Let’s take a look at this recent stock chart from Apple (AAPL) to give us a clue at what might happen to Berkshire stock should Warren Buffett pass away or can no longer run the company. This chart shows a sudden, precipitous decline in the morning hours of October 3, 2008 after a rumor surfaced about Steve Jobs suffering a heart attack. The stock fell 8.2% in a hurry and only recovered after Apple refuted the rumor. Granted, this occurred in the middle of an ongoing global financial meltdown but it nonetheless illustrates a salient point for investors in companies run by larger than life CEOs.

One can argue that a smooth transition would result in a decline far less drastic. Nevertheless, the point isn’t so much about the intensity of the movement but rather the direction of the movement. Perhaps Berkshire investors have already priced in the loss of the great CEO. Maybe the recent plunge in Apple stock price is not just a reaction to the credit crisis but is also a pricing in of the loss of its visionary CEO. A surprise illness or death merely intensifies and shortens the reactionary response, it doesn’t negate the need to discount the inevitable and what would probably be less fitting replacement leadership.

Perhaps no other public company CEOs have become so much an essential part of their company. Apple is the very embodiment of Steve Jobs, the way he sees the world, and his will to impose upon the world his ideals and vision. Jobs’ vision is a poetic and contrarian vision – where technology is beautiful and accommodates the human. Berkshire is as much an embodiment of Warren Buffett. When he took over, the company was a struggling enterprise in a dying American textiles industry. Today, it is a massive investment conglomerate, or rather a wonderful collection, of businesses in myriad industries such as insurance, jewelry, furniture, etc. Warren Buffett’s vision is a playful and contrarian vision – where overly serious people swing from extreme greed to extreme fear and he stands to profit by watching for and catching their mistakes, like playing a yo-yo.

It is hard to argue that these two companies could remain the same without their singular leaders, regardless of how well-laid their succession plans may be. Sure, cultural DNA can be passed down much as genetic DNA travels through generations. But I inevitably see the world differently than my father as will the corporate heirs of Apple and Berkshire deviate from Jobs’ and Buffett’s visions. Shareholders are inherently nervous about the inevitable. The certainty of mortality or frailty leads to the uncertainty of change.

Macro

• Once again, Mark Zandi and his team at Moody’s Economy.com (MCO) comes through with something interesting. Click through on the image below and interact with the map to find out if your state and county is in risk of recession. My home state of California is definitely at risk, dragged down by rapidly falling housing prices. I currently spend most of my time in Utah, one of the few places that has seen strong economic expansion and even strong real estate price appreciation. Forbes recently named Salt Lake City first in its “Best Cities for Jobs in 2008″ rankings.

• BRICs (Brazil, Russia, India, China markets and stocks) call temptingly to investors frustrated by the recent turmoil in domestic equities markets. They have dominated the issuance of global depositary receipts, accounting for 50% of the record $55 billion raised in 2007. Executives at the Bank of New York Mellon (BK), a large operator in the ADR space, say the trend is expected to continue as BRICs companies are anxious to tap into capital from developed economies as well as listing shares in their own countries’ exchanges. Caveat emptor, while these depositary receipts must pass some regulatory and compliance hurdles, their accounting and reporting standards do not match the rigor of domestic stocks.

• Life, Liberty, and the Pursuit of Happiness: Questions exploring the link between income and happiness are not new. Recent studies show that per-capita GDP is an imperfect measure of welfare. No really? Any attempt at measuring “happiness” will, by definition, be subject to inaccurate opinion and “self-perception” – we humans are an idiosyncratic lot. Furthermore, when income inequality expands (a necessary symptom of meritocracies), large portions of a country’s population loses satisfaction. We live in interesting times (read turbulent) and envy is either a sin or a highly irrational emotion.

Micro

• Building BRICs on education: The national Chinese universities are notoriously competitive and accept only a tiny fraction of China’s brightest students. In the past, the next brightest were relegated to factory jobs and other less “prestigious” careers. As China’s wealth grows, the citizenry will demand more social mobility. Enter private, for-profit educational institutions like New Oriental Education & Technology Group (EDU). I suspect we’ll see more such issues coming to our public equities markets from the BRIC economies. Full Disclosure: I currently have a long or short position in EDU in one or more of my private investment partnerships.

• The Tiger bets on the Dragon in the Year of the Pig: Julian Robertson has served as a great role model for me especially for his legacy of mentoring numerous “Tiger Cubs” at his now defunct Tiger Management who have gone on to run highly successful hedge funds of their own. His influence cannot be measured only on the returns he generated. Now Charles Coleman’s Tiger Global reported a knockout 2007 in which the Tiger Cub generated a 71% return. Big technology names such as Google (GOOG) and Research in Motion (RIMM) fueled the outstanding performance. A large portion of the portfolio benefited from the strong performance of Chinese stocks. Big winners included Baidu.com (BIDU), Longtop Financial Technologies (LFT), Focus Media Holding (FMCN), the aforementioned New Oriental Education & Technology Group (EDU), and Gushan Environmental Energy (GU). Julian Robertson established a reputation for rigorous fundamental analysis coupled with insightful contrarian strategies. That begs the question; when does China become too expensive? Full Disclosure: I currently have long or short positions in RIMM and EDU in one or more of my private investment partnerships.

