Munger

When you look at DELL's operating margins they have gone down from the 9% to the 7%s and FCF per share has declined by 12% over the past 5 years. If this continues in the future, DELL is expensive. All businesses cycle -- none go up in a straight line. Few businesses have demonstrated the multi decade durability and strength of Dell, which reflects in large part management focus on ROIC. If focused on trends, recent results are of greater relevance and all metrics cited above have been improving in recent quarters. In 1QFY12, margins improved much more than expected and operating income was up 67%, with FCF growth even greater. The business mix is changing as Michael Dell has reiterated until he is blue in the face -- no one is listening. ...but the businesses that he has to compete in are mediocre versus HPQ, MSFT, IBM or CSCO. HPQ's management my be in dis-array but it has a better collection of businesses to that genrate in the aggregate about 5% more in operting margin per year. I am not saying Dell is not cheap but you do have to ackowledge that their sets of business are of lessor quality than HPQ, CSCO, MSFT or IBM. Nothing personal but completely disagree. Mistake to focus on margins in isolation. ROIC is the relevant measure and while MSFT, IBM, and CSCO all generate excellent ROIC so does DELL. I actually have started smaller positions in MSFT and CSCO. Many of the HPQ businesses are actually in deep trouble...and now you have a CEO who is stepping away from those businesses in an effort to turn HPQ into a software company, essentially from scratch -- no prediction on HPQ but I'll grab the popcorn and watch as this drama unfolds...the board is a disaster -- decisions based more on business politics than business principles. The acquisition of Palm will prove to be a complete disaster. This is why you are seeing DELL pay-up for acquistions like Perot and the storage co they bought last year. Dell may have a more skilled player but they we dealt one-pair while HPQ was dealt 3 of kind and CSCO and MSFT where dealt full houses. "Pay-up" -- while tough to argue the acquisitions meet a Graham net/net criteria, I don't believe they have overpaid. The acquisitions have been relatively small and business performance improves dramatically when plugged into Dell's distribution network. And if I remember correctly, Dell backed away from a bidding war with HPQ -- Dell has shown a willingness to back away when the economics don't make sense no matter how much he may like the underlying technology, which is great for shareholders. Most tech companies forget (or don't even have a clue) that the most relevant measure is FCF/share not the "sexiness" or "trendiness" of the technology.

While no one knows exactly what Dell will look like in 10 years, the risk/reward at these valuation levels is extremely compelling. No predictions on where the stock price goes but downside is limited given the cash flow characteristics of the business and the fortress balance sheet, which is comforting given the risk of a major downturn in the economy. The upside is potentially significant. I am long the stock (and have been since $12) because of the risk/reward not because I have any great insight into what the company will be in 10 years. For a company with a supposedly weak competitive position, Dell has generated huge free cash flow and high ROIC every year except 1 since being a public company. Few companies have generated such consistent and robust returns during this 20+ year period, which included a collapse of the tech bubble as well as the greatest financial crisis since the Great Depression and the rise of Apple. A key competitive advantage for Dell is the scale of its distribution network. And Dell has unquestionably strong corporate relationships on a global basis. Don't underestimate Michael Dell. This consistent performance reflects his business acumen and understanding/appreciation of free cash flow and ROIC. Michael Dell has also reached into his back pocket and pulled out $200+ million of his own money to buy stock in Dell over the past 18 months. In addition, the company has been aggressively buying back stock at current valuation levels. Management is on our side and has every incentive to protect and create shareholder value. I also see Michael Dell as one of the top tech executives on the planet -- he has been immersed in the industry since he was 18 years old...I'll take him on my side any day, especially against the hapless leaders at HPQ (a company that appears to be run by the board of directors). HPQ is a company in complete and total disarray. The PC is far from dead. Enterprise service and solutions now represents 30% of the top line. The company is managed to be a cash flow machine and generate high ROIC. Find me another company that dedicates a portion of every quarterly conference call and investor presentation discussing their efforts to continually improve asset turnover -- these guys "get it"... I believe Dell is one of the largest positions for Southeastern/Longleaf, who own about 8% of the company and coincidently hold 8%+ (including options) of their Partners fund in Dell. They have openly shared their thesis on the company for those interested.

