"Top 10 Warren Buffet investment tips and interpretations"
10. Tip: "Our insurance business had an excellent year... that party is over. It's a certainty that insurance-industry profit margins, including ours, will fall
significantly in 2008. So be prepared for lower insurance earnings during the next few years."
Interpretation: You can also afford to be wrong more than anyone else when you're the richest investor.
9. Tip: The four key ingredients for a good investment are "a business you understand, favourable long-term economics, able and trustworthy management, and a sensible
price tag."
Interpretation: It's hard to go wrong when your bank account has more money than that of most nations.
8. Tip: The four businesses which made Buffet his wealth, American Express, Wells Fargo, Procter & Gamble and Coca-Cola, were founded in 1850, 1852, 1837 and 1886
respectively. "Start-ups are not our game."
Interpretation: You might get rich with new stocks. You can get wealthy with old stocks.
7. Tip: "Susan (Jacques, chief executive of his jewellery retailer Borsheims) came to Borsheims 25 years ago as a $4-an-hour saleswoman. She's smart, she loves the
business and she loves her associates. That beats having an MBA degree any time."
Interpretation: Skip school. Get real life experience. College educated people are a dime a dozen.
6. Tip: Berkshire Hathaway bought 1.3pc of PetroChina in 2002 and 2003 for $488m, valuing the Chinese oil company at $37bn when Buffett thought it was probably worth
$100bn.
When the China share bubble took its value to $275bn in 2007, way above its fundamental value, Buffett cashed in his holding for $4bn, an eightfold rise in five years.
Interpretation: The time to sell is always best when you've personally bloated the market and your uber-wealthy peers are moving on to greener rice paddies.
5. Tip: On the Wall Street firms traditional practice of promising 8 percent returns: "If they are wrong, the chickens won't come home to roost until long after they
retire."
Interpretation: It's OK to back a Wall Street liar, even when the house is on fire, lit by the paper money and a strike-anywhere match, placed by Goldman Sachs and
other financeers in expensive Bankers' attire.
4. Tip: On the impressive 2002-2007 rise of the Euro vs. the US Dollar: "This is our doing, not some nefarious plot by foreign governments."
Interpretation: Even if plots and conspiracies are involved, you can make a lot of money buying and selling currencies.
3. Tip: Quoting John Stumpf, chief executive of Wells Fargo, on lenders' behaviour: "It is interesting that the industry has invented new ways to lose money when the old
ways seemed to work just fine."
Interpretation: You can't teach an old dog new tricks, but you can always find news ways to make gamblers lose their shirts.
2. Tip: On the American housing bubble which imploded in 2007: "As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been
swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."
Interpretation: If you aren't tolerant of seeing skinny dippers exposed at low tide, don't swim at the nudist beaches.
... and the #1 Warren Buffet investment tip and interpretation is:
1. Tip: Buffett took premiums worth $4.5bn from investors buying insurance from him against four major stock markets being lower in 15 to 20 years than they are today.
Interpretation: It's easy to make a profit when you can afford to capitalize whole markets with other peoples' money.
