
350
And we see it whether it's in freight car loadings, we see it in all kinds of ways.
351
Automobiles have been better than I would have anticipated.
352
Housing has been worse than I would have anticipated.
353
But overall, the economy has been moving forward now for five years.
354
Now, it's moving.
355
from a position that, you know, they talk about having eight or nine recessions since World War II and how we've come out of them faster.
356
This was way, way, way different than any other recession we've had post -World War II.
357
This was a recession where virtually everybody in this room and around the country was actually scared for a while.
358
I mean, people go through recessions and they're unpleasant and all that.
359
But people literally, they took
360
Treasury Bill rates down to a negative rate.
361
Now
362
when you were willing to take less money from a treasury bill than you would get from putting money under your mattress,
363
that is a different phenomenon in economics from what we've experienced.
364
So you've had the American people be paralyzed by fear and coming out of that paralysis.
365
And the gain has been really, I think, quite satisfactory.
366
You'd love to see it faster.
367
And let me point out one other thing.
368
We talk about 2 % of your gains now and everybody says that's terrible, you know, and it's not our potential and everything.
369
The population is probably going to grow a little less than 1 % a year.
370
So if you have 2 % real gains, that means in a generation,
371
in 20 years, you will have greater than a 20 % per capita gain in real GDP.
372
Now real GDP is about $54 ,000 per person in the United States.
373
If you get a 20 % real gain per capita, that's $10 ,000 per person,
374
more per capita income in the United States in one generation.
375
That's fantastic.
376
I mean, it may not be as good as we did in some of the decades after
377
World War II, but if you go back in history, centuries went by without getting anything like that.
378
And 20 % gain, how would you like to have that distributed somehow evenly across the population?
379
You'd be rid of all poverty and everything else.
380
So even at our present rates of gain, this country is turning out more and more stuff per capita year by year,
381
and it will continue to do so.
382
We have a marvelous machine, and it has worked extraordinarily since 1776.
383
In my lifetime, I was born in 1930, in my lifetime, the real GDP per capita in the United States has increased six for one,
384
one person's lifetime.
385
I mean, nothing like it's ever happened.
386
And it isn't because we're smarter, and it isn't because we work harder, it's because we have a system that unleashes human potential.
387
And, you know, just look at the people in this room.
388
I mean, you know, you have more potential than you thought you had ten years ago or twenty years ago.
389
You certainly have more potential than your parents thought you had.
390
So it just, it just, and you will find ten years from now,
391
you have a, that you had a lot more potential than you thought you had today.
392
I mean, and you're gonna get a chance to use it in this country.
393
You know, you're not condemned to a life that, you know, that was ordained by what your parents did before you or something.
394
It's a wonderful, wonderful system.
395
And it's still working and it will keep working.
396
Here.
397
Hi, Jenny Johnson with Franklin Templeton Investments.
398
How do you know when to throw in the towel on an investment or a business?
399
When to throw in the towel on an - On investment or a business. Or business?
400
Yeah, well, what you know, you're doing too late.
401
I've done, I went in the textile business by accident in 1965, and I threw in the towel about 20 years later.
402
And that was about 20 years too late.
403
There's a great tendency to want to hold on, justify old decisions.
404
I mean, that's a human trait.
405
And when you really know you've got a bad business is when you have a good manager and you're getting bad results.
406
I mean, when you're getting bad results with a bad manager,
407
you still have to examine the question of whether you can get better results if you get a better manager.
408
Usually you can't.
409
I've said in the past that
410
when a management with a reputation for excellence encounters a business with a reputation for bad economics,
411
it's the reputation of the business that remains intact.
412
And I've proved that many times.
413
There are businesses that are just plain tough.
414
And there may be too many competitors, but there's reasons why they don't drop out.
415
There's reasons, well, we started out in textiles.
416
And we made over half of the linings for men's suits in the country.
417
And we went through World War II and got awards
418
and Sears Roebuck named us their supplier of the year and all of that sort of thing.
419
And then we'd say, well, we'd like to increase the price of.
420
of these linings a quarter of a cent a yard in Sears.
421
You must be out of your mind.
422
There's ten other guys that will sell it to us at the old price.
423
And nobody ever went into a Sears store and said,
424
I'd like a blue serge suit with a half -away lining.
425
It didn't exist.
426
We had no connection to the consumer.
427
And there are lots of lousy businesses.
428
And there's lots of wonderful businesses.
429
And my job over the years has been to try and figure out which is which, and I've made plenty of mistakes.
430
I bought a company called Dexter Shoes in the early 90s.
