Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Buffett: Why Stocks Beat Gold & Bonds

edited February 2012 in Off-Topic
February 9, 2012

In an adaptation from his upcoming shareholder letter, the Oracle of Omaha explains why equities almost always beat the alternatives over time.

By Warren Buffett

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

"My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment."

Comments

  • edited February 2012
    No surprise that he continues to disagree with his father.

    Additionally:
    http://www.bloomberg.com/news/2012-02-09/buffett-says-bonds-are-among-most-dangerous-assets-on-low-rates-inflation.html

    “High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments -- and indeed, rates in the early 1980s did that job nicely,” Buffett wrote. “Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.”

  • edited February 2012
    "Buffett said investors should avoid gold, because its uses are limited and it doesn't have the potential of farmland or companies to produce new wealth. Achieving a long-term gain on the metal requires an "expanding pool of buyers" who believe the group will increase further, he said."

    --- I would say Steve Romick would agree with much of what Buffett wrote. Romick has a carefully crafted set of stocks, some cash buffer, only a bit of opportunistic (high-yield) bonds and he also stated he likes Farmlands.

    "And Romick is even considering how average folks might invest in U.S. farmland. He sees a real estate opportunity capitalizing on a growing global population demanding more food and a meatier diet." (2010)

    "This fund's manager, Steve Romick, holds quarterly conference calls for investors, much like a public-company CEO discussing quarterly profits. Romick often has a lot of explaining to do, since he has the leeway to stuff his fund with whatever he thinks will work. He then sticks with the picks: The fund's turnover is 20 percent, nowhere near the 55 percent average for alternative funds. These days, about two-thirds of the fund is invested in stocks, especially in those of large multinational corporations that Romick says will benefit from emerging markets' growth. "He doesn't hit a lot of home runs with stocks. He hits a lot of singles and doubles," says Ron Roge, a financial planner who invests in FPA Crescent for his clients. Among Romick's recent nonstock bets: loaning money to an office building, buying farmland and picking up pools of subprime residential mortgages." (2012)


Sign In or Register to comment.