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Live-blogging cnbc’s airing of Buffett and Greed responding to questions from Columbia Business school

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Q: Was Greed at the root of the financial crisis?

Buffett: We’ve got the engine that was ever devised. Greed will continue. But what drives the system is the equality of the opportunity.

Gates: The best systems are ones with good short term metrics and a willingness to do things long term (investing in research, eg) and a willingness to invest in youth. Other countries have seen it (China, India) and are trying to emulate it. But nobody wants to borrow from the extreme leverage US got into. But that’s not the heart of our system.

Q: Mr. Gates, can you tell us what you were feeling when you first heard Lehman’s was filing for bankruptcy?

Gates: The fact that there are ups and downs – he had no sentimentality. The domino effect caused him anxiety – he called up Warren 🙂

Q: Was it a mistake to let Lehman go under?

Buffett: Gives Bernanke high marks on the whole for how he’s handled this.

Q: To what extent to you think that business schools like Columbia were responsible for the crisis?

Gates: Business schools teach wonderful things. The case studies of this crisis will be taught here for decades to come. Leverage is a very dangerous thing. The notion of risk on this was not well understood.

Q: Can you teach ethics in a business school?

Buffett: The best place to teach ethics is in the home. The wonderful thing about it is you can succeed wonderfully in this country with ethics. Practicing ethically is not a hindrance at all. This country doesn’t avoid problem; it solves them. Youth have a wonderful future. This is currently fertile soil and there’s no reason to cut corners.

Q: What industry do you think will produce the next Bill Gates?

Gates: Industries have different paces of innovation. The math of the chip, fibre optics… there are few other industries which will compete for being exciting. Energy industry? Medicine? Those are the three that have the strongest momentum.

Buffett: Don’t let anybody else tell you what to do. Do what turns you on.

Q: Can you explain your key motivation to investing so heavily in the Burlington Railway industry at this time?

Buffett: Well, when I was a kid, I asked for a model railway and didn’t get one! (laughter) Railroads are still key, and will be, to transporting goods back and forth. You have the most environmentally friendly and efficient method in Railway – far more efficient than highways. They use 1/3 less fuel, they put far less pollutants into air. (money coach: YEAYYYY! I own CN Rail shares 🙂 )

Q: What keeps you up at night?

Buffett: I try to live my life so that nothing does! I don’t like to sound like a mortician, but last fall was quite exciting to me – there were opportunities that didn’t exist a year or two earlier. I don’t want to be leveraged so that I cannot participate or so that it keeps me up at night. The corn fields had not gone away. Our innovativeness had not gone away. I knew we just had to straighten a few things out, and we are.

Gate: A pandemic – outliers like that, you have to keep an eye on. Our K-12 system is not improving as it should be. That’s a bit scary and needs more attention. But our system generally has a lot of good self-corrections in it.

Q: May people question the current rally in the market. Is it sustainable?

Buffett: I first invested at 11 yrs old. Guess which year has been the best? The answer is 1954. The DOW went up 50%. (Moneycoach – I think I got that quote right, need to double check). It’s a terrible mistake to look at the economy then look at whether to buy stocks. You should look at any given company and evaluate its longterm prospects. If you find a good company, a bad economy is your friend. It gives you a chance to do things. If you wait to see the Robin, spring will be over.

Q: Can you comment on the work Steve Jobs has done on Apple?

Gates: They’re in a bit of a different business because they sell both hardware and software. They’re an incredible force. Of all the leaders in the industry, he’s showed more inspiration and he saved the company.

Q: What’s the one thing that your MBA didn’t prepare you for?

Buffett: It prepared me very well – specific profs, not the whole degree – I was lucky in that I found what turned me on, early on. A couple profs really inspired me. It gave me confidence in myself, propelled me, gave me tailwind. I later went to a Dale Carnegy course which gave me public speaking skills.

Q: Mr. Gates, what role did pure luck play in your success?

Gates: I was lucky to be born with certain skills. I was lucky to have parents who let me buy as many books as I wanted. And I was lucky in my timing- to be young and looking at the microprocessor just as it was emerging. So timing, skill set, meeting Warren … it’s unusual to have so much luck in one life.

Q: In the context of your unique friendship, what do you admire most about each other?

Buffett: It’s my athletic ability (laughter). What I most admire about Bill is his view about what he should do with the wealth he accumulated – he knows he benefited from society and he knows every life is of equal value to every other human life. They’re going to use the last half of their lives to improving lives of 6.5 Billion people around the world.

Gates: His integrity as an example. His sense of humour. But his desire to teach – to put things in simple terms so others can understand – it’s a real gift I admire incredibly.

Q: Dean of Columbia Business School asks: How do we develop business leaders who understand context and connect the dots?

