In economics and finance, arbitrage () is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost.

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to ''expected'' profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). In academic use, an arbitrage involves taking advantage of differences in price of a ''single'' asset or ''identical'' cash-flows; in common use, it is also used to refer to differences between ''similar'' assets (relative value or convergence trades), as in merger arbitrage.

People who engage in arbitrage are called arbitrageurs ()—such as a bank or brokerage firm. The term is mainly applied to trading in financial instruments, such as bonds, stocks, derivatives, commodities and currencies.

Arbitrage-free

If the market prices do not allow for profitable arbitrage, the prices are said to constitute an arbitrage equilibrium or arbitrage-free market. An arbitrage equilibrium is a precondition for a general economic equilibrium. The assumption that there is no arbitrage is used in quantitative finance to calculate a unique risk neutral price for derivatives.

Conditions for arbitrage

Arbitrage is possible when one of three conditions is met:

#The same asset does not trade at the same price on all markets ("the law of one price"). #Two assets with identical cash flows do not trade at the same price. #An asset with a known price in the future does not today trade at its future price discounted at the risk-free interest rate (or, the asset does not have negligible costs of storage; as such, for example, this condition holds for grain but not for securities).

Arbitrage is not simply the act of buying a product in one market and selling it in another for a higher price at some later time. The transactions must occur ''simultaneously'' to avoid exposure to market risk, or the risk that prices may change on one market before both transactions are complete. In practical terms, this is generally only possible with securities and financial products which can be traded electronically, and even then, when each leg of the trade is executed the prices in the market may have moved. Missing one of the legs of the trade (and subsequently having to trade it soon after at a worse price) is called 'execution risk' or more specifically 'leg risk'.

In the simplest example, any good sold in one market should sell for the same price in another. Traders may, for example, find that the price of wheat is lower in agricultural regions than in cities, purchase the good, and transport it to another region to sell at a higher price. This type of price arbitrage is the most common, but this simple example ignores the cost of transport, storage, risk, and other factors. "True" arbitrage requires that there be no market risk involved. Where securities are traded on more than one exchange, arbitrage occurs by simultaneously buying in one and selling on the other.

See rational pricing, particularly arbitrage mechanics, for further discussion.

Mathematically it is defined as follows:

$P(V\_t\; \backslash geq\; 0)\; =\; 1$ and $P(V\_t\; \backslash neq\; 0)\; >\; 0$

where $V\_t$ means a portfolio at time t.

Examples

Suppose that the exchange rates (after taking out the fees for making the exchange) in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = $12 = £6. Converting ¥1000 to $12 in Tokyo and converting that $12 into ¥1200 in London, for a profit of ¥200, would be arbitrage. In reality, this "triangle arbitrage" is so simple that it almost never occurs. But more complicated foreign exchange arbitrages, such as the spot-forward arbitrage (see interest rate parity) are much more common.

One example of arbitrage involves the New York Stock Exchange and the Security Futures Exchange OneChicago (OCX). When the price of a stock on the NYSE and its corresponding futures contract on OCX are out of sync, one can buy the less expensive one and sell it to the more expensive market. Because the differences between the prices are likely to be small (and not to last very long), this can only be done profitably with computers examining a large number of prices and automatically exercising a trade when the prices are far enough out of balance. The activity of other arbitrageurs can make this risky. Those with the fastest computers and the most expertise take advantage of series of small differences that would not be profitable if taken individually.

Economists use the term "global labor arbitrage" to refer to the tendency of manufacturing jobs to flow towards whichever country has the lowest wages per unit output at present and has reached the minimum requisite level of political and economic development to support industrialization. At present, many such jobs appear to be flowing towards China, though some which require command of English are going to India and the Philippines. In popular terms, this is referred to as offshoring. (Note that "offshoring" is not synonymous with "outsourcing", which means "to subcontract from an outside supplier or source", such as when a business outsources its bookkeeping to an accounting firm. Unlike offshoring, outsourcing always involves subcontracting jobs to a different company, and that company can be in the same country as the outsourcing company.)

Sports arbitrage – numerous internet bookmakers offer odds on the outcome of the same event. Any given bookmaker will weight their odds so that no one customer can cover all outcomes at a profit against their books. However, in order to remain competitive their margins are usually quite low. Different bookmakers may offer different odds on the same outcome of a given event; by taking the best odds offered by each bookmaker, a customer can under some circumstances cover all possible outcomes of the event and lock a small risk-free profit, known as a Dutch book. This profit would typically be between 1% and 5% but can be much higher. One problem with sports arbitrage is that bookmakers sometimes make mistakes and this can lead to an invocation of the 'palpable error' rule, which most bookmakers invoke when they have made a mistake by offering or posting incorrect odds. As bookmakers become more proficient, the odds of making an 'arb' usually last for less than an hour and typically only a few minutes. Furthermore, huge bets on one side of the market also alert the bookies to correct the market.

Exchange-traded fund arbitrage – Exchange Traded Funds allow authorized participants to exchange back and forth between shares in underlying securities held by the fund and shares in the fund itself, rather than allowing the buying and selling of shares in the ETF directly with the fund sponsor. ETFs trade in the open market, with prices set by market demand. An ETF may trade at a premium or discount to the value of the underlying assets. When a significant enough premium appears, an arbitrageur will buy the underlying securities, convert them to shares in the ETF, and sell them in the open market. When a discount appears, an arbitrageur will do the reverse. In this way, the arbitrageur makes a low-risk profit, while fulfilling a useful function in the ETF marketplace by keeping ETF prices in line with their underlying value.

Some types of hedge funds make use of a modified form of arbitrage to profit. Rather than exploiting price differences between identical assets, they will purchase and sell securities, assets and derivatives with similar characteristics, and hedge any significant differences between the two assets. Any difference between the hedged positions represents any remaining risk (such as basis risk) plus profit; the belief is that there remains some difference which, even after hedging most risk, represents pure profit. For example, a fund may see that there is a substantial difference between U.S. dollar debt and local currency debt of a foreign country, and enter into a series of matching trades (including currency swaps) to arbitrage the difference, while simultaneously entering into credit default swaps to protect against country risk and other types of specific risk..

Price convergence

Arbitrage has the effect of causing prices in different markets to converge. As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets tend to converge to the same prices, in all markets, in each category. The speed at which prices converge is a measure of market efficiency. Arbitrage tends to reduce price discrimination by encouraging people to buy an item where the price is low and resell it where the price is high, as long as the buyers are not prohibited from reselling and the transaction costs of buying, holding and reselling are small relative to the difference in prices in the different markets.

Arbitrage moves different currencies toward purchasing power parity. As an example, assume that a car purchased in the United States is cheaper than the same car in Canada. Canadians would buy their cars across the border to exploit the arbitrage condition. At the same time, Americans would buy US cars, transport them across the border, and sell them in Canada. Canadians would have to buy American Dollars to buy the cars, and Americans would have to sell the Canadian dollars they received in exchange for the exported cars. Both actions would increase demand for US Dollars, and supply of Canadian Dollars, and as a result, there would be an appreciation of the US Dollar. Eventually, if unchecked, this would make US cars more expensive for all buyers, and Canadian cars cheaper, until there is no longer an incentive to buy cars in the US and sell them in Canada. More generally, international arbitrage opportunities in commodities, goods, securities and currencies, on a grand scale, tend to change exchange rates until the purchasing power is equal.

In reality, of course, one must consider taxes and the costs of travelling back and forth between the US and Canada. Also, the features built into the cars sold in the US are not exactly the same as the features built into the cars for sale in Canada, due, among other things, to the different emissions and other auto regulations in the two countries. In addition, our example assumes that no duties have to be paid on importing or exporting cars from the USA to Canada. Similarly, most assets exhibit (small) differences between countries, transaction costs, taxes, and other costs provide an impediment to this kind of arbitrage.

Similarly, arbitrage affects the difference in interest rates paid on government bonds, issued by the various countries, given the expected depreciations in the currencies, relative to each other (see interest rate parity).

Risks

Arbitrage transactions in modern securities markets involve fairly low day-to-day risks, but can face extremely high risk in rare situations, particularly financial crises, and can lead to bankruptcy. Formally, arbitrage transactions have negative skew – prices can get a small amount closer (but often no closer than 0), while they can get very far apart. The day-to-day risks are generally small because the transactions involve small differences in price, so an execution failure will generally cause a small loss (unless the trade is very big or the price moves rapidly). The rare case risks are extremely high because these small price differences are converted to large profits via leverage (borrowed money), and in the rare event of a large price move, this may yield a large loss.

The main day-to-day risk is that part of the transaction fails – execution risk. The main rare risks are counterparty risk and liquidity risk – that a counterparty to a large transaction or many transactions fails to pay, or that one is required to post margin and does not have the money to do so.

In the academic literature, the idea that seemingly very low risk arbitrage trades might not be fully exploited because of these risk factors and other considerations is often referred to as limits to arbitrage.

Execution risk

Generally it is impossible to close two or three transactions at the same instant; therefore, there is the possibility that when one part of the deal is closed, a quick shift in prices makes it impossible to close the other at a profitable price. However, this is not necessarily the case. Many exchanges and idbs allow multi legged trades (e.g. basis block trades on LIFFE).

Competition in the marketplace can also create risks during arbitrage transactions. As an example, if one was trying to profit from a price discrepancy between IBM on the NYSE and IBM on the London Stock Exchange, they may purchase a large number of shares on the NYSE and find that they cannot simultaneously sell on the LSE. This leaves the arbitrageur in an unhedged risk position.