• Conservative lending principles will hold banks steady through the credit crisis. Even when the yield curve is more positively sloped, giving in to the temptation to relax credit standards will come back to bite undisciplined management. A few banks off the top of my head that have reaped the benefits of prudent lending include Wells Fargo & Company (WFC), US Bancorp (USB), and even Oriental Financial Group (OFG). Oriental belongs to the group of banks that serve Puerto Rico, a small group that has underperformed for so long that Wall Street expectations cannot go much lower.

Technology

• Charlene Li, an analyst with Forrester Research (FORR), writes a good piece on the future of social networks. She impresses me with her forward thinking and ability to simplify some deep concepts. The future of social networking will feature universal identities, a unified social graph, deeper social context for “activities” and a new business model where social influence defines marketing value. These predictions are very relevant to my work at SocialOptimize and I especially like marketing value defined by social influence. Fortune 2000 companies would do well to heed Charlene’s prognostications. Why is Charlene working for a big stodgy publicly traded company? She ought to jump ship and join SocialOptimize.

• Apple (AAPL) takes a serious run at Research in Motion (RIMM) and its Blackberry devices. The iPhone debuted to much fanfare, but Wall Street has been relatively unimpressed with the product and results. Apple recently announced the release of the iPhone SDK, essentially opening up the iPhone as a platform for outside developers to create software for the iPhone. Predictably, this has gotten the tech industry very excited, but Wall Street continued to respond with ambivalence. The day of the announcement, Apple’s stock actually dropped. Kleiner Perkins Caufield & Byers also announced a $100 million venture fund devoted to backing iPhone focused startups. Full Disclosure: I currently have a long or short position in RIMM in one or more of my private investment partnerships.

• Space is still the final frontier. If global warming continues, we’ll need to find alternative places to inhabit. The Europeans launched a humongous “cargo ship” into space to resupply a space station. Live long and prosper!

“What would you do if you only had a few months left to live?”
My good friend SA, the structural engineer, shrugs and says, “I don’t know, but I don’t like some of the messages in the movie.”
“I loved the movie! It was poignant and thought-provoking,” counters TJ, the beautiful Googler we’re trying to set up with SA.
I’m clinging to a thin strand of hope that opposites indeed attract, but it’s not looking good for my already dismal matchmaking record.

We are coming out of a last minute Sundance Film Festival screening of The Guitar, a beautifully produced film by Amy Redford. The movie wrestles with the question – What would you change about your life if you faced imminent death? With stunningly intimate imagery and a moving soundtrack, the story follows a blue collar New Yorker named Mel, played by Saffron Burrows, as she learns of her terminal cancer and her subsequent efforts to cope. Her journey is a meandering mélange of moments of great sorrow, joy, loneliness, defiance, euphoria, and freedom.

“What didn’t you like about the movie?” TJ asks incredulously.
“Something wasn’t right. Plus I could’ve sworn those were San Francisco streets we saw in the movie,” replies SA.
“Big cities are all the same in a visceral sort of way,” I remark.

The problem is Mel’s answer to the central question of the movie. She changes her entire life by moving out of her old, dingy apartment and into a spacious and unaffordable loft. She abandons her senses and inhibitions (oftentimes a good thing) and discovers the joys of over-the-limit credit card shopping. She orders a luxurious bed, designer sofas and lamps, gourmet food for delivery, and most importantly, a magnificent Fender guitar. Mel eventually maxes out her credit limit on a dozen cards with no intentions of ever paying back her responsibility as she nears her impending death.

“That scene in her loft when she’s alone and playing her guitar in front of those gigantic concert speakers and crying…that was powerful. There is nothing quite like the sound of a great electric guitar. The total release of all her emotions…wow,” I exclaim.
“Yeah, that was an amazing scene,” says TJ.
“Yeah, I thought that was pretty good,” says SA.
There you go buddy, agreeing with her every once in a while wouldn’t hurt your case. Maybe this weekend might end on a high note after all with my two friends getting together.

Mel finds great happiness in finally surrounding herself with objects of her desire. The guitar, especially, leads her to a trembling catharsis. But is that the best way to go out? Isn’t what she does a little, if not a lot, selfish? Is the best way to exit the stage by taking as much as one can? What happened to giving all of one’s self as the candle burns out? The most heroic stories I know involve brave souls facing certain death with newfound generosity, giving of all their time and money to making other people happy.

“What would you do Allan?” ask TJ and SA as we walk toward the parking lot.
“I’d charge a Ferrari and drive forever.”