Warrent Buffett, investor extraordinaire, just bought something. The Burlington Northern Santa Fe Railroad Company (BNI). It cost $26 billion. He already owned part of the railroad, but he wanted it all. Figured it was a great investment. So why should you care?

First, because it's Warren Buffett. While he's made one or two bad investments (see Eastern Airlines (who?) as an example), most of what Mr. Buffett buys increases in value. He's not the second richest man in America because he's lucky. When he buys into an industry, it may be one that most investors should consider.

Reportedly, Goldman Sachs (NYSE: GS) staff will be receiving the largest bonus payouts in the company's 150-year history, thanks to a solid first half of 2009. This news has kicked off a bit of concern that large investment banks that survived the credit crunch would hamper any attempts at financial regulation reforms. The main reason that Goldman Sachs was able to perform well in the quarter was a general lack of competition and a surge in revenue thanks to the company's trading of foreign currency, bonds, and fixed-income products.

A week ago, the London staff of Goldman Sachs was told that they could expect larger bonuses -- as long as the company's predictions for its most profitable year ever come to fruition. Next month's second-quarter earnings report are expected to show a jump in profits. An example of how strong the quarter was, Warren Buffet spent $5 billion to purchase GS shares in January -- and the Oracle of Omaha has made $1 billion on this investment.

Just like the government's tardy recognition of the recession, nine months after the fact, Washington has become embarrassed over and over again by the scandalous behavior of Wall Street investment banks and corporate executives. This includes: overindulgent life styles at company, shareholder, and taxpayer expense; outrageous bonuses by money losing companies; corporate jets; lavish business retreats; gaming of stock options and more.

Our nation has been strip-mined by corporate executives that think short term, focus on themselves instead of their company, and people they represent, and have been negligent to consider the repercussions of their actions or inaction.

Strip-mining allows for the removal of minerals in the fastest and easiest way possible grabbing at surface material as you work your way down and cause havoc to the ecosystem. Environmental problems are of great concern now more than ever and the process is heavily regulated -- more so than the economic strip mining of the last few years.

Since Washington is so affected by lobbyists whose interests are not aligned with the overall public well-being (note: I did not say welfare), as the cynic would say "the best government money can buy", the public is not getting its monies worth.

All year long there has been one big question looming over America: is the country in recession, and if not, can a full blown recession be avoided? Well, according to The National Bureau of Economic Research, the country most certainly is in the midst of a recession, and has been since December of last year.

There has been a lot of debate as early as the start of the year over whether or not the country had already fallen into a recession. While we had not seen the official definition of a recession confirmed, several respected analysts had claimed the recession was under way months ago.

The officual definition of a recession is when economic growth slows for consecutive quarters. Despite this not having occurred earlier this year, billionaire investor Warren Buffet came out publicly as early as March 3 of this year claiming that America had already dipped into recessionary times.

It must have been a deeply emotional board meeting for Anheuser-Busch Cos. (NYSE: BUD). In family control for more than 150 years, the company has become a quintessential American icon.

Despite all this, Anheuser's had no choice in selling out to InBev NV, a giant beer company based in Leuven, Belgium.

Simply put, the offer was too rich: $49.91 billion. After all, over the past few years, Anheuser was a laggard. What's more, the plunging dollar has made it easier for foreign-based buyers to make plays for U.S. companies. It seems that no company is immune.

The Anheuser-InBev merger combination -- which will be called Anheuser-Busch InBev -- will result in the world's largest beer company (the #2 will be SABMiller PLC). In all, revenues will amount to roughly $36 billion.

For InBev the deal carries lots of risk. The valuation for Anheuser comes close to 15X EBITDA (earnings before interest, taxes, depreciation and amortization). Furthermore, the deal involves a huge slug of debt. Then again, over the years, InBev has demonstrated savvy M&A skills, wielding a strong cost-cutting knife.

In the end, it's the shareholders who are cheering, with Warren Buffett being particularly joyful. His company, Berkshire Hathaway (NYSE: BRK.A), owns 5% of Anheuser.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

This weeks Barron's (subscription required) talks about The Next Warren Buffett. Of course nobody believes that's going to happen. The headline is cast to grab attention and sell papers, just like mine, but it's not happening: no way, no how!

Barron's discusses in it's story the strong possibilty that David Sokol, 51, the curent chairman of MidAmerican Energy Holdings Company is the most likely to succeed Buffett. MidAmerican has $39 billion in assets and is a subsidiary of Berkshire Hathaway (NYSE: BRK.A). The headline should really have read "succeed" not be the "next".

