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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[joshreddy]

The guy is Asking the question is BILL

[impaugjuldivmax]

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

[rhythmandacoustics]

3 years after this interview the mortgage bubble popped.

The valuation of derivatives is the most challenging. It screws up the balance sheet.

[bistrova]

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

[dp]

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.

[MonsieurDee]

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

[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)

[Sills]

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

[davidg.]

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

[michaelbrownlee]

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

[InvestingEducation]

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

[ronit.pereira]

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.

[warmpi]

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

[zada]

I need to break into the sand business

[mikhailsharon]

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.

[donaldhendrix]

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

[dustinconner]

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

[candyfloss]

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.

[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.