Daily Investment Tips

In a world where many fear the economic future of American economy, Warren Buffet is confident of the future.

Warren Buffett said in his 2011 letter to Berkshire Hathaway shareholders Saturday that he still believes America’s best days are ahead.

Highlights From the Warren Buffet Shareholder Letter 2011

Don’t trust companies financial statement, do your own homework – Buffett urged investors not to focus on the net income figures that companies report because they are easily manipulated through accounting tricks or by selling investments.

Dangers of investing in borrowed money – “When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbors get envious. But leverage is addictive,” Buffett said. “Once having profited from its wonders, very few people retreat to more conservative practices.”

This is the time to invest – He plans to put to use Berkshire Hathaway $38 Billion cash hoard. “We’re prepared,” Buffett wrote. “Our elephant gun has been reloaded, and my trigger finger is itchy.”

Housing is set for recovery- He said a housing recovery will likely begin within the next year, which would help the economy and several Berkshire subsidiaries, including ones that make carpets and bricks.

To download a copy go to Berkshire Hathaway Shareholder Letters.

written by Constantine Njeru \\ tags: American Economy, Berkshire Hathaway, Berkshire Hathaway Shareholders, Bricks, Carpets, Elephant, Elephant Gun, Financial Statement, Hoard, Homework, Leverage, Many Fear, Neighbors, Net Income, Shareholder Letters, Subsidiaries, Trigger Finger, Trust Companies, Warren Buffet Shareholder Letter, Warren Buffett

When it comes to Forex Currency Trading the regulator sets rules on the amount of leverage or margin allowed for trading.

The new rules set by the U.S. Commodity Futures Trading Commission, or CFTC rules prohibit retail forex dealers from offering more than 50-to-1 leverage for major currencies such as the dollar and the Japanese yen or 20-to-1 leverage for more-exotic currencies.

This rule protects forex currency traders from taking large risk that may lead to massive losses.

written by Constantine Njeru \\ tags: Cftc, Commodity Futures Trading, Commodity Futures Trading Commission, Commodity Trading, Currencies, Currency Traders, Currency Trading, Dollar And The Japanese Yen, Forex Dealers, Forex Traders, Forex Trading, Futures Trading Commission, Leverage, Massive Losses, Risk

John Meriwether is a good example of why many investors never learn from their mistakes. Investors delude themselves thinking “This time its different”

John Meriwether was the co-founder of Long Term Capital Management, together with two future Nobel Prize winners, Myron Scholes and Robert C. Merton. With this two brainys on board it seemed this hedge fund was a sure bet.

The fund got off to a flying start, it raised $1.01 billion from high net worth individuals. It delivered annualized returns of over 40% (after fees) in its first years. Nothing could go wrong.

But when the Russian crisis hit in 1998, it lost $4.6 billion in less than four months. With mounting losses and a bailout from the FED the fund was closed in early 2000.

You would have thought John Meriwether had learnt from his mistakes. But immediately after LTCM closed shop Meriwether launched JWM Partners. A fund that would continue many of LTCM’s strategies. He managed to convince investors to invest in him by promising them this time he was going to use less leverage.

Whoever said lightening doesnt strike twice was wrong, just like the Russian Financial crisis of 1998 killed LTCM, the 2007 Credit crisis struck JWM partners. JWM Partners LLC was hit with 44% loss from September 2007 to February 2009 in its one of its fund. As such, JWM Hedge Fund was shut down in July 2009.

Never buy into the idea “This time it is different.”

written by Constantine Njeru \\ tags: Bailout, Bet, Co Founder, Credit Crisis, First Years, Four Months, Hedge Fund, High Net Worth Individuals, Investors, John Meriwether, Jwm Partners Llc, Leverage, Long Term Capital, Long Term Capital Management, Losses, Myron Scholes, Nobel Prize Winners, Robert C Merton, Russian Crisis, Russian Financial Crisis