The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [543]
Chapter 32
1. Warren Buffett letter to Ben Graham, January 16, 1968.
2. Ibid.
3. Armon Flenn, “Run for Your Money,” New York Times, June 3, 1968; “Mutual Interest,” Time, January 19, 1968; Robert D. Hershey Jr., “Mutual Funds Reaching Further for Investment,” New York Times, September 29, 1968.
4. In 1929, only about 3% of the population owned stock. In 1968, about 12.5% of the population owned stock or equity mutual funds.
5. Letter to partners, July 11, 1968.
6. The SEC prepared a study stating that the new system, NASDAQ, was “on the horizon” in 1963. NASDAQ went live on February 8, 1971, and traded as much volume as the American Stock Exchange in its first year. Eric J. Weiner, What Goes Up: The Uncensored History of Modern Wall Street, New York: Little, Brown, 2005.
7. Warren Buffett letter to the Graham Group, January 16, 1968.
8. Warren Buffett letter to the Graham Group, September 21, 1971.
9. DRC earnings were down overall $400,000, or 17%, in 1968. Associated Cotton Shops earned about 20% on the money employed in the business—an outstanding performance in any year but especially in difficult 1968.
10. Letter to partners, January 24, 1968.
11. Buffett lost money in stocks at times and was quick to cut his losses. The margin of safety didn’t prevent losses but shifted the odds away from large losses.
12. The Youth International Party (Yippees), a prankster group of anarchist activists, nominated Pigasus the Pig as their party candidate. Leader Jerry Rubin said, “Why vote for half-pigs like Nixon, Wallace, and Humphrey, when you can have the whole hog?” at a speech to the University of British Columbia Faculty Club (October 24, 1968).
13. Interview with Verne McKenzie, who says that Chace was upset but did not show it. He did what he had to do.
14. The impact of credit cards and a radical change in consumer thinking about consumption is hard to overstate. Savings and layaway—once commonplace in purchasing even items such as clothing—were replaced by debt. Although economists debate measures of household wealth over time, the result has been a world of renters who tithe to financial institutions. The “earthquake risk” is a catastrophic mass deleveraging. (See 2008 credit crisis.)
15. Retailers paid, on average, 2¢ for every dollar of sales for the stamps they gave out and tacked this onto the price of their goods.
16. They priced Blue Chip cheaper, at 1.5¢.
17. Blue Chip had 71% of the trading-stamp business in California at the time. “Safe on Its Own Turf,” Forbes, July 15, 1968.
18. Sperry & Hutchinson sued Blue Chip when the Alpha Beta and Arden-Mayfair food chains dropped S&H stamps in favor of Blue Chip stamps. Blue Chip paid $6 million to settle this case.
19. Each “package,” priced at $101, consisted of $100 face amount of 6.5% ten-year debt plus three shares of $0.333 par common stock. A total of 621,600 Blue Chip shares were included in the offering. Nine retailers who were big Blue Chip customers split another 45%, which went into trusts for ten years. The remaining 10% went to company management (as reported in the Wall Street Journal, September 23, 1968).
20. A couple of gas-station chains were still suing, as were a group of small trading-stamp companies in Northern California. Blue Chip Stamps annual report to shareholders, 1969.
21. One of the Graham Group members recalls this.
22. Letter to partners, January 24, 1968.
23. Leslie Berlin, The Man Behind the Microchip. New York: Oxford University Press, 2005.
24. Buffett shorted 10,000 shares of Control Data in the third quarter of 1965 in the low $30s—at this point he had over $7 million of his portfolio in shorts. He eventually bought some Control Data for the partnership in 1968, as a “workout,” meaning an arbitrage.
25. Interview with Katie Buffett, who said Fred wanted to put in $300 and she “snitched a little