Berkshire Hathaway is a conglomerate holding company which was founded in 1839. At the beginning Berkshire Hathaway was focussed on textile operations, but later in In 1962 the legendary investor Warren Buffett bought the whole company and turned it into an investment holding. Since then the companies produced an averaged annual growth in book value of 20.3%.

Highest priced stock ever traded at NYSE

Due to the fact that Warren Buffett never executed a share split the class A shares were traded at an all-time high of $150,000 on December 13, 2007. In Dezember 2009 the a class shares were traded at 99.200 $ which made them highest priced stocks at NYSE. In 2009 the net income amounted to 8.015 Billion US Dollars with total revenues of 112.493 Billion US Dollars. The assests of the Berkshire Hathaway amounted to 297.119 Billion US Dollars.  In 2005 the CEO of Berkshire Hathaway Warren Buffett owned 35 % of Berkshire Hathaway which made hin the second richest man in the world. Charlie Mugner the vice chairman of Berkshire Hathaway also owns enough hathaway stocks to make him a billionaire.

Berkshire Hathaway stock price Source: Google Finance

The first edition of Security Analysis, published in 1934, forever changed the theory and practice of successful investing. Yet the remainder of that tumultuous decade brought unprecedented upheaval to the financial world, compelling Benjamin Graham and David Dodd to produce a comprehensively revised second edition.

It is that edition, out of print for decades, that you now hold in your hands. Security Analysis, Second Edition, published in 1940, is considered by many (including legendary Graham student Warren Buffett) to be vastly superior to the first. Yet after three subsequent editions and over six decades, the insightful and instructive second edition could be found only in rare bookshops and closely-guarded private collections.

McGraw-Hill, the book’s original publisher, is honored to publish Security Analysis: The Classic 1940 Edition. Identical in every meaningful aspect to the classic original, this is the long-awaited book that set the tone for decades of value investors. Let it provide you with a greater understanding of this country’s financial heritage, along with timeless value investing insights that have proven relevant and profitable in all types of markets and financial environments–and will never go out of style.

“The lapse of six years since first publication of this work supplies the excuse, if not the necessity, for the present comprehensive revision … We have revised our text with a number of objectives in view. There are weaknesses to be corrected and some new judgments to be substituted.”–From the Preface

The names Graham and Dodd have come to be inextricably linked in the minds of thoughtful, disciplined investors. Their 1934 book Security Analysis made the two synonymous with intelligent, long-term investing, and forever changed the face of Wall Street. While post-Crash traders and investors treasured the book for its rigorous honesty, determined logic, and unequalled track record of success, the authors saw only the “weaknesses to be corrected.”

The second edition of Security Analysis, published in 1940, allowed Ben Graham and David Dodd to set the record straight. It was considered by many then, and is considered by many now–including Graham student and disciple Warren Buffett, to be superior in many ways to the first. Still, as subsequent revised editions appeared, the once-indispensable second edition fell out of print and became virtually impossible to locate.

With Security Analysis: The Classic 1940 Edition, McGraw-Hill returns this long-sought investment classic to the marketplace. While its timeless advice–that investors should ignore social trends, company prospects, and management styles to focus on the balance sheet–is as vital today as it was in 1940, it is the book’s updated insights and observations that justify its importance in the annals of both investing and publishing.

Even as the financial world sang the praises of 1934’s groundbreaking Security Analysis, Benjamin Graham and David Dodd knew they could improve it. And that they did, with the 1940 publication of a brilliant second edition. Now, after having been unavailable for decades, this influential book returns in Security Analysis: The Classic 1940 Edition. As powerful today as it was for investors six decades back, it will reacquaint you with the foundations of value investing–more relevant than ever in tumultuous 21st century markets–and allow you to own the only book that could rightfully claim to have improved upon the eloquent first edition of Security Analysis.

Warren Buffett is one of the greatest investors of all time. Speaking at the University of Florida in front of a class of MBA students he gives a short speech about morals and ethics before giving the floor to the students with a Question and Answer session.

The Dow Jones

The most exciting question is where the Dow will move in 2010. I share the opinion the the Dow Jones will decline in 2010, because there are too many factors which could influence it negatively. First of all the high unemployment rate coupled with rising energy prices will be poison for the tiny recovery. Also the fact that the FED has to get rid of it´s zero interest rate policy one day will influence the markets heavily. So in my opinion there could be two possible scenarios I marked in the chart whereas I favorite the green one. I do that because there is still very much capital which wants to be invested, many people saw the good performance of the Dow in 2009 and believe that this could continue in 2010, so they invest now. But the market is definitely overbought at this moment, not directly overvalued but overbought, so I think we´ll have a pullback at late february or march here.

