Warren Buffett explains the difficulty in analyzing financial companies

Warren Buffett and Charlie Munger answer a couple of questions from Bill Ackman at the 2005 Berkshire Hathaway annual meeting.
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[@joshreddy4278]

The guy is Asking the question is BILL ACKMAN!!!!!!

[@zach4216]

hype

[@KK-bc6ok]

Bill Ackman

[@kirilmihaylov1934]

He is hedge fund manager

[@notactuallytaylor]

So nice seeing him getting advice from this legend

[@dustinconner9157]

@@notactuallytaylor Now, if he would take it..

[@jtaco4101]

@@dustinconner9157 he's doing alright for himself, lol

[@bistrova97]

The guy asking a question sounds smart, he should start a hedge fund or smt

[@Sanathvarma]

Lol ackman

[@apc9714]

@@Sanathvarma He should buy Netflix
Oh well never mind

[@rammohan1991]

he is a degenerate hustler

[@rhythmandacoustics]

3 years after this interview the mortgage bubble popped.
The valuation of derivatives is the most challenging. It screws up the balance sheet.

[@impaugjuldivmax]

ohh... 2005 they were so young back then only 75 y.o.

[@Macaxeira432]

They wish they were 75...Munger is 96 lol 💀

[@aakash0910]

This is one of the best channels.

[@The_Financial_Review]

Thank you!

[@justinjrahman]

Agreed!

[@wallstreetkindergarten2953]

Grandpa from another mother.

[@dp26385]

We learned from the 2008 financial crisis that ratings seem to be bought for a price and are not actually a true rating. I don’t know if the laws have been changed since then to prevent this.

[@kirilmihaylov1934]

This guy is smart.... very smart

[@bethisway]

Love this quality

[@MonsieurDee]

That's why I don't even try with financial companies

[@Sills71]

Ackman was more right that most on this... and that includes Buffet...

[@kmizikovsky]

Why?

[@bolokefe5300]

he asked the question he didnt answer dummy

[@josephjones836]

Wow, Bill Ackman is in the building.

[@matthewking5612]

His cousin dude

[@ReflectionOcean]

- Understand that even AAA-rated companies can have misleading financials (0:09)
- Recognize the difficulty in accurately evaluating financial companies' reserves and loan quality (1:02)
- Consider the implications of derivatives and complex transactions on financial transparency (2:26)
- Acknowledge that financial reporting, even by government institutions, can be flawed (6:45)

[@InvestingEducation]

Agree. Thats why we don't generally own financial companies or banks for our youtubd portfolio.

[@kirilmihaylov1934]

Problem is when something like 2008 happens finance sector is done...all big crises came from the finance sector....

[@InvestingEducation]

@@Gallant972310 I guess he has close relationships with managament like jamie dimon and BoA ceo to make sure no hanky panky is going on. The cheap prices also probably make him comfortable

[@InvestingEducation]

@Marcus Pieterse that's true. However these still hav alot of competition. Why not buy companies with little or no competition instead?

[@michaelbrownlee9497]

Coded speak for " the employees are corrupt then the reports are corrupt and our auditors are not catching it.

[@davidg.2217]

BUFFETT AND MUNGER....TWO SMARTEST GUYS IN THE 🌎 WORLD...👍

[@ronit.pereira7172]

2:08 WD-40 .... GAWWWDDD why didnt i see this video just before a year ago

[@Finderskeepers.]

Great comment by Munger, governments are even worse and we all have shareholder power there.

[@gordongordon98]

2005 A.I.G. cooked books 🌚

[@dustinconner9157]

Bill Ackman, should be the example of if he can invest anyone can. Better off giving Buffett the money to invest than Ackman, IMO..

[@jtaco4101]

I'm a massive buffet fan, and a sharp fall in the market may prove him right, but he hasn't had the best results in the last 20 years.

[@joehopkins3684]

@@jtaco4101 why do people take credit for predicting short term movements? They are no better at analysing the short term direction of the market than astrologers. Buffet would only bet on the long term.

[@yosangle]

@@joehopkins3684 20 years is long term.

[@zada7629]

I need to break into the sand business

[@warmpi]

They didn't provide any insight for Ackman though. Though tbf he probably was just asking the question for the sake of asking.

[@user-ql3ws5uz1d]

Bill Ackman lol

[@mikhailsharon4331]

It's a hard game to play the finance game because it is in the interest of some of the players to make the facts opaque. It's not equivalence or fair but a game of deception.

[@donaldhendrix1805]

be advised eddie=jackson....i am 70 percent sure!

[@candyfloss184]

Just as a business in gas will have more explosions, similarly financial institutes will have accounting shenanigans. If you don’t like the lack of good accounting practises, you are in the wrong world to invest in these accounting time bombs called financial institutions.

[@pongfoong9523]

Where this my dollar ?

[@knmfujiwara]

I don't understand Warren. If financial companies are so unstable - why invest in it at all? Certainly, you don't have to know everything for you to say you are competent but I would think that not knowing the status of a company whether it's going south or north is an indicator that you don't know what you should know. It's even worse if you assume what you think you know is what you know.

[@unknowninfinium4353]

What makes things boggling is he invested in Goldman Sachs after 2008.

[@arthurangeloramos4580]

He didn’t say financial companies are unstable. He said financial companies are “complex”. For example, an insurance company’s revenue would be the premiums from the insured, while their expense would be the present value of contingent claims in the future. The revenue part is simple (just count how many premiums were paid). On the expense side, you may think of just counting how much claims were paid out on the same period, but you still have to account for the contingent claims that will arise. This expense part requires estimation through quantitative modeling and statistical assumptions (probability of claims in the future). Given the complex nature of the expense, there’s a greater chance for errors in accounting and reporting of figures. But that doesn’t mean the business is bad, right? Warren just happened to be very knowledgeable in valuing financial companies that he knows how much room for errors he can allow on the figures he’s looking at and assess if it’s profitable or not. Hope this adds explanation.

[@unknowninfinium4353]

@@arthurangeloramos4580
Could you elaborate on how Warren is good at evaluating in simple terms so I can understand it?
I want to start evaluating insurance companies too.

[@ajtoce]

Things have changed dramatically since 2005

[@ajtoce]

@@unknowninfinium4353 Look up the 4 filters

[@ronniedelahoussayechauvin6717]

Scams

[@tc9634]

And now Berkshire owns all the credit ratings agencies, all the banks, all the credit card companies and all the insurance and reinsurance companies 🙄