Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating ones I read this week.
Warren Buffett, whose Berkshire Hathaway (NYSE: BRK-B ) is putting on its annual shareholder meeting in Omaha this weekend, was once asked by a crowd for tips on becoming a better investor. According to The Omaha World Herald:
Buffett thought for a few seconds and then reached for the stack of reports, trade publications and other papers he had brought with him.
"Read 500 pages like this every day," said Buffett, or words to that effect. "That's how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it."
And more of it
While we're talking about Berkshire, the blog Farnam Street provides a good set of quotes from Charlie Munger on "the work required to have an opinion":
"I never allow myself to have an opinion on anything that I don't know the other side's argument better than they do." -- Charlie Munger
"We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side." -- Charlie Munger
The Wall Street Journal reports on the nation's budget deficit:
The federal government said Monday it would pay down a small portion of the national debt this quarter for the first time in six years.
The debt reduction, seen as temporary, is a sign that higher tax receipts and spending cuts are improving Washington's finances. The respite in borrowing will likely give the Obama administration a bit more time before running up against the federal debt ceiling.
The Treasury Department said that it expects to retire a net $35 billion in bonds, notes and bills from April to the end of June. That compares with its estimate from earlier this year that it would rack up an additional $103 billion in marketable debt in the second quarter ...
Still, the usual shortfalls will likely return quickly. The Treasury said it expects to borrow a net $223 billion in the July to-September period. And the budget deficit will likely hit $845 billion in the fiscal year ending Sept. 30, down from more than $1 trillion the prior four years, according to the Congressional Budget Office.
Berkshire Hathaway, the conglomerate run by Warren Buffett, also used to shun buybacks. Like Apple, it, too, changed tacks recently. In 2011, Berkshire said it would begin repurchasing shares for as much as a 10 percent premium to its book value, or common shareholder equity. The company's board raised the limit in December to 20 percent. (Berkshire had paid about $1.4 billion to buy back stock as of the end of last year.)
Unlike Apple, Berkshire provided well-defined parameters from the outset. The stock currently trades for a 41 percent premium to book, so investors have a clear understanding that Berkshire isn't a buyer at today's prices. The company has said it wouldn't do buybacks if they would reduce Berkshire's cash to less than $20 billion. It also has said it expects the program to continue indefinitely. There is no timetable.
The Washington Post describes some of the government's palm-to-forehead moments:
It is one of the oddest spending habits in Washington: This year, the government will spend at least $890,000 on service fees for bank accounts that are empty. At last count, Uncle Sam has 13,712 such accounts with a balance of zero.
They are supposed to be closed. But nobody has done the paperwork yet.
So even as the sequester budget cuts have begun idling workers and frustrating travelers, the government is required to pay $65 per year, per account to keep them on the books.
Professor Richard Florida writes about Americans' changing outlook on owning a home:
Overall, a majority of Americans, including seven in 10 renters, say they aspire to own their own home someday. But more than half (57 percent) believe that "buying has become less appealing," while 54 percent believe that "renting has become more appealing." Almost half of current home owners (45 percent) can see themselves renting at some point in the future. And, the rate increases alongside income and education, with 48 percent of college-educated home owners, 53 percent of home owners with a post-graduate education, and 51 percent of home owners with household incomes greater than $75,000 saying they would consider renting.
Just admit it
Barry Ritholtz writes on "the fine art of being wrong":
If you recognize the statistical certainty that you will be wrong, it should be much easier to accept any error as a normal part of your life.
When people refuse to admit error, it is because their sense of self-worth is too tied up in their calls. Once the expectation of error becomes built in, you remove the ego altogether.
Admitting error should be part of your regular process. I have found two ways to do this that seem to get good results: 1) Identify the error in a professional capacity to relevant parties. This can be to you, your co-workers and colleagues. 2) Perform regular reviews of your errors with the hope of avoiding them in the future. I do this with my annual mea culpas; Ray Dalio's Bridgewater hedge fund is notorious for their brutal self-examinations — and they are (arguably) the most successful hedge fund in the world.
Billionaire Ray Dalio (mentioned above) provides some advice on how to become a better investor:
Enjoy your weekend.