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Events and Happenings

Over the past 55 years, has grown Inc. into No. 11 on the Fortune 500 list of U.S. corporations.

Buffett describes the Omaha-based company as his masterpiece, a work of financial ―art‖ that he seeks to enhance each day and build into a lasting source of economic energy.

Almost from the start — he was born on Aug. 30, 1930, to Howard Buffett and the former Leila Stahl — Buffett showed an ability to turn dollars invested into dollars earned.

His success and visibility as a business leader and financial guru will attract an estimated 40,000 people to Berkshire's annual shareholders meeting and related events over the weekend, plus international attention from news organizations. (Steve Jordon & Joe Ruff, 2010)

Below are some key landmarks along the way: (Balaji Ganesan, 2013)

Year Events Happenings 1936 Warren started selling Juicy Fruit chewing gums as packs. When asked for 1 piece, he would not sell and he thought he may be left behind with 4 pieces which could not be sold too. He made 2 cents per pack profit. Warren used to purchase Coca-Cola in six packs for 25 cents from his grandfather‘s grocery store – Buffett and Son. He will sell each Coke can for 5 cents. Profit of 5 cents per pack. 1941 Warren was 11 years old and buys his first stock - 6 Cities Service (now known as CITGO – an Oil company) shares (3 for himself and 3 for his sister Doris) at $38 per share. That is all the money he had at that time. (Little or No diversification, which he will continue to do throughout investment career) Share price fell to $27 and within a short span climbs to $40. They sold the stock at $40, but, the stock shot up to $202 in next few years. He later cited this experience as an early lesson in patience in investing. 1943 He files his first tax return and deducts his bike as a work expense for $35. 1945 Warren makes $175 monthly selling Washington Post newspapers and saves $1200 to buy a 40 acre farmland in Omaha – Nebraska. 1947 Warren joins with his friend Donald Danly stars a company called Wilson Coin Operated Machines, to buy a pinball machine at a cost of $25 and places in nearby barber shop. Wilson Coin makes $50 per week for Warren and Donald. Warren does tax returns for himself and Wilson Coin. In next few months they owned 3 machines and a year later sold them for $1200. 1949 - Warren‘s savings reaches $9800. Warren Buffett joins Columbia University 1954 and learns from Benjamin Graham. He was willing to work for Benjamin Graham, even for free, but was not offered a job. Warren returned to Omaha, purchased a Texaco station, but did not go well. He was also working as an Investment salesman for Buffett-Falk & Company, at his father's brokerage firm. 1954 Benjamin Graham called him again and offered a job for $12000 a year. Here, he worked closely with Walter Schloss. 1956 Graham decided to retire and folded his business. Warren's savings have grown from $9,800 to $140,000. Warren returned to Omaha and on May 1, created Buffett Associates Ltd. Seven family members and friends invested totally $105000. Warren invested only $100. 1957 Buffett added few more partnerships and was managing totally 5 partnerships, all from his home. 1958 At the end of 3 years, Buffett has doubled the partner’s money. 1959 Warren was introduced to by his friend Edwin Davis in a dinner. Charlie Munger later becomes the Vice Chairman of Berkshire Hathaway. 1961 Buffett is running seven partnerships in 1961; Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff, and Underwood. Partnerships were worth few millions, Buffett made his first million dollar investment in Dempster - a windmill manufacturing company. Sanborn Map Company accounted for 35% of the partnerships‘ assets. He explained to the partners that in 1958 Sanborn was selling at $45 per share when the value of its investment portfolio itself was at $65 per share which meant that it was undervalued by $20 per share with a map business coming in for nothing. Buffett reveals that he earned a spot on the board of Sanborn. 1962 Buffett went to New York to meet his old acquaintances to include more partners and raise capital. Collected few hunderds of thousand dollars. Buffett partnerships were worth $7.2 million. Buffett merged all partnerships into one and named as Buffett Partnerships Ltd. Munger introduced Warren to Harry Bottle who cut costs, laid off workers, and turned Dempster to generate cash. Buffett noticed Berkshire Hathaway selling at $8 a share and started buying aggressively. 1963 Buffett sold Dempster for $2.3 million gain, 3x times the invested amount. Buffett‘s partnerships began aggressively purchasing Berkshire paying $14.86 per share while the company had working capital was at $19 per share, this did not include the value of fixed assets. Buffett partnership becomes a single largest shareholder of Berkshire Hathaway. 