Today I found another interesting article on pre-earthquake phenomenon, known as EARTHQUAKE CLOUD.
早在17世紀中國古籍中就有“晝中或日落之後，天際晴朗，而有細雲如一綫，甚長，震兆也”的記載，1935年我國寧夏的隆德縣《重修隆德縣志》中記載有“天晴日暖，碧空清淨，忽見黑雲如縷，婉如長蛇，橫臥天際，久而不散，勢必爲地震”
但是，世界各國對于地震雲的研究還是最近幾年的事，其中以我國和日本處于領先地位，我國對地震雲的研究始于1976年唐山大地震之後，目前成功的例證有十餘個，日本利用地震雲預報地震成功的例證有上百個，有趣的是，首先提出“地震雲”這個名字的不是地震學者，而是一政治家，他就是日本前福岡市市長鍵田忠三郎，他曾經親身經曆過日本福岡1956年的7級地震，幷且在地震時親眼看到天空中有一種非常奇特的雲，以後只要這種雲出現，總有地震相應發生，所以他就把這樣的雲稱爲“地震雲”。
那麽，什麽樣的雲才是地震雲呢？這種雲的最大特點在于“奇”，與一般的雲有著明顯的區別。
蔚藍的天空中有時會留下一條飛機的尾迹，常見的條帶狀地震雲很像飛機的尾迹，不過更加厚實和豐滿些，它一般預示震中處于雲向的垂直綫上。
另外有一種輻射狀的地震雲，則有數條的帶狀雲同時相交在一點，猶如一把沒有扇面的扇骨鋪在空中，雲的交點垂直于地面就是震中所在地。
此外還有一種條紋狀地震雲，形似人的兩排肋骨，根據此雲判斷震中較爲複雜。
地震雲出現的時間以早上和傍晚居多，地震雲持續的時間越長，則對應的震中就越近，地震雲的長度越長，則距離發生地震的時間就越近，地震雲的顔色看上去越令人KB，則所對應的地震强度就越强。
目前，對于地震雲的形成原因衆說紛談，雖然各有道理，但是都不能完整的解釋地震前出現的這種現象，所以至今還是個謎，而且地震本身是個非常複雜的過程，所以預報地震，最好采用綜合法。
http://www.takungpao.com/news/08/05/13/ZM-904496.htm
2008年5月20日星期二
Study Warned of China Quake Risk Nearly a Year Ago
I think it is more appropriate for me to talk about geopraphic rather than economics.
Kevin Holden Platt in Beijing for National Geographic News
May 16, 2008
Just ten months before a deadly earthquake struck Sichuan Province's Beichuan county on May 12, a scientific study warned that the Chinese region was ripe for a major quake.
After examining satellite images and conducting on-the-ground inspections of deep, active faults in Sichuan Province for more than a decade, scientists issued a warning.
"The faults are sufficiently long to sustain a strong ground-shaking earthquake, making them potentially serious sources of regional seismic hazard," the Chinese, European, and U.S. geoscientists wrote in the mid-July 2007 edition of the journal Tectonics.
They concluded that clashing tectonic forces were growing in Beichuan, ready to burst in an explosion of seismic energy.
With precision and what now seems like eerie foresight, the researchers charted the active faults on multicolored maps of Beichuan, which turned out to be the epicenter of the recent earthquake.
"As far as I know, this is the only investigation of these active faults," said study co-author Michael Ellis of the Center for Earthquake Research and Information at the University of Memphis in Tennessee.
(Related: "China Quake Delivered Seismic One-Two Punch" [May 15, 2008].)
The magnitude 7.9 quake that struck on May 12 almost entirely leveled parts of Sichuan Province. Chinese officials today estimated that the death toll would reach 50,000 and that nearly five million people are homeless.
(See photos of the earthquake's destruction.)
"Locked in a Journal"
There is little reason to believe Chinese officials were aware of the July 2007 report, or that it would have made much difference if they had been.
"We had certainly identified the potential of these active faults," Ellis said. "But that information was effectively locked in an academic journal."
