How to Stay Out of Debt: Warren Buffett – Financial Future of American Youth (1999)

Buffett became a billionaire on paper when Berkshire Hathaway began selling class A shares on May 29, 1990, when the market closed at $7,175 a share. More on Warren Buffett:

In 1998, in an unusual move, he acquired General Re (Gen Re) for stock. In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. On March 15, 2005, AIG’s board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, former attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General’s office agreed to a settlement in which AIG would pay a fine of $1.6 billion. In 2010, the federal government settled with Berkshire Hathaway for $92 million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing ‘corporate governance concessions’.

In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion. In 2006, Buffett announced in June that he gradually would give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution would go to the Bill and Melinda Gates Foundation. In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.

Buffett ran into criticism during the subprime crisis of 2007–2008, part of the late 2000s recession, that he had allocated capital too early resulting in suboptimal deals. “Buy American. I am.” he wrote for an opinion piece published in the New York Times in 2008. Buffett has called the 2007–present downturn in the financial sector “poetic justice”. Buffett’s Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his recent deals appear to be running into large mark-to-market losses.

Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs. Some of Buffett’s Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. The scale of the potential loss prompted the SEC to demand that Berkshire produce, “a more robust disclosure” of factors used to value the contracts. Buffett also helped Dow Chemical pay for its $18.8 billion takeover of Rohm & Haas. He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the current crisis in debt and equity markets.

In 2008, Buffett became the richest man in the world, with a total net worth estimated at $62 billion by Forbes and at $58 billion by Yahoo, dethroning Bill Gates, who had been number one on the Forbes list for 13 consecutive years. In 2009, Gates regained the position of number one on the Forbes list, with Buffett second. Their values have dropped to $40 billion and $37 billion, respectively, Buffett having lost $25 billion in 12 months during 2008/2009, according to Forbes.

In October 2008, the media reported that Warren Buffett had agreed to buy General Electric (GE) preferred stock. The operation included extra special incentives: he received an option to buy 3 billion GE at $22.25 in the next five years, and also received a 10% dividend (callable within three years). In February 2009, Buffett sold some of the Procter & Gamble Co, and Johnson & Johnson shares from his portfolio.

In addition to suggestions of mistiming, questions have been raised as to the wisdom in keeping some of Berkshire’s major holdings, including The Coca-Cola Company (NYSE:KO) which in 1998 peaked at $86. Buffett discussed the difficulties of knowing when to sell in the company’s 2004 annual report:

That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately, however, it’s the windshield through which investors must peer, and that glass is invariably fogged.

37 thoughts on “How to Stay Out of Debt: Warren Buffett – Financial Future of American Youth (1999)

  1. Sorry to be decoding Mr Buffet's speech but I thought I will share something that I learned from my experience. Hope the audience and owner of the video don't mind. Mr Buffet's speeches and saying has inspired me for a long time. My most favorite one is "Honesty is a very expensive gift, Don't expect it from cheap people.” In this video he also says most people "sleepwalk" at work. Very true. People don't want to take trouble and come to work because it pays. That includes high ranking managers and even CXO level people at times. If you want to build an successful organization you have to keep these class of people out of your workforce at least from managerial function. Remember what Lou Gerstner author of "Who said elephant can't dance?" once said – "People don't do what you expect them to but what you inspect."

  2. Mr Buffet also said, He, Bill gates and generally people in the USA are incredibly lucky to be born in the USA. 100% true. Look how Bill, Jeff Bezos touch something and it turned into gold. Even a boy in dorm room can turn his hobby into a Billion Dollar business. No where else in the world such opportunity exists. Even if there are people with same talent as Bill Gates, Jeff Bezos exits in the other parts of the world they can't bring their dreams to fruition. That ecosystem and infrastructure of USA does not exists elsewhere.

  3. Next Mr. Buffet says, to do reasonably well in the USA is not difficult. If someone does not dabble in risky affairs would still be able to enjoy good things in life as Mr Buffet does. Completely true and one would get safe and a dignified exit from this earth if you follow this principle. There are 7.7 Billion people on earth and perhaps 99.99% is not great risk takers. But if someone wants to become an entrepreneur or wish to do something in life rather than just having an education, get a job, own a house and raise a family than his advice won't help. You have to take risk, pain to achieve something. When you take risk – many possibilities will appear like you may fail in your venture, suffer losses and great pain. So, you need a different lesson to survive if you think you belong to that 0.01% of 7.7 Billion people. P.S. – I have lived and worked in the USA for 8 years.

