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General_Magician Special user United States 707 Posts |
Well, let's see what Warren Buffet himself says about debt. This particular quote discusses how debt is used as a means of leverage in an attempt to make money:
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Warren Buffet acknowledges that debt can effectively increase the return on equity (leverage) in a company but warns against it. I put into bold what Warren Buffet says. Now, I am going to tell you, no matter what you think of Warren Buffet on a personal level (like you might attack him because he fired some guy and maybe he made a mistake, but WE ALL MAKE MISTAKES, EVEN WARREN BUFFET), he has a solid track record for producing wealth. Nobody, I mean nobody, can deny this. It is an undeniable fact. And I am going to tell you, he has a track record to back up his talk. And he is not a fan of debt at all and prefers to make money by investing your own money rather than borrowing money from a bank or from bondholders. Me personally, there is no way in hell I would ever rely on debt to produce wealth. I am sure the banks are more than happy to make loans to people though and might even tell people they can make money through debt leveraging. After all the banks or bondholders don't make money unless they are lending somebody their money. They will tell you anything under the sun to get you to take a loan from them. But debt is a trap and a ball and chain and you can suffer serious consquences from going into debt. Maybe you pay off your debt. If you do, that's great. But it's easy to go into debt and all too often, very difficult to get out and in many cases, if you are able to get out of debt you pay a heavy price doing so in the process.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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balducci Loyal user Canada 227 Posts |
"Now, I am going to tell you, no matter what you think of Warren Buffet on a personal level (like you might attack him because he fired some guy and maybe he made a mistake, but WE ALL MAKE MISTAKES, EVEN WARREN BUFFET)"
I did not attack him. I only repeated what Warren Buffet said himself.
Make America Great Again! - Trump in 2020 ... "We're a capitalistic society. I go into business, I don't make it, I go bankrupt. They're not going to bail me out. I've been on welfare and food stamps. Did anyone help me? No." - Craig T. Nelson, actor.
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General_Magician Special user United States 707 Posts |
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I did not attack him. I only repeated what Warren Buffet said himself. Why even bother bringing that up when that still doesn't detract from Warren Buffet's solid credentials of producing wealth and making money? I just didn't see the sense of even bothering to bring that up when, Warren Buffet still made great decisions, has a solid track record of producing wealth and can back up his talk with results. On the other hand, we are talking about the qualities of millionaires. When we talk of Warren Buffet, we are in fact, discussing the qualities of billionaires. So, we may have a few millionaries who comment here, but I guess what I am discussing is ideas I learned right from Warren Buffet himself and his teacher, Benjamin Graham. But Warren Buffet is not a millioniare, he is a billionaire. I believe in learning from the best and I certainly think Warren Buffet qualifies as one of the best in the world. I don't think anybody can really deny that and be taken seriously.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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balducci Loyal user Canada 227 Posts |
The point is, Buffet has used debt when it was useful to him to do so. Your thesis, correct me if I am mistaken, seems to be to avoid debt at all times, to never go into debt. That is NOT what Warren Buffet said / says / does / did.
"In 1982, Warren Buffett noted that Berkshire Hathaway preferred to buy companies with little or no debt and has repeated this mantra on many occasions. He adopts the same philosophy for his company, preferring to avoid debt but where necessary going into it on a long-term basis only with fixed rates of interest and to obtain the finance before they need it."
Make America Great Again! - Trump in 2020 ... "We're a capitalistic society. I go into business, I don't make it, I go bankrupt. They're not going to bail me out. I've been on welfare and food stamps. Did anyone help me? No." - Craig T. Nelson, actor.
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Don’t Borrow without a Plan to Pay it Back
This was an interesting bit of true business wisdom. Many of us think that all borrowing is bad all the time. Instead of putting a blanket ban on borrowing, Warren Buffett emphasizes the importance of making smart financial decisions, and having a plan to repay any money you borrow. Before you take out a loan, you should have an idea of what you will do to repay it. http://www.moolanomy.com/6532/7-best-mon......buffett/
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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balducci Loyal user Canada 227 Posts |
By the way, General_Magician, take a look at how much debt Berkshire Hathaway takes on sometime (e.g. by issuing bonds). You may be surprised, if you think he rarely uses debt.
http://finance.yahoo.com/q/ks?s=BRK-A http://www.bloomberg.com/news/2013-05-09......nce.html http://www.bloomberg.com/news/2013-08-06......may.html http://www.businessweek.com/news/2012-01......ebt.html
Make America Great Again! - Trump in 2020 ... "We're a capitalistic society. I go into business, I don't make it, I go bankrupt. They're not going to bail me out. I've been on welfare and food stamps. Did anyone help me? No." - Craig T. Nelson, actor.