In the 1980s, risk arbitrage was common. In this form of speculation, one trades a security that is clearly undervalued or overvalued, when it is seen that the wrong valuation is about to be corrected by events. The standard example is the stock of a company, undervalued in the stock market, which is about to be the object of a takeover bid; the price of the takeover will more truly reflect the value of the company, giving a large profit to those who bought at the current price—if the merger goes through as predicted. Traditionally, arbitrage transactions in the securities markets involve high speed, high volume and low risk. At some moment a price difference exists, and the problem is to execute two or three balancing transactions while the difference persists (that is, before the other arbitrageurs act). When the transaction involves a delay of weeks or months, as above, it may entail considerable risk if borrowed money is used to magnify the reward through leverage. One way of reducing the risk is through the illegal use of inside information, and in fact risk arbitrage with regard to leveraged buyouts was associated with some of the famous financial scandals of the 1980s such as those involving Michael Milken and Ivan Boesky.

Mismatch

Another risk occurs if the items being bought and sold are not identical and the arbitrage is conducted under the assumption that the prices of the items are correlated or predictable; this is more narrowly referred to as a convergence trade. In the extreme case this is merger arbitrage, described below. In comparison to the classical quick arbitrage transaction, such an operation can produce disastrous losses.

Counterparty risk

As arbitrages generally involve ''future'' movements of cash, they are subject to counterparty risk: if a counterparty fails to fulfill their side of a transaction. This is a serious problem if one has either a single trade or many related trades with a single counterparty, whose failure thus poses a threat, or in the event of a financial crisis when many counterparties fail. This hazard is serious because of the large quantities one must trade in order to make a profit on small price differences.

For example, if one purchases many risky bonds, then hedges them with CDSes, profiting from the difference between the bond spread and the CDS premium, in a financial crisis the bonds may default ''and'' the CDS writer/seller may itself fail, due to the stress of the crisis, causing the arbitrageur to face steep losses.

Liquidity risk

Arbitrage trades are necessarily synthetic, ''leveraged'' trades, as they involve a short position. If the assets used are not identical (so a price divergence makes the trade temporarily lose money), or the margin treatment is not identical, and the trader is accordingly required to post margin (faces a margin call), the trader may run out of capital (if they run out of cash and cannot borrow more) and go bankrupt even though the trades may be expected to ultimately make money. In effect, arbitrage traders synthesize a put option on their ability to finance themselves.

Prices may diverge during a financial crisis, often termed a "flight to quality"; these are precisely the times when it is hardest for leveraged investors to raise capital (due to overall capital constraints), and thus they will lack capital precisely when they need it most.

Types of arbitrage

Merger arbitrage

Also called risk arbitrage, merger arbitrage generally consists of buying the stock of a company that is the target of a takeover while shorting the stock of the acquiring company.

Usually the market price of the target company is less than the price offered by the acquiring company. The spread between these two prices depends mainly on the probability and the timing of the takeover being completed as well as the prevailing level of interest rates.

The bet in a merger arbitrage is that such a spread will eventually be zero, if and when the takeover is completed. The risk is that the deal "breaks" and the spread massively widens.

Municipal bond arbitrage

Also called ''municipal bond relative value arbitrage'', ''municipal arbitrage'', or just ''muni arb'', this hedge fund strategy involves one of two approaches.

Generally, managers seek relative value opportunities by being both long and short municipal bonds with a duration-neutral book. The relative value trades may be between different issuers, different bonds issued by the same entity, or capital structure trades referencing the same asset (in the case of revenue bonds). Managers aim to capture the inefficiencies arising from the heavy participation of non-economic investors (i.e., high income "buy and hold" investors seeking tax-exempt income) as well as the "crossover buying" arising from corporations' or individuals' changing income tax situations (i.e., insurers switching their munis for corporates after a large loss as they can capture a higher after-tax yield by offsetting the taxable corporate income with underwriting losses). There are additional inefficiencies arising from the highly fragmented nature of the municipal bond market which has two million outstanding issues and 50,000 issuers in contrast to the Treasury market which has 400 issues and a single issuer.

Second, managers construct leveraged portfolios of AAA- or AA-rated tax-exempt municipal bonds with the duration risk hedged by shorting the appropriate ratio of taxable corporate bonds. These corporate equivalents are typically interest rate swaps referencing Libor or SIFMA . The arbitrage manifests itself in the form of a relatively cheap longer maturity municipal bond, which is a municipal bond that yields significantly more than 65% of a corresponding taxable corporate bond. The steeper slope of the municipal yield curve allows participants to collect more after-tax income from the municipal bond portfolio than is spent on the interest rate swap; the carry is greater than the hedge expense. Positive, tax-free carry from muni arb can reach into the double digits. The bet in this municipal bond arbitrage is that, over a longer period of time, two similar instruments—municipal bonds and interest rate swaps—will correlate with each other; they are both very high quality credits, have the same maturity and are denominated in U.S. dollars. Credit risk and duration risk are largely eliminated in this strategy. However, basis risk arises from use of an imperfect hedge, which results in significant, but range-bound principal volatility. The end goal is to limit this principal volatility, eliminating its relevance over time as the high, consistent, tax-free cash flow accumulates. Since the inefficiency is related to government tax policy, and hence is structural in nature, it has not been arbitraged away.

Note, however, that many municipal bonds are callable, and that this imposes substantial additional risks to the strategy.

Convertible bond arbitrage

A convertible bond is a bond that an investor can return to the issuing company in exchange for a predetermined number of shares in the company.

A convertible bond can be thought of as a corporate bond with a stock call option attached to it.

The price of a convertible bond is sensitive to three major factors:

''interest rate''. When rates move higher, the bond part of a convertible bond tends to move lower, but the call option part of a convertible bond moves higher (and the aggregate tends to move lower).

''stock price''. When the price of the stock the bond is convertible into moves higher, the price of the bond tends to rise.

''credit spread''. If the creditworthiness of the issuer deteriorates (e.g. rating downgrade) and its credit spread widens, the bond price tends to move lower, but, in many cases, the call option part of the convertible bond moves higher (since credit spread correlates with volatility).

Given the complexity of the calculations involved and the convoluted structure that a convertible bond can have, an arbitrageur often relies on sophisticated quantitative models in order to identify bonds that are trading cheap versus their theoretical value.

Convertible arbitrage consists of buying a convertible bond and hedging two of the three factors in order to gain exposure to the third factor at a very attractive price.

For instance an arbitrageur would first buy a convertible bond, then sell fixed income securities or interest rate futures (to hedge the interest rate exposure) and buy some credit protection (to hedge the risk of credit deterioration). Eventually what he'd be left with is something similar to a call option on the underlying stock, acquired at a very low price. He could then make money either selling some of the more expensive options that are openly traded in the market or delta hedging his exposure to the underlying shares.

Depository receipts

A depository receipt is a security that is offered as a "tracking stock" on another foreign market. For instance a Chinese company wishing to raise more money may issue a depository receipt on the New York Stock Exchange, as the amount of capital on the local exchanges is limited. These securities, known as ADRs (American Depositary Receipt) or GDRs (Global Depositary Receipt) depending on where they are issued, are typically considered "foreign" and therefore trade at a lower value when first released. However, they are exchangeable into the original security (known as fundibility) and actually have the same value. In this case there is a spread between the perceived value and real value, which can be extracted. Since the ADR is trading at a value lower than what it is worth, one can purchase the ADR and expect to make money as its value converges on the original. However there is a chance that the original stock will fall in value too, so by shorting it one can hedge that risk.

Dual-listed companies

A dual-listed company (DLC) structure involves two companies incorporated in different countries contractually agreeing to operate their businesses as if they were a single enterprise, while retaining their separate legal identity and existing stock exchange listings. In integrated and efficient financial markets, stock prices of the twin pair should move in lockstep. In practice, DLC share prices exhibit large deviations from theoretical parity. Arbitrage positions in DLCs can be set up by obtaining a long position in the relatively underpriced part of the DLC and a short position in the relatively overpriced part. Such arbitrage strategies start paying off as soon as the relative prices of the two DLC stocks converge toward theoretical parity. However, since there is no identifiable date at which DLC prices will converge, arbitrage positions sometimes have to be kept open for considerable periods of time. In the meantime, the price gap might widen. In these situations, arbitrageurs may receive margin calls, after which they would most likely be forced to liquidate part of the position at a highly unfavorable moment and suffer a loss. Arbitrage in DLCs may be profitable, but is also very risky, see. Background material is available at .

A good illustration of the risk of DLC arbitrage is the position in Royal Dutch Shell—which had a DLC structure until 2005—by the hedge fund Long-Term Capital Management (LTCM, see also the discussion below). Lowenstein (2000) describes that LTCM established an arbitrage position in Royal Dutch Shell in the summer of 1997, when Royal Dutch traded at an 8 to 10 percent premium. In total $2.3 billion was invested, half of which long in Shell and the other half short in Royal Dutch (Lowenstein, p. 99). In the autumn of 1998 large defaults on Russian debt created significant losses for the hedge fund and LTCM had to unwind several positions. Lowenstein reports that the premium of Royal Dutch had increased to about 22 percent and LTCM had to close the position and incur a loss. According to Lowenstein (p. 234), LTCM lost $286 million in equity pairs trading and more than half of this loss is accounted for by the Royal Dutch Shell trade.

Private to public equities

The market prices for privately held companies are typically viewed from a return on investment perspective (such as 25%), whilst publicly held and or exchange listed companies trade on a Price to Earnings multiple (such as a P/E of 10, which equates to a 10% ROI). Thus, if a publicly traded company specialises in the acquisition of privately held companies, from a per-share perspective there is a gain with every acquisition that falls within these guidelines. Exempli gratia, Berkshire-Hathaway. A hedge fund that is an example of this type of arbitrage is Greenridge Capital, which acts as an angel investor retaining equity in private companies which are in the process of becoming publicly traded, buying in the private market and later selling in the public market. Private to public equities arbitrage is a term which can arguably be applied to investment banking in general. Private markets to public markets differences may also help explain the overnight windfall gains enjoyed by principals of companies that just did an initial public offering.