my guess is that biglari concluded that if he wants new ownership, he wants to be the new owner to be BH anyone who has conviction about the sustainability of cash flows, could only conclude the stock is extremely cheap...personally i don't have that conviction but have to assume that since biglari owns close to 10% of the company, he has at least some conviction about the cash flows... will be very interesting to see how this story unfolds the ITEX CEO is inviting trouble for himself by trying to steal from shareholders

"ITEX, sardar spoke with Steve white yesterday and told him he needs to have a shareholder vote or he would not support him in a transaction it's recently announced" Did some work on the above post. As best I can tell, the CEO of ITEX basically gave himself shares equal to app 5% of the company without subjecting the distribution to a shareholder vote. Possible the CEO is very good but no excuse for stealing from shareholders. The share distribution w/o shareholder approval is absolutely crooked. How does this guy think he'll get away with giving himself 5% of the company without putting the transaction to a shareholder vote? I have no idea if the ITEX business is sustainable but the economics are clearly outstanding and the current valuation is cheap based on trailing 12 months cash flow and adjusting for the cash on the BS. BH owns a large stake in the company. Based on his personality, tough to see Biglari backing away from this situation. As part of the work, I saw that Parsad has a not insignificant stake in the ownership of ITEX. Any comments Parsad?

Should add that I'm not a fan of Biglari -- he obviously has an enormous ego. However, to be fair -- if my understanding of the recap is correct, I don't see how the B share dividend advantages Biglari relative to the rest of his shareholders. Additionally, while his other actions are somewhat offensive (renaming the company after himself, restructuring the comp plan), it still seems he has every incentive to maximize shareholder value. I could be wrong but seems to me that this guy is not interested in simply collecting a $10m bonus every year. His ego is so big that he strikes me as someone trying to become one of the richest people in the world -- and the only way he would come close to that goal is if the stock price goes much, much higher. I don't have an opinion on whether he will be successful with his plans. On the stock price -- it does seem pretty cheap...Biglari seems in total control so the magnitude of the upside is largely dependent on whether Biglari is successful with his plans...and his bonus will be zero if fails. He has every incentive to create shareholder value -- whether he does...who knows?

This recapitalization scheme is new to me -- so I think I'm confused because I read the 8k differently. As I read the 8k, shareholders will vote on whether to approve the recapitalization -- i.e., the creation of B shares. If the recapitalization is approved, ALL shareholders (including Biglari) will be distributed 10 B shares for each A share they own -- once the recapitalization is approved, shareholders will have NO choice on whether or not to accept the B shares. Here is an example: assume you own 100 shares and the market price on the day of recapitalization is $400. After the recap, you will still own 100 A shares but now also own 1000 B shares. To reflect the B share dividend, the stock price would adjust to approx $36.36. Pre recap: 100 shares x $400 = $40,000 Post recap" 100 A shares x $36.364 = 3,636 1000 B shares x $36.364 = 36,364 Biglari has reserved the right to then do a 1/15 reverse stock split, which would seem likely. What am I missing?????

