charlie munger
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Greg Spreicher of

In his October 16, 2008 New York Times op-ed piece, Warren Buffett wrote the following:

I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.


A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

In a recent CNBC interview, which I posted on November 19, 2010, Buffett said that his total tax rate would be around 16-17% of his income. He then went on to say that he would have “tens of millions” of capital gains.

From this we can surmise a few interesting things about how Buffett runs his personal portfolio.

1. Buffett is happy to be 100% in cash if he cannot find obvious bargains in the market as he was before the market turned down in 2008.

2. Buffett will scale into stocks and continue buying as they go lower. He is willing to go 100% long if the opportunity is compelling. “If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.”

3. He sells some or all of his stocks when they are no longer undervalued and have appreciated, rather than holding them indefinitely. If he had tens of millions of capital gains tax at a rate of 16 to 17%, he appears to have had capital gains in the neighborhood of $200 to $500 million. Buffett does not sell shares of Berkshire Hathaway to the best of my knowledge, so these gains appear to be from his personal account.

This is by no means an indictment of buy and hold which works well if you buy high quality franchises and do not overpay. In this case, your gains are primarily governed by the growth in intrinsic value of the business. Highly skilled investors may be able to do better – even after taxes – if they have the discipline to actively purchase obviously mis-priced securitied and sell them when they appreciate to fair value.