The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [530]
29. Jason Zweig says in a July 2003 Money article, “Lessons from the Greatest Investor Ever,” that “From 1936 to 1956, at his Graham-Newman mutual fund, he produced an average annual gain of more than 14.7% vs. 12.2% for the overall market—one of the longest and widest margins of outperformance in Wall Street history.” This record does not reflect the impressive performance of GEICO, which was distributed to the shareholders in 1948.
Chapter 22
1. At times he had said he wanted to be a millionaire by age thirty.
2. Interview with Ed Anderson.
3. “Newman and Graham predated A. W. Jones, which everybody thinks is the first hedge fund,” Buffett says. A.W. Jones is best known as the first promoter of the concept of hedging the risk in stocks with short sales. However, its fee structure, partnership arrangement, and flexible investing approach—that is, the classic hedge fund as the term is technically defined—were pioneered much earlier, by Graham if not others as well.
4. Interview with Chuck Peterson.
5. The first partnership agreement provided: “Each limited partner shall be paid interest at the rate of 4% per annum on the balance of his capital account as of December 31 of the immediately preceding year as shown by the Federal Income Tax Return filed by the partnership applicable to said year’s business, said interest payments to be charged as expenses of the partnership business. In lieu of a separate computation of interest for the period ending December 31, 1956, each limited partner shall be paid 2% of his original capital contribution, said payments to be charged as expense of the partnership business for said period. In addition each of the limited partners shall share in the overall net profits of the partnership, that is, the net profits of the partnership from the date of its formation to any given point of time in the proportions set opposite their respective names.” The total interest of the partners added up to 21/42 or 50% of the total interest in the earnings (Certificate of Limited Partnership, Buffett Associates, Ltd., May 1,1956). The agreement to share in the losses was an amendment to the partnership agreement on April 1, 1958.
6. According to Joyce Cowin, both Buffett and her own husband, Dan Cowin, who had been introduced to Buffett by Fred Kuhlken, ran money separately for Gottschaldt and Elberfeld.
7. Interview with Chuck Peterson.
8. Some of these remarks were made at the 2003 speech to Georgia Tech students, the rest in interviews with the author.
9. Hartman L. Butler Jr., “An Hour with Mr. Graham,” March 6, 1976, interview included in Irving Kahn and Robert Milne, Benjamin Graham: The Father of Financial Analysis. Occasional Paper No. 5, The Financial Analysts Research Foundation, 1977.
10. Interview with Tom Knapp.
11. “Tourist Killed Abroad, Portugal-Spain Highway Crash Fatal to Long Island Man,” New York Times, June 23, 1956. Kuhlken had been on a yearlong trip. The other passenger, Paul Kelting, was listed in critical condition.
12. Sloan Wilson, The Man in the Gray Flannel Suit. New York: Simon & Schuster, 1955.
13. Interview with Susie Buffett Jr.
14. From Headliners & Legends, MSNBC, February 10, 2001.
15. Interview with Charlie Munger.
16. Or thereabouts.
17. Interview with Ed Anderson.
18. According to Tom Knapp, one thing Dodge and Buffett had in common was their tightfistedness. Even when he later became one of Buffett’s richest partners, Homer Dodge would angle for a free canoe from a canoe maker. He knew every route into New York City from both La Guardia and JFK airports, and took convoluted trips by bus and subway and on foot rather than hire a cab.
19. The Dodges chose a slightly different deal. Buffett’s share of the profits would be only 25%, but the amount he could lose was limited to his capital, initially only $100. Certificate of Limited Partnership, Buffett Fund, Ltd., September 1, 1956.
20. Cleary split profits over 4%, while Buffett was exposed to the extent of any arrears. Certificate of Limited Partnership, B-C Ltd., October