Euro - USD

The dollar will in my opinion come back to a level  of 1,3 - 1,4 vs. the Euro because of several reasons. The dept level of for example Greece has achieved 295 billion Euro that´s 121 % of the economic performance of this county. Also other counties of the European union are struggling with high dept levels for example Spain, France or Great Britain. Also the economy usually restarts working faster in the USA, which means that the FED will rise the federal funds rate of the quicker than the EZB in Europe.

Gold and Oil

First of all I don´t think the the oil price will go back in an enormous way in 2010. I rather believe that the year 2007 as well as the year 2009 showed us, that we now achieved a point where the global demand of oil rises while supply declines constantly. We call this point peak oil, so in my opinion we will definitely see oil prices of 110 - 130 dollars a barrel in 2010. The only reason why the oil price could decline a bit or in other words could stagnate is because of the come back of the dollar.

On the contrary the gold price has a potential to loose in price, however this depends on when the economy will start working again. If the dollar won´t come back to a level of 1.3 vs the euro and the global economy won´t stabilize we could definitely see prices above 1500 or 2000 dollar per ounce, otherwise we will get back to 600-800 $ per ounce which is my favorite scenario.

The mentioned points above are just a personal of, I hope you understand that I don´t assume responsibility for the correctness of this data.

“The Snowball” begins with a Buffett presentation to an elite 1999 group at Sun Valley, suggesting in a humorous manner that the “.com” frenzy was no more than a bubble. Then, its on to learning why his associate Charles Munger (an inseparable partner since 1959) is both the opposite and highly similar to Buffett. Warren Buffett, we learn comes from a heritage of very thrifty small business owners.

Unfortunately, his mother was somewhat unbalanced, directing frequent tirades at Warren and his sister, creating a lifelong need for the approval of women. Calculating the comparative life spans of religious song writers while in church led Warren towards religious skepticism at an early age.

If you have never heard of Buffett, Forbes currently ranks him as the third richest man in the world and he is arguably the world’s greatest investor. He has amassed his fortune by making astute investment decisions and investing in businesses. Here is what I have learnt from Buffett:

1. Rich Is A State Of Mind
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.” – Warren Buffett

The difference between being poor and being rich is really just a state of mind. Poor people think thoughts of poverty and lack, rich people think thoughts of abundance and prosperity. Your beliefs are going to determine the way you perceive wealth, the decisions you make and the way you act towards it.

2. Success Is More Than About Your Bank Balance
When asked by CNBC what is the secret to success, Buffett replied “If people get to my age and they have the people love them that they want to have love them, they’re successful. It doesn’t make any difference if they’ve got a thousand dollars in the bank or a billion dollars in the bank… Success is really doing what you love and doing it well. It’s as simple as that. I’ve never met anyone doing that who doesn’t feel like a success. And I’ve met plenty of people who have not achieved that and whose lives are miserable.”

3. Spend Less Than You Earn
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” -Warren Buffett

It seems like common sense advice and you’ve no doubt heard financial experts preaching about it for years. You can’t possibly get ahead financially if you’re spending more than your paycheck. Buffett is famous for living a simple and frugal lifestyle. He is the only billionaire I know that still lives in the same house he bought back in 1958 for $31,500. He drove a 2001 Lincoln Town Car for years which he bought second hand. Buffett has a net worth in excess of $52 billion and yet lives off an annual salary of $100,000. The relative percentage of his spending based on his overall net worth is minuscule.

4. Avoid Consumer Debt
The sooner we realize that consumerism is a social plague that has been propagated by billion dollar marketing machines to keep you shackled to your job, the sooner we can stop spending money on useless stuff. It is a fool’s game to spend today so that you can work tomorrow to pay it off. It is a losing proposition because one day your working days are going to be over but the debt is still going to be hanging over your head. Clever marketing has convinced our society that to be happy you have to have more, be more and do more. Buffett abhors consumer debt instead choosing to use debt wisely by leveraging it in investments. To help you deal with your debt consider reading “How To Get Yourself Out Of Debt“.

5. You Are Who You Associate With
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” -Warren Buffett

If you want to succeed financially you need to associate with people who are most conducive to encouraging and cheering on your financial journey. If the people you associate with see money as evil, object to capitalism and find wealth a foreign concept then your financial health and well being is going to be influenced by their views. Whether we like it or not we are all influenced to some extent by the people we spend our primary time with. If you aspire to achieve financial security then you need to find a mastermind of people in your life whom you can all encourage and help each other.