1964 Due to a financial crisis, share falls to $35. Buffett found the value and started buying aggressively. 1965 Buffett invested $4 million in Walt Disney after a meeting with Walt Disney himself – almost 5% of the company. Buffett takes entire control of Berkshire Hathway, and named Ken Chase to be the CEO. 1966 Buffett closes the partnership to new money. Buffett wrote in his letter ―unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL.‖ Warren invests in Hochschild, Kohn (Departmental Store in Baltimore). Warren‘s personal investment in the partnership increased to approximately $6.8 million. 1967 Buffett Partnership now owns 59.5% of Berkshire Hathaway. Berkshire Hathaway paid 10 cents as dividend. This is the first and only dividend it has paid ever. Partnership was worth $65 million. Buffett‘s personal investment was $10 million. Buffett told his partners that in the current raging bull market he could not find good investments. He also briefly considered leaving investing to pursue other interests. American Express share reached $180, making $20 million profit on $13 million investment. Berkshire Hathaway acquired National Indemnity for $8.6 million. Berkshire acquired National Fire and Marine Insurance Company. 1968 Partnership was worth $104 million. 1969 Berkshire acquired Sun Newspapers (Publishing), Rockford Bank (Banking), National Bank (Banking) and Blacker Printing Company (Publishing). Buffett decided to close the partnership and liquidated the assets to the partners. From 1957-1969 Partnership's returns were 29.5%. Warren has three recommendations 1. Partners consider Bill Ruane's Sequoia Fund or 2. Investors take cash or 3. Take shares in Berkshire Hathaway that Warren now controls. Warren‘s personal stake was worth $25 million. 1970 The Buffett partnership is completely dissolved and divested of its assets. Warren owns 29% of the company and becomes the chairman. 1972 Through Blue Chips Stamp Company, Berkshire buys See‘s Candies (Chocolates) and Corp (Financial Services). 1974 Due to falling stock prices, the value of Berkshire Hathaway portfolio began to fall. Warren‘s personal network falls by more than 50%. 1975 Buffett merges Berkshire and Diversified – the firm controlled by Munger. Munger gets 2% stock of Berkshire and becomes its vice chairman. 1976 Berkshire invests $4 million in GEICO (Insurance) when its stock price was just above $2. Until 1996 Buffett was investing in GEICO regularly until 1996, when Berkshire completely acquired the company. Berkshire subsidiary National Fire and Marine Insurance Company acquired Central Fire & Casualty Company, and Cypress Insurance Company. 1977 Berkshire invested in the Buffalo Evening News (Publishing) for $32.5 million. He also invests in Interpublic (Advertising) and Ogilvy & Mather (Advertising), Kaiser Industries (Metals and Mining) and Knight-Rider (Publishing). 1978 Berkshire invested in SAFECO (Insurance) and ABC Broadcasting (TV Network) 1979 Berkshire was trading at $290 per share. Warren‘s personal networth was approximately $100 million. Was receiving $50000 per year as salary. Berkshire started to buy shares in General Foods (Foods), Handy & Harman (Metals and Mining), Affiliated Publications (Publishing), Media General (Publishing), FW Woolworth (Retail), Amerada Hess (Oil), Precision Steel Warehouse (Materials and Construction). 1980 Berkshire buys stock of RJ Reynolds (Tobacco), ALCOA (Metals and Mining), Pinkerton (Professional Services), Cleveland-Cliffs Iron (Metals and Mining), National Detroit (Banking), Times Mirror (Publishing), National Student Marketing (Financial Services). 1981 Berkshire buys stock of Arcata (Forest products/Paper), and GATX (machinery). 1982 Buffalo Evening News was the only local newspaper of Buffalo and its name is changed to Buffalo News. The newspaper earned $19 million in its first year without competition. By the late eighties the Buffalo News was earning $40 million/year. Berkshire invested in Time (Publishing), Crum & Forster (Insurance). 1983 Berkshire merged with , which a priori was a majority owned subsidiary of Berkshire. Berkshire Hathaway purchases (Furniture) for $60 million. Berkshire portfolio was worth $1.3 billion. Begins with $775 per share and ends the year with $1310 per share. Warren‘s personal network was $620 million, and makes to the Forbes‘ list of millionaires for the first time. 1984 Berkshire buys $139 million of Washington Public Power Supply System Bonds. Berkshire invested in Exxon (Oil), Northwest Industries (Diversified). 1985 Buffett shuts down Berkshire Hathaway‘s textile business. Warren helped merger between ABC TV Network and Capital Cities (Communications). He was forced to leave the Board of Washington Post, (as the legislation prohibited him from sitting on the boards of both Capital Cities and Washington Post). Buffett purchased Scott and Fetzer – who boast products like Kirby vacuums and World Book . Berkshire also buys Fecheimer Brothers (Uniform company). Berkshire invested in Beatrice (Food). 