Ellis hopes that replacing the collapsed buildings with earthquake-proof structures could prevent future tragedies.
"I've been to these little towns [before the quake]," Ellis said. "Most of the houses are built of unreinforced masonry, and you can see little brick factories all around this area.
"It is more expensive to build earthquake-proof structures," he added. And the vast majority of people in Sichuan Province are anything but rich.
The Science Behind the Quake
Earthquake activity is nothing new in Beichuan.
"We have shown evidence for surface-rupturing earthquakes along the Beichuan fault since 12,000-13,000 years ago," Ellis and colleagues reported last summer.
Speaking with National Geographic News, Ellis said, "Ultimately, the [2008] earthquake is related to the continuing and inexorable collision of India with Asia, which is occurring at a rate of about 20 to 22 milimeters [just under an inch] per year."
This collision started more than 50 million years ago, when the tectonic plate beneath India crashed into the Eurasian plate. (Watch how the plates slammed into each other.)
"The Himalayas and all of Tibet was created by this collision," Ellis added.
As the Indian plate continues its slow-motion crash into Asia—sometimes in jerks marked by earthquakes—it is pushing the entire Tibetan Plateau northward.
"This earthquake was the Tibetan mountains moving east over the plains of Chengdu [the capital of Sichuan Province]," said Roger Bilham, a geoscientist at the University of Colorado who was not involved in the July 2007 study.
Not Just Sichuan's Problem
Study co-author Ellis said that, as the Tibetan Plateau moves northward, "the interior parts of Tibet are collapsing, rather like a soufflé taken out of the oven into cold air."
Faults along the southern, Himalayan edge of Tibet present hazards as great as those underlying the Sichuan temblor, Ellis said.
"Risk associated with the loss of collateral and lives is very high along the Himalaya, because so many people live there or immediately downstream," Ellis added.
"The risk is similarly high in Sichuan [to the east], because of the population and, like India and Nepal, the relatively poor building standards," he said.
And as India continues to pound into Tibet, "it is still creating new fault lines"—and new dangers.
Kevin Holden Platt in Beijing for National Geographic News
May 16, 2008
Just ten months before a deadly earthquake struck Sichuan Province's Beichuan county on May 12, a scientific study warned that the Chinese region was ripe for a major quake.
After examining satellite images and conducting on-the-ground inspections of deep, active faults in Sichuan Province for more than a decade, scientists issued a warning.
"The faults are sufficiently long to sustain a strong ground-shaking earthquake, making them potentially serious sources of regional seismic hazard," the Chinese, European, and U.S. geoscientists wrote in the mid-July 2007 edition of the journal Tectonics.
They concluded that clashing tectonic forces were growing in Beichuan, ready to burst in an explosion of seismic energy.
With precision and what now seems like eerie foresight, the researchers charted the active faults on multicolored maps of Beichuan, which turned out to be the epicenter of the recent earthquake.
"As far as I know, this is the only investigation of these active faults," said study co-author Michael Ellis of the Center for Earthquake Research and Information at the University of Memphis in Tennessee.
(Related: "China Quake Delivered Seismic One-Two Punch" [May 15, 2008].)
The magnitude 7.9 quake that struck on May 12 almost entirely leveled parts of Sichuan Province. Chinese officials today estimated that the death toll would reach 50,000 and that nearly five million people are homeless.
(See photos of the earthquake's destruction.)
"Locked in a Journal"
There is little reason to believe Chinese officials were aware of the July 2007 report, or that it would have made much difference if they had been.
"We had certainly identified the potential of these active faults," Ellis said. "But that information was effectively locked in an academic journal."
Ellis hopes that replacing the collapsed buildings with earthquake-proof structures could prevent future tragedies.
"I've been to these little towns [before the quake]," Ellis said. "Most of the houses are built of unreinforced masonry, and you can see little brick factories all around this area.
"It is more expensive to build earthquake-proof structures," he added. And the vast majority of people in Sichuan Province are anything but rich.
The Science Behind the Quake
Earthquake activity is nothing new in Beichuan.
