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Buffett: Why Stocks Beat Gold & Bonds

Kenster1_GlobalValue
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

  • scott
    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.”

  • Kenster1_GlobalValue
    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)


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