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General_Magician Special user United States 707 Posts |
Ok, so maybe Warren Buffet did take out some debt. But he's definately not a fan of debt, that's for sure and he prefers to buy companies that don't have debt. And the debt he took out was fixed rate debt. However, me personally, aside from the fact that Warren Buffet has taken out some debt in the past, I am a big believer in staying out of debt because then you are putting yourself at the mercy of banks that are proven to be corrupt and, even if you have a fixed rate loan, you can still pay a price. An example would be fixed rate mortage loans that are under-water. Anytime you take out a loan, you are taking a risk and their is never a 100% guarantee you will be able to pay it back. Anytime you invest, you are taking on some risk and there is no guarantee of a return.
However, there is a big difference between investment and gambling. In investing, you are managing your risk to where the odds are heavily in your favor that you will see a return. That means, doing some serious research and knowing a lot about the company AND business you are investing in and insuring that you have a signifant and large margin of safety for your money before investing. In essence, when you buy a company, company should be worth anywhere from 50% to 70% MORE than what you actually paid for it, which gives you some large margin of safety for the principle of your investment. What most people do, is simply throw their money into the stock market and then eventually they lose most of their money. There was no margin of safety for the principle of their investment and they did not engage in risk management. Now, back to debt. Taking money, that belongs to somebody else and starting a company or investing in a company is something that Warren Buffet clearly warns AGAINST. And, Warren sparingly uses debt and tries NOT to use it all. If for some reason that investment goes south and stop producing, you could very well end up having to pay that loan back plus interest. It would be even worse if that loan is not a fixed rate loan and that would certainly be a disaster. Even with a fixed rate loan, you just lost your money plus more. If you are going to lose some money, it might as well be just your money, that way it doesn't harm your credit history and you don't find yourself in court getting sued by your creditors. I prefer to build wealth from a solid foundation, starting with money I have already worked hard to earn myself. Debt is not a solid foundation to build a business from. It's simply a foundation of sand. And debt is not a solid foundation to build personal wealth from either. Any creation should have a solid foundation and for wealth creation that means working hard and smart, earning your own money and using your own money that you have earned yourself as the foundation to create even more wealth. And when you think about it, when you have to work really hard to sweat and earn that money yourself, you certainly appreciate that money so much more than if you borrowed it from somebody and never worked to earn it. That means, you will also do a better job of investing that money wisely because you want to invest in a way that will give you the best chance to see a return, because you certainly don't want your hard work to go down the tubes in a bad investment. But when it's somebody else's money, you might not be as careful and that could cause trouble for you further down the line when you wind up in court getting sued by your creditors.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Is a professional gambler investing or gambling?
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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General_Magician Special user United States 707 Posts |
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Is a professional gambler investing or gambling? He's gambling. Take the time to read Benjamin Graham's book "The Intelligent Investor" sometime. He learned to invest during the Great Depression and later wrote a book on value investing in the 1940s. They have updated editions of the book that reads in more modern language and talks about modern day examples of what Benjamin Graham was talking about and how his principles are applied today. In the book, he describes the difference between gambiling and investing. Which most people gamble. Benjamin Graham was Warren Buffet's teacher and his book has stood the test of time as well. I think there is a lot of wisdom in his book that was hard won from the Depression years.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
I've read The Intelligent Investor, as well as much of Buffet's writings. But a good gambler is investing in the same sense that a poor investor is gambling.
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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General_Magician Special user United States 707 Posts |
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I've read The Intelligent Investor, as well as much of Buffet's writings. But a good gambler is investing in the same sense that a poor investor is gambling. It's a great book and so you know what Benjamin Graham considers gambling and what he considers investing. I think his book along with the "Art of War" by Sun Tzu are two of the greatest books I have ever read. I especially like how he talks about "Mr. Market" in his book and how the investor can take advantage of him when "Mr. Market" is feeling overly depressed and how he takes advantage of others when he is overly excited and optomistic. But I also think money is far more likely to be invested wisely by you, when it is you who has had to sweat, work hard and go through the trouble to earn it. Not to mention, if you lose the money in a bad investment, you won't have to worry about getting sued by creditors, losing all your assets that you value and treasure or working for somebody else as their indentured servant paying them interest for what could be a very long time. Debt is a dangerous and risky path to indentured servitude. You don't want to gamble with your freedom. Your freedom is priceless and worth far more than any amount of money.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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General_Magician Special user United States 707 Posts |
I also think debt is the dangerous and risky path to long term poverty and destitution as well as indentured servitude.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
Graham knew more about investing than he did about gambling. And Warren Buffett made his early millions off of other people's money.