1986 Berkshire acquired Fechheimer Brothers Company. Berkshire invested in Lear Seagler (Aerospace). Berkshire passes above $3000 per share. 1987 Stock markets crashed in October, and Berkshire lost 25% of its value. Share price dropped from approximately $4200 to around $3100. Buffett personally lost $320 million. Berkshire buys 12% of Salomon Brothers (Investment Bank). 1988 Buffett started buying Coca-Cola (Beverages), eventually took 7% stake in the company for $1.2 billion. Berkshire buys stock of Freddie Mac (Financial Services). 1989 Berkshire acquired Borsheim‘s (Jewellery) from Friedman Family. Berkshire rose from $4800 to $8000 per share. Berkshire buys stock of Gillette (Toiletries). Warren‘s personal fortune rose to $3.8 billion. 1990 Berkshire buys 10% of (Banking). 1991 Berkshire acquired H. H. Brown (Footwear) and started buying M&T Bank (Banking). Buffett served as CEO of Solomon Brothers following firm‘s treasury bond trading scandal. Berkshire invested in Guinness (Beverages). 1992 Berkshire acquired Company (Insurance) of Omaha. Buffett continued serving as interim Chairman of Solomon Brothers following firm‘s treasury bond trading scandal. Warren purchases General Dynamics (Aeorspace) and Berkshire becomes the largest shareholder. Berkshire's stock goes over $10,000 per share 1993 Berkshire acquired Dextor (Footwear). Turned out to be a bad investment for Berkshire. 1994 The Bestseller ―The Warren Buffett Way‖ by Robert G. Hagstrom Jr. is published. Berkshire invests in McDonald‘s (Restaurants), Gannett (Publishing), PNC Bank (Banking). 1995 Berkshire acquired Helzberg‘s Diamond Shops (Jewellery) and R. C. Willey (Home Furnishings). Berkshire Hathaway's annual meeting is so well attended that it is held in Omaha's Holiday Convention Center for the first time. Berkshire stock crosses $25,000 per share. 1996 Berkshire acquired remaining stake in GEICO Corporation and turned GEICO into a 100% owned Berkshire subsidiary. Berkshire acquired Flight Safety International (provider of professional aviation training). Wesco a subsidiary of Berkshire, acquires Kansas Bankers Surety Co (Insurance). 1997 Berkshire acquired Star Furniture (Furniture) and International (Fast Food restaurants) and also invests in Travellers (Insurance). Buffett invested 2% of his investment portfolio in silver. Buffett makes a huge investment in US Airways (Airlines) – turned out to be a bad investment decision. 1998 Berkshire acquired the following companies:  General Re, reinsurer (Re-insurance company)  Executive Jet (later renamed NetJets) (Private Aviation) 1999 Berkshire acquired the following companies:  Jordan‘s Furniture Company, the Massachusetts based furniture powerhouse.  Part of MidAmerican Energy Holdings Company, utility company. 2000 Berkshire acquired the following companies:  Ben Bridge (Jewellery)  Berkshire acquired CORT, the leading national provider of rental furniture, accessories and related services in the growing ―rent-to- rent‖ furniture rental industry.  Justin Industries includes Acme Building Brands – Company.  , Inc., the world‘s largest manufacturer of tufted broadloom carpet.  Benjamin Moore & Co. Benjamin Moore, a leading manufacturer and retailer of premium paints, stains and industrial coatings, was founded in 1883. Buffett is named the top money manager of the 20th century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton. 2001 Berkshire acquired the following companies:  Corp, a leading manufacturer and marketer of premium-quality building products.  MiTek, headquartered in Chesterfield, Missouri, the world‘s leading provider of steel connector products, design engineering software and ancillary services for the global building components market.  XTRA Corporation, which leases, primarily on an operating basis, over- the-road trailers, marine containers, and intermodal equipment, including intermodal trailers, chassis and domestic containers.  H&R Block (Financial Services)  Moody‘s Corporation (Financial Services) Insurance claims from the 9/11 terrorist attacks total $2.28 billion. Buffett apologizes to his shareholders for failing to foresee the risk and properly price insurance coverage. 2002 Berkshire acquired the following companies:  Larson-Juhl – a custom picture frame maker  , Inc., apparel manufacturer.  Albecca, which designs, manufactures, and distributes a complete line of high-quality, branded custom picture framing products.  Garan, a leading manufacturer of children‘s, women‘s, and men‘s apparel bearing the private labels of its customers as well as various of its own trademarks, including .  CTB, a leading designer, manufacturer and marketer of equipment and systems for the poultry, hog, egg production and grain industries.  