Regulatory arbitrage

Regulatory arbitrage is where a regulated institution takes advantage of the difference between its real (or economic) risk and the regulatory position. For example, if a bank, operating under the Basel I accord, has to hold 8% capital against default risk, but the real risk of default is lower, it is profitable to securitise the loan, removing the low risk loan from its portfolio. On the other hand, if the real risk is higher than the regulatory risk then it is profitable to make that loan and hold on to it, provided it is priced appropriately.

This process can increase the overall riskiness of institutions under a risk insensitive regulatory regime, as described by Alan Greenspan in his October 1998 speech on The Role of Capital in Optimal Banking Supervision and Regulation.

Regulatory Arbitrage was used for the first time in 2005 when it was applied by Scott V. Simpson, a partner at law firm Skadden, Arps, to refer to a new defence tactic in hostile mergers and acquisitions where differing takeover regimes in deals involving multi-jurisdictions are exploited to the advantage of a target company under threat.

In economics, regulatory arbitrage (sometimes, tax arbitrage) may be used to refer to situations when a company can choose a nominal place of business with a regulatory, legal or tax regime with lower costs. For example, an insurance company may choose to locate in Bermuda due to preferential tax rates and policies for insurance companies. This can occur particularly where the business transaction has no obvious physical location: in the case of many financial products, it may be unclear "where" the transaction occurs.

Regulatory arbitrage can include restructuring a bank by outsourcing services such as IT. The outsourcing company takes over the installations, buying out the bank's assets and charges a periodic service fee back to the bank. This frees up cashflow usable for new lending by the bank. The bank will have higher IT costs, but counts on the multiplier effect of money creation and the interest rate spread to make it a profitable exercise.

Example: Suppose the bank sells its IT installations for 40 million USD. With a reserve ratio of 10%, the bank can create 400 million USD in additional loans (there is a time lag, and the bank has to expect to recover the loaned money back into its books). The bank can often lend (and securitize the loan) to the IT services company to cover the acquisition cost of the IT installations. This can be at preferential rates, as the sole client using the IT installation is the bank. If the bank can generate 5% interest margin on the 400 million of new loans, the bank will increase interest revenues by 20 million. The IT services company is free to leverage their balance sheet as aggressively as they and their banker agree to. This is the reason behind the trend towards outsourcing in the financial sector. Without this money creation benefit, it is actually more expensive to outsource the IT operations as the outsourcing adds a layer of management and increases overhead.

Telecom arbitrage

Telecom arbitrage companies allow phone users to make international calls for free through certain access numbers. Such services are offered in the United Kingdom; the telecommunication arbitrage companies get paid an interconnect charge by the UK mobile networks and then buy international routes at a lower cost. The calls are seen as free by the UK contract mobile phone customers since they are using up their allocated monthly minutes rather than paying for additional calls.

Such services were previously offered in the United States by companies such as FuturePhone.com. These services would operate in rural telephone exchanges, primarily in small towns in the state of Iowa. In these areas, the local telephone carriers are allowed to charge a high "termination fee" to the caller's carrier in order to fund the cost of providing service to the small and sparsely populated areas that they serve. However, FuturePhone (as well as other similar services) ceased operations upon legal challenges from AT&T and other service providers.

Statistical arbitrage

Statistical arbitrage is an imbalance in expected nominal values. A casino has a statistical arbitrage in every game of chance that it offers—referred to as the house advantage, house edge, vigorish or house vigorish.

The debacle of Long-Term Capital Management

Long-Term Capital Management (LTCM) lost 4.6 billion U.S. dollars in fixed income arbitrage in September 1998. LTCM had attempted to make money on the price difference between different bonds. For example, it would sell U.S. Treasury securities and buy Italian bond futures. The concept was that because Italian bond futures had a less liquid market, in the short term Italian bond futures would have a higher return than U.S. bonds, but in the long term, the prices would converge. Because the difference was small, a large amount of money had to be borrowed to make the buying and selling profitable.

The downfall in this system began on August 17, 1998, when Russia defaulted on its ruble debt and domestic dollar debt. Because the markets were already nervous due to the Asian financial crisis, investors began selling non-U.S. treasury debt and buying U.S. treasuries, which were considered a safe investment. As a result the price on US treasuries began to increase and the return began decreasing because there were many buyers, and the return (yield) on other bonds began to increase because there were many sellers (i.e. the price of those bonds fell). This caused the difference between the prices of U.S. treasuries and other bonds to increase, rather than to decrease as LTCM was expecting. Eventually this caused LTCM to fold, and their creditors had to arrange a bail-out. More controversially, officials of the Federal Reserve assisted in the negotiations that led to this bail-out, on the grounds that so many companies and deals were intertwined with LTCM that if LTCM actually failed, they would as well, causing a collapse in confidence in the economic system. Thus LTCM failed as a fixed income arbitrage fund, although it is unclear what sort of profit was realized by the banks that bailed LTCM out.

Etymology

"Arbitrage" is a French word and denotes a decision by an arbitrator or arbitration tribunal. (In modern French, "''''" usually means referee or umpire.) In the sense used here it is first defined in 1704 by Mathieu de la Porte in his treatise "" as a consideration of different exchange rates to recognize the most profitable places of issuance and settlement for a bill of exchange ("".)

See also

Types of financial arbitrage

Arbitrage betting

Covered interest arbitrage

Fixed income arbitrage

Political arbitrage

Risk arbitrage

Statistical arbitrage

Triangular arbitrage

Uncovered interest arbitrage

Volatility arbitrage

Related concepts

Algorithmic trading

Arbitrage pricing theory

Coherence (philosophical gambling strategy), analogous concept in Bayesian probability

Efficient market hypothesis

Immunization (finance)

Interest rate parity

Intermediation

No free lunch with vanishing risk

TANSTAAFL

Value investing

Notes

References

Greider, William (1997). ''One World, Ready or Not''. Penguin Press. ISBN 0-7139-9211-5.

''Special Situation Investing: Hedging, Arbitrage, and Liquidation'', Brian J. Stark, Dow-Jones Publishers. New York, NY 1983. ISBN 0870943847; ISBN 9780870943843

External links

What is Arbitrage? (About.com)

ArbitrageView.com – Arbitrage opportunities in pending merger deals in the U.S. market

Information on arbitrage in dual-listed companies on the website of Mathijs A. van Dijk.

What is Regulatory Arbitrage. Regulatory Arbitrage after the Basel ii framework and the 8th Company Law Directive of the European Union.

Institute for Arbitrage.

Institute for Arbitrage and stock market.

Category:Financial markets

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Coordinates	34°03′″N118°15′″N
name	Al Pacino
birth name	Alfredo James Pacino
birth date	April 25, 1940
birth place	New York City
occupation	Actor, director, screenwriter, producer
years active	1968–present
children	2 daughters, 1 son }}

Alfredo James "Al" Pacino (born April 25, 1940) is an American film and stage actor and director. He is famous for playing mobsters, including Michael Corleone in ''The Godfather'' trilogy, Tony Montana in ''Scarface'', Alphonse "Big Boy" Caprice in ''Dick Tracy'' and Carlito Brigante in ''Carlito's Way'', though he has also appeared several times on the other side of the law — as a police officer, detective and a lawyer. His role as Frank Slade in ''Scent of a Woman'' won him the Academy Award for Best Actor in 1992 after receiving seven previous Oscar nominations.

He made his feature film debut in the 1969 film ''Me, Natalie'' in a minor supporting role, before playing the leading role in the 1971 drama ''The Panic in Needle Park''. Pacino made his major breakthrough when he was given the role of Michael Corleone in ''The Godfather'' in 1972, which earned him an Academy Award nomination for Best Supporting Actor. Other Oscar nominations for Best Supporting Actor were for ''Dick Tracy'' and ''Glengarry Glen Ross''. Oscar nominations for Best Actor include ''The Godfather Part II'', ''Serpico'', ''Dog Day Afternoon'', ''...And Justice for All'' and ''Scent of a Woman''.

In addition to a career in film, he has also enjoyed a successful career on stage, picking up Tony Awards for ''Does a Tiger Wear a Necktie?'' and ''The Basic Training of Pavlo Hummel''. A longtime fan of Shakespeare, he made his directorial debut with ''Looking for Richard'', a quasi-documentary on the play ''Richard III''. Pacino has received numerous lifetime achievement awards, including one from the American Film Institute. He is a method actor, taught mainly by Lee Strasberg and Charles Laughton at the Actors Studio in New York.

Although he has never married, Pacino has had several relationships with actresses and has three children.

Early life and education

Pacino was born in East Harlem, New York City to Italian American parents Rose and Salvatore Pacino, who divorced when he was two years old. When he was two, his mother moved to the South Bronx near the Bronx Zoo, to live with her parents, Kate and James Gerardi, who originated from Corleone, Sicily. His father moved to Covina, California, and worked as an insurance salesman and restaurateur. Pacino attended Fiorello H. LaGuardia High School in New York. During his teenage years 'Sonny', as he was known to his friends, aimed to become a baseball player, though he was also nicknamed 'The Actor'. Pacino flunked nearly all of his classes except English and dropped out of school at 17. His mother disagreed with his decision; they had an argument and he left home. He worked at a string of low-paying jobs, including messenger boy, busboy, janitor, and postal clerk, in order to finance his acting studies.

He started smoking at age nine, drinking and casual marijuana use at age thirteen, but never took hard drugs. His two closest friends died young of drug abuse at the ages of 19 and 30. Growing up in a deprived area, he got into occasional fights and was something of a troublemaker at school.

He acted in basement plays in New York's theatrical underground but was rejected for the Actors Studio while still a teenager. Pacino then joined the Herbert Berghof Studio (HB Studio), where he met acting teacher Charlie Laughton, who became his mentor and best friend. During this period, he was frequently unemployed and homeless, and sometimes had to sleep on the street, in theaters, or at friends' houses. In 1962, his mother died at the age of 43. The following year, his grandfather, James Gerardi, one of the most influential people in his life, also died.

