Jurgis

You guys might be surprised, but N. Korea not only has Internet, it also has outsourced/offshored businesses. US companies do not directly outsource/offshore there, but more neutral country companies do and there's no guarantee that US-outsourced work does not get re-outsourced to N. Korea. Some info at http://spectrum.ieee.org/podcast/at-work/tech-careers/for-outsourcing-it-have-you-considered-north-korea

None of the stocks above have a chance in heck to compound sales/earnings at 10-15% for 10-20 years. GOOGL might have the highest growth rate in next few years, but they also have the highest risk of growth falloff. And their market cap with such growth would cross 1T really fast. This is the biggest issue with wide moat high growth investing. Unless you get in early, no trees grow to the sky and the 25 -40 PE is not really undervalued. In case people doubt this, please look at KO and the financial shenanigans it had to resort to to maintain the illusion of wide moat high growth. Buffett has realized this long time ago. That's why cash flow from See's is not invested in See's. Unfortunately, for most companies the money is either invested in diworsefication or in overpriced share buybacks. So, yes, buy wide moats when they are cheap. But don't expect great returns by buying them at inflated multiples.

Company may be listed in US, but not be an US company. I believe PHYS is Canadian. They claim that they are a PFIC partially intentionally for tax efficiency reasons: they seem to claim that if you file QEF, you can get 20% long term capital gains tax rate, while otherwise holding physical commodity makes you pay 28% collectible rate. I might be simplifying here. I did not try to fully understand the implications, since I don't plan to buy and hold this. You can read more at http://sprottphysicalbullion.com/sprott-physical-gold-trust/tax-information/

I believe you are wrong about IRAs/401(k)s, because the gains/losses are not taxable. PFICs are not MLPs or K-1 corporations that actually require tax gymnastics while in IRA. I believe this guy is correct: http://www.costbasis.com/stocks/pficstock.html I've seen some other tax professionals suggesting the same. However, I am not a CPA, caveat emptor and all that. I believe that IRS has/had a way to ask such questions to the IRS personnel directly. You might want to look into it if this important to you.

@yadayada - It is possible that we will enter a crappy multidecade period. However, 2000s were not that great for US either. And high inflation in 1970s was not great either. So perhaps you are making a mistake of being too pessimistic? ;) Buffett's optimism is interesting because he is negative about things: he has been concerned about dollar debasing, national debt and possible inflation for decades now. This has never stopped him from investing though. If he had followed his negativity, he would have been wrong so far and much poorer. I am not saying that everyone should be permabull. It's just that so far bears have been right occasionally, but wrong ultimately. You might be right that this time it's different. But are you really certain to bet on it?

Very good discussion about Buffett's optimism. :) I think that another thing related to the topic that is not mentioned often enough is Buffett's managerial abilities. He discounts this in his interviews, but "Snowball" offers an insight into the kitchen. He was directly involved in replacing 2 (3?) of KO's CEOs. Despite not liking it, he had to do similar cleanups in GenRe, NetJets, etc. In couple cases at least he had to replace the management more than once until he hit the right person who made the business flourish. So part of his success is that he manages to get outstanding people into the place either immediately when buying the business or after cockroaches are found.

Disclaimer: I am not a CPA/etc. Is the gross profit of the company negative? I think you are confusing operating profit and gross profit. Not sure. I believe it depends on whether holding company holds something that produces passive income. But you'd need someone more knowledgeable to say for sure. (You may know the following, so skip if so) The idea behind PFIC is to make it more difficult for US investors to get into non-US listed investment companies (funds) and escape taxation through investments that are not taxed in the foreign country. Otherwise, you could buy into a mutual fund in SomeCountry where cap gains are not taxed at corporate level, the fund invests in stocks, buys/sells, but you never pay short term taxes - you only pay when you sell out of the mutual fund after twenty years. It's not that you are prohibited from owning PFIC. It only hurts you in tax reporting time. If you are small investor, I suggest not owning potential PFICs or owning them in tax sheltered accounts where you and IRS don't care. If you are not small investor, hire someone to do your taxes - just make sure they know about these things. If you are small investor and you screw up with reporting, the likelihood of IRS auditing you is very low. I doubt many holders of GRVY, for example, reported according to PFIC. I doubt any were ever audited. :) GRVY was the only PFIC that I owned I believe. Although I am sure there were other edge cases with cash-rich net-nets... I wonder how many Japanese net-net investors file taxes with PFIC accounting. :)