You don't need to read through Warren Buffett's entire letter to shareholders to find specific investment advice.
In my Street Talk column on Forbes.com, I compared Buffett's billion-dollar positions from 2008 to his positions a year later:
If you want to ride Buffett's coattails even with a lag, you can emulate the changes in the Berkshire portfolio by adding to your Wal-Mart ( WMT) position, reducing your Procter & Gamble ( PG) and Johnson & Johnson ( JNJ) (I'm surprised), increasing your Sanofi-Aventis ( SNY) and dumping ConocoPhillips ( COP) as fast as you can. Other copycat investments could include options on Goldman Sachs ( GS ) or General Electric ( GE), or securities, common or preferred stocks in Dow Chemical ( DOW ), Swiss Reinsurance or Wm. Wrigley Jr.Company, which was acquired by Mars Inc., a private concern. Berkshire's holdings were the result of private transactions, not publicly traded vehicles.
Buffett's moves help him avoid the worst market drops. He also misses the biggest upward swings. He had strong words in his letter for the executives and board members of the companies that failed:
. . . directors of major banks are "derelict" if they don't "insist that [their] CEO bear full responsibility for risk control. If he's incapable of handling that job, he should look for other employment. And if he fails at it -- with the government thereupon required to step in with funds or guarantees -- the financial consequences for him and the board should be severe."
That doesn't mean Buffett steered clear of derivative contracts. The complex instruments that hurt the big banks can be used carefully to control investment risk, Buffett noted. As I said on the StreetTalk blog:
In an amazing disclosure, the 79-year-old investment genius reveals that he and he alone initiates and monitors every derivatives contract on his books, except for some contracts at Berkshire subsidiaries. "If Berkshire ever gets in trouble, it will be my fault," says. "It will not be because off misjudgments made by a Risk Committee or a Chief Risk Officer."
This is fascinating. Warren Buffett is his own Risk Committee and Chief Risk Officer. He should open an academy for Wall Street derivatives traders who have no idea of what risks they have been taking.
After completing a $26 billion purchase of Burlington Northern Railroad, Buffett is down to his last $20 billion in cash. What will he do in 2010? He always finds a way to make money. You can emulate his trades, or make a direct investment in Berkshire Hathaway, which after a split is selling for about $80 a share -- the most affordable price in decades.
Follow Robert Lenzner on Twitter: www.twitter.com/boblenzner
of course, no worries on FASB 166/167, Sheila Bair bent over to wall street on that one.
http://yieldpig.blogspot.com/
Nobody but him had primary shares of Goldman Sachs right when Hank Paulson bailed it out; not even the taxpayer.
To even pretend that the 'average Joe' has the same 'playing field' as Buffet is laughable.
And you might as well consider any money he makes is being subsidized by the American taxpayer since he's allowed to exchange worthless derivatives and credit-default swaps for cash through Goldman Sachs since Paulson illegally gave the gambling a casino a 'bank charter' to qualify for the Fed's TALF discount window.
If he didn't have those life lines he would have to immediately file for chapter 7 bankruptcy and put Berkshire Hathaway into RECEIVERSHIP.
It's paper-billionaires like Buffet mooching off taxpayers that's the problem with this country.
The "average Joe" does have the same playing field: he can buy Berkshire stock. Then he will get EXACTLY the same investment returns as Buffet. It's the same money. People who did that 20 years ago got very rich.
The problem is not the playing field. Mutual funds have outperformed the picks of Wall Street insiders. The problem is having money to invest in the first place. Most don't have it, or don't have enough to make a difference. The rich get the same return on investment as Joe, but it's a bigger return because they had more to start with.
As far as that problem, the rich ending up with too much of society's benefits, you are blaming the wrong person. Buffet has consistently said that the rich like him are under-taxed, and objected to the Bush tax cuts.
Warren Buffett will be 80 years old this year. What will happen over the next 20 years?