Warren Buffett's Midas touch

The decisions that have made Buffett the second wealthiest man in the world have included investments in Coca-Cola, American Express, Gillette, The Washington Post and Wells Fargo, plus some major acquisitions in the fields of insurance, house building and building materials, clothing and furniture.  During 2003 Buffett, contrary to some market expectations, engaged in currency speculation against the dollar.  By the end of the year his company held some $12 billion in foreign currency.

Buffett's success is founded on information.  When, during the 1990s, undervalued stocks were becoming more difficult to find, Buffett turned his attention to corporate acquisitions.  His next field of operation, in 2002, was junk bonds - until prices rose.  The subsequent foreign currency operation built on the US trade deficit when foreign investors were flooded with dollars.

Buffett takes a long-term view and typically shuns debt.  During the dot-com boom he preferred to steer clear of high-tech stocks, his attitude appearing old-fashioned to many.  In the event, his preference for more traditional and easily understood firms and products bore fruit.  He had correctly gauged the low probability of dotcom stocks rising.  He likes to ask 'discomforting questions' to avoid biased decision making.

Buffett also understands the need to avoid fatal downsides.  He has said that he has 'never believed in risking what my family and friends have and need in order to pursue what they don't have and don't need'.