The from its founder and Chairman, Doris K. Christopher, and her family. The Pampered Chef is the largest branded kitchenware company and the largest direct seller of housewares in the U.S., with more than 67,000 ―Kitchen Consultant‖ sales representatives. Berkshire and other investment groups buy $500 million in bonds issued by Level 3 Communications, the former Omaha fiber network company. Buffett entered in $11 billion worth of forward contracts to deliver US dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion. 2003 Berkshire acquired the following companies:  McLane, based in Temple, Texas, one of the nation‘s largest wholesale distributors of groceries and nonfood items to convenience stores, drug stores, wholesale clubs, mass merchandisers, quick service restaurants, theaters and others.  , Inc., a manufactured housing company for $1.7 billion.  Burlington Industries, one of the world‘s most diversified marketers and manufacturers of softgoods for apparel and interior furnishings. 2004 Elected as Director of Berkshire Hathaway. 2005 Berkshire acquired the following companies:  Medical Protective Company (Medical malpractice carrier)  from its founder and CEO, Peter J. Liegl. Forest River is a leading manufacturer of leisure vehicles in the U.S. The company manufactures a complete line of motorized and towable recreation vehicles, utility trailers, buses, boats and manufactured houses.  Despite insurance business losses of about $2.5 billion caused by Hurricane Katrina, Berkshire records a $5.6 billion gain in its net worth.  Berkshire subsidiary Shaw Industries acquired Honeywell International.  Procter and Gamble (Consumer Goods)  Anheuser-Busch (Food and Beverage) Berkshire stock crosses $90,000 per share. 2006 Buffett announced in June that he would give away more than 80%, or about $37 billion, of his $44 billion fortune to five foundations in annual gifts of stock, starting in July 2006. The largest contribution will go to the Bill and Melinda Gates Foundation. Berkshire stock crosses $100,000 per share. Berkshire acquired the following companies:  , a privately held company that is a leading global distributor of corporate news, multimedia and regulatory filings.  Russell Corporation, a leading branded athletic and sporting goods company.  80% of the Iscar Metalworking Companies (IMC) in a transaction that values IMC at US$5 billion. The Iscar Metalworking Companies is a privately held group, with operations worldwide, and is an industry leader in the metal cutting tools business through its Iscar, TaeguTec, Ingersoll and other IMC group companies.  Successful completion of its acquisition of Applied Underwriters, the industry leader in integrated workers‘ compensation solutions and all of its subsidiaries — including its North American Casualty insurance companies.  TTI, Inc., a privately held electronic component distributor headquartered in Fort Worth, Texas.  Southern Energy Homes – an electric utility company.  Brooke Sports (Apparel) 2007 In a letter to shareholders, Buffett announced that he was looking for a younger successor or perhaps successors to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett. Berkshire acquired the following companies:  Boat America Corporation, which owns Seaworthy Insurance Company and controls the Boat Owners Association of the .  Leading jewelry manufacturers Bel-Oro International and Aurafin LLC, which were merged into Richline Group. 60% of Marmon Holdings, Inc. formerly owned by Jay Pritzker family.  SE Homes (Materials and Construction)  BoatUS (Boat America Corporation is the main supplier of towing, insurance and other services to the nonprofit boater's association) 2008 Berkshire acquired the following companies:  Marmon Holdings – a holding company that owns companies that produce electrical components, industrial components and transportation equipment, and provide services including construction and retail solutions.  Coachmen Industries – recreational vehicle manufacturer.  Mars Inc (Food and Beverage) 2009 Berkshire subsidiary Shaw Industries acquired Sportexe (a leading synthetic turf company). Berkshire acquired Cavalier Homes (home building company). A $5 billion ―paper‖ loss on investments and derivatives triggers a first-quarter loss by Berkshire, its biggest since the 9/11 terrorist attacks. But earnings rebound later in the year. 2010 Warren buys the entire railroad company of Burlington Northern for $44 billion. As a result of this acquisition, Berkshire entered the S&P 500, replacing Burlington Northern Santa Fe. Berkshire subsidiary McLane Company acquired Kahn Ventures. Berkshire invested in Munich Re (Insurance). 2011 Berkshire acquired (Speciality Chemicals). 2012 Berkshire acquired Omaha World-Herald (Publishing), IBM (Technology). 2013 Berkshire acquired 50% stake in H. J. Company (Food and Beverage).

