Buffett Partnership Letter October 1969

Warren E. Buffett | October 9, 1969

Introducing Bill Ruane

Buffett recommends Bill Ruane (Ruane, Cunniff & Stires) to partners needing an alternative money manager.

Bill's credentials:

• Met in Ben Graham's class at Columbia University, 1951
• Composite record: 1956-1961 and 1964-1968 averaged over 40% per annum
• 1962 was down about 50%, 1963 was breakeven
• Manages $20-30 million currently

"I consider Bill to be an exceptionally high probability decision on character and a high probability one on investment performance."

Bond vs Stock Analysis

For a taxpayer in 40% Federal bracket:

Investment	Expected After-Tax Return
Passive tax-free bonds	6.5%
Professionally managed stocks (average)	6.5%
Top 1-2% managed stocks	9.5%

"For the first time in my investment lifetime, I now believe there is little choice for the average investor between professionally managed money in stocks and passive investment in bonds."

Liquidation Timeline

• November: Formal 30-day notice of retirement
• December: Information package on controlled companies (DRC and B-H)
• January 5: Cash distribution (at least 56% of Jan 1, 1969 capital) + proportional DRC/B-H shares
• March 1970: Bill and John available for bond purchases
• After March 1970: Bill and Warren out of advisory business

Source

Warren E. Buffett, October 9, 1969.