431
I paid $400 -plus million for it, and it made a lot of money before I bought it.
432
But, you know, as soon as I bought it, they pulled some switch or something, and it immediately started losing money.
433
And it was because of foreign competition, so on.
434
Or it was maybe because I owned it, I don't know.
435
And it went to zero.
436
And the worst thing was that I paid for it in stock.
437
So that $400 million in stock I gave at the time is now worth about $5 billion.
438
So every time Berkshire stock goes down, I feel a little bit better because of my opportunity loss on this business.
439
But, you know, when I looked at Dexter's Shoe, they had a good position in retailers.
440
They turned out good shoes.
441
They had a great workforce, all kinds of things.
442
But I just forgot one thing, that they weren't going to make shoes in the United States anymore.
443
So you make mistakes, and it does pay to recognize quickly when you've made them.
444
If you've got a good person running a business and it isn't making any money, you're in the wrong business.
445
And you've got to face up to that.
446
And on her, I think the other half of the question was about investments.
447
Do you have any rule of thumb about when you give up on or when you realize it?
448
Well, again, I mean, I love it when the things we buy go down.
449
I mean, I just, I get euphoric, you know.
450
Stocks are down today, and I'm buying more of something I was buying yesterday.
451
I'm buying it cheaper.
452
Now, when you go to the grocery store and you buy something cheaper than you bought it the day before, you think that's terrific.
453
But people with their stocks, they think that the stock knows more than they do.
454
So that they, when the stock goes down, they say the stock is telling them something, you know.
455
And what it's telling me is I can get more for my money.
456
But they take it as kind of a referendum on themselves, you know, and it's me versus the stock.
457
If it ever gets back to what I paid, I'm gonna sell it.
458
The stock doesn't care what you paid.
459
I mean, you have to remember, the stock doesn't even care that you own it.
460
You are nothing to the stock.
461
That stock is everything to you, you know.
462
And you remember you paid $10 .13, and therefore the stock should get to $10 .13 before you sell it.
463
You know, the stock has no feelings about you.
464
I hate to disillusion you on this, but it just doesn't care.
465
And so the only question with every stock every day, and you don't do it this frequently,
466
is can I get more for my money someplace else?
467
You've got a chance to be in thousands and thousands of great businesses, and their prices change all the time, so their relative valuations change.
468
And you can make the exchange at very low cost these days, commissions or nothing.
469
So you can always shift from one business to another.
470
You have a huge advantage over Andrew Carnegie.
471
When he was in the steel business, he was in the steel business, or Rockefeller was in the oil business.
472
He could not shift over immediately to retailing or something like that.
473
You can rearrange your business empire, which you own through that little portfolio that you have.
474
You can rearrange that at a moment's notice with practically no cost.
475
It's a huge advantage, which people turn into a disadvantage.
476
There is nothing about the price action of the stock that tells you whether you should keep owning.
477
What tells you whether you should keep owning
478
it is what you expect the company to do in the future versus the price at
479
which it's selling now compared to the other opportunities of businesses
480
that you think you know equally well and make that same comparison.
481
And that's all there is to owning stocks.
482
Question?
483
Back there in the back, are there two hands up together?
484
Well, okay.
485
I'll let you choose back there.
486
Hi.
487
You said obviously this recovery's been a little, you know, bumpy, and some industries have done well, and some not so well, like home building.
488
Many have articulated that for us to really see the full potential of our economy growing, home building's going to have to recover.
489
Do you agree with that, and what does that look like for you, and what do you think the catalyst is to get us there?
490
Home building, you said earlier that it had lagged.
491
Yeah.
492
And the question is, what do you think about home building and whether, how much of a problem is this?
493
Well, it's come back some, but it's come back at a pace way less than I would expect.
494
Now we over built like crazy in 2004, 5 and 6, we were building a couple million units.
495
And basically it ties in with household formation.
496
And household formation falls off dramatically.
497
in a recession, at least initially.
498
I mean, if you look at 2009, I believe the household formation, you know, was almost flat.
499
People just, they put plans on hold.
500
But that doesn't last long, you know.
501
Hormones kick in, you know, and in -laws get tiresome too.
502
So, in the end, you know, if people keep behaving as they have since Adam and Eve,
503
you will have household formations in this country.
504
And you will not have them all wanting to live with their in -laws or some of that.
505
They will want to have their own homes or apartment units.
506
Now, we've had more of a bulge in apartment units than we have at homes.
507
I mean, there can be some movement between people's preferences
508
within whether they want to live in an owner -occupied home or in an apartment.