Buffett: I think that what I learned from _____ (Graham?)_____ – having sound principles takes you though everything.

Q: Do you think we’re through the roughest times?

Buffett: The financial panic is behind us. The spillout is still with us. It will end – it won’t go on forever. To try to pick the bottom – don’t pass up something attractive today in the hopes of finding something even more attractive tomorrow.

Q: Will clean energy investments help pick up the economy?

A: We don’t yet know which of the energy industries will pan out long-term. You’ll have to be careful to find one with its cost-structure in line, not one being pushed along by subsidy.

3493128907_d4e4fc08b9Photo Credit: kanegen

Massive DISCLAIMER – see masthead – I am not a financial planner.  I want to post a wee bit in the coming days on the topic of ethical investing.  But these posts should in no way be construed as advice or recommendations.  Do your own homework, or contact a licensed financial advisor/planner.  These posts are simply my thoughts as a citizen who is hoping to invest ethically and make money at it.

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In an earlier post, I mused about general expectations I have for ethical investments.   In short, I’m not looking for perfect purity.  I’m looking for things which are better than the current status quo.  And things I can influence as a shareholder.

Over the next couple years, I’ll be scanning for green energy businesses. It’s a bit iffy, I know, and does not conform to my usual investment principle of looking for companies that have been money makers for several years already.  But I’m pretty convinced that Green Energy remains the Next Big Thing.

Here’s why.

My hunch is that indeed we’ve reached peak oil – ie., we’ve maxed out how much can be produced, and from now on production is going to decline.

BP’s Review of World Energy states: The amount of proven oil reserves awaiting to be exploited fell last year for the first time in a decade. The amount of crude left in the ground was 1.258trn barrels – 3bn less than last year.    Speaking of Canada specifically (the 2nd largest producer in the world), according to the National Energy Board (NEB), gas production in Canada peaked at 17.5 billion cubic feet per day (bcf/d) in 2001, and has been decreasing since then. 

While this may be contested, the uncertainty is of grave concern to business – how can you do business when you don’t know what price you’ll be paying any given year for your energy?  Even the US Military, the biggest consumer of energy in the world, has clearly indicated they want out of traditional energy sources and want green alternatives.  Not only is it a price concern, it is also a death concern – fuel convoys are popular targets and account for half the American deaths.

So if there’s business incentive to move off of traditional energy, and military interest as well, I’m guessing I will live to see a fundamental shift in energy sources.

Please God, let it be towards energy sources that mitigate climate change!  (as opposed to euphemistically named ‘unconventional gas‘ – or, as I like to call it ‘I know!  Let’s do the same old, same old, but worse!’)

So.

I’ll be exploring:

Which companies build wind turbines?

Which companies build solar cells?

Who builds geo thermal heat pumps?


Readers:   any companies you recommend I investigate?

2650359120_f03d519fd0photo credit: Jaroslaw Pocztarkski

If you haven’t heard about it yet, you will over the coming months:  Bees are disappearing and the implications for our food supply are a whole lot scarier than you probably think.

Eat apples?  check

Eat carrots?  check

Onions? check

Blueberries?  check

Garlic?  check

Broccoli?  Tomatoes?  Squash? Cherries?  Almonds?  What about oranges?

Each of these foods among countless more, require pollination by bees.

Truth be told, my knowledge about the role bees play in putting food on my table only extended as far as honey on my toast.  I didn’t realize they played such a keystone role in so many other foods that both humans and livestock require.  In economic terms, in Canada the value of honeybee pollination is estimated at $1.2 Billion a year.

30% of all bee colonies in the USA have died in the past couple years.  And similar numbers are being reported from all over the world.  No one really knows why.  They’re just dying off every year.

So while we’re increasingly anxious about peak oil and climate change, it could be the demise of this tiny little creature that does us in.

Haagen-Dazs has created a site with further info, a wee bit lite in tone: www.helpthehoneybees.com.

What does all this have to do with money?   Not much, directly, but everything indirectly if our food supply suffers a catastrophic breakdown.  So if you’re able, #HelpHoneyBees !

I love when disparate elements converge. Yesterday, a twitter pal asked for info on investing ethically. Today is Blog Action Day and the topic is Climate Change. (check out Gordon Brown’s blog post on the topic, or The White House’s post, er, but they’re not much better than mine – wicked grin) And the rapidly melting polar ice-caps made the news again – of much greater significance to me now that I live in Yellowknife.

Combine these, et voila:  How could I *not* post about how I factor in eco-ethics in my investment choices for Blog Action Day? (transparency: I’m drawing on an article I had originally published in Shared Vision magazine)

Disclaimer!  Disclaimer!  I am not a financial advisor (see masthead).  This is how I approach my personal investment choices.  Do your own research, or hire a financial planner.  This isn’t investment advice!