6. Gambling Is A Fools Game
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” – Warren Buffett

While we are young and naive we choose to take risks with our money that are dumb and stupid. Trying to hit a home run with your money every time is a losing proposition with long term consequences. To chase investments that offer a high rate of return you must also assume that it also comes with a higher rate of risk. Bill Gates once quipped “Warren’s and my betting has always been confined to $1 bets” when talking about them paying poker together. If two billionaires take risk management this seriously, it’s time we average punters did the same thing.

7. Give Back To The Community
“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.” – Warren Buffett

They say that to have more you need to give more. A contradiction in terms, maybe, but it’s a simple truth that is as enduring as time. As the bible says “It is more blessed to give than to receive -Acts 20:35”. Buffett has announced in 2006 that he was giving away over $30 billion to the Bill and Melinda Gates Foundation making it at the time of writing the largest charitable donation in history. He also contributes large sums to his children’s charitable foundations.

8. Generosity and Abundance Goes Hand In Hand
“Even though Ben Graham [Buffett's mentor] had everything he needed in life, he still wanted to give something back by teaching, So just as we got it from somebody else, we don’t want it to stop with us. We want to pass it along too.” – Warren Buffett

A famous bible quote goes: “What benefit will it be to you if you gain the whole world but lose your own soul?” – Mark 8:36. The path to wealth isn’t a solo endeavor. How sad would life be if you come to the end of your life and there is no one to share it with. So as you journey on your path to financial abundance remember that there will be many people who generously helped you on your journey so it is only fitting to pay it forward when the opportunity arises. Generosity with your time, with your money, with your resources are great virtues to have. The greatest ally to building a strong friendship is to help others achieve what they want from life.

I leave you with this last quote “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” – Warren Buffett

Written by Tezza  website: 4EvaYoung.com published under Creative Commons 3.0 License.

Get Benjamin Graham´s “The Intelligent Investor” now !

Get Benjamin Graham´s “Security Analysis” now !

The Intelligent Investor by Benjamin Graham is a classic. Considered by many to be the father of value investing and modern security analysis. Benjamin Graham started working on Wall Street in 1914, a time when portfolio management was based more on unsupportable impressions and inside information. Benjamin Graham brought a disciplined and intelligent approach to the profession.

After reading The Intelligent Investor in his senior year at the University of Nebraska, Warren Buffett was so impressed that he traveled to New York to study with Benjamin Graham at Columbia University.  Warren Buffett once said that he was “15 percent (Philip) Fisher and 85 percent Benjamin Graham.”  The training that Warren Buffett received from Benjamin Graham was critical to his success.  If you read this book, you’ll know why.

However that´s not true in most cases value investors actually even don´t care about stock prices. An investment is present if it promises the safety of the set in capital as well as a profit on the set in capital after a detailed analysis, everything else is speculation. So according to Benjamin Graham if somebody buys a stock without analysing the balance, the environment and the cash flow statement of a company he is a speculator. Even if this person has read some news about the company and is sure that the price of the shares will rise this person is a speculator.

On the other hand an investor always analyses the balance and combines it results with the news and information of a company. In the end an investor should always get a value which defines what the company is worth in his eyes right now. Based on this value his either buys or sells a stock, but he would never buy a stock because he read a great article about this stock or the 38-days line crosses the 200 days line or something like this.

Nevertheless it has to be said that it´s not forbidden to practice speculation, there are also some guys who are quite good in this field. But it´s important to understand that there is a difference between building up a fortune by growing with a company and trying to get rich quick by trading in shares of a company.

This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with favored status. Government is determining the “haves” and the “have nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.

Though Berkshire’s credit rating is pristine — we are one of only seven AAA corporations in the country — our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment it is far better to be a financial cripple with a government guarantee than a Gibraltar without one.

The current ratio provides us information about the financial strength of a company. In order to calculate the current ratio we have to divide the current assets by the current liabilities of a company.

In my opinion for most businesses a ratio between 1 and 2 is ideal but this varies from company to company and depends on the industry. However a current ratio under 1 indicates liquidity problems and a current ratio above 2 lack of efficiency. By the way, Benjamin Graham always wanted a ratio of at least 2 to one.

The second key figure we can calculate is the so-called quick ratio or acid test ratio. This key figure provides more information about the cash position of the company. But it´s more focused on if the company is able to pay coming liabilities.

In order to calculate the quick ratio we divide the financial assets by the current liabilities of a company. The quick ratio should always be below 1. If this is not the case the company could really face problems to pay it´s bills.

The last ratio is the so-called cash ratio. The cash ratio is the most strictest form to calculate the accounting liquidity of a company. We divide just the liquid assets so the financial assets minus outstanding bills by the current liabilities. The result of this calculation should always be above 0.2 .