But being short something where your loss is unlimited is quite different than being long something that you’ve already paid for. And it’s tempting. You see way more stocks that are dramatically overvalued in your career than you will see stocks that are dramatically undervalued. I mean there — it’s the nature of securities markets to occasionally promote various things to the sky, so that securities will frequently sell for 5 or 10 times what they’re worth, and they will very, very seldom sell for 20 percent or 10 percent of what they’re worth. So, therefore, you see these much greater discrepancies between price and value on the overvaluation side. So you might think it’s easier to make money on short selling. And all I can say is, it hasn’t been for me. I don’t think it’s been for Charlie. It is a very, very tough business because of the fact that you face unlimited losses, and because of the fact that people that have overvalued stocks — very overvalued stocks — are frequently on some scale between promoter and crook. And that’s why they get there. And once there — And they also know how to use that very valuation to bootstrap value into the business, because if you have a stock that’s selling at 100 that’s worth 10, obviously it’s to your interest to go out and issue a whole lot of shares. And if you do that, when you get all through, the value can be 50. In fact, there’s a lot of chain letter-type stock promotions that are sort of based on the implicit assumption that the management will keep doing that. And if they do it once and build it to 50 by issuing a lot of shares at 100 when it’s worth 10, now the value is 50 and people say, “Well, these guys are so good at that. Let’s pay 200 for it or 300,” and then they could do it again and so on. It’s not usually that — quite that clear in their minds. But that’s the basic principle underlying a lot of stock promotions. And if you get caught up in one of those that is successful, you know, you can run out of mone
American investor, entrepreneur and businessman
Warren Edward Buffett (born 30 August 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net worth of over $113 billion as of June 2022, making him the world's fifth-wealthiest person.
From: Wikiquote (CC BY-SA 4.0)
Also Known As:
The Oracle of Omaha
Alternative Names:
Warren Edward Buffett
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When I was sixteen, I had just two things on my mind - girls and cars. I wasn't very good with girls. So I thought about cars. I thought about girls, too, but I had more luck with cars.
Let's say that when I turned sixteen, a genie had appeared to me. And that genie said, 'Warren, I'm going to give you the car of your choice. It'll be here tomorrow morning with a big bow tied on it. Brand-new. And it's all yours.'
Having heard all the genie stories, I would say, 'What's the catch?' And the genie would answer, 'There's only one catch. This is the last car you're ever going to ge tin your life. So it's got to last a lifetime.'
If that had happened, I would have picked out that car. But, can you imagine, knowing it had to last a lifetime, what I would do with it?
I would read the manual about five times. I would always keep it garaged. If there was the least little dent or scratch, I'd have it fixed right away because I wouldn't want it rusting. I would baby that car, because it would have to last a lifetime.
That's exactly the position you are in concerning your mind and body. You only get one mind and one body. And it's got to last a lifetime. Now, it's very easy to let them ride for many years. But if you don't take care of that mind and that body, they'll be a wreck forty years later, just life the car would be.
It's what you do right now, today, that determines how your mind and body will operate ten, twenty, and thirty years from now.
The problem with municipal finance generally is that, you know, Neville Chamberlain said “not in our time,” in terms of peace and, basically, many politicians think “not in my time” when they’re dealing with fiscal matters. The pension situation, first states, then cities, and so-on, you… it’s absolutely terrible, because really don’t wanna face – they want, they can give promises now which translate into votes, and they don’t really have to with the pensions they really don’t have to deliver on those until they’re long gone. And Puerto Rico, they’ve been kicking the can down the road for a long time, and they even raised new money, I think, not much more than a year ago, a very high price for hedge funds. The answer to financial problems is not more borrowing, more borrowing, but they’ll do it as long as they can and finally the day of reckoning comes and it would have been so much easier to tackle the problem earlier and no, you know, you got all different classes of bondholders and other claimants and they’re gonna fight like crazy. Charlie [Munger] always says, he says, “an ounce of prevention is worth a ton of cure,” and now you’re in the cure stage in Puerto Rico. "Buffett on Puerto Rico's debt crisis" CNBC (2 May 2016)