For me, one of the most interesting things about reading through the financial pages of the newspaper has been the realization that America's economic situation, both in good times and bad, is not a pre-ordained matter of fate. While economic processes, the intervention of various governmental organizations, and good old supply and demand all play their part in determining the direction of the nation, these forces are also not the whole story. A large chunk of the economy can also be tacked up to the personalities of its big players. For example, the failure of Silverado Savings and Loan in the late 1980's was due in no small part to Neil Bush (by the way, we're still paying for the bailout, which was estimated to have cost the American taxpayers $1 billion). Similarly, the Savings and Loan crisis was itself fueled by the amazing Michael Milken, whose ability to "restructure" debt made him the poster boy for 1980's greed. And, after all, who can deny the importance of Ivan Boesky when it comes to demonstrating the seductive nature of insider trading? While it is unreasonable to lay any economic boom or bust at a single person's door, there is no doubt that individuals can strongly influence the economy, both for good and for ill.

Warren Buffett

One person that I've been researching lately is Warren Buffett. The CEO and largest shareholder of Berkshire Hathaway, he is currently listed as the richest person in the world. On the surface, Buffett's business strategy is amazingly simple: he believes in so-called "value investing," in which he finds companies that are undervalued, purchases significant amounts of their stock, and holds on to it until the market comes to its senses and values the company more highly. Of course, while Buffett's strategy is simple in concept, it requires a great deal of financial knowledge and economic muscle to make it work.

What's really gotten to me about Buffett is his surprisingly egalitarian stances on pretty much everything. Although he is almost incalculably wealthy, he chooses to stay in Omaha, where he famously lives in the same house that he has occupied for almost fifty years. His salary is only $100,000, which is low for a senior executive in a holding company; for somebody with Buffett's skills and knowledge base, it borders on the ridiculous. In fact, as Buffett has repeatedly noted, under the current income tax system, he pays far less in taxes than many of his employees.

Furniture Brands-(NYSE:FBN) markets residential furniture through Broyhill Furniture, Lane Furniture, Thomasville Furniture and HDM Furniture. FBN is recently up $3.30 to $13.44 after Samson Holding reported a 14.9% stake in FBN. Samson has indicated it may seek to acquire control of the company. FBN reported June 2007 quarterly total revenue of $535 million. FBN will host an investor day on 10/23 in New York City. FBN October option implied volatility of 54 is above its 26-week average of 35 according to Track Data, suggesting larger price risk.

USG-(NYSE: USG), a manufacturer and distributor of building materials, is recently up $.57 to $38.14 on renewed & unconfirmed takeover chatter. Unconfirmed chatter is circulating today that a consortium of four of the largest Chinese construction companies wants to acquire a 24% stake in USG. China Overseas Land is one of the names mentioned in the consortium. Warren Buffet is an owner of approximately 19% of USG. USG October 40 calls have traded 72 times on transaction volume of 2,103 contracts above its open interest of 2,013 contracts. USG October option implied volatility of 42 is above its 26-week average of 32 according to Track Data suggesting larger price risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) acquired a stake in Kraft Foods Inc (NYSE: KFT) that was below 5%, the Wall Street Journal (subscription required) reported.
• R.H. Donnelley Corporation (NYSE: RHD) has paid about $350M for Business.com, the marketing directory Web company, beating out Dow Jones & Co. (NYSE: DJ) and the New York Times Company (NYSE: NYT) in the process, according to the Wall Street Journal.
• Callaway Golf Company (NYSE: ELY), which closed Wednesday at about $17.42, could swing lower as the peak summer season wanes amid continued concern about overall consumer discretionary spending, according to Barron's Online's (subscription required) "Weekday Trader" section.

OTHER PAPERS:

• The U.K. Times reported that the global debt market crisis may delay or cancel the sale of Cadbury Schweppes plc's (NYSE: CSG) U.S. drinks arm.
• Coca-Cola (NYSE: KO), Wipro Limited (NYSE: WIT) and Danone are in talks with Ramesh Chauhan to buy Bisleri, the bottled water brand that has become a generic name for the product category, reported the Economic Times.

Investors make mistakes every day. If they didn't we'd all be as rich as Warren Buffett and we're not.