Actors Studio training

After having spent four years at HB Studio, Pacino successfully auditioned for the Actors Studio. The Actors Studio is a membership organization for professional actors, theatre directors and playwrights in the Hell's Kitchen neighborhood of Manhattan in New York City. Pacino studied "method acting" under acting coach Lee Strasberg, who later appeared with Pacino in the films ''The Godfather Part II'' and in ''...And Justice for All''. During later interviews he spoke about Strasberg and the Studio's effect on his career. "The Actors Studio meant so much to me in my life. Lee Strasberg hasn’t been given the credit he deserves ... Next to Charlie, it sort of launched me. It really did. That was a remarkable turning point in my life. It was directly responsible for getting me to quit all those jobs and just stay acting." During another interview he added, "It was exciting to work for him [Lee Strasberg] because he was so interesting when he talked about a scene or talked about people. One would just want to hear him talk, because things he would say, you’d never heard before ... He had such a great understanding... he loved actors so much."

Pacino is currently co-president, along with Ellen Burstyn and Harvey Keitel, of the Actors Studio.

Stage career

In 1967, Pacino spent a season at the Charles Playhouse in Boston, performing in Clifford Odets' ''Awake and Sing!'' (his first major paycheck: $125 a week); and in Jean-Claude Van Itallie's ''America, Hurrah'', where he met actress Jill Clayburgh while working on this play. They went on to have a five-year romance and moved together back to New York City.

In 1968, Pacino starred in Israel Horovitz's ''The Indian Wants the Bronx'' at the Astor Place Theater, playing Murph, a street punk. The play opened January 17, 1968, and ran for 177 performances; it was staged in a double bill with Horovitz's ''It's Called the Sugar Plum'', starring Clayburgh. Pacino won an Obie Award for Best Actor for his role, with John Cazale winning for Best Supporting actor and Horowitz for Best New Play. Martin Bregman saw the play and offered to be Pacino's manager, a partnership that became fruitful in the years to come, as Bregman encouraged Pacino to do ''The Godfather'', ''Serpico'' and ''Dog Day Afternoon''. Pacino and this production of ''The Indian Wants the Bronx'' traveled to Italy for a performance at the Festival dei Due Mondi in Spoleto. It was Pacino's first journey to Italy; he later recalled that "performing for an Italian audience was a marvelous experience". Pacino and Clayburgh were cast in "Deadly Circle of Violence", an episode of the ABC television series ''N.Y.P.D.'', premiering November 12, 1968. Clayburgh at the time was also appearing on the soap opera ''Search for Tomorrow'', playing the role of Grace Bolton. Her father would send the couple money each month to help.

On February 25, 1969, Pacino made his Broadway debut in Don Petersen's ''Does a Tiger Wear a Necktie?'' at the Belasco Theater. It closed after 39 performances on March 29, 1969, but Pacino received rave reviews and won the Tony Award on April 20, 1969. Pacino continued performing onstage in the 1970s, winning a second Tony Award for ''The Basic Training of Pavlo Hummel'' and performing the title role in ''Richard III''. In 1980s Pacino again achieved critical success on the stage while appearing in David Mamet's ''American Buffalo,'' for which Pacino was nominated for a Drama Desk Award. Since 1990 Pacino's stage work has included revivals of Eugene O'Neill's ''Hughie'', Oscar Wilde's ''Salome'' and in 2005 Lyle Kessler's ''Orphans''.

Pacino made his return to the stage in summer 2010, as Shylock in a Shakespeare in the Park production of ''The Merchant of Venice''. The acclaimed production transferred to Broadway at the Broadhurst Theatre in October, earning US$1 million at the box office in its first week. The performance also garnered him a Tony Award nomination for Best Leading Actor in a Play.

Film career

Early film career

Pacino found acting to be enjoyable and realized he had a gift for it while studying at The Actors Studio. However, his early work was not financially rewarding. After his success on stage, Pacino made his movie debut in 1969 with a brief screen appearance in ''Me, Natalie'', an independent film starring Patty Duke. In 1970, Pacino signed with the talent agency Creative Management Associates (CMA).

1970s

It was the 1971 film ''The Panic in Needle Park'', in which he played a heroin addict, that brought Pacino to the attention of director Francis Ford Coppola, who cast him as Michael Corleone in the blockbuster Mafia film ''The Godfather'' (1972). Although several established actors – including Robert Redford, Warren Beatty, and then little-known Robert De Niro – also tried out for the part, Coppola selected the relatively unknown Pacino, much to the dismay of studio executives. He was even teased on the set because his short stature. Pacino's performance earned him an Academy Award nomination, and offered a prime example of his early acting style, described by Halliwell's Film Guide as "intense" and "tightly clenched". Pacino boycotted the Academy Award ceremony, as he was insulted at being nominated for the Supporting Acting award, noting that he had more screen time than costar and Best Actor winner Marlon Brando – who was himself boycotting the awards.

In 1973, he co-starred in ''Scarecrow'', with Gene Hackman, and won the Palme d'Or at the Cannes Film Festival. That same year Pacino was nominated for an Academy Award for Best Actor after starring in ''Serpico'', based on the true story of New York City policeman Frank Serpico, who went undercover to expose the corruption of fellow officers. In 1975, he enjoyed further success with the release of ''Dog Day Afternoon'', based on the true story of bank robber John Wojtowicz. It was directed by Sidney Lumet, who also directed him in ''Serpico'' a few years earlier, and Pacino was again nominated for Best Actor.

In 1977, Pacino starred as a race-car driver in ''Bobby Deerfield'', directed by Sydney Pollack, and received a Golden Globe nomination for Best Motion Picture Actor – Drama for his portrayal of the title role, losing out to Richard Burton, who won for ''Equus''. His next film was the courtroom drama ''...And Justice for All'', which again saw Pacino lauded by critics for his wide range of acting abilities, and nominated for the Best Actor Oscar for a fourth time. and the comedy-drama ''Author! Author!'' were critically panned. However, 1983's ''Scarface'', directed by Brian De Palma, proved to be a career highlight and a defining role. Upon its initial release, the film was critically panned, but did fairly well at the box office, grossing over US$45 million domestically. Pacino earned a Golden Globe nomination for his role as Cuban born american drug lord resulting in a four-year hiatus from films. During this time Pacino returned to the stage. He mounted workshop productions of ''Crystal Clear'', ''National Anthems'' and other plays; he appeared in ''Julius Caesar'' in 1988 in producer Joseph Papp's New York Shakespeare Festival. Pacino remarked on his hiatus from film: "I remember back when everything was happening, '74, '75, doing ''The Resistible Rise of Arturo Ui'' on stage and reading that the reason I'd gone back to the stage was that my movie career was waning! That's been the kind of ethos, the way in which theater's perceived, unfortunately." Pacino returned to film in 1989's ''Sea of Love'', in which he portrayed a detective hunting a serial killer who finds victims through the singles column in a newspaper. The film earned solid reviews.

1990s

Pacino received an Academy Award nomination for playing Big Boy Caprice in the box office hit ''Dick Tracy'' in 1990, in which critic Roger Ebert wrote that Pacino is "the scene-stealer". Later in the year he followed this up by a return to one of his most famous characters, Michael Corleone, in ''The Godfather Part III'' (1990). The film received mixed reviews, and had problems during pre-production due to script rewrites and the withdrawal of actors shortly before production. In 1991, Pacino starred in ''Frankie and Johnny'' with Michelle Pfeiffer, who co-starred with Pacino in ''Scarface''. Pacino portrays a recently paroled cook who begins a relationship with a waitress (Pfeiffer) in the diner he works in. It was adapted by Terrence McNally from his own Off-Broadway play ''Frankie and Johnny in the Clair de Lune'' (1987), which featured Kenneth Welsh and Kathy Bates. The film received mixed reviews, although Pacino later said he enjoyed playing the part. Janet Maslin in ''The New York Times'' wrote, "Mr. Pacino has not been this uncomplicatedly appealing since his "Dog Day Afternoon" days, and he makes Johnny's endless enterprise in wooing Frankie a delight. His scenes alone with Ms. Pfeiffer have a precision and honesty that keep the film's maudlin aspects at bay."

In 1992, Pacino won the Academy Award for Best Actor, for his portrayal of the blind U.S. Army Lieutenant Colonel Frank Slade in Martin Brest's ''Scent of a Woman''. That year, he was also nominated for Best Supporting Actor for ''Glengarry Glen Ross'', making Pacino the first male actor ever to receive two acting nominations for two different movies in the same year, and to win for the lead role.

Pacino starred alongside Sean Penn in the crime dramas ''Carlito's Way'' in 1993, in which he portrayed a gangster who is released from prison with the help of his lawyer (Penn) and vows to go straight. Pacino starred in Michael Mann's ''Heat'' (1995), in which he and Robert De Niro appeared on-screen together for the first time (though both Pacino and De Niro starred in ''The Godfather Part II'', they did not share any scenes).

In 1996, Pacino starred in his theatrical docudrama ''Looking for Richard'', which is both a performance of selected scenes of William Shakespeare's ''Richard III'' and a broader examination of Shakespeare's continuing role and relevance in popular culture. The cast brought together for the performance included Alec Baldwin, Kevin Spacey and Winona Ryder. Pacino played Satan in the supernatural thriller ''The Devil's Advocate'' (1997) which co-starred Keanu Reaves. The film was a success at the box office, taking US$150 million worldwide. Roger Ebert wrote in the ''Chicago Sun-Times'', ‘The satanic character is played by Pacino with relish bordering on glee.’ In ''Donnie Brasco'' Pacino played mafia gangster "Lefty", in the true story of undercover FBI agent Donnie Brasco (Johnny Depp) and his work in bringing down the mafia from the inside. Pacino also starred as real life ''60 Minutes'' producer Lowell Bergman in the multi-Oscar nominated ''The Insider'' opposite Russell Crowe, before starring in Oliver Stone's ''Any Given Sunday'' in 1999.