Recently in the WSJ...excellent, in my opinion. Investment Strategy: All About the Benjamins By MARK SPITZNAGEL Two disparate views of markets represent well the range of opinion among U.S. stock market participants today. One is a devout faith in market efficiency and the supremacy of market pricing as a reflection and forecast of fundamental value. The other expects errors and biases in market pricing. The first should be recognizable as belonging to Ben Bernanke (easily the biggest trader and most significant market manipulator in history); the other to Ben Graham, the father of value investing. With which Benjamin do you agree? I think a simple thought experiment best answers this question. Imagine a world where the stock market is open for trading only one hour of every year. No more scrolling stock tickers or central bank scuttlebutt on interest rate policy (and certainly far fewer insufferable hedge fund managers and Wall Street traders). If this would change how you invest, then apparently a steady stream of market quotations is a sine qua non of your investment process; a trade makes sense to you when validated and quickly rewarded by the constant transactional opinions of your friends in the marketplace. You are a Benjamin Bernanke trader. However, if you would maintain the same investment approach as always, then your investment decisions must be based on your expectation of the cash flows to be received from those investments, irrespective of what subsequent market quotations have to say about them. You don't care what your friends think (and you probably don't have many of them anyway). You are a Benjamin Graham investor. To the Bernanke trader, market prices are the most information-laden depiction and forecast of the state of the world. They are neither dear nor cheap—they just are. Thus statements such as "price increases largely reflect strong economic fundamentals" (Mr. Bernanke's take on house prices in 2005). But the wisdom of the crowd turns tragically biased when opinions are interdependent. And amplification and contagion of opinion is what markets do so well through continuous Bernanke trader herding. The Graham investors recognize this, as well as the difficulty for anyone—especially economists and analysts—to accurately predict changes in macro variables or returns on corporate investment. They treat the implicit forecasts embedded in market valuations as folly. Markets get dear and cheap, and it's pretty obvious when they do. Clearly, lower interest rates can promote greater purchases of risky assets and thus higher stock market valuations, as market participants assume a more flush economy and willingly accept more risk to generate a respectable return. Bernanke traders do often rule the roost—and for years. Today's stock market is a case in point. Bernanke and his traders are stampeding, as rising stock prices signal higher corporate returns and earnings to come. Among their rallying cries is the expectation that stock price volatility, when positive, will magically and recursively improve the very fundamentals being priced (the "wealth effect"). Meanwhile, Graham investors have stoically stepped aside. History does not bode well for the Bernanke traders. Interest rate levels and stock market valuations imply forecasts of economic activity and returns that don't pan out. Low interest rates give only an ephemeral boost to stock prices and, like clockwork, are always accompanied by higher liquidity preference (or holding of cash relative to GDP). So, as today, central-bank decreed low rates don't work. The Q ratio is the aggregate stock market valuation relative to net asset replacement cost, which accurately gauges the market's expectations of returns on tangible capital and resulting profit growth. That ratio has made a half-dozen historic highs since 1900, all of which were followed eventually by much lower stock market prices. This ratio very recently surpassed all of these highs except for the go-go late 1990s. Moreover, corporate returns on invested capital have been volatile but have otherwise remained flat, enforced by a very competitive economy. It can always be different this time. Black swans abound. But there is a distinct difference in the consequences of failure of these two investment views. The Bernanke trader takes positions at prices often implying extremely advantageous and precise scenarios, the adjustment of which would mean severe losses. The Graham investor takes positions only at prices implying exceedingly disadvantageous scenarios, the adjustment of which would, by definition, mean far less severe losses. While the Bernanke traders bask in the market's efficiency, the Graham investors dither in their margin of safety. So with which Benjamin are you betting? Certainly your answer to this question ought to be the same Benjamin with which you agree. But there are plenty of cognitive biases that may prevent us from betting our beliefs. And the vast professional investing community may not have the luxury of choice, as the career risk associated with exclusion from the Bernanke trader camp can be the stuff of nightmares. The only thing certain? One Ben's views will win. Mr. Spitznagel is the founder and chief investment officer of the hedge fund Universa Investments LP, based in Santa Monica, Calif.

Question -- did Buffett not criticize Sokol's actions because he would potentially open a can of worms re Charlie Munger's stake in BYD? While I don't for a minute think the Munger/BYD is comparable to Sokol/LZ, could Buffett want to avoid any possibility of an aggressive regulator or media trying to tarnish Munger by extrapolating a Buffett condemnation of Sokol/LZ?

http://www.bloomberg.com/news/2011-03-31/buffett-misses-chance-to-show-moral-courage-commentary-by-alice-schroeder.html Not a fan of Schroeder but I think she is spot on in her assessment. Personally -- my respect and admiration of Buffett as both an investor and a person has not diminished in any way but I think he demonstrated a rare error in judgement by not making a more forceful EXPLICIT statement about the inappropriateness of Sokol's purchase of LZ for the reasons cited by Schroeder. With that said, Sokol was clearly fired so Buffett implicitly did make a very forceful statement about his tolerance for unethical behavior -- the presumed heir apparent was shown the door in short order after Buffett learned details of the trades. And from my perspective, Sokol always seemed cocky, aggressive, and arrogant relative to the culture Buffett/Munger tried to create at Berkshire.