"We have shown evidence for surface-rupturing earthquakes along the Beichuan fault since 12,000-13,000 years ago," Ellis and colleagues reported last summer.
Speaking with National Geographic News, Ellis said, "Ultimately, the [2008] earthquake is related to the continuing and inexorable collision of India with Asia, which is occurring at a rate of about 20 to 22 milimeters [just under an inch] per year."
This collision started more than 50 million years ago, when the tectonic plate beneath India crashed into the Eurasian plate. (Watch how the plates slammed into each other.)
"The Himalayas and all of Tibet was created by this collision," Ellis added.
As the Indian plate continues its slow-motion crash into Asia—sometimes in jerks marked by earthquakes—it is pushing the entire Tibetan Plateau northward.
"This earthquake was the Tibetan mountains moving east over the plains of Chengdu [the capital of Sichuan Province]," said Roger Bilham, a geoscientist at the University of Colorado who was not involved in the July 2007 study.
Not Just Sichuan's Problem
Study co-author Ellis said that, as the Tibetan Plateau moves northward, "the interior parts of Tibet are collapsing, rather like a soufflé taken out of the oven into cold air."
Faults along the southern, Himalayan edge of Tibet present hazards as great as those underlying the Sichuan temblor, Ellis said.
"Risk associated with the loss of collateral and lives is very high along the Himalaya, because so many people live there or immediately downstream," Ellis added.
"The risk is similarly high in Sichuan [to the east], because of the population and, like India and Nepal, the relatively poor building standards," he said.
And as India continues to pound into Tibet, "it is still creating new fault lines"—and new dangers.
2008年5月7日星期三
Buffett advice: Buy smart...and low
Warren Buffett said investors should think independently when making buying choices. The Korean market trumps American banks.
Jason Zweig, Money Magazine senior writer/columnist
Last Updated: May 6, 2008: 1:15 PM EDT
OMAHA (Money Magazine) -- On Sunday, May 4, I attended the press conference where Berkshire Hathaway Chief Executive Warren Buffett and vice chairman Charlie Munger took questions from print reporters for two hours, then went off and did more interviews for TV.
Buffett, who composes his thoughts at blazing speed and speaks in long and complex paragraphs, spent the entire weekend talking. Munger, who is as laconic as Buffett is loquacious, saves his voice - speaking, as always, only a handful of words at a time.
Buffett and Munger, aged 77 and 84 respectively, have the mental energy and sharpness of someone half their age.
Here are some highlights.
Building a philosophy
In response to a question from Barbara Kiviat of Time on how he and Munger control their emotions, Buffett replied: "[It] comes about from having an investment philosophy grounded in the idea that a stock is a piece of a business. If you look at it that way, there's no reason to get excited whether some analyst is recommending it or the company is splitting the shares two-for-one, or whatever. The only way to drive the extraneous thoughts out of your mind is to have a philosophy. And for us that philosophy comes from Benjamin Graham and The Intelligent Investor, especially chapters 8 and 20. It's not very complicated stuff."
"You have to have the right temperament. I tell the students who come visit me that if you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. You need a philosophy and the ability to think independently...It doesn't make any difference what other people think of a stock. What matters is whether you know enough to evaluate the business," he opined.
"You should be able to write down on a yellow sheet of paper, 'I'm buying General Motors at $22, and GM has [566] million shares for a total market value of $13 billion, and GM is worth a lot more than $13 billion because _______________." And if you can't finish that sentence, then you don't buy the stock. [Note: Buffett mentioned GM for illustrative purposes only.] All this requires some temperamental detachment from other people's behavior. Both Charlie and I have a natural instinct in that direction. We value our opinions more than others' -- perhaps to an extreme!"
