Making it Look Easy: How Warren Buffett Did It

Article: The Economist, The Secrets of Buffett's Success

Interesting article in this week's Economist about a study of how Warren Buffett has managed to make such successful investments over a long period of time, and stock-picking has very little to do with it.  It comes down to two simple factors:

1) He concentrates on stocks with low betas (ie, low risk, low return stocks).  According to the article, these stocks perform better on a risk-adjusted basis than high flying stocks. (Possibly, I guess, because investors who are looking to get rich quick overlook them, so they are in less demand.)

2) He leverages his portfolio (ie, borrows money to buy more stock).  His source of funds is not loans or bonds, but insurance premiums, which gives him an extremely low funding cost.

This makes a lot of sense, especially if you read Buffett's annual shareholder letter, which always describes with glee the free float he gets from his insurance businesses.  (Letters are available here, and well worth reading).

Now that I know the secret, I just have to get hold of a massively successful insurance company.

Obama's Economics Report Card

Article: The Economist, Barack Obama's Economic Record

Well worth reading.

The Quandary of Air Conditioning

Article: New York Times, The Cost of Cool by Elisabeth Rosenthal

Here's another vicious circle for you: as the populations of tropical developing nations move into the middle class, they will demand air conditioned homes, offices and cars, just like Americans do.  This will  contribute to global warming, which will further increase the demand for air conditioning, until... What?

Elisabeth Rosenthal's article is informative and thought-provoking.  It does not simply bash our decadent comfort-seeking life-style, but notes that air conditioning brings benefits for our health and productivity, and seems to be a requirement for modern knowledge workers, especially in hot climates.  This is a quandary, for which there is no simple obvious solution.

One more thing to puzzle and worry about...

http://graphics8.nytimes.com/images/2012/08/19/opinion/19rosenthal_chart/19rosenthal_chart-custom1.png

World Jewish Population

Very interesting special special report in this week's Economist on Judaism and the Jews, including the graphic below.  The total Jewish world population of 13.6 million is similar to that of the country of Zambia, or the city of Karachi, Pakistan.

from The Economist magazine www.economist.com

Is There Life After Fifty?

Article: The Economist, Schumpeter, Enterprising Oldies

This article, which is short and well worth reading gave me some hope.  Zuckerberg and company aside, it gives a bunch of examples and reasons why entrepreneurship and other creative endeavors are not only for the young-- not by a long shot.  For example:

• Dane Stangler of the Kauffman Foundation found that highest rate of entrepreneurial activity was in the 55-64 age group.  Lowest was in the 20-34 age group.
• Ray Croc started McDonald's in his 50's.
• Colonel Harland Sanders started KFC in his 60's.
• The Stones, Dylan, Paul McCartney, Leonard Cohen: still going strong.
• Arianna Huffington founded the Huffington Post at age 54.
• Marc Pincus founded Zynga at age 41.

Six Latin American Countries Without Ambassadors

Article: U.S. Sway Clipped In Latin America, Nicolas Casey, Wall Street Journal

Can you name the six Latin American countries whose ambassadorial appointments have been held up in Congress?  They are:

• Barbados
• Ecuador
• El Salvador
• Nicaragua
• Urugay
• Venezuela

Article also has a nice map...

Economic Growth: Get the Picture?

Regarding the economy, sometimes a simple picture is very helpful.  This is from Friday's Wall Street Journal:

(Recovery Doesn't Feature Typical Snapback in Growth, WSJ, 1/27/2012)