  4. Great video and really admire him. The things he said at the beginning like forming a habit, integrity etc is a voice of an entrepreneur. In corporate world we don't see it. In my career I have seen manager working as protectionist – they would take the first step to save the job first, or how they would secure their bonus or how they would go to the next level in corporate ladder. Rest everything is secondary. We call it corporate culture. I myself have suffered multiple layoffs and never saw a promotion in 16 years of my career except in one occasion where I was promoted to next band in my very first job. To survive in the corporate world you have to be a different animal. In my early years of working as a professional, my colleague used to say – Elephant have two pairs of teeth. One pair is to show and one pair is to chew!!! It meant, what you do and what you say should be different. Always show more than what you did. I refused to grow my elephant teeth to show and I suffered. I am not saying Warren Buffet is wrong. But chances are nearly zero that you will be working for a person of his caliber or trait. You will end up working for a typical manager who at best would be a job seeker. P.S. I am from IT/Software background and have worked 16 years in the industry.

  5. Bailouts king Warren buffet has taken over $20 billions in bailouts
    Welfare King Warren buffet gets over $2 billions in government subsidies payment's !
    Socialism King Warren buffet pay's less taxes than his secretary and receive $ billions in government handouts !
    This phony Crooked bastard' Need to be in prison for welfare Fraud an looting and Robbing the Dumbass Americans blind on scheme's an bailouts for the Greedy thieving scheming Gluttonous bastard' !

  6. as soon as you register your birth . your birth number is worth around £750.000 to the goverment. that is called a strew man. and you are all your life… dead at sea. LOOK IT UP ITS TRUE

  7. Warren suggest : write someone you admire hero and another you don't:

    Admire : President Obama Don't admire : Trump
    Good character, Corrupt, con businessman,
    Educated Unfaithful womanizer
    Cultured. Racist, sexist sexual assaulter
    Family man Humble Insecure
    Respectful faithful husband Pathological Liar. Not respected.

    Clearly President Obama is a great hero and great World leader.

  8. Warren buffet and Jay Z said the same thing with two different lines.
    Warren said: Avoid credit card.
    HOV said: You know whats worse than throwing away money away at a strip club? Credit.

  9. The bottom line is the System has you brain washed into thinkin you need more than one credit card and there is where the trouble begins throught out your life by the time it dawns on you your in debt up to your eyes balls, get out of debt once you know your in trouble and only keep one credit card. one is all you need only use it when u have to etc……. credit cards are your poison espijsicallly if you abuse them. its up to you.

  10. A small correction – the WWW was invented by ENGLISH man Sir Tim Berners-Lee in ENGLAND, and so therefore the 'net will always remain English, irrespective of who made it into a money earning business. Apart from this this Warren Buffet talk was brilliant and so much appreciated.
    Thank You Mr Buffet.

  11. You can become very rich, if you are ready to kill fear, make sacrifices and take risk. forex trading is a cool business that is not known to many people in the world. many forex traders started with a simple trading strategy, trades have set rules for how to buy and sell currency pairs including selecting the right execution technologies. This investment is highly profitable. All thanks to Andrew Feldstein strategy.

  12. uhumm Debit is money… them mobs created the system of debit…without debit, there will be no money in circulation, & the Central Bank will then stop printing out those so called moneyless paper. & which we have labelled money…. uhummm

  13. thank you so much always To be in life and who you turn of most they quality in your life and what you admire behave to come into habit most of the people can not change in their life because they have many problem like health,society and it is very hard to defined the people so how much you love in your activity how much talent for ability to use the capacity to take risk having some map resource and put some knowledge in your growing business it is depend on you.
    thank you so much for sharing your experience.

  14. You are broad minded human sir Buffets previously suggested 1.8 billions eligible we can present him gradually step by step is take in positively when you give it 100% it is possible to you I never for get your help to me very broad minded human what you help me you are my god good present in your mind you can do it positively going . Yshk viswanatham MscBed.

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