Kiviat followed up by asking whether they mind being regarded as "a bastion of calm" by others. Buffett simply stated, "I think they're probably right," while Munger was more loquacious: "Not only are they right, but it's a huge advantage to us to get the reputation of being wiser and stronger than other places. Would any of you object to being considered wiser and stronger when you're trying to get anything in life? The key is not to be seduced by crazy ideas, but instead just stick to the fundamentals year after year. Academia doesn't get too interested in us -- we're too simple. What would the professors do? A great many of the formulas [they use to analyze securities and markets] are dead wrong. They exist purely to give the intellectual class something to do. We don't do anything just exercise our intellectual proclivity for mathematical formulas."
Then Buffet said one of the most remarkable things I've ever heard him say: "There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month."
Look at that sentence again. What Buffett is actually saying is that most people's emotions work backwards: They get greedy when stock prices go up and fearful when they go down. Instead, if you are a true investor, you should shop for stocks the same way you shop for anything else: Look for sale prices, and never regard falling prices as inherently bad news. Instead, falling prices create the opportunity to buy even more of something that was already worth owning.
In that single sentence Buffett captured the difference between investing and speculating: An investor, like Buffett, wants the price of a stock to fall below the value of its underlying business so he can buy even more and hold for as long as possible. A speculator (like Jim Cramer) only wants the price of a stock to go up, with no regard for the value of the underlying business at all, so he can sell as fast as possible. To the investor, the market's opinions do not matter. To the speculator, they are the only thing that matters.
Bond insurers beware
In what may spell trouble for bond insurers MBIA and AMBAC, Buffett said, "We see every day that people are coming to us and paying more than they paid the original bond insurer to see that they have an insurer." Berkshire wrote $400 million in municipal-bond insurance in the first quarter of 2008 and is already licensed to operate in 49 states. "This is entirely a secondary-market business," said Buffett, "where people are telling us, 'We'll pay you just to back them up.' "
Note carefully what is going on here: People who already have insurance on a very low-risk investment (municipal bonds) are coming to Buffett and asking him to ensure that their existing insurance will be adequate. It is like a man who is already wearing a belt paying you to put a pair of suspenders on him. This is the kind of business that Buffett loves. Without naming names, he criticized MBIA and AMBAC for ravaging their own capital by insuring too much dicey mortgage debt: "If they keep writing the business at any price, eventually the secondary market is likely to reflect that in the price [of bonds that carry their insurance]. And if you're writing business to pay for yesterday's losses, you'll be sorry."
Then Buffett marveled at the fact that "You have one bond insurer whose stock went from $96 to $4 [AMBAC (ABK)] and they're still rated AAA. The other one issued 14% paper with Treasuries at 4% [MBIA (MBI)] and they're still rated AAA." At that point, Munger elicited laughter from the room by intoning, "The rating agencies, with 20-20 hindsight, could have done better."
Korea and China vs. U.S. regional banks
When a Korean journalist asked whether Berkshire would buy any other Korean companies in addition to its existing holding in steelmaker Posco, Buffett revealed that he had bought "a number of" Korean stocks for his personal portfolio "a few years ago," when "that stock market got about as cheap as any market I've seen in my lifetime."
But most Korean stocks are too small to have a significant impact on Berkshire's portfolio, so Buffett and Munger don't expect to put much money there. Nevertheless, "Korea represents sound value," said Munger, and Buffett added: "It's one of the better stock markets in the world."
Later, in answering a question about whether the credit crisis has turned regional bank stocks into good values, Buffett said: "It's hard to get much conviction on how [the management] will behave and whether they tell the truth. There's a lot of leeway [in the accounting procedures and the reported financial statements]. Talking to the CEOs isn't very useful. When they're lying, they believe it themselves a lot of the time. I want to see how people behave in different situations."
In short, Buffett is not bullish on regional banks. Munger, however, was more upbeat: "For somebody who's very diligent, you've identified a prospecting territory that has some promise. It wouldn't necessarily work for us [because BRK needs to buy very large blocks of stock], but it might work for others."
Buffett wasn't done criticizing the impervious financial statements of US banks: "If you had $1 million," he retorted to Munger, "it would be easier to go through a manual of Korean stocks than to select a few good American banks." This time Munger agreed: "I'd take the Korean stock market so much faster than the American banks that it'd make your head spin."