As this Warren Buffett investment timeline reveals, Buffett has made a large variety of acquisitions in many different industries and lines of businesses. But the underlying thinking is the same: buying good businesses (high return on invested capital) when they are cheap / reasonably valued. (Warren Buffett Quotes, 2013) Case Studies and Scandals

i) The Deal (Jesse Eisinger, 2011)

US financial Superman, the mild-mannered Midwesterner Warren E. Buffett, swooped in again to save another bank, the financial markets, the American economy and just maybe our precious way of life.

Mr. Buffett's purchase of $5 billion worth of Bank of America preferred stock (on his usual generous terms, including long-lasting warrants to buy common stock at an attractive price) immediately stiffened the upper lips of chattering investors and pundits.

Bank of America's chairman hailed it as a "vote of confidence" in the bank. It was also celebrated as a signal that the worst was over in the rout recently experienced by the

American financial sector.

For the moment, that all seems right: Bank of America's stock is up 17 percent from the Aug. 25 announcement, and stocks of the other three major American banks—

JPMorgan Chase, Citigroup and Wells Fargo—are also up.

But as the news is digested, it could set off the opposite effect. The Buffett investment just might turn out to erode, not increase, confidence. And not only for Bank of America, but for the banking sector as a whole.

Mr. Buffett's investment reveals something both infuriating and scary. Bank of

America has not been talking straight about its need for capital.

"You cannot have the largest bank in the country saying, 'We don't need the money,' and then paying this kind of price to Warren Buffett for capital they say they don't need," said Daniel Alpert, who runs the investment firm Westwood Capital. "Industrywide, it's a potential boomerang because we think, ‗Why should we believe any of these guys when they say they don't need the money?' "

"We've been through a massive crisis in 2007 and '08 where executives of major financial institutions tried to hide their insolvency," he added. "They said, ‗No, no, a thousand times no, we're fine.' And then they were gone."

Sure, Mr. Buffett reportedly approached Brian T. Moynihan, Bank of America's chief executive, who initially rebuffed the investment offer—suggesting that Bank of

America didn't really need capital. Even so, Mr. Moynihan's reticence didn't last long.

And if the bank truly didn't need capital, why make such an expensive deal that could dilute other shareholders?

The more investors think about it, the more Mr. Buffett's announcement will intensify, not allay, their fears about Bank of America's capital position. Indeed, Mr.

Buffett is making something more resembling a loan than an equity investment. His $5 billion doesn't fully count in the important measure of capital that regulators look at, called Tier 1.