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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General_Magician Special user United States 707 Posts |
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And Warren Buffett made his early millions off of other people's money. My understanding was that Buffet made his early millions by investing other people's money for them and in return he charged them a fee for managing their money. He did not make his early millions by going into debt. The people whose money he managed, he made them money as well, but of course, he charged them a fee for his investment expertise.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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General_Magician Special user United States 707 Posts |
Now here is a youtube video that I found about Warren Buffet talking about staying out of debt: http://www.youtube.com/watch?v=IvveZr0D_9Y
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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LobowolfXXX Inner circle La Famiglia 1196 Posts |
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On 2014-02-02 23:07, General_Magician wrote: That's right; I didn't mean to suggest that he's borrowed his initial stake.
"Torture doesn't work" lol
Guess they forgot to tell Bill Buckley. "...as we reason and love, we are able to hope. And hope enables us to resist those things that would enslave us." |
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AllAboutMagic Veteran user California 333 Posts |
Since some people are such staunch followers of Warren Buffet and dare not deviate from what he says.....Buffett had his first million dollars by the age of 32. How close are you to being on track, keeping in mind that a million dollars in 1962, according to the CPI inflation calculator, would be the equivalent of 7.7 million dollars today. If you are not close then you may consider using other means to finding your wealth.
I love how you decry debt, then when someone tells you how they quadrupled their wealth by a debt instrument you go all Debbie Downer on them. Sure you may go upside down on a mortgage, but you only realize the loss if you sell. If you wait it out, it will come back. I bought my first home before the recession and a year later it was upside down approximately 100,000 dollars, but it still provided me, my husband, my family with warmth and shelter. We kept it, it recovered, and now it's appreciating. I could sell it for a profit if I wanted to.....something I couldn't do if I rented. I get what you are wanting to do and respect it, however, I personally don't think you will achieve all your goals simply because of how close minded you are. I sincerely hope you do, but if it happens I think it will be a much longer and harder row to hoe. I would highly suggest working with a financial advisor to set some realistic goals and what it would reasonably take to get there. My husband and I were amazed by what we learned from just one appointment. It's amazing what maxing out a Roth IRA can do over a 30 year period. p.s. nobody can afford kids. if you don't want them I say more power to ya, the world is over populated anyway. but that's a lame excuse if you do want them and are using money as a reason not to. |
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tommy Eternal Order Devil's Island 16544 Posts |
Money is magic and like all magical things it comes from putting two equal and opposite forces together where there is a relationship between. ie open a brothel in a place where young fellows go looking for girls. Putting the two together magically produces the third thing, money. Greed and fear are equal and opposite forces such drives the market and so on. Rumble in Jungle - see the King for further details. http://4.bp.blogspot.com/_vrOFMoZ6elg/TQ......King.jpg
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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AllAboutMagic Veteran user California 333 Posts |
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On 2014-01-05 11:06, Slide wrote People should stop speaking in absolutes, or for others. The 10% rule is easy if you don't live beyond your means. I have kids, a mortgage, two college savings plans for the kids, 1 1/2 incomes AND my husband was set back with a lay off in a down turned economy...and we still put away 10% every check. On top of that, this working class couple is on track to retire very comfortably in our late 50's if we wanted. So I am sorry Slide, you are incorrect, it is doable. Your kids will cost you 350,000 because YOU are choosing to pay it. Two years at a community college and two at a university still look the same on paper as 4 years at a university, but at a fraction of the cost. |
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General_Magician Special user United States 707 Posts |
I simply don't agree AllAboutMagic with yours and many others philosophy. I think debt is very dangerous and is not the firm foundation for solid and long lasting wealth. If you actually watch the video I posted above, Warren Buffet tells you he thinks you would be foolish to sell 10% of yourself for 50 grand if you actually plan on living up to your full potential. And another thing you will notice, IF you have actually taken the time to watch the video, is that he talks about how he doesn't live in big, fancy expensive 50 room mansions and he doesn't drive a fancy car either. He'll tell you are foolish for selling 10% of yourself if you plan to live up to your full potential. And this isn't a millionaire that's talking here either. This is a billionaire. So what you are listening to is not just merely the qualities of a millionaire, but the qualities of a billionaire. He's one of the best in the world and, I don't know about you AllAboutMagic, but sure does make a lot of sense to me, to learn from the best. If you want to be good at something in a particular area, you learn from the best and after learning from the best, you create your own innovation from what you were taught.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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