2000s

Pacino has not received another nomination from the Academy since ''Scent of a Woman'', but won two Golden Globes since the year 2000, the first being the Cecil B. DeMille Award in 2001 for lifetime achievement in motion pictures.

In 2000, Pacino released a low budget film adaptation of Ira Lewis' play ''Chinese Coffee'' to film festivals. Shot almost exclusively as a one-on-one conversation between the two main characters, the project took almost three years to complete and it was funded entirely by Pacino. ''Chinese Coffee'' was included along with Pacino's two other rare films he has been involved in producing, ''The Local Stigmatic'' and ''Looking for Richard'', on a special DVD boxset titled ''Pacino: An Actor's Vision'' which was released in 2007. Pacino produced prologues and epilogues for the discs containing the films.

Pacino turned down an offer to reprise his role as Michael Corleone in the computer game version of ''The Godfather''. As a result, Electronic Arts was not permitted to use Pacino's likeness or voice in the game, although his character does appear in it. He did allow his likeness to appear in the video game adaptation of the remake of 1983's ''Scarface'', titled ''Scarface: The World is Yours''.

Director Christopher Nolan worked with Pacino for ''Insomnia'', a remake of the Norwegian film of the same name, co-starring Robin Williams. ''Newsweek'' stated that "he [Pacino] can play small as rivetingly as he can play big, that he can implode as well as explode". The film and Pacino's performance were well-received, gaining a favorable rating of 92 percent on the review aggregation website Rotten Tomatoes. The film did moderately well at the box office, taking in $113 million dollars worldwide. His next film, ''S1m0ne'', was one that Pacino liked, but which did not gain much critical praise or box office success.

He played the part of a publicist in ''People I Know'', a small film that received little attention despite Pacino's well-received performance. Rarely taking a supporting role since his commercial breakthrough, he accepted a small part in the box office flop ''Gigli'' in 2003 as a favor to director Martin Brest. and was described by Pacino as something he "personally couldn't follow".

Pacino starred as Shylock in Michael Radford's 2004 film adaptation of ''The Merchant of Venice'', choosing to bring compassion and depth to a character traditionally played as a villainous caricature. In ''Two for the Money'', Pacino portrays a sports gambling agent and mentor for Matthew McConaughey, alongside Rene Russo. The film was released on October 8, 2005 and received mixed reviews. Desson Thomson wrote in ''The Washington Post'', "Al Pacino has played the mentor so many times, he ought to get a kingmaker's award (...) the fight between good and evil feels fixed in favor of Hollywood redemption."

On October 20, 2006, the American Film Institute named Pacino the recipient of the 35th AFI Life Achievement Award. On November 22, 2006, the University Philosophical Society of Trinity College, Dublin awarded Pacino the Honorary Patronage of the Society.

Pacino starred in Steven Soderbergh’s ''Ocean's Thirteen'' alongside George Clooney, Brad Pitt, Matt Damon, Elliott Gould and Andy García as the villain Willy Bank, a casino tycoon targeted by Danny Ocean and his crew. The film received generally favorable reviews.

''88 Minutes'' was released on April 18, 2008 in the United States, having already been released in various other countries in 2007. The film co-starred Alicia Witt and was critically panned, although critics found the fault to be in the plot instead of Pacino's acting. In ''Righteous Kill'', Pacino and Robert De Niro co-star as New York detectives searching for a serial killer; rapper 50 Cent also stars in it. The film was released to theaters on September 12, 2008. Although it was an anticipated return for the two stars, it was not well received by critics. Lou Lumenick of ''The New York Post'' gave ''Righteous Kill'' one star out of four, saying: "Al Pacino and Robert De Niro collect bloated paychecks with intent to bore in ''Righteous Kill'', a slow-moving, ridiculous police thriller that would have been shipped straight to the remainder bin at Blockbuster if it starred anyone else."

2010s

Pacino played Dr. Jack Kevorkian in an HBO Films biopic entitled ''You Don't Know Jack'', which premiered April 2010. The film is about the life and work of the physician-assisted suicide advocate. The performance earned Pacino his second Emmy Award for lead actor and his fourth Golden Globe award.

Pacino and Robert De Niro are reportedly set to star in the upcoming project ''The Irishman'', that will be directed by Martin Scorsese and co-star Joe Pesci. He's also filming a biographical picture about Phil Spector.

It was announced in May 2011 that Pacino was to be honored with the "Glory to the Film-maker" award at the 68th Venice International Film Festival. The award will be presented ahead of the premier of his film ''Wilde Salome'', which is the third film Pacino has directed. Pacino, who plays the role of Herod in the film, describes it as his "most personal project ever".

Personal life

Although he has never married, Pacino has three children from two of his many relationships. The eldest, Julie Marie (born 1989), is his daughter with acting coach Jan Tarrant. He also has twins, son Anton James and daughter Olivia Rose (born 2001), with actress Beverly D'Angelo, with whom he had a relationship from 1996 until 2003. Pacino had a relationship with Diane Keaton, his co-star in the Godfather Trilogy. The on-again, off-again relationship ended following the filming of ''The Godfather Part II''. Other women he has had relationships with include Tuesday Weld, Marthe Keller, Kathleen Quinlan and Lyndall Hobbs.

Filmography

Year	Title	Role	Notes
1969	''Me, Natalie''	Tony	Film debut
1971	''''	Bobby
1972	''''	Michael Corleone	Nominated—Academy Award for Best Supporting ActorNominated—Golden Globe Award for Best Actor – Motion Picture Drama
1973		Francis Lionel 'Lion' Delbuchi
1973	''Serpico''	Frank Serpico	Golden Globe Award for Best Actor – Motion Picture DramaNominated—Academy Award for Best Actor
1974	''''	Michael Corleone
1990	''''	Michael Corleone	Nominated—Golden Globe Award for Best Actor – Motion Picture Drama
1991		Johnny
1992			Nominated—Academy Award for Best Supporting ActorNominated—Golden Globe Award for Best Supporting Actor – Motion Picture
1992	''Scent of a Woman''	Frank Slade	Academy Award for Best Actor
1996		John Pappas
1997
1997	''''	John Milton
1999	''''	Lowell Bergman
1999	''Any Given Sunday''	Tony D'Amato
2000	''Chinese Coffee''	Harry Levine	Also director; filmed in 1997
2002		Will Dormer
2002	''S1m0ne''	Viktor Taransky
2002	''People I Know''	Eli Wurman
2003	''''	Walter Burke
2003	''Gigli''	Starkman
2003		Roy Cohn	Emmy Award for Best Lead Actor – Miniseries or a MovieGolden Globe Award for Best Actor in a Mini-Series or Motion PictureScreen Actors Guild Award–Best Actor in A Mini-Series or Television Movie
2004	''''	Shylock
2005		Walter Abrams
2007	''Ocean's Thirteen''	Willie Bank
2007	''88 Minutes''	Dr. Jack Gramm
2008	''Righteous Kill''	Detective David "Rooster" Fisk
2010		Dr. Jack Kevorkian	TV filmEmmy Award for Outstanding Lead Actor – Miniseries or a Movie Golden Globe Award for Best Actor in a Mini-Series or Motion Picture Screen Actors Guild Award–Best Actor in A Mini-Series or Television Movie
2011	''The Son of No One''	Detective Stanford
2011	''Wilde Salome''		director
2011		Himself
2013		Aniello Dellacroce

Awards and nominations

Pacino has been nominated and has won many awards during his acting career including eight Oscar nominations (winning one), 15 Golden Globe nominations (winning four), five BAFTA nominations (winning two), two Emmy Awards for his work on Television and two Tony Awards for his work on the Stage. In 2007 the American Film Institute awarded Pacino with a lifetime achievement award and in 2003 British television viewers voted Pacino as the greatest film star of all time in a poll for Channel 4.

Notes

References

External links

Al Pacino at Emmys.com

Category:1940 births Category:Actors from New York City Category:Actors Studio alumni Category:American film actors Category:American film directors Category:American people of Italian descent Category:American people of Sicilian descent Category:American stage actors Category:BAFTA winners (people) Category:Best Actor Academy Award winners Category:Best Actor BAFTA Award winners Category:Best Drama Actor Golden Globe (film) winners Category:Best Miniseries or Television Movie Actor Golden Globe winners Category:Cecil B. DeMille Award Golden Globe winners Category:Drama Desk Award winners Category:Emmy Award winners Category:Fiorello H. LaGuardia High School alumni Category:Living people Category:Obie Award recipients Category:Outstanding Performance by a Male Actor in a Miniseries or Television Movie Screen Actors Guild Award winners Category:People from Harlem Category:People from New York City Category:People from the Bronx Category:Tony Award winners Category:Article Feedback 5

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Alan Seymour (born 6 June 1927 in Fremantle, Western Australia), is an Australian playwright and author. He was educated at Perth Modern School, leaving at 15 after failing to complete the Junior Certificate. He found work as a radio announcer in a commercial radio station 6PM. During his two years there he wrote a number of short radio plays that were broadcast live. In 1945 he moved to Sydney where he worked as an advertising copy-writer with 2UE.

In 1945 Seymour moved to Sydney where he worked as an advertising copy-writer with 2UE. He returned to Perth after the war where he worked as a free-lance writer for ABC Radio. Seymour became ABC Radio’s film critic. He joined a commercial radio station 6KY as an announcer and copy-writer and after six months was offered an announcing post at the ABC. In November 1949, Seymour returned to Sydney where he became an educational and freelance drama writer for ABC Radio and later television. From 1953 to 1957 he was theatrical director for the Sydney Opera Group. His first play, ''Swamp Creatures'', premiered by the Canberra Repertory Society, was a finalist in the London ''Observer'' play competition in 1957.

Seymour left Australia in 1961 and worked in London as a television writer, producer and commissioning editor with the BBC, and as a theatre critic for ''The London Magazine''. From 1966-1971 he lived in Turkey and wrote novels, stage plays and magazine articles. From 1974-81 Seymour was a script editor and occasional producer with BBC Television, after which he returned to free-lance writing. He returned to live in Sydney in 1995.