That is perhaps why Bank of America's money-raising has not stopped with Mr.

Buffett. On Monday, the bank sold about half of its stake in China Construction Bank for more than $8 billion. And over the last year, Bank of America has been jettisoning multiple businesses to raise cash and shore up its capital.

Prudent, yes, and we can hope the bank's management has learned a lesson about credibility. Last year, Mr. Moynihan suggested that the bank would be able to raise its dividend after it passed the Federal Reserve's second round of stress tests. No such luck. That plan was blocked, rightly, by the Fed, whose exams revealed, among other perils, Bank of America's overexposure to the sickly real estate sector.

Yet Mr. Moynihan and Bank of America persisted, with analysts expecting the bank to come back in the middle of the year to push the Fed to revisit the dividend issue.

So much for that now.

Still, even with these moves, some investors and analysts do not think the bank's actions will be sufficient and that it will have to sell common shares to raise capital.

Bank of America disagrees. Yes, the stock has "an overhang" thanks to economic and legal uncertainty, but "we understand that and are working very aggressively to address that," said Jerome F. Dubrowski, a spokesman. "We have more than enough capital to run our business" based on current rules, he said.

The bank has clearly explained to investors and regulators how it will reach compliance with the new rules ahead of schedule, he added. The Buffett opportunity was too good to pass up, Mr. Dubrowski said: "There's only one Warren Buffett. We are very happy to have him, but it wasn't driven by capital."

Yet Bank of America investors had whipped themselves into a panic in August because of the giant legal liability faced by the bank. The Buffett investment does not remove that, let alone any of the bank's other millstones.

Not only does the bank still face billions in legal settlement costs from

Countrywide Financial, but it also has to buy back billions in faulty mortgages. Bank of

America's questionable foreclosure practices continue to drag it down, and in addition it faces Securities and Exchange Commission investigations into the actions of its subsidiary, Merrill Lynch, in the lead-up to the financial crisis. Bank of America acquired

Merrill in 2008, under heavy pressure from the Federal Reserve and the Treasury

Department.

The big problem, however, is not the unknown legal costs, but the exceedingly well-known exposure to real estate, both home mortgages and home-equity lines of credit.

The bears will return, armed with a soft economy and the declining housing market. As they do, what is to stop them from jumping from bank to bank?

Compared with Bank of America, Wells Fargo has more exposure to real estate and less capital. The bank classifies about 19 percent of its residential mortgage loans as either delinquent or nonperforming, a number similar to that of Bank of America.

Wells Fargo says its fine, but where have we heard that before?

Of all the big American banks, JPMorgan Chase, perhaps surprisingly, has the highest proportion of bad mortgages, at about 24 percent, according to

Bankregdata.com. Citigroup is lowest at less than 14 percent. But JPMorgan's balance sheet is more solid than that of any of the country's other megabanks.

Even if the major banks do not experience additional capital crises, the Fed plans to keep interest rates low for years. That will almost certainly depress bank lending rates, squeezing profits.

That is, if the banks lend at all. In one of the most important business lines for

Bank of America and the other Big Three banks, residential mortgages, the banks are pricing themselves out of the market, offering uncompetitive rates. The mortgage market remains shattered.

Why aren't the banks lending? They fear potential future litigation, for one. And they claim there is not enough demand from high-quality borrowers. But if they had conviction that the economy and housing markets were recovering, those concerns would ebb.

ii) Warren Buffett and Obamacare (msnbc, 2013)

Warren Buffett and Obamacare

Rep. Jim Jordan, a far-right Ohio Republican, told reporters this week that the anti- healthcare forces have the wind at their backs. ―All the momentum is in our direction,‖ he said. ―Warren Buffett said yesterday, ‗Scrap the bill.‘‖

Jordan‘s point, in all likelihood, is that if Buffett, an ally of President Obama, was willing to condemn the Affordable Care Act on Tuesday, shortly before the House‘s 42nd repeal vote, then the White House‘s position must be in real trouble.

