JBird

The point is well taken, and basically I agree. The purpose of the board though is to learn, and it seems this thread created an opportunity for at least one member to learn something new about inflation. To somewhat slam a post born out of intellectual curiosity is a disservice to the learning process.

Could you explain the advantage of A in years of inflation specifically? I would but Buffett does a better job than I could; check out the 1983 Berkshire Annual report. At the end he attaches an appendix called Goodwill and its Amortization: Rules and Realities. It is a financial masterpiece.

Of course you're absolutely right. I didn't consider reinvestment because it wasn't raised as consideration in Ander's original post.

The answer is no, and that's only because he put a higher price tag on A. If you knew for certain there's no high inflationary years ahead, it makes sense to go with B- your annual return is plainly higher

I am really impressed with this question. I pick A because of its advantage in years of inflation. I also think that the returns are sensible under current interest rates.

I'd be happy to join in on that

I've just gotten into bridge. Are there other boardmembers that play?

BRK-- 76% LUKOY-- 13% Cash-- 11%

Yes. And similarly, you may choose to consider market risk, but that doesn't mean it exists. ;)

Investors with a long time horizon have no reason to consider what you've labeled as market risk. Volatility means that an identifiably wonderful company worth X, will sometimes sell for 2X, sometimes X, and sometimes .5X. And if you can just figure out what X is, you're going to get very rich over time. Market volatility is the friend of the intelligent investor.

Suppose you must outsource the management of your portfolio. What questions would you ask prospective managers to evaluate them?

You can read Buffett's own words on the topic in his Partnership letters. Simply googling Buffett Partnership letters will give you all you need.

Kass was interviewing friends of Buffett who didn't know him on a business level? For what purpose? This is the sort of info that helps me explain why he did so poorly at the meeting.

The caltech talk with Becky quick, and the two parody articles.

1) When you calculate intrinsic value, assuming it's by DCF, generally how many years out do you project owner earnings? When, if ever, do you project into perpetuity? 2) How do you decide the appropriate discount rate? Do you ever factor in a change of the risk-free rate over time? 3) If your projection of earnings goes for, say 10 years, Year 11 and beyond are "out" years. How do you deal with the valuation of Year 11 and beyond? Do you apply a terminal multiple, value all future cash at zero, etc.?

If one of the condition of a black swan is that its impact is meaningful, then probably not.

"The risk of being out of the game is huge compared to the risks of being in it."

The Goldman report seems overly optimistic. Their estimates are of EPS, rather than just earnings. They don't describe to what extent they believe EPS will increase due to earnings growth vs. repurchases. Frankly, that's not surprising. The question I'm asking myself is, does Goldman expect the S&P 500 to be a massive net-repurchaser of stock over the next 3 years? I've been trying to find information on repurchases for the S&P 500. I've found plenty on the dollar amounts going into repurchases, but little else. Does anyone have info regarding the changes in shares outstanding for the S&P 500 over time?

Sanjeev, what do you believe the probability is of a major sovereign default?

It seems obvious to me that the investor shorting treasuries now will generate a capital gain in the long run; the inevitable rise in interest rates will see to that. But just how successful will the investment be? It's largely dependent on when interest rates rise, and by how much. Heeding Aesop's investment insight, I'm shying away from the investment myself because I can't answer those questions.

A question for the CFA candidates: Does the CFA body of knowledge suggest that price volatility is a measure of risk?

Inspired by a lecture from Charlie Munger, http://ycombinator.com/munger.html, I thought it may be useful to have a discussion on probabilities. Specifically, attempting to quantify the probabilities of some future events, as well as explaining the thinking process behind the estimation. I'd like to stick to events that are both important and knowable. Consider first the questions Warren asked of Charlie during the Berkshire meeting this year: What is the probability that inflation runs at 5% or higher in the next 10 years? What is the probability that the US dollar is the world reserve currency in 20 years? Of course, answering these questions cannot be done with precision.

This interview took place in 2012, not 2013. This year's interview took place in a aircraft hangar.

Invert, always invert

I disagree with your thesis that returns for the general stock market are insufficient over the risk-free interest rate. I think that stocks are reasonably priced. In any case, what you're saying is perfectly reasonable.