His best-known play, ''The One Day of the Year'' was written in 1958 for an amateur playwriting competition, inspired by an article in the University of Sydney newspaper ''Honi Soit'' lambasting Anzac Day.

The play met with huge controversy on its release. Initially it was rejected by the Adelaide Festival of Arts Board of Governors in 1960, but was first performed on 20 July 1960 as an amateur production by the Adelaide Theatre Group. In April 1961, at the first professional season at the Palace Theatre in Sydney, a bomb scare during a dress rehearsal forced police to clear the theatre. Later that year the production was staged at the Theatre Royal Stratford East, in London. Since then it has been staged regularly throughout Australia and internationally. It is also studied in various school curricula.

''The One Day of the Year'' dramatised the growing social divide in Australia and the questioning of old values. In the play, Anzac Day is criticized by the central character, Hughie, as a day of drunken debauchery by returned soldiers and as a day when questions of what it means to be loyal to a Nation or Empire must be raised.

Despite the criticisms of Anzac Day expressed in the play, the term has since been adopted as expressing the importance of Anzac Day.

Although Seymour is best known in Australia for ''The One Day of the Year'', his international reputation relates not only to this early play, but also to his many screenplays, television scripts and adaptations of novels for film and television.

References

Category:1927 births Category:Australian dramatists and playwrights Category:Australian novelists Category:Living people Category:People educated at Perth Modern School

de:Alan Seymour

Coordinates	34°03′″N118°15′″N
name	Warren Buffett
birth name	Warren Edward Buffett
birth date	August 30, 1930
birth place	Omaha, Nebraska, U.S.
nationality	American
alma mater	University of NebraskaColumbia Business School
occupation	Businessman, Investor
salary	US$100,000
networth	US$50 billion (2011)
spouse	Susan Thompson Buffett (1952–2004)Astrid Menks (2006–present)
children	Susan Alice BuffettHoward Graham BuffettPeter Andrew Buffett
signature	Warren Buffett Signature.svg }}

Warren Edward Buffett (; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and is the third wealthiest person in the world as of 2011.

Buffett is called the "Oracle of Omaha" or the "Sage of Omaha" and is noted for his adherence to the value investing philosophy and for his personal frugality despite his immense wealth. Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. He also serves as a member of the board of trustees at Grinnell College.

Early life

Buffett was born in 1930 in Omaha, Nebraska, the second of three children and only son of U.S. Representative Howard Buffett,, a fierce critic of the interventionist New Deal domestic and foreign policy, and his wife Leila (née Stahl). Buffett began his education at Rose Hill Elementary School in Omaha. In 1942, his father was elected to the first of four terms in the United States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School, and graduated from Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stock broker."

Even as a child, Buffett displayed an interest in making and saving money. He went door to door selling chewing gum, Coca-Cola, or weekly magazines. For a while, he worked in his grandfather's grocery store. While still in high school he was successful in making money by delivering newspapers, selling golfballs and stamps, and detailing cars, among other means. Filing his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route. In 1945, in his sophomore year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in different barber shops.

Buffett's interest in the stock market and investing also dated to his childhood, to the days he spent in the customers' lounge of a regional stock brokerage near the office of his father's own brokerage company. On a trip to New York City at the age of ten, he made a point to visit the New York Stock Exchange. At the age of 11, he bought three shares of Cities Service Preferred for himself, and three for his sister. While in high school he invested in a business owned by his father and bought a farm worked by a tenant farmer. By the time he finished college, Buffett had accumulated more than $90,000 in savings measured in 2009 dollars.

Buffett entered college as a freshmen in 1947 at the Wharton Business School of the University of Pennsylvania and studied there for two years from 1947 to 1949. In the year 1950, when he entered his junior year, he transferred to the University of Nebraska–Lincoln where at the age of nineteen, he graduated with a degree of Bachelor of Science in Business Administration. After the completion of his undergraduate studies, Buffett enrolled at Columbia Business School after learning that Benjamin Graham (author of "The Intelligent Investor" – one of his favorite books on investing) and David Dodd, two well-known securities analysts, taught there. He received a M.S. in Economics from Columbia Business School in 1951. Buffett also attended the New York Institute of Finance. In Buffett’s own words:

The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.}}

Career

Warren Buffett was employed from 1951–54 at ''Buffett-Falk & Co.'', Omaha as an investment salesman, from 1954–1956 at ''Graham-Newman Corp.'', New York as a securities analyst, from 1956–1969 at ''Buffett Partnership, Ltd.'', Omaha as a general partner and from 1970 – Present at Berkshire Hathaway Inc, Omaha as its Chairman, CEO.

In 1950, at the age of 20, Buffett had made and saved $9,800. In April 1952, Buffett discovered Graham was on the board of GEICO insurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor allowed him in. There he met Lorimer Davidson, Geico's Vice President, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's life-long friend and a lasting influence and later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett graduated from Columbia and wanted to work on Wall Street, however, both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused.

Buffett returned to Omaha and worked as a stockbroker while taking a Dale Carnegie public speaking course. Using what he learned, he felt confident enough to teach an "Investment Principles" night class at the University of Nebraska-Omaha. The average age of his students was more than twice his own. During this time he also purchased a Sinclair Texaco gas station as a side investment. However, this did not turn out to be a successful business venture.

In 1952 Buffett married Susan Thompson at Dundee Presbyterian Church and the next year they had their first child, Susan Alice Buffett. In 1954, Buffett accepted a job at Benjamin Graham's partnership. His starting salary was $12,000 a year (approximately $97,000 adjusted to 2008 dollars). There he worked closely with Walter Schloss. Graham was a tough man to work for. He was adamant that stocks provide a wide margin of safety after weighting the trade-off between their price and their intrinsic value. The argument made sense to Buffett but he questioned whether the criteria were too stringent and caused the company to miss out on big winners that had more qualitative values. That same year the Buffetts had their second child, Howard Graham Buffett. In 1956, Benjamin Graham retired and closed his partnership. At this time Buffett's personal savings were over $174,000 ($1.2 million inflation adjusted to 2009 dollars) and he started Buffett Partnership Ltd., an investment partnership in Omaha.

In 1957, Buffett had three partnerships operating the entire year. He purchased a five-bedroom stucco house in Omaha, where he still lives, for $31,500. In 1958 the Buffett's third child, Peter Andrew Buffett, was born. Buffett operated five partnerships the entire year. In 1959, the company grew to six partnerships operating the entire year and Buffett was introduced to Charlie Munger. By 1960, Buffett had seven partnerships operating: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff and Underwood. He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. Eventually eleven agreed, and Buffett pooled their money with a mere $100 original investment of his own. In 1961, Buffett revealed that Sanborn Map Company accounted for 35% of the partnership's assets. He explained that in 1958 Sanborn stock sold at only $45 per share when the value of the Sanborn investment portfolio was $65 per share. This meant that buyers valued Sanborn stock at "minus $20" per share and were unwilling to pay more than 70 cents on the dollar for an investment portfolio with a map business thrown in for nothing. This earned him a spot on the board of Sanborn.

As a millionaire

In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at the board meeting and named a new president, Ken Chace, to run the company. In 1966, Buffett closed the partnership to new money. Buffett wrote in his letter: "... unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL."

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only dividend of 10 cents. In 1969, following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway. In 1970, as chairman of Berkshire Hathaway, Buffett began writing his now-famous annual letters to shareholders. However, he lived solely on his salary of $50,000 per year, and his outside investment income. In 1979, Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett's net worth reached $620 million, placing him on the Forbes 400 for the first time.

In 1973, Berkshire began to acquire stock in the Washington Post Company. Buffett became close friends with Katharine Graham, who controlled the company and its flagship newspaper, and became a member of its board of directors. In 1974, the SEC opened a formal investigation into Warren Buffett and Berkshire's acquisition of WESCO, due to possible conflict of interest. No charges were brought. In 1977, Berkshire indirectly purchased the ''Buffalo Evening News'' for $32.5 million. Antitrust charges started, instigated by its rival, the ''Buffalo Courier-Express''. Both papers lost money, until the ''Courier-Express'' folded in 1982.

In 1979, Berkshire began to acquire stock in ABC. Capital Cities announced $3.5 billion purchase of ABC on March 18, 1985 surprised the media industry, as ABC was four times bigger than Capital Cities at the time. Berkshire Hathaway chairman Warren Buffett helped finance the deal in return for a 25% stake in the combined company. The newly merged company, known as Capital Cities/ABC (or CapCities/ABC), was forced to sell off some stations due to FCC ownership rules. Also, the two companies owned several radio stations in the same markets.

In 1987, Berkshire Hathaway purchased a 12% stake in Salomon Inc., making it the largest shareholder and Buffett the director. In 1990, a scandal involving John Gutfreund (former CEO of Salomon Brothers) surfaced. A rogue trader, Paul Mozer, was submitting bids in excess of what was allowed by the Treasury rules. When this was discovered and brought to the attention of Gutfreund, he did not immediately suspend the rogue trader. Gutfreund left the company in August 1991. Buffett became Chairman of Salomon until the crisis passed; on September 4, 1991, he testified before Congress. In 1988, Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7% of the company for $1.02 billion. It would turn out to be one of Berkshire's most lucrative investments, and one which it still holds.

As a billionaire

Buffett became a billionaire on paper when Berkshire Hathaway began selling class A shares on May 29, 1990, when the market closed at $7,175 a share. In 1998, in an unusual move, he acquired General Re (Gen Re) for stock. In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, former attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion. In 2010, the federal government settled with Berkshire Hathaway for $92 million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing 'corporate governance concessions'.

In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion. In 2006, Buffett announced in June that he gradually would give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution would go to the Bill and Melinda Gates Foundation. In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.