I don't think, by the way, that Buffett and Munger were trying to say that the Korean stock market is a steal. They were, instead, merely pointing out that investors need to think for themselves and to cast a wide net. If you run out today and buy a bunch of Korean stocks without researching them first, you're not following Buffett and Munger's advice, you're violating it.
A Chinese reporter asked whether Berkshire will be buying more stocks in China now that its market has fallen by almost half, and what the next year will hold for Chinese investors. Buffett's answer held a lesson for investors based anywhere. "We're not in the business of forecasting what the market will do in the next year," said Buffett. "But if a market goes down, we like that. There's no way Charlie and I get upset when stocks go down. We like it, because falling prices give us the opportunity to buy more good businesses at better prices."
"We don't predict stock prices," he went on to day. "All we know is, the lower they go, the more interesting they get. I think it was Agatha Christie, who was married to an archeologist, who said: 'I don't mind getting older, because the older I get, the more interested my husband becomes in me.' Well, the lower stock prices go, the more interested we get in them...We are not looking at any stocks in China now, but China will always be on our radar screen."
Valuing stocks
Asked how he evaluates financial stocks when so many have balance sheets complicated by derivatives, Buffett said: "There are some that I can't value. I probably couldn't value them even if I worked there, even if I were in charge, and even if I had a year to do it. It's just too complicated [with such large positions in complex derivatives]....Most of them, I'm agnostic. I guess that means I don't trust them. When you're buying stock in a financial institution, you should have a reason to be quite comfortable with the risk-assessment capabilities of the people in charge...to have a real fix on the people running the institution. We can't do that with a lot of [banks]. We just can't figure out what they're doing most of the time.... [the accounting doesn't] really spell out where the institution stands. So you'd better know more about the people running it than any set of figures can give you."
Buffett added that not long ago, he read the 270-page 10-K annual report of a bank he was curious about. "After a couple of hours," he said, "I had about 25 pages marked with big question marks that I couldn't answer." (This raises the obvious question: If Warren Buffett can't understand the financial statements of big banks with derivatives, who can?)
Munger summed up the complexity of derivatives this way: "Wall Street is always going to go where the money is and not worry about the consequences. First they invent things they shouldn't sell to anybody, then they end up selling them to their grandmothers."
Munger commented later, "Many of the present troubles were richly deserved. A lot of financial institutions behaved with a combination of stupidity and over-reaching, and that's not a good combination. I think the world is right to exact a large penalty. Capitalism wouldn't exist without failure."
Added Buffett: "Capitalism without failure is like Christianity without hell. These institutions not only brewed the Kool-Aid but drank it. [Some of the banks and mortgage companies] were like an arsonist who got caught in the house after he set it on fire."
Munger's final word on the subject: "In some of these institutions, the main product is not banking, it's testosterone."
http://money.cnn.com/2008/05/05/news/companies/buffet.pm.wrap/
Jason Zweig, Money Magazine senior writer/columnist
Last Updated: May 6, 2008: 1:15 PM EDT
OMAHA (Money Magazine) -- On Sunday, May 4, I attended the press conference where Berkshire Hathaway Chief Executive Warren Buffett and vice chairman Charlie Munger took questions from print reporters for two hours, then went off and did more interviews for TV.
Buffett, who composes his thoughts at blazing speed and speaks in long and complex paragraphs, spent the entire weekend talking. Munger, who is as laconic as Buffett is loquacious, saves his voice - speaking, as always, only a handful of words at a time.
Buffett and Munger, aged 77 and 84 respectively, have the mental energy and sharpness of someone half their age.
Here are some highlights.
Building a philosophy
In response to a question from Barbara Kiviat of Time on how he and Munger control their emotions, Buffett replied: "[It] comes about from having an investment philosophy grounded in the idea that a stock is a piece of a business. If you look at it that way, there's no reason to get excited whether some analyst is recommending it or the company is splitting the shares two-for-one, or whatever. The only way to drive the extraneous thoughts out of your mind is to have a philosophy. And for us that philosophy comes from Benjamin Graham and The Intelligent Investor, especially chapters 8 and 20. It's not very complicated stuff."