509
But so far in this recovery, and we're in the carpet business, we are the largest home builder in the United States.
510
We own a company called Clayton Homes.
511
It actually will turn out about 30 ,000 homes this year.
512
But it's lagged significantly the rate of gain I would expect, considering everything else that's happened in the economy,
513
and considering how low interest rates are.
514
I mean, you know, everybody in this room should get a 30 -year mortgage now.
515
And you get the mortgage, if it turns out interest rates go lower, you call it off.
516
If they go higher, you don't call it off.
517
You've got the option.
518
It's an incredibly attractive instrument for the, you know, it's a 30 -minute instrument if you've been wrong on interest rates,
519
and it's a 30 -year instrument if you've been right on interest rates.
520
And I can't get that one -sided instrument at Berkshire Hathaway.
521
I can only get it for a mortgage.
522
So you would think that people would be lining up now to get mortgages to buy a home.
523
And it's a good way to go short the dollar.
524
I mean, there's all short interest rates.
525
It's almost a no -brainer.
526
But so far, home construction pickup has been slower than I would anticipate.
527
But I have a lot of faith in hormones.
528
And I don't really think that their impact will be less five or ten years from now.
529
So we will have a catch up period.
530
We've had the catch up period going on in autos at a much faster pace, I think, than most people anticipated.
531
I mean, we're going to have close to a 17 million car year here.
532
And I would not have guessed we'd have a 17 million car year at the same time
533
that we have houses moving at the rate they are.
534
It'll improve.
535
But I've been wrong on the timing so far, so I'll probably continue to be wrong.
536
Well, I'm afraid the clock is telling us that our time is up.
537
And I hope we'll give
538
Warren a great hand for both speaking and singing to us.
539
Thank you.
Download App
Everything you need to speak fluently
AI PronunciationScore every sentence
IPA PracticeMaster every sound
VocabularyBuild your word bank
Vocab GameLearn while playing
Same Channel
FOR YOU
Recommend Video
C1321 sentences
Watch CNBC's full interview with Berkshire Hathaway Chair Warren Buffett
Daily ConversationUniversity StudentsWorking Adults
C11
362 sentences
How The Economic Machine Works by Ray Dalio
Daily ConversationUniversity StudentsWorking Adults
C11
764 sentences
Bill Ackman: Is Permanent Capital an Investor’s Biggest Edge? | Podcast | In Good Company
Daily ConversationUniversity StudentsWorking Adults
C11
39 sentences
Warren Buffett: How To Analyze a BALANCE SHEET
Daily ConversationUniversity StudentsWorking Adults
C15
62 sentences
"Customer Obsession" Leadership Principle Explained by Amazon CEO Andy Jassy
Daily ConversationUniversity StudentsWorking Adults
C184 sentences
The 4-Hour Workweek in a World of AI
Daily ConversationUniversity StudentsWorking Adults
C11
158 sentences
The Investment Committee debates whether the AI trade is in trouble
Daily ConversationUniversity StudentsWorking Adults
C115
55 sentences
"Focusing is about saying no" - Steve Jobs (WWDC'97)
Daily ConversationUniversity StudentsWorking Adults
C13
246 sentences
$15 Trillion Money-Making Machine | How BlackRock Became Too Powerful to Ignore
Daily ConversationUniversity StudentsWorking Adults
B2336 sentences
How Used Car Dealerships Actually Make Money?
Daily ConversationWorking Adults
C13
39 sentences
Charlie Kirk: The Last Interview
Business EnglishDaily ConversationUniversity Students
B24
283 sentences
Warren Buffett Is Selling NOW. The $397 Billion COLLAPSE.
Business EnglishDaily ConversationUniversity Students
Vocabulary and speaking notes for this lesson
This speaking lesson is built on the video “Warren Buffett On Investment Strategy”. This video has 539 sentences and 6474 words to shadow. The speech runs for 37:59. The speaker talks at a natural 170 words per minute, close to everyday conversation. 86% of the words are among the 3,000 most common in English; the rest is worth studying before you start.