Late 2000s recession

Buffett ran into criticism during the subprime crisis of 2007–2008, part of the late 2000s recession, that he had allocated capital too early resulting in suboptimal deals. “Buy American. I am.” he wrote for an opinion piece published recently in the New York Times. Buffett has called the 2007—present downturn in the financial sector "poetic justice". Buffett's Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his recent deals appear to be running into large mark-to-market losses.

Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs. Some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. The scale of the potential loss prompted the SEC to demand that Berkshire produce, "a more robust disclosure" of factors used to value the contracts. Buffett also helped Dow Chemical pay for its $18.8 billion takeover of Rohm & Haas. He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the current crisis in debt and equity markets.

In 2008, Buffett became the richest man in the world dethroning Bill Gates, worth $62 billion according to Forbes, and $58 billion according to Yahoo. Bill Gates had been number one on the Forbes list for 13 consecutive years. In 2009, Bill Gates regained number one of the list according to Forbes magazine, with Buffett second. Their values have dropped to $40 billion and $37 billion respectively, Buffett having (according to Forbes) lost $25 billion in 12 months during 2008/2009.

In October 2008, the media reported that Warren Buffett had agreed to buy General Electric (GE) preferred stock. The operation included extra special incentives: he received an option to buy 3 billion GE at $22.25 in the next five years, and also received a 10% dividend (callable within three years). In February 2009, Buffett sold some of the Procter & Gamble Co, and Johnson & Johnson shares from his portfolio.

In addition to suggestions of mistiming, questions have been raised as to the wisdom in keeping some of Berkshire's major holdings, including The Coca-Cola Company (NYSE:KO) which in 1998 peaked at $86. Buffett discussed the difficulties of knowing when to sell in the company's 2004 annual report:

That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately, however, it’s the windshield through which investors must peer, and that glass is invariably fogged.

In March 2009, Buffett stated in a cable television interview that the economy had "fallen off a cliff... Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen". Additionally, Buffett fears we may revisit a 1970s level of inflation, which led to a painful stagflation that lasted many years.

In 2009, Warren Buffett invested $2.6 billion as a part of Swiss Re's raising equity capital. Berkshire Hathaway already owns a 3% stake, with rights to own more than 20%. In 2009, Warren Buffett acquired Burlington Northern Santa Fe Corp. for $34 billion in cash and stock. Alice Schroeder, author of Snowball, stated that a reason for the purchase was to diversify Berkshire Hathaway from the financial industry. Measured by market capitalization in the Financial Times Global 500 Berkshire Hathaway as of June 2009 was the eighteenth largest corporation on earth.

In 2009, Buffett divested his failed investment in ConocoPhillips, saying to his Berkshire investors,

I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future than the current $40–$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.

The merger with the Burlington Northern Santa Fe Railway (BNSF) closed upon BNSF shareholder approval in 1Q2010. This deal is valued at approximately $34 billion and reflects an increase of a previously existing stake of about 22%.

In June 2010, Buffett defended the credit rating agencies for their role in the US financial crisis, claiming that:

Very, very few people could appreciate the bubble. That's the nature of bubbles – they're mass delusions.

On March 18, 2011, Goldman Sachs acquired Federal Reserve approval to buy back Berkshire's preferred stock in Goldman. Buffet has been reluctant to give up the stock which averages $1.4 million in dividend a day, stating:

I'm going to be the Osama bin Laden of capitalism. I'm on my way to an unknown destination in Asia where I'm going to look for a cave. If the U.S. Armed forces can't find Osama bin Laden in 10 years, let Goldman Sachs try to find me.

Personal life

Buffett married Susan Buffett (née Thompson) in 1952. They had three children, Susie, Howard and Peter. The couple began living separately in 1977, although they remained married until her death in July 2004. Their daughter, Susie, lives in Omaha and does charitable work through the Susan A. Buffett Foundation and is a national board member of Girls, Inc. In 2006, on his seventy-sixth birthday, Warren married his never-married longtime-companion, Astrid Menks, who was then 60 years old. She had lived with him since his wife's departure to San Francisco in 1977. It was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. All three were close and Christmas cards to friends were signed "Warren, Susie and Astrid". Susan Buffett briefly discussed this relationship in an interview on the Charlie Rose Show shortly before her death, in a rare glimpse into Buffett's personal life.

Warren Buffett disowned his son Peter's adopted daughter, Nicole, in 2006 after she participated in the Jamie Johnson documentary, ''The One Percent.'' Although his first wife had referred to Nicole as one of her "adored grandchildren", Buffett wrote her a letter stating, "I have not emotionally or legally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or a cousin." He signed the letter "Warren."

His 2006 annual salary was about $100,000, which is small compared to senior executive remuneration in comparable companies. In 2007 and 2008, he earned a total compensation of $175,000, which included a base salary of just $100,000. He lives in the same house in the central Dundee neighborhood of Omaha that he bought in 1958 for $31,500, today valued at around $700,000 (although he also owns a $4 million house in Laguna Beach, California). In 1989 after having spent nearly 6.7 million dollars of Berkshire's funds on a private jet, Buffett sheepishly named it "''The Indefensible''". This act was a break from his past condemnation of extravagant purchases by other CEOs and his history of using more public transportation.

He remains an avid player of bridge, which he learned from Sharon Osberg, and plays with her and Bill Gates. He spends twelve hours a week playing the game. In 2006, he sponsored a bridge match for the Buffett Cup. Modeled on the Ryder Cup in golf, held immediately before it, and in the same city, a team of twelve bridge players from the United States took on twelve Europeans in the event. He is a dedicated, lifelong follower of Nebraska football, and attends as many games as his schedule permits. He supported the hire of Bo Pelini following the 2007 season stating, "It was getting kind of desperate around here". He watched the 2009 game against Oklahoma from the Nebraska sideline after being named an honorary assistant coach.

Warren Buffett worked with Christopher Webber on an animated series with chief Andy Heyward, of DiC Entertainment, and then A Squared Entertainment. The series features Buffett and Munger, and teaches children healthy financial habits for life. Buffett was raised Presbyterian but has since described himself as agnostic. In December 2006 it was reported that Buffett does not carry a cell phone, does not have a computer at his desk, and drives his own automobile, a Cadillac DTS. Buffett wears tailor-made suits from the Chinese label Trands; earlier he wore Ermenegildo Zegna.

Lineage

Buffett's DNA report revealed that his paternal ancestors hail from northern Scandinavia, while his maternal ancestors most likely have roots in Iberia or Estonia.

Recognition

In 1999, Buffett was named the top money manager of the Twentieth Century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton. In 2007, he was listed among ''Time'''s 100 Most Influential People in the world. In 2011, President Barack Obama awarded him the Presidential Medal of Freedom. Most recently, Buffett, along with Bill Gates, was named the most influential global thinker in Foreign Policy's 2010 report.

Politics

In addition to other political contributions over the years, Buffett has formally endorsed and made campaign contributions to Barack Obama's presidential campaign. On July 2, 2008, Buffett attended a $28,500 per plate fundraiser for Obama's campaign in Chicago hosted by Obama's National Finance Chair, Penny Pritzker and her husband, as well as Obama advisor Valerie Jarrett. Buffett backed Obama for president, and intimated that John McCain's views on social justice were so far from his own that McCain would need a "lobotomy" for Buffett to change his endorsement. During the second 2008 U.S. presidential debate, candidates John McCain and Barack Obama, after being asked first by presidential debate mediator Tom Brokaw, both mentioned Buffett as a possible future Secretary of the Treasury. Later, in the third and final presidential debate, Obama mentioned Buffett as a potential economic advisor. Buffett was also finance advisor to California Republican Governor Arnold Schwarzenegger during his 2003 election campaign.

Writings

Warren Buffett's writings include his annual reports and various articles. Buffett is recognized by communicators as a great story-teller, as evidenced by his annual letters to shareholders. He warned about the pernicious effects of inflation:

In his article ''The Superinvestors of Graham-and-Doddsville'', Buffett rebutted the academic Efficient-market hypothesis, that beating the S&P 500 was "pure chance", by highlighting the results achieved by a number of students of the Graham and Dodd value investing school of thought. In addition to himself, Buffett named Walter J. Schloss, Tom Knapp, Ed Anderson (Tweedy, Brown Inc.), Bill Ruane (Sequoia Fund, Inc.), Charles Munger (Buffett's own business partner at Berkshire), Rick Guerin (Pacific Partners, Ltd.), and Stan Perlmeter (Perlmeter Investments). In his November 1999 ''Fortune'' article, he warned of investors' unrealistic expectations:

Wealth

In 2008 he was ranked by ''Forbes'' as the richest person in the world with an estimated net worth of approximately US$62 billion. In 2009, after donating billions of dollars to charity, Buffett was ranked as the second richest man in the United States with a net worth of US$37 billion with only Bill Gates ranked higher than Buffett. His net worth is up to $47 billion in the past 12 months.

Philanthropy

The following quotation from 1988 highlights Warren Buffett's thoughts on his wealth and why he long planned to re-allocate it:

From a ''NY Times'' article: "I don't believe in dynastic wealth", Warren Buffett said, calling those who grow up in wealthy circumstances "members of the lucky sperm club". Buffett has written several times of his belief that, in a market economy, the rich earn outsized rewards for their talents:

His children will not inherit a significant proportion of his wealth. This is consistent with statements he has made in the past indicating his opposition to the transfer of great fortunes from one generation to the next. Buffett once commented, "I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing".

In June 2006, he announced a plan to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation. He pledged about the equivalent of 10 million Berkshire Hathaway Class B shares to the Bill & Melinda Gates Foundation (worth approximately US$30.7 billion as of June 23, 2006), making it the largest charitable donation in history, and Buffett one of the leaders of philanthrocapitalism. The foundation will receive 5% of the total donation on an annualised basis each July, beginning in 2006. (Significantly, however, the pledge is conditional upon the foundation's giving away each year, beginning in 2009, an amount that is at least equal to the value of the entire previous year's gift from Buffett, in addition to 5% of the foundation's net assets.) Buffett also will join the board of directors of the Gates Foundation, although he does not plan to be actively involved in the foundation's investments.