"You have to have the right temperament. I tell the students who come visit me that if you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. You need a philosophy and the ability to think independently...It doesn't make any difference what other people think of a stock. What matters is whether you know enough to evaluate the business," he opined.
"You should be able to write down on a yellow sheet of paper, 'I'm buying General Motors at $22, and GM has [566] million shares for a total market value of $13 billion, and GM is worth a lot more than $13 billion because _______________." And if you can't finish that sentence, then you don't buy the stock. [Note: Buffett mentioned GM for illustrative purposes only.] All this requires some temperamental detachment from other people's behavior. Both Charlie and I have a natural instinct in that direction. We value our opinions more than others' -- perhaps to an extreme!"
Kiviat followed up by asking whether they mind being regarded as "a bastion of calm" by others. Buffett simply stated, "I think they're probably right," while Munger was more loquacious: "Not only are they right, but it's a huge advantage to us to get the reputation of being wiser and stronger than other places. Would any of you object to being considered wiser and stronger when you're trying to get anything in life? The key is not to be seduced by crazy ideas, but instead just stick to the fundamentals year after year. Academia doesn't get too interested in us -- we're too simple. What would the professors do? A great many of the formulas [they use to analyze securities and markets] are dead wrong. They exist purely to give the intellectual class something to do. We don't do anything just exercise our intellectual proclivity for mathematical formulas."
Then Buffet said one of the most remarkable things I've ever heard him say: "There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month."
Look at that sentence again. What Buffett is actually saying is that most people's emotions work backwards: They get greedy when stock prices go up and fearful when they go down. Instead, if you are a true investor, you should shop for stocks the same way you shop for anything else: Look for sale prices, and never regard falling prices as inherently bad news. Instead, falling prices create the opportunity to buy even more of something that was already worth owning.
In that single sentence Buffett captured the difference between investing and speculating: An investor, like Buffett, wants the price of a stock to fall below the value of its underlying business so he can buy even more and hold for as long as possible. A speculator (like Jim Cramer) only wants the price of a stock to go up, with no regard for the value of the underlying business at all, so he can sell as fast as possible. To the investor, the market's opinions do not matter. To the speculator, they are the only thing that matters.
Bond insurers beware
In what may spell trouble for bond insurers MBIA and AMBAC, Buffett said, "We see every day that people are coming to us and paying more than they paid the original bond insurer to see that they have an insurer." Berkshire wrote $400 million in municipal-bond insurance in the first quarter of 2008 and is already licensed to operate in 49 states. "This is entirely a secondary-market business," said Buffett, "where people are telling us, 'We'll pay you just to back them up.' "
Note carefully what is going on here: People who already have insurance on a very low-risk investment (municipal bonds) are coming to Buffett and asking him to ensure that their existing insurance will be adequate. It is like a man who is already wearing a belt paying you to put a pair of suspenders on him. This is the kind of business that Buffett loves. Without naming names, he criticized MBIA and AMBAC for ravaging their own capital by insuring too much dicey mortgage debt: "If they keep writing the business at any price, eventually the secondary market is likely to reflect that in the price [of bonds that carry their insurance]. And if you're writing business to pay for yesterday's losses, you'll be sorry."
Then Buffett marveled at the fact that "You have one bond insurer whose stock went from $96 to $4 [AMBAC (ABK)] and they're still rated AAA. The other one issued 14% paper with Treasuries at 4% [MBIA (MBI)] and they're still rated AAA." At that point, Munger elicited laughter from the room by intoning, "The rating agencies, with 20-20 hindsight, could have done better."
Korea and China vs. U.S. regional banks
When a Korean journalist asked whether Berkshire would buy any other Korean companies in addition to its existing holding in steelmaker Posco, Buffett revealed that he had bought "a number of" Korean stocks for his personal portfolio "a few years ago," when "that stock market got about as cheap as any market I've seen in my lifetime."
