Successful Investing
As a happy owner of stock in Berkshire Hathaway, I enjoyed reading your articles on Warren Buffett ["How to Make Money the Buffett Way," August 6]. But you missed the core of his methods. Buffett notes in an annual report that the secret is to use other people's money without borrowing it. The core business of Berkshire is profitable insurance, and from this he derives the float that is the use of premiums now that are taken in to pay for losses later. The second secret is to pay the minimum possible in taxes. Since Berkshire pays no dividend, there is no capital-gains tax unless one sells the stock. This is different from a mutual fund that holds a comparable array of assets and has to pass on each year to the fund holders taxable dividends and capital gains.
JOHN SLOAN
Manassas, Va.
You quoted Buffett about index funds: "Diversification is a protection against ignorance. It makes very little sense if you know what you're doing." In The Little Book of Common-Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by Vanguard founder John C. Bogle, Buffett is quoted as saying, "A low-cost index fund is the most sensible equity investment for the great majority of investors." Since very few actively managed mutual funds will outperform the market, and Buffett's unparalleled career is drawing down, I will take his advice and consistently utilize an indexing approach.
JEFFREY PAYNE
Lodi, Calif.
In addition to the new Buffettology, I recommend The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market by Pat Dorsey, director of stock analysis at Morningstar ["Bringing Buffett to the Beach"]. Chapter 10 walks the reader thoroughly through the process of intrinsic value calculation.
CHARLES A. WESTON
Annandale, N.J.
Elusive Ways of the CIA
Regarding "Beyond the CIA's Veil" [August 6], the interview with Tim Weiner, and his historical book about the CIA, Legacy of Ashes: I'd like to refer to Merle Miller's interview book with Harry Truman, Plain Speaking: An Oral Biography of Harry S. Truman. Truman was quoted as saying that the organization and chartering of the CIA was a mistake. Truman added that had he known what was going to happen, he never would have authorized the agency. He also chided President Dwight Eisenhower's administration for letting the CIA get out of hand. As a Marine officer in Vietnam in 1969, I had the occasion to bump into two "spooks" on a helicopter pad. Both were wearing safari jackets and .38-caliber revolvers in shoulder holsters. As we were waiting for the helicopter, I asked them where they were going. They smiled and looked away, never answering my question.
FRANK MCADAMS
Dana Point, Calif.
U.S. Mind-Set
In "Our National Funk" [August 6], Michael Barone spins the Pew Global Attitudes Project poll into a partisan issue. So "almost all" the Democrats are unhappy about the nation's future, and the country should be kvelling that we have not repeated 9/11 and the economy is growing? Reality tells us that the time between the first and second World Trade Center attacks was eight years; our enemies are nothing if not patient. Should we be patting ourselves on the backs for making it to six? There is also the simple fact that real wages have not done well, even though corporate profits have done so. Remember that Bush's first term was the first time since Herbert Hoover that a president ended his term with fewer jobs than when he started. In this case, sometimes belief that the country needs a change of course is not simply a partisan thing.
DAVID J. MELVIN
Chester, N.J.
advertisement