But did the Sage of Omaha actually say ―Scrap the bill‖ this week? Wouldn‘t that have been a pretty big story? Jon Chait took a closer look. It turns out a right-wing site called Money Morning quoted Buffett saying the following: ‗What we have now is untenable over time,‘ said Buffett, an early supporter of President Obama. ‗That kind of a cost compared to the rest of the world is really like a tapeworm eating, you know, at our economic body.‘‖ The quote was picked up by Jeffrey H. Anderson of the Weekly

Standard – ―You know things are bad for President Obama when even Warren Buffett has soured on Obamacare and says that ‗we need something else‘ ‖ – and ricocheted around the conservative-news world, implanting itself in Jordan‘s mind as yet the latest evidence that even supporters of Obamacare recognize it is doomed to failure.

A series of conservatives sites trumpeted Buffett‘s alleged anti-Obamacare comments, with something called Newsbusters demanding to know, ―Will the media report it?‖

Actually, no, that rascally media held off, not because there‘s a liberal conspiracy, but because the quote was taken out of context from something Buffett said in 2010. In fact, he actually supports Obamacare with a fair amount of enthusiasm. He said what

Americans ―have now is untenable‖ three years ago in reference to the health care system before the Affordable Care Act.

Eventually, the Weekly Standard realized it had made a mistake, and published this update: ―It appears that Buffett made his anti-Obamacare comments in 2010, thereby showing that he, like most of the American people, has opposed Obamacare since even before it was passed.‖

Except, the correction needs a correction – Buffett didn‘t oppose the reform law in 2010 and doesn‘t oppose the law now. Indeed, he even spoke out this week to reiterate, ―I support it. It relates to providing medical care for all Americans. That‘s something I‘ve thought should be done for a long, long time.‖

This is a terrific example of the conservative media at work. A prominent conservative outlet gets a story wrong. Presented with reality, the same outlet clarifies matters, but gets the story wrong again, while hoping to pretend it was right.

All the while, Republican lawmakers hear the bogus claim but not the correction, which in turn helps the lie live on. Soon, the ―fact‖ that Buffett criticized the Affordable

Care Act – even though he didn‘t – will be one of the basic truths that conservatives

―know‖ to be true, and they‘ll assume the rest of the country is unaware because the darned ―liberal media‖ refused to get the word out. All of this is necessary, of course, because of the right‘s zeal to convince them that a moderate health care reform law built on ideas Republicans used to like is destroying America from within. iii) Dempster Mill Manufacturing Company

Warren Buffett writes below:

We are presently (1962) involved in the control of Dempster Mill Manufacturing

Company of Beatrice, Nebraska. Our first stock was purchased as a generally undervalued security five years ago. A block later became available, and I went on the

Board about four years ago. In August 1961, we obtained majority control, which is indicative of the fact that many of our operations are not exactly of the "overnight" variety.

Presently we own 70% of the stock of Dempster with another 10% held by a few associates. With only 150 or so other stockholders, a market on the stock is virtually non-existent, and in any case, would have no meaning for a controlling block. Our own actions in such a market could drastically affect the quoted price.

Therefore, it is necessary for me to estimate the value at yearend of our controlling interest. This is of particular importance since, in effect, new partners are buying in based upon this price, and old partners are selling a portion of their interest based upon the same price. The estimated value should not be what we hope it would be worth, or what it might be worth to an eager buyer, etc., but what I would estimate our interest would bring if sold under current conditions in a reasonably short period of time. Our efforts will be devoted toward increasing this value, and we feel there are decent prospects of doing this.

Dempster is a manufacturer of farm implements and water systems with sales in

1961 of about $9 million. Operations have produced only nominal profits in relation to invested capital during recent years. This reflected a poor management situation, along with a fairly tough industry situation. Presently, consolidated net worth (book value) is about $4.5 million, or $75 per share, consolidated working capital about $50 per share, and at yearend we valued our interest at $35 per share. While I claim no oracular vision in a matter such as this, I feel this is a fair valuation to both new and old partners.

Certainly, if even moderate earning power can be restored, a higher valuation will be justified, and even if it cannot, Dempster should work out at a higher figure. Our controlling interest was acquired at an average price of about $28, and this holding currently represents 21% of partnership net assets based on the $35 value.