But most Korean stocks are too small to have a significant impact on Berkshire's portfolio, so Buffett and Munger don't expect to put much money there. Nevertheless, "Korea represents sound value," said Munger, and Buffett added: "It's one of the better stock markets in the world."
Later, in answering a question about whether the credit crisis has turned regional bank stocks into good values, Buffett said: "It's hard to get much conviction on how [the management] will behave and whether they tell the truth. There's a lot of leeway [in the accounting procedures and the reported financial statements]. Talking to the CEOs isn't very useful. When they're lying, they believe it themselves a lot of the time. I want to see how people behave in different situations."
In short, Buffett is not bullish on regional banks. Munger, however, was more upbeat: "For somebody who's very diligent, you've identified a prospecting territory that has some promise. It wouldn't necessarily work for us [because BRK needs to buy very large blocks of stock], but it might work for others."
Buffett wasn't done criticizing the impervious financial statements of US banks: "If you had $1 million," he retorted to Munger, "it would be easier to go through a manual of Korean stocks than to select a few good American banks." This time Munger agreed: "I'd take the Korean stock market so much faster than the American banks that it'd make your head spin."
I don't think, by the way, that Buffett and Munger were trying to say that the Korean stock market is a steal. They were, instead, merely pointing out that investors need to think for themselves and to cast a wide net. If you run out today and buy a bunch of Korean stocks without researching them first, you're not following Buffett and Munger's advice, you're violating it.
A Chinese reporter asked whether Berkshire will be buying more stocks in China now that its market has fallen by almost half, and what the next year will hold for Chinese investors. Buffett's answer held a lesson for investors based anywhere. "We're not in the business of forecasting what the market will do in the next year," said Buffett. "But if a market goes down, we like that. There's no way Charlie and I get upset when stocks go down. We like it, because falling prices give us the opportunity to buy more good businesses at better prices."
"We don't predict stock prices," he went on to day. "All we know is, the lower they go, the more interesting they get. I think it was Agatha Christie, who was married to an archeologist, who said: 'I don't mind getting older, because the older I get, the more interested my husband becomes in me.' Well, the lower stock prices go, the more interested we get in them...We are not looking at any stocks in China now, but China will always be on our radar screen."
Valuing stocks
Asked how he evaluates financial stocks when so many have balance sheets complicated by derivatives, Buffett said: "There are some that I can't value. I probably couldn't value them even if I worked there, even if I were in charge, and even if I had a year to do it. It's just too complicated [with such large positions in complex derivatives]....Most of them, I'm agnostic. I guess that means I don't trust them. When you're buying stock in a financial institution, you should have a reason to be quite comfortable with the risk-assessment capabilities of the people in charge...to have a real fix on the people running the institution. We can't do that with a lot of [banks]. We just can't figure out what they're doing most of the time.... [the accounting doesn't] really spell out where the institution stands. So you'd better know more about the people running it than any set of figures can give you."
Buffett added that not long ago, he read the 270-page 10-K annual report of a bank he was curious about. "After a couple of hours," he said, "I had about 25 pages marked with big question marks that I couldn't answer." (This raises the obvious question: If Warren Buffett can't understand the financial statements of big banks with derivatives, who can?)
Munger summed up the complexity of derivatives this way: "Wall Street is always going to go where the money is and not worry about the consequences. First they invent things they shouldn't sell to anybody, then they end up selling them to their grandmothers."
Munger commented later, "Many of the present troubles were richly deserved. A lot of financial institutions behaved with a combination of stupidity and over-reaching, and that's not a good combination. I think the world is right to exact a large penalty. Capitalism wouldn't exist without failure."
Added Buffett: "Capitalism without failure is like Christianity without hell. These institutions not only brewed the Kool-Aid but drank it. [Some of the banks and mortgage companies] were like an arsonist who got caught in the house after he set it on fire."
Munger's final word on the subject: "In some of these institutions, the main product is not banking, it's testosterone."
http://money.cnn.com/2008/05/05/news/companies/buffet.pm.wrap/
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