OK then.  Here goes.

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So I saw The Corporation, I saw Inconvenient Truth, and I know about how Halliburton is this really evil company and so is Monsanto.  It’s enough to make you swear off investing forever, and in fact one woman in my (former) investment club did just that.

“It’s all dirty!” she cried, “I’m outta here” (or words to that effect).  I empathize.

There’s little old me with my middle-class income on the one hand. There’s great big planet-screwing corporations we love to hate on the other.  And somehow I need to bridge the two if I hope to retire in a manner to which my dachshunds are accustomed.  I need to leverage my money off the initiatives of the c-word entities in order to become the multi-millionaire I aim for (yes, really.  And don’t laugh – my tiny loft in gastown may just do it all on its own if the real estate insanity continues.)

Here are 3 approaches to building our wealth and keeping our consciences, as well as the planet, clean.

1. Get comfortable with wealth. Many of us with a strong ethical orientation carry deep in our hearts a quiet distaste for wealth in general. The last thing we want to do is participate in inequity, when there are kids not getting the basic nutrition they need.

Here’s how I handle it.  No bones about it:  I want to become a wealthy (in the bank account sense of the word) woman. I believe that if there’s money floating around out there in the world – and there is! –  I’d like to be one of the people directing its flow.  Unless my own values change, I’m quite sure that a million here or there in my own portfolio will be directed towards initiatives that I want to see thrive because they’re doing something good in the world.  And I bet a million or two in your portfolio would be similarly directed.

2. Get comfortable in bed with imperfect corporations. Consider this:  Just like within the mix of humans, there are in fact some lousy corporations, but also some pretty wonderful corporations (I have a crush on – and invest in – Apple for example), and just like humans, even the good ones may have asymmetries, areas where they screw up until someone calls them on it (like Apple who got their knuckles rapped about their lack of commitment to the environment, and has since had a remarkable turnaround).  Let’s allow for that – a measure of imperfection that we can live with.

3. Let’s work on changing from the inside rather than critiquing from the outside.  I’m not suggesting we take on the truly dreadful companies, of course.  But if there’s a company that’s doing well, but with an area or two that could use improvement, let’s support what they’re doing right, and use our shareholders’ votes to move it further in a good direction.  Individually, our few votes may not hold a whole lot of sway (although never underestimate the power of one!) but collectively, if those of us with like minds start purchasing up shares, we may be stronger than we dream of.  A great example of this is the Interfaith Centre for Corporate Responsibility. Sister Daly had a legendary exchanges with GE CEO J. Welch regarding the polluted Hudson River, culminating in GE paying to clean up the river.   So be strong!  As a shareholder, you have every right to request the company you own take climate change seriously and examine its operations accordingly.

There you have it – my general approach to this investing ethically business.  In the coming week, I’ll review a couple of the companies I own and how they stack up vis a vis our planet earth.  Readers – any of you have investments you feel good about?  Care to share?

I grew up in a mining town. When I was a kid, it was gold mining. Now it’s diamond mining. Anyway, back in the day, Yellowknife had two working gold mines, Giant and Con. Any local readers remember the Miner’s Mess and the Rec? Yep, Yellowknife had an element of rough-and-tumble to it.

I was too young to know that the mines would some day run out of gold and they’d close. And like all of us, I would never have dreamed that a strike would become so tense that a union member would plant a bomb in Giant Mine and kill nine scab labourers – one of the largest murder investigations in RCMP history.

And. And. And: It certainly didn’t occur to me that the (US) owner of the mines would OOPS! declare bankruptcy and stick Canadians with the approx HALF-BILLION-DOLLAR clean-up (arsenic) bill.

And that’s just for Giant Mine. There’s also Colomac Mine and Tundra Mine. Oh, and that’s just in the NWT! There’s also Pamour Mine in Ontario, Hope Brook Mine in Newfoundland and Kerness Mine in B.C.

The owner (formerly known as Peggy Witte, now Margaret Kent) of the now-bankrupt mine, I see, is now CEO and President of a new mining company, Century Mining Corp. Interestingly, it looks like Century is up to some shenanigans this year in Quebec. I hear she has a second home in Hawaii.

There’s worse, folks. Much, much worse.

She’s baaaccccck: in addition to Century Mine, she owns Tamerlane Mine and just guess who’s mining in the NWT – Pine Point. They’re re-opening a portion of the Pine Point Zinc deposit. (We’re in good company. Tamerlane is also doing business in Peru.)

Dear us: Who is this Peggy Witte/Margaret Kent that not only does she leave us with nearly a HALF BILLION DOLLAR BILL, but now she’s allowed to have at us again?

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