Of course, this section of our portfolio is not going to be worth more money merely because General Motors, U.S. Steel, etc., sell higher. In a raging bull market, operations in control situations will seem like a very difficult way to make money, compared to just buying the general market. However, I am more conscious of the dangers presented at current market levels than the opportunities. Control situations, along with work-outs, provide a means of insulating a portion of our portfolio from these dangers.

In year 1963, having read this far, you are entitled to a report on how we have done to date in 1962. For the period ending October 31st, the Dow-Jones Industrials showed an overall loss, including dividends received, of approximately 16.8%. We intend to use the same method or valuing our controlling interest in Dempster Mill

Manufacturing at this yearend that we did at the end of last year. This involved applying various discounts to the balance sheet items to reflect my opinion as to what could be realized on a very prompt sale. Last year this involved a 40% discount on inventories, a

15% discount on receivables, estimated auction value of fixed assets, etc., which led to an approximate value or $35.00 per share.

The successful conversion of substantial portions of the assets of Dempster to cash, at virtually 100 cents on the dollar, has been the high point of 1962. For example, inventory of $4.2 million at last yearend will probably be about $1.9 million this yearend, reducing the discount on this item by about $920,000 (40% of $2.3 million reduction). I will give this story my full journalistic treatment in my annual letter. Suffice to say at this point that applying the same discounts described above will probably result in a yearend value of at least $50.00 per share. The extent of the asset conversion job can perhaps best be illustrated in a sentence by pointing out that whereas we had $166,000 of cash and $2,315,000 of liabilities at November 30, 1961 (Dempster fiscal yearend), we expect this year to have about $1 million in cash and investments (of the type the Partnership buys) against total liabilities of $250,000. Prospects for further improvement in this situation in 1963 appear good, and we expect a substantially expanded investment portfolio in Dempster next year.

Valuing Dempster at $50 per share, our overall gain (before any payments to partners) to October 31st for the Partnership has been 5.5%. This 22.3 percentage- points advantage over the Dow, if maintained until the end of the year, will be among the largest we have ever had. About 60% of this advantage was accomplished by the portfolio other than Dempster, and 40% was the result of increased value at Dempster.

I want all partners and prospective partners to realize the results described above are distinctly abnormal and will recur infrequently, if at all. This performance is mainly the result of having a large portion of our money in controlled assets and workout situations rather than general market situations at a time when the Dow declined substantially. If the Dow had advanced materially in 1962, we could have looked very bad on a relative basis, and our success to date in 1962 certainly does not reflect any ability on my part to guess the market (I never try), but merely reflects the fact that the high prices of generals partially forced me into other categories or investment. If the Dow had continued to soar, we would have been low man on the totem pole. We fully expect to have years when our method of operation will not even match the results of the Dow, although obviously I don't expect this on any long-term basis or I would throw in the towel and buy the Dow.

I‘ll cut this sermon short with the conclusion that I certainly do not want anyone to think that the pattern of the last few years is likely to be repeated; I expect future performance to reflect much smaller advantages on average over the Dow. Each letter ends with the request that you let me know about anything that isn't clear. Please be sure that you do this. We are all geared up with secretarial help, a new typewriter, etc., and we want to be sure that this letter and agreement are understood by all.

Many times Generals represent a form of "coattail riding" where we feel the dominating stockholder group has plans for the conversion of unprofitable or under- utilized assets to a better use. We have done that ourselves in Sanborn and Dempster, but everything else equal we would rather let others do the work. Obviously, not only do the values have to be ample in a case like this, but we also have to be careful whose coat we are holding.

http://basehitinvesting.com/wp-content/uploads/2013/09/buffett_case-study-on-investment- filters-tabulating-company.pdf

http://csinvesting.org/wp- content/uploads/2012/05/dempster_mills_manufacturing_case_study_bpls.pdf

http://www.msnbc.com/rachel-maddow-show/warren-buffett-and-obamacare-case-study http://www.investopedia.com/financial-edge/0510/buffett-scandals-then-and-now.aspx http://business.time.com/2011/03/31/buffett-scandel-could-have-been-worse-sokols-other- trade/ http://www.msnbc.com/rachel-maddow-show/warren-buffett-and-obamacare-case-study