agree...looks terrible...will be interesting to see if anything comes of it

The headline seems sensational relative to Buffett's exact comments but the overall interview is quite good. http://english.themarker.com/warren-buffett-the-u-s-is-moving-toward-plutocracy-1.351236

"No prob. I believe the original poster has held greater than 75% cash since early 2010." "I dont think top companies like Coke or Kraft will ever hit 5x Future Cash Flow. Based on your prior posts it appears that that is what you are waiting for." I repeat -- these statements are not true. Always difficult to understand why someone would choose to lie about another person. I stand by all of my previous statements, including those in the link provided by Myth. And I firmly stand by the comment that I would buy Coke hand over fist at 5x earnings. Never did I say that I'm waiting for Coke to trade at 5x earnings. And importantly, if Coke ever traded down to 5x earnings, I would have the cash to buy (and Buffett would as well). The common theme in my posts has been the need to demand a wide margin of safety for many of the reasons cited by Klarman. It is up to each individual to determine how wide that margin of safety should be for their investment approach. I am very happy with my results. Myth -- I'm rooting for you...honestly hope you make a lot of money investing.

"No prob. I believe the original poster has held greater than 75% cash since early 2010." "I dont think top companies like Coke or Kraft will ever hit 5x Future Cash Flow. Based on your prior posts it appears that that is what you are waiting for." These statements are not true. Always difficult to understand why someone would choose to lie about another person.

Been some time since I've posted. Kudos to those traders who captured the Fed induced jump in the stock market. Personally -- my position has not changed...the risks remain very high. On that note, I am passing along an excerpt from Seth Klarman's most recent annual letter. If you read through my prior posts, you'll see that his views are almost exactly the same as I expressed -- so yes, I am guilty of confirmation bias. The views of Klarman and others like myself who share his concerns could well prove wrong (the future is unknowable) but they are worth considering. Also Buffett's continued assertion that America's best years are ahead is unequivocally 100% correct but let's put in context. The best years were by far still ahead of America in January 1861 but the country was soon to enter a brutal civil war. In June of 1929 America's best years still were ahead, a view likely shared by the majority of men and women in the country. Just 4 months later the stock market crashed, marking the beginning of the Great Depression. And the country would engage in a World War before true peace and prosperity would return to the US. I am not predicting hardship on any such scale for the US in the coming years but when Buffett asserts the best days are ahead, he should add that this reality doesn't mean the US is immune from very difficult times. And in my opinion, the road ahead is unlikely to be smooth, with the margin of safety currently offered by Mr. Market (in general) not nearly sufficient to offset the risks. Of course there will always individual opportunities but make sure the margin of safety is high. Klarman: Government interventions are a wild card for even the most disciplined investors. On one hand, the U.S. government has regularly intervened in markets for decades, especially by lowering interest rates at the first sign of bad economic news, which has the effect of artificially inflating securities prices. Today, monetary easing and fiscal stimulus augment consumer demand, increasing risks not only regarding the integrity and sustainability of securities prices but also those surrounding the sustainability of business results. It is hard for investors to get their bearings when they cannot readily distinguish durable business performance from ephemeral results. Endless manipulation of government statistics adds to the challenge of determining the sustainability – and therefore the proper valuation – of business performance. As securities prices are propped up and interest rates are manipulated sharply lower (thereby justifying those higher prices in the minds of many), prudent investors must demand a wide margin of safety.

Munger, if you plan on using my board, please have the courtesy to not butcher my name. I think a couple of people corrected you on this in the past. If you disagree with any comments I make...fine! But I operate using my real name and not behind some moniker, so I would hope that you have the decency to respect that. Not intentional.

