IMAGINARY CONVERSATION WITH WARREN BUFFETT 

Interviewer (I), Warren Buffet (WB)

I:  Welcome to Kuala Lumpur Mr WB.

WB: Tq.

I: What do you think of Malaysia Stocks?

WB: Err... how old is the market?

I:  About 37 years. Why?

WB:  During the past 37 years old, how many times do the KLCI dropped two years in a row?

I:  Err..... oh..... only twice.

WB:  There you go, what is the chance of it drop 3 years in a row?

I:  It will become history.  It is unprecedented.

WB:  Over the last 10 years, roughly how many stocks over the last 10 years went up 6 times or more? Or 20% p.a. compounded

I: Err..........not many......perhaps 10-20 stocks?

WB:  What is the number of counters in the stock market? 

I:  About 1,800?

WB:  Good, take 20/1800, that will be about 1%.  What is the probability that you think you can find this 1% now, and they will perform for the next 10 years.

I:  Err....I am not sure, perhaps let me ask the local sifus.  (after 10 minutes).  They told me there is a 60% chance.

WB:  Are they willing to invest on your behalf?

I:  Nope.

WB:  Then, for probability of doing 20% and above 10 years in a row is very slim, perhaps less than 1%.

I:  So, in such a case, would you invest in Malaysia?

WB:  Compared with NYSE, I find that NYSE has more choices and they have 30 or more years good track records.  They have international brands.  Do Malaysia has international brands like Samsung, Hyundai, Toyota, etc?

I:  Nope, not that I can think of at the moment? No yet, perhaps?  If you are a Malaysian, would you put all your money here?

I: On second thought, I think we have, we have 1MDB, we have PKFZ, we have IPPs, we have Proton, we have cow living in Singapore Condos, we have RM2.6b donation, we have corrupted leaders over 30 years consistently, err........ are these international brands?  But we didn't send any troops to Iraq on the pretext of WMD which did not exist.  But, people also accused us that we are exporter of ISIS? (Interviewer talking to himself)

WB:  Unlikely.

I: Why?

WB:  Too much donation, I mean corruption.............., comparing with Singapore, Taiwan, S.Korean, HK, you are not the best student in town.  So, your probabiillty of success is lower.

I:  So, if you have RM1m, how much would you put in Malaysia stocks?

WB:  Most probably 50% or less.

I:  Why?

WB:  Looking at the current situation (work culture) + (government policies) + (multinationals companies), your competitiveness is not the TOP 5 in Asia.

I:  Where will you put the remaining 50%?

WB:  At the moment, most markets is on the higher ban of the historical PE.  I will stay invested say 50% in stocks, perhaps some in good companies in S.Korea, Taiwan, Singapore, Europe and NYSE.  

I: One last question, you think you can apply your approach in Malaysia stocks?

WB:  Hmmm............ maybe I won't be warrent buffett here.  There are already so many self claimed warren buffett here.

COUNTRY ALLOCATION

Let just say you inherited RM1.0m, and it is really excess money that you don't depend on, what will be your allocation and what is your plan and approaches?

WB:    Err..........  If you give me a investment horizon of 20, I will look for moat companies all over the world.  Then, I will invest 50% in them, as I said, most markets are on the high side, then, if there is correction of 20% or more, I will get more (say invest another 20%). So I will be 70% invested.  If there is another correction of 20%, I will invest the remaining 30%.  Else, I will stay 50:50, then 70:30 (for 1st correction) and 100:0 (for 2nd correction).