Here's a list of six such mistakes:

• Follow hot tips. As a blogger on AOL's BloggingStocks, I know that some of the most popular posts are the ones that repeat what Jim Cramer said on his TV show five minutes before the post appears on the blog. The reason these posts are so popular is because lots of people are Cramer Ditto Heads (CDHs). He tells them what to do and they do it. While some use Cramer as a starting point for further research, many are too willing to be led and are not inclined to do their own research.
• Don't know how to research fundamentals. One of the reasons people don't do their own research is because they don't know how. Specifically, one kind of research many people don't know how to do is understanding how a company -- whose stock someone wants to buy -- fits within its industry. Many people would not know how to begin answering fundamental questions such as: Is the industry profitable? Why? How is that profitability likely to evolve? What is the company's market share? If it's a leader, can it sustain that leadership? If it's behind can it catch up? What kind of cash flow does the business generate? How much cash flow is it likely to sustain in the future? Does the market recognize these future cash flows in its price?
• Don't know how to analyze technicals. Many times fundamentals have nothing to do with how a stock performs. For example, in December 2003, Martha Stewart Omnimedia Inc. (NYSE: MSO) stock started going up from $9 when its Home & Garden Television (HGTV) show was taken off the air to $36 in February 2005 when Martha Stewart got out of jail. During that time the company saw its revenues shrink 20% a year and its losses skyrocket. The reason the stock went up is a mystery. But I thought people who were loyal Martha Stewart Ditto Heads (MSDHs) bought MSO as a show of support. Many investors do not know how to analyze money flows that would provide clues to what is driving a stock up or down. This can cause them to buy when they should be selling, or sell when they should be buying.

A survey from Barron's magazine describes Apple Inc.'s (NASDAQ:AAPL) co-founder and CEO Steve Jobs as the "ultimate CEO who matters." This survey identified the upper echelon of CEOs across the globe who have "top notch reputations" in the financial community and who likely would be missed by investors if they unexpectedly left their jobs.

To qualify, CEOs need to have been on the job for at least three years, but Barron's tended to prefer those who had at least five years of experience because it takes time to influence a large company and develop a reputation in the investment world. This survey is not entirely scientific considering Barron's drew on the subjective opinions of its own staff and many prominent investors.

Many of the CEOs who made the list have either founded their companies or have been with them for a decade or longer. Founders include Rupert Murdoch of News Corp. (NYSE:NWS), Warren Buffet of Berkshire Hathaway (NYSE:BRK), and Fred Smith of FedEx Corp. (NYSE:FDX). It is noted in the article that, "a founder often has intimate business knowledge, commands strong employee loyalty and can resist periodic entreaties from Wall Street for quick fixes to tough problems."

A common theme for all CEOs is that they have all delivered for the shareholders. Nearly all of the companies have stocks that have bested the Standard & Poor's 500 index during the CEOs tenure. One CEO in particular, Steve Jobs (co-founder of Apple Inc.), is so valuable to his company that the report notes that "Jobs' departure probably would result in a greater loss of stock-market value than the loss of any other CEO in the world. Jobs might be worth 20 or so points to Apple shares, roughly $16 billion." No wonder Apple is so eager to minimize its CEOs association with the company's option-backdating woes.

Berkshire Hathaway (NYSE:BRK.A) is a collection of 70 investments that have a collective value of $126 billion. In this eclectic portfolio are investments in Coca Cola (NYSE:KO), Johnson and Johnson (NYSE:JNJ) to American Express (NYSE:AXP) to insurance concerns, carpeting firms to a furniture firm. There appears no rhyme or reason and the disparity is so vast. So why is Berkshire so successful? Why not just buy a monster fund like Fidelity's Magellan and just call it a day?

Berkshire is totally strategic in their approach. Each business is viewed from a long term point of view, the stock price and stock market be damned. Buffett has always maintained that if a business is managed properly and for the long term, the value placed on the investment by the stock market will figure it out correctly. Remember, Buffett once said the stock market short term is a voting machine, long term it is a weighing machine. He's right.

The Fidelity Magellan Fund (FMAGX) has over $46 billion in assets, and quite frankly, has seen better days. The past three years annual return has been 7.6% on average, below its comparable peer group. It is a collection of over 350 investments and yet, its returns have been blah. So what gives? Magellan has to be competitive to attract new dollars not only to its own fund, but to the Fidelity family of funds. Berkshire Hathaway can take its sweet old time and not worry about a down year or two. Buffett has made it imminently clear that investors own Berkshire because they believe in the long term structure and value-building proposition. Fidelity Magellan needs to post up quarterly results and gets instantly compared to its peer group. This does not allow the fund manager to think in longer term time horizons, although he states he does. Investment decisions are then sometimes made to satisfy the calender versus the potential of the investment. But he is serving two masters--the shareholders and the competitive positioning of Magellan. It is a tough way to manage and think long term.