Ross -- your post was silly since it has no basis in reality as I'll show... Assuming every company in the market is over valued Where did I say every company? -- please quote directly as I have done when addressing anyone's prior comments. stating that buying any equity is a fools game is laughable. Where did I state that buying ANY equity is a fools game? -- please quote directly as I have done when addressing anyone's prior comments. Go back and read again. In fact, I've also stated that I own some stocks. An over valued market does not mean their are not deals out there Where did I state this? -- please quote directly as I have done when addressing anyone's prior comments. Parsad was right in asserting that big money would start moving into equities looking for yield. I ask again -- Will you at least acknowledge that the investments you make based on analysis of relative yields and consequent predictions of capital flows is not an approach consistent with traditional Buffett/Graham absolute value investing? Will you acknowledge that success in the approach described above is not sustainable and largely based on luck/timing the capital flows correctly? -- or do you believe you can predict with certainty the timing and direction of macro capital flows based on relative asset yields? -- and even if you believe you can do this, will you acknowledge that this approach is not consistent with traditional Buffett/Graham absolute value investing? Ross -- I agree...go back to looking for stocks.

Bronco -- not offended at all. I agree with you. And if ever catch me spouting any BS about past performance/bottom ticking stocks, call me out. Myth -- I hear you. Will avoid lecture format -- not appealing at all, even if correct. Best.

Parsard -- to avoid any confusion -- here goes again... If you are talking about ABSOLUTE values Munger, then the assumption would be that you left the market somewhere in 1998, returned in 2003, left again in 2007 and returned in March of 2009...is that correct? Like all -- I have made mistakes (which I've learned from) but I have strictly focused on absolute value -- this has served me well...we'll leave at that... I refuse to engage in a bragging contest. I quote you directly -- Unfortunately, that's not how the world works. You have various degrees of overvaluation and undervaluation at any given point of time. Capital will always move to where it is utilized most efficiently. Thus capital moved from overvalued assets (fixed income instruments) to undervalued assets (equities) in the last two months. Institutions need to cover their cost structure, generate income and qualify their existence. The same institutions will move from asset class to asset class...bouts of rationality balanced with bouts of fear and panic. Will you at least acknowledge that the investments you make based on analysis of relative yields and consequent predictions of capital flows is not an approach consistent with traditional Buffett/Graham absolute value investing? Will you acknowledge that success in the approach described above is not sustainable and largely based on luck/timing the capital flows correctly? -- or do you believe you can predict with certainty the timing and direction of macro capital flows based on relative asset yields? -- and even if you believe you can do this, will you acknowledge that this approach is not consistent with traditional Buffett/Graham absolute value investing? Not trying to put words in your mouth -- I've directly quoted you and then asked questions to which you can respond in your own words. Here is my approach, which will never change -- I search for companies that possess great businesses models, great management teams, and sustainable competitive advantages and will establish large positions only with the margin of safety is high (stated atlernatively, when the absolute value is compelling). If I find a very high margin of safety but the business doesn't possess the three attributes above, I will occasionally establish a position. Occasionally, I will take small speculative positions but I won't kid myself into otherwise thinking I am making an investment. Record low yields will NEVER push me into a "less overvalued" asset just so I can get a higher yield than is offered in cash. Best.

Bronco -- I'm with you bud..."There is no credibality to me when someone says "that stock just went up 500% and I caught it at the bottom". No interest in people who tout either lucky calls or recommendations after the fact. You will never see me on this board bragging about a past investment that I didn't disclose prior to the appreciation. And you'll never see me touting my performance in a mindless fed induced bull market as reflective of my "great ability." The great ones shine when others are in serious pain. Despite my very bearish macro view, most of my time is still spent searching for individual stock ideas. I would like nothing more than to have a great idea. I have no great conviction ideas -- none. I'll admit to being tempted by BH and have a small position but don't have enough confidence that management is on our side -- that opinion could change...also concerned about commodity inflation on all food related businesses -- although my sense is that SNS has some pricing flex given they have lowered prices more than the competition in the past. I have also previously disclosed the EBAY was the closest I could find to value in the market -- stock has done quite well since. Last, I have disclosed that I have a small position in OSTK. More generally, the Fed is trying to artificially inflate all asset values, which has temporarily worked. In this environment, I'll enjoy the popcorn and sleep well at night. Anyone who asserts there are numerous opportunities offering a high margin of safety in the market is either a fool or trying to talk their book. I have well more than 50% of my fund in cash. And before anyone jumps to call me a fool because I don't realize "cash is trash" I would also add that the fund is up more than the market this year -- I am up more than I would have anticipated on an absolute basis, thanks largely to Ben Bernanke and the lemmings that followed his