The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [545]
34. From the 1969 Diversified Retailing annual report. But if Buffett had been hit by the proverbial bus, under the terms of the debenture, the obligation for mandatory redemption would have ceased. So he was taking the element of random chance out of it.
35. Wilder was not the only doubter. “Danny [Cowin] thought I was crazy to do it,” says Buffett.
36. Cited in the 1989 letter to shareholders.
37. “How Omaha Beats Wall Street,” Forbes, November 1, 1969.
38. The article stated that Buffett had lived in the house since his marriage in 1952, an error later repeated by other writers. The Farnam house was far from the “starter home” that is implied. Articles often refer to the house as “modest” or some similar term and rarely mention its extensive remodeling. Buffett bought the house in 1958.
39. Evelyn Simpson, “Looking Back: Swivel Neck Needed for Focus Change Today,” Omaha World-Herald, October 5, 1969.
Chapter 34
1. Carol Loomis, “Hard Times Come to the Hedge Funds,” Fortune, January 1970, the first of a series of Loomis articles that showcase Buffett’s opinions.
2. Book value. Tangible book value was $43. Warren Buffett letter to partners, October 9, 1969.
3. Ibid.
4. The more inquisitive partners may have discovered that Berkshire Hathaway owned Sun Newspapers by reading its 1968 annual report.
5. Letter to partners, October 9, 1969. Buffett explained that he expected stocks to yield about 6½% after tax for the next ten years, roughly the same as a “purely passive investment in tax-free bonds.” Even the best managers, he said, were unlikely to do better than 9½% after tax. Compare this to the 17% return he had projected to partners in the early years of the partnership and the 30% average he had actually achieved.
6. Letter to partners, December 5, 1969.
7. According to Buffett, a couple of them never were able to find anyone they trusted to manage their money, and one ended up working as a fortune-teller in San Diego.
8. Letter to partners, December 26, 1969.
9. This statement is intriguing since Buffett had just named Dow Jones as the stock he would like to own on a desert island. However, the Sun was not a good investment.
10. Emphasis added by author. By then, a small cult of Buffett-stalkers monitored his holdings, and curiosity about Buffett’s intentions was rife among many partners. The importance of a clear statement of his intentions—after more than a decade of obsessive secrecy—should have been unmistakable (at least with hindsight).
11. Buffett indulged in a bit of score-settling with the underwriters in his letter to partners of December 26, 1969, saying that the deal was pitched “with a heavy weight” placed on a comparison to Sperry & Hutchinson, the nearest competitor, but shortly “before the stock was to be offered, with the Dow Jones Industrials much lower but S&H virtually unchanged, they indicated a price far below their former range.” (Blue Chip at the time had declined significantly.) “We reluctantly agreed and felt we had a deal but, on the next business day, they stated that our agreed price was not feasible.”
12. It was a little unclear what the filling stations’ actual beef was. They had given out Blue Chip stamps and made money doing it. If there were five stamp companies in California, they might have given out stamps that cost more, and it isn’t clear that they would have made more money—they might have made less.
13. This takes into account the approximately 90,000 shares of Blue Chip Stamps that were still tied up in BPL because of the delay in the sale.
14. DRC’s 1971 annual report discloses $841,042 of notes issued “in exchange for common stock of an affiliated company” due on varying dates, or within twelve months of the death of Warren E. Buffett. DRC continued to issue these notes until 1978, for a total of $1.527 million. During the first year the notes were also payable at the payee’s demand. Apparently the notes were reissued with this term