Warren Buffett: Why stocks beat gold and bonds

zanek · Feb 9, 2012

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/?iid=HP_LN

Warren Buffett: Why stocks beat gold and bonds

"FORTUNE -- Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date."

People in the comments on CNN are all making ad homieum attacks on Buffet or saying he's trying to find bag holders for the next stock drop.

What do you all think ?

cyoungmark · Feb 9, 2012

Value Investing has returned more than any other longer term strategy. I think if you know how to invest right, your return will be greater because you will pick the best asset, not the other way around.

sumfuka · Feb 10, 2012

I still prefer gold over stocks. Reason being it is one of the few things that could be manipulated. And you don't have to worry about time decay. Currencies used to be good but in this day and age, who is to say that particular currency won't collapse. Nations are crumbling right before our eyes.

So Buffett can keep compounding on his stocks, and I'll keep compounding on the metals. Everyone wins.

nutmeg · Feb 10, 2012

Buffetts holding period for stocks is "forever"

Now if you want to short a stock, he's the man to see. He's not going to call in your loan.

So WEB sets up a fixed rate of interest on your short position, long term long vs long term short.

Probably looks good on paper for the both of them.

newwurldmn · Feb 10, 2012

Quote from zanek:

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/?iid=HP_LN

Warren Buffett: Why stocks beat gold and bonds

"FORTUNE -- Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date."

People in the comments on CNN are all making ad homieum attacks on Buffet or saying he's trying to find bag holders for the next stock drop.

What do you all think ?

I would be listening to him. Remember he was the first person of note to publicly say that the derivatives were a disaster waiting to happen (and that was in 2003).

piezoe · Feb 10, 2012

Quote from sumfuka:

I still prefer gold over stocks. Reason being it is one of the few things that could be manipulated. And you don't have to worry about time decay. Currencies used to be good but in this day and age, who is to say that particular currency won't collapse. Nations are crumbling right before our eyes.

So Buffett can keep compounding on his stocks, and I'll keep compounding on the metals. Everyone wins.

you're deluding yourself. Mr. Buffett is correct. You should read the article again and learn to think in terms of purchasing power. Wall street hype and markets are always reported in nominal dollars, you must think in terms of purchasing power to be able to invest wisely.

For example, when you discount the S&P for inflation you find the that the total return since the mid seventies is, if you omit dividends, roughly that of Treasuries with of course greater risk. However, if you include dividends, you now get a return a little better than inflation. Over longer periods, gold keeps you roughly even with inflation, and bonds lose to inflation.

The key to long term investing is dividends, or value investing as someone else has pointed out. I prefer the dividend route and only consider, for long term investing, stocks in a long term up trend with a history of raising dividends. I will buy nothing but stocks that pay dividends.

MKTrader · Feb 10, 2012

Quote from newwurldmn:

I would be listening to him. Remember he was the first person of note to publicly say that the derivatives were a disaster waiting to happen (and that was in 2003).

He also cheerleads every bailout and stimulus package...and personally profits from them. He was once a good value investor. He's a crony capitalist scumbag now.

Oh, and he made a really bad bet on silver in 2005. He literally picked one of the worst (and few) times to invest in PMs during the last decade.

He's the last person to listen to when it comes to PMs or unbiased views on investing and the economy.

piezoe · Feb 10, 2012

Quote from MKTrader:

He also cheerleads every bailout and stimulus package...and personally profits from them. He was once a good value investor. He's a crony capitalist scumbag now.

Oh, and he made a really bad bet on silver in 2005. He literally picked one of the worst (and few) times to invest in PMs during the last decade.

He's the last person to listen to when it comes to PMs or unbiased views on investing and the economy.

Capitalism, when perfected, IS crony capitalism. You should admire him for that.

MKTrader · Feb 10, 2012

Quote from piezoe:

Capitalism, when perfected, IS crony capitalism. You should admire him for that.

Absolutely not. Unless your definition of "capitalism" goes something like this:

"Capitalism, therefore, has come to be viewed as compatible with and indeed even requiring activist government: a government that manipulates investment patterns through fiscal policy, regulates production, supervises competition through licensing and antitrust laws, stimulates exports by use of subsidies, and controls the purchase of imports with tariffs and quotas. The interventionist state, in the evolution of historical capitalism, has come to be considered the prerequisite for the maintenance of the market economy."

http://www.fff.org/freedom/0193b.asp

A decentralized system of free markets would look more like this:

http://books.google.com/books/reade...frontcover&output=reader&source=gbs_atb_hover

piezoe · Feb 10, 2012

Quote from MKTrader:

Absolutely not. Unless your definition of "capitalism" goes something like this:

"Capitalism, therefore, has come to be viewed as compatible with and indeed even requiring activist government: a government that manipulates investment patterns through fiscal policy, regulates production, supervises competition through licensing and antitrust laws, stimulates exports by use of subsidies, and controls the purchase of imports with tariffs and quotas. The interventionist state, in the evolution of historical capitalism, has come to be considered the prerequisite for the maintenance of the market economy."

http://www.fff.org/freedom/0193b.asp

A decentralized system of free markets would look more like this:

http://books.google.com/books/reade...frontcover&output=reader&source=gbs_atb_hover

Yes, that's fairly close to my definition of the reality of U.S. capitalism. Another definition, and my favorite is the first definition in Webster's New World Dictionary, 1956 edition.

I don't confuse "free enterprise" with "capitalism". The capitalists themselves are responsible for the confusion. Equating free enterprise with capitalism is somewhat like equating Business with Ethics.

As a capitalist I love the U.S. version and Crony Capitalism. As a consumer, I hate it. The proper role of government, in my very humble opinion, is to protect free enterprise from us capitalists. In that respect the U.S. has failed mightily.