Key vocabulary in this video
15 words from the video worth learning, with pronunciation and meaning:
| Word | Pronunciation | Meaning |
|---|---|---|
| earn verb | /ɝn/ | To gain (success, reward, recognition) through applied effort or work. |
| automobile noun | /ˈɔː.tə.məˌbil/ | A type of motor vehicle designed to move on the ground under its own stored power and intended to carry a driver, a small number of additional passengers, and… |
| recession noun | /ɹɪˈsɛʃn̩/ | The act or an instance of receding or withdrawing. |
| household adjective | /ˈhaʊshoʊld/ | Belonging to the same house and family. |
| lifetime noun | /ˈlaɪf.taɪm/ | The duration of the life of someone or something. |
| instrument noun | /ˈɪnstɹəmənt/ | A device used to produce music. |
| reputation noun | /ˌɹɛpjʊˈteɪʃən/ | What somebody or something is known for. |
| mortgage noun | /ˈmoɹ.ɡɪd͡ʒ/ | A legal agreement in which a borrower pledges real property as collateral for a loan used to purchase or refinance that property. |
| ratio noun | /ˈɹeɪ.ʃoʊ/ | A number representing a comparison between two named things. |
| invest verb | /ɪnˈvɛst/ | To spend money, time, or energy on something, especially for some benefit or purpose; used with in. |
| profitable adjective | /ˈpɹɑ.fɪ.tə.bl̩/ | Producing a profit. |
| towel noun | /ˈtaʊ̯əl/ | A cloth used for wiping, especially one used for drying anything wet, such as a person after a bath. |
| subsidiary adjective | /sʌbˈsɪ.di.əɹ.i/ | Auxiliary or supplemental. |
| anticipate verb | /ænˈtɪs.ɪ.peɪt/ | To act before (someone), especially to prevent an action. |
| tangible adjective | /ˈtæn.d͡ʒə.bəl/ | Touchable; able to be touched or felt; perceptible by the sense of touch. |
Phrasal verbs you will hear
| Word | Meaning |
|---|---|
| go down verb | To descend; to move from a higher place to a lower one. |
| come up with verb | To manage to produce, deliver, or present (something) by inventing, creating, thinking of, or obtaining it. |
| catch up verb | To pick up suddenly. |
| come back verb | To return to a place. |
| figure out verb | To come to understand; to discover or find a solution; to deduce. |
| get back to verb | Return to (an activity) |
| get out of verb | To leave, exit or escape from; to become free of. |
| give up verb | To surrender (someone or something); to inform on (someone). |
Sentences worth repeating
Short, complete lines from the video that you can reuse in everyday conversation:
- What would you say now about stocks?
- Who's going to be your opponent?
- Do you believe that's the case?
- How about, didn't your wife lose her credit card?
- What's your opinion about the issues in that trial?
Grammar in this video
The structures the speaker uses most, with the exact words from the video:
| Structure | In the video |
|---|---|
| Present perfect continuous have/has been + -ing — an action that started earlier and is still going on | have been making · has been moving |
| Conditional sentences if + clause, will/would + verb — a condition and its result | if Jeb Bush runs, that Mitt Romney won't |
| Present perfect have/has + past participle — a past action that still matters now | has grown · you've cut · they've changed |
| Passive voice be + past participle — the focus is on what happens, not who does it | were called · has been terminated · has been turned |
Pronunciation to watch
The speaker uses 174 contractions and reduced forms, such as don't, I'm, you've. Say them the short way, as you hear them.
- The “th” sounds: nevertheless /ˌnɛvɚðəˈlɛs/, thumb /ˈθʌm/, tenth /tɛnθ/
- The “sh” and “zh” sounds: recession /ɹɪˈsɛʃn̩/, reputation /ˌɹɛpjʊˈteɪʃən/, ratio /ˈɹeɪ.ʃoʊ/, shareholder /ˈʃɛəˌhəʊl.də(ɹ)/, casualty /ˈkæʒu.əlti/
- Long words — get the stress right: automobile /ˈɔː.tə.məˌbil/, reputation /ˌɹɛpjʊˈteɪʃən/, subsidiary /sʌbˈsɪ.di.əɹ.i/, anticipate /ænˈtɪs.ɪ.peɪt/, casualty /ˈkæʒu.əlti/
How to practise with this video
- Listen to the whole video once without speaking and note the words you do not know.
- Start at 0.75× speed, shadow it sentence by sentence, then go back to normal speed once it feels easy.
- Record yourself and compare with the original, paying attention to words like earn, automobile, recession.
What is the Shadowing Technique?
Shadowing is a science-backed language learning technique originally developed for professional interpreter training and popularized by polyglot Dr. Alexander Arguelles. The method is simple but powerful: you listen to native English audio and immediately repeat it out loud — like a shadow following the speaker with just a 1–2 second delay. Unlike passive listening or grammar drills, shadowing forces your brain and mouth muscles to simultaneously process and reproduce real speech patterns. Research shows it significantly improves pronunciation accuracy, intonation, rhythm, connected speech, listening comprehension, and speaking fluency — making it one of the most effective methods for IELTS Speaking preparation and real-world English communication.