Meanwhile, Warren Buffett has set up a brand new game that investors will relish in watching as events unfold: finding his successor. I doubt that person will come from the mutual fund world.

Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing...Where do we go from here?"

Marketwatch columnist Chuck Jaffe has an excellent piece about the frequently fraudulent high yield investment programs (HYIP's) that litter the internet. Known for promising outrageous returns (10%+ per week in some cases) and given only vague details about how they earn their returns, these "investments" are most often Ponzi schemes.

I recently interviewd convicted felon Barry Minkow, who is now founder of the Fraud Discovery Institute, working tirelessly to protect investors from scams. In his new 3-part DVD series about protecting yourself from fraud (look for it on his website when it is avaialable) the DVD featured sections on investment fraud, elder fraud, and affinity fraud, and is both informative and entertaining. In talking about investment frauds (such as HYIP's), Minkow urged investors to think of it this way: Warren Buffett is considered arguably the greatest investor of all time, and he compounded money at a rate of about 23% per year.

Anytime someone offers you better returns, ask yourself: are they better than Warren Buffett?

In correspondence with Amey Stone, (one of our beloved editors) almost two years ago, during a very shaky market, I did some rare speculating.

I preface this article by acknowledging that such exercises are usually pointless and not something I engage in very often. My deep value investing style is focused on companies and not markets, facts and verifiable high probability theories. Often I am the contrarian as in Me and my Merck: Should I keep it? Sometimes I am the curmudgeon (hopefully lovable curmudgeon) and I have scoffed at analysts (Analyzing the Analysts - It's all a joke right?) and prognosticators whose primary business is skimming fees from the top of your investment stash.

Among what I thought at the time were my verifiable high probability theories was that oil money, real estate money and Chinese money (from our sad trade deficit) was going to recirculate back into the stock market. Oil prices were just starting to move up, real estate was booming, and the Chinese were piling up billions of dollars of our treasury notes. Furthermore I thought the Chinese would not just be satisfied moving some of their debt instruments (bonds) into equities (stocks) but actually start shopping for U.S. companies. This came to pass in their acquisition of IBM's Think Pad (R) division by Levano, and their failed attempt to acquire Unocal, and they are still on the look-out for other opportunities.

So in early 2005 I made the case to Amey that we were going to see the Dow hit 11,000 by the end of the year and that we would hit 12,000 by the end of this year. Well of course the Dow Jones Industrial Average did hit 11,000 as anticpated climbing from about 10,000 mid year in '05 and I believe it will soon reach 12,000, maybe even by the end of the year, which was on my list of "speculations".

It's only a question of time. It's only another 3% +/- in a year of mixed results.

By the way, Warren Buffett comments about the trade deficit in a story about our loss of integrity in Warren Buffett, America's greatest storyteller.

So having just about hit all my targets from my notes to Amey of two years ago I started thinking about where we go from here. I think we are in for more of the same and for the same reasons. Plus a few new insights, if I may be so bold.

Microsoft Corporation (NASDAQ:MSFT) has many issues to contend with at the company's current size and complexity. Among them is the disparity of its growing line of products; the lower profit margins offered by hardware sales in comparison to its traditional high margin software sales; and the increased number of formidable competitors it faces in every direction it looks.

This is the continuation of Monday's story Micro'soft' vs Micro'hard' -- Break it up fellas! In the first article I touched upon the scale of Microsoft and their lack of agility. I concluded that even several tremendous successes (swallowing Apple (AAPL) whole was used to exemplify) would only have marginal affect on the share price in the aggregate.

This story is not about whether Microsoft makes worthy products, or is inventive, or can create the next big thing. This is about what Microsoft is, and what it should be as a company going forward. Does Microsoft want to get back to its high-growth days and generate the kind of excitement a Google, Inc. (NASDAQ:GOOG) or MySpace (recently acquired by Newscorp (NYSE:NWS)) does, or do they want to be a large conglomerate. Given the number of new products that are announced weekly, and all the unfinished business the company has started, it is apparent that the die has been cast for the latter; it is a conglomerate.

Conglomerate \Con*glom"er*ate\, n.

Webster's: That which is heaped together in a mass or compacted from various sources; a mass formed of fragments; collection; accumulation.

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