This is a significant shift from previous statements Buffett has made, having stated that most of his fortune would pass to his Buffett Foundation. The bulk of the estate of his wife, valued at $2.6 billion, went to that foundation when she died in 2004. He also pledged $50-million to the Nuclear Threat Initiative, in Washington, where he has served as an adviser since 2002.

In 2006, he auctioned his 2001 Lincoln Town Car on eBay to raise money for Girls, Inc. In 2007, he auctioned a luncheon with himself that raised a final bid of $650,100 for a charity. On June 27, 2008, Zhao Danyang, a general manager at Pure Heart China Growth Investment Fund, won the 2008 5-day online "Power Lunch with Warren Buffett" charity auction with a bid of $2,110,100. Auction proceeds benefit the San Francisco Glide Foundation. The following year, executives from Toronto-based Salida Capital paid US$1.68 million to dine with Buffett.

In a letter to Fortune Magazine's website in 2010 Buffett remarked:

This statement was made as part of a joint proposal with Bill Gates to encourage other wealthy individuals to pool some of their fortunes for charitable purposes.

Bill Gates's wife Melinda urged people to learn a lesson from the philanthropic efforts of the family that sold its home and gave away half of its value, as detailed in ''The Power of Half''. On December 9, 2010, Buffett, Bill Gates, and Mark Zuckerberg (Facebook's CEO), signed a promise they called the "Gates-Buffett Giving Pledge", in which they promised to donate to charity at least half of their wealth over time, and invited others among the wealthy to donate 50% or more of their wealth to charity.

Public positions

Buffett's speeches are known for mixing business discussions with humor. Each year, Buffett presides over Berkshire Hathaway's annual shareholder meeting in the Qwest Center in Omaha, Nebraska, an event drawing over 20,000 visitors from both United States and abroad, giving it the nickname "Woodstock of Capitalism". Berkshire's annual reports and letters to shareholders, prepared by Buffett, frequently receive coverage by the financial media. Buffett's writings are known for containing quotations from sources as ranging between the Bible and Mae West, as well as advice in a Midwestern folk style, and numerous jokes.

Tobacco

During the RJR Nabisco, Inc. hostile takeover fight in 1987, Buffett was quoted as telling John Gutfreund:

Speaking at Berkshire Hathaway Inc.'s 1994 annual meeting, Buffett said investments in tobacco are:

Coal

In 2007, Buffett's PacifiCorp, a subsidiary of his MidAmerican Energy Company, canceled six proposed coal-fired power plants. These included Utah's Intermountain Power Project Unit 3, Jim Bridger Unit 5, and four proposed plants previously included in PacifiCorp's Integrated Resource Plan. The cancellations came in the wake of pressure from regulators and citizen groups, including a petition drive organized by Salt Lake City commercial real estate broker Alexander Lofft and directed at Buffett personally. The 1,600 petitioners, who described themselves in a letter to Buffett as "a collection of citizens, business owners and managers, service professionals, public servants, and organization representatives ... your friends and new customers here in Utah," explained that, in their view, any further expansion of coal generation in Utah would "compromise our health, obscure our viewsheds, shrink and contaminate our watersheds, and thin out our most beloved snow pack," concluding that "our attractiveness as a place to live and work is also threatened, and so is our economic competitiveness as a major metro area and a state, compromising our recent gains in income and property values".

Klamath river

American Indian tribes and salmon fishermen sought to win support from Warren Buffett for a proposal to remove four hydroelectric dams from the Klamath River. He had David Sokol respond that the FERC would decide the question.

Trade deficit

Buffett views the United States' expanding trade deficit as a trend that will devalue the US dollar and US assets. He believes that the US dollar will lose value in the long run, as a result of putting a larger portion of ownership of US assets in the hands of foreigners. In his letter to shareholders in March 2005, Warren Buffett predicted that in another ten years’ time the net ownership of the U.S. by outsiders would amount to $11 trillion.

Americans ... would chafe at the idea of perpetually paying tribute to their creditors and owners abroad. A country that is now aspiring to an ‘ownership society’ will not find happiness in – and I’ll use hyperbole here for emphasis – a 'sharecropping society’.

Author Ann Pettifor has adopted the image in her writings and has stated: "He is right. And so the thing we must fear most now, is not just the collapse of banks and investment funds, or of the international financial architecture, but of a 'sharecropper society, angry at its downfall".

Dollar and gold

The trade deficit induced Buffett to enter the foreign currency market for the first time in 2002. However, he substantially reduced his stake in 2005 as changing interest rates increased the costs of holding currency contracts. Buffett continues to be bearish on the dollar, and says he is looking to acquire companies which derive a substantial portion of their revenues from outside the United States. Buffett emphasized the non-productive aspect of a gold standard for the USD in 1998 at Harvard:

It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

In 1977 Buffett was also quoted as saying about stocks, gold, farmland, and inflation:

Stocks are probably still the best of all the poor alternatives in an era of inflation – at least they are if you buy in at appropriate prices.

Taxes

Buffett stated that he only paid 19% of his income for 2006 ($48.1 million) in total federal taxes (due to their being from dividends & capital gains), while his employees paid 33% of theirs, despite making much less money. “How can this be fair?” Buffet asked, regarding how little he pays in taxes compared to his employees. “How can this be right?” He also added:

: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

Buffett favors the inheritance tax, saying that repealing it would be like "choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics". In 2007, Buffett testified before the Senate and urged them to preserve the estate tax so as to avoid a plutocracy. Some critics have argued that Buffett (through Berkshire Hathaway) has a personal interest in the continuation of the estate tax, since Berkshire Hathaway has benefited from the estate tax in past business dealings and had developed and marketed insurance policies to protect policy holders against future estate tax payments. Buffett believes government should not be in the business of gambling, or legalizing casinos, calling it a tax on ignorance.

Expensing of stock options

He has been a strong proponent of stock option expensing on the Income Statement. At the 2004 annual meeting, he lambasted a bill before the United States Congress that would consider only some company-issued stock options compensation as an expense, likening the bill to one that was almost passed by the Indiana House of Representatives to change the value of Pi from 3.14159 to 3.2 through legislative fiat.

When a company gives something of value to its employees in return for their services, it is clearly a compensation expense. And if expenses don't belong in the earnings statement, where in the world do they belong?

Investing in China

Buffett invested in PetroChina Company Limited and in a rare move, posted a commentary on Berkshire Hathaway's website stating why he would not divest from the company despite calls from some activists to do so, due to its connection with the Sudanese civil war that caused Harvard to divest from the company in 2005. He did, however, sell this stake soon afterwards, sparing him the billions of dollars he would have lost had he held on to the company in the midst of the steep drop in oil prices beginning in the summer of 2008.

In October 2008, Buffett invested in new energy automobile business by paying $230 million for 10% of BYD Company (), which runs a subsidiary of electric automobile manufacturer BYD Auto. In less than one year, the investment has reaped him over 500% return of profit.

Books about Buffett

Numerous books have been written about Warren Buffett and his investment strategies. In October 2008, ''USA Today'' reported that there were at least 47 books in print with Buffett's name in the title. The article quoted the CEO of Borders Books, George Jones, as saying that the only other living persons named in as many book titles were U.S. presidents, major world political figures, and the Dalai Lama. Buffett said that his own personal favorite is a collection of his essays called ''The Essays of Warren Buffett'', which he described as "a coherent rearrangement of ideas from my annual report letters" as edited by Larry Cunningham.

Some best-selling, or otherwise notable, books about Buffett:

Roger Lowenstein, ''Buffett, Making of an American Capitalist''

Robert Hagstrom, ''The Warren Buffett Way''. Alice Schroeder, ''The Snowball: Warren Buffett and the Business of Life''. (Written with Buffett's cooperation.) Mary Buffett and David Clark, ''Buffettology'' and four subsequent books. (Combined sales of more than 1.5 million copies.) Janet Lowe, ''Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor''. John Train, ''The Midas Touch: The Strategies That Have Made Warren Buffett 'America's Preeminent Investor'.'' Andrew Kilpatrick, ''Of Permanent Value: The Story of Warren Buffett''. (The longest of the books about Buffett, with 330 chapters, 1,874 pages and 1,400 photos, weighing 10.2 pounds.) John P. Reese, "The Guru Investor: How to Beat the Market Using History's Best Investment Strategies". (Includes step-by-step stock-picking method based on Buffett's approach) Janet M. Tavakoli, ''Dear Mr. Buffett: what an investor learns 1,269 miles from Wall Street'', John Wiley and Sons, 2008, ISBN 9780470406786

Bibliography

''The Essays of Warren Buffett : Lessons for Corporate America'', Warren Buffett and Lawrence A. Cunningham, The Cunningham Group; revised edition (April 11, 2001), ISBN 978-0966446111

''The Essays of Warren Buffett: Lessons for Corporate America, Second Edition'', Warren E. Buffett and Lawrence A. Cunningham, The Cunningham Group; 2nd edition (April 14, 2008), ISBN 978-0966446128

See also

Forbes list of billionaires

References

External links

Berkshire Hathaway official website

Latest Holdings In Berkshire Hathaway Portfolio, Dynamically Updated

Buffett Partnership Letters

Berkshire Hathaway SEC 13F Filings

Category:1930 births Category:Living people Category:American agnostics Category:American billionaires Category:American businesspeople Category:American insurance businesspeople Category:American chief executives Category:American financiers Category:American investors Category:American money managers Category:American philanthropists Category:Berkshire Hathaway Category:Bill & Melinda Gates Foundation people Category:Businesspeople from Omaha, Nebraska Category:Businesspeople in the insurance industry Category:Columbia Business School alumni Category:Equity securities Category:Grinnell College people Category:Nebraska Democrats Category:Stock traders Category:Wharton School alumni Category:University of Nebraska–Lincoln alumni Category:Presidential Medal of Freedom recipients Category:Buffett family

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