Nobody explains investing concepts better than Warren Buffett, and he is at his personal best with this latest piece. In it, he discusses the so-called ‘safe haven’ investment options such as gold and fixed income vehicles (T-Bills and Bonds). He then explains why he feels ownership of great businesses via stocks is the best alternative of the three.
The client piece I wrote this past summer attempted to deliver a similar message. While I am proud of what I wrote and am glad it was well received, this is clearly superior and essential reading for anyone trying to make sense of investments.
Excerpt from the article:
Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”
Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce. Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens.