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To: Trading Machine who wrote (8305)	4/30/2000 11:34:00 AM
From: MonsieurGonzo	Respond to of 11051

> the parsley sage of Omaha I get no sense that Buffett enjoys investing, or for that matter, has any capacity to enjoy success. You know Berney has studied Buffett's work and life for many years. Awhile back, before you were born ( here on SI :) Berney and I had a conversation about the man's life, which is {ahem} shall we say, interesting - in and of itself, and about Buffettology - which is a kind of explanation of -cum- apology for his investment principles and practice. I don't admire Buffett as an investor. He gives me no fresh insights from or, supplement to Graham & Dodd. His greatest strengths appear to be discipline and perseverance, indeed admirable but, not un-obvious character traits that we are likely to find in any professional, regardless of his or her endeavour. Critics point out that Buffett has neither a global perspective nor an appreciation of Technology / Media / Telecom destiny. And even if this is true, such insights are not required to make money, and this is what he does - Buffett makes money with money. He is a consummate capitalist, creating wealth without any implicit value to society. Buffett talks to us about buying unrealized value, about buying companies rather than stocks. From all that he has written, and said, and done - I get the impression that he does not "buy", rather - he "possesses": Buffett does not talk to us about selling unrealized value; about allocation or, exchanging one value for another. Perhaps because his portfolio is a company - one piece of a brilliant financial structure. imho Buffett's true genius is in the structure of his financial enterprise, rather than his chosen bits and pieces. Most of us retain earnings from our jobs, then attempt to grow these savings by investing them into something which is perceived to become more valuable tomorrow than it is today. Most of us derive some personal satisfaction and sense of purpose from our jobs; ie., we don't do what we do, "just for money", even in America. OurJobs@X% ==> HOUSE+STOCKs Buffett is different. Buffett distills "job" to "generate cash in-flow" -- at the core of his enterprise are surplus cash in-flows generated by the statistical mechanisms / actuarial tables of the insurance business. Though selling insurance is an assumption of risk, it is rather like being a casino operator, with the odds always skewed in favour of the house. Most insurance companies stuff their actuarial table cash in-flows into things like BONDS, or more precisely, "spread products", which also have some degree of statistical certainty. Spread Products don't "grow" kapital per se, rather - they just "exist" as a series of known distributions. ActuarialTable@X% ==> BONDS Buffett's genius was to connect an actuarial table insurance company to an equity portfolio mutual fund. ActuarialTable@X% ==> BONDS@Y% ==> STOCKS@Z% The structure solves many of the problems that standalone mutual funds have; eg., dis-economy of scale, variable cash in-flows and out-flows, and inflexible investment criteria - not to mention all the rules and regulations and taxes one gets around by creating this unique new financial entity. I will always admire Buffett for doing this, and for having done it well, for so long. I have since come across the term, "a barbell allocation", used by Money Managers to describe a portfolio where you have a lot of money allocated to very low-risk, high-income something on one hand, feeding a very high-risk, high growth something on the other. For example... MoneyFunds@X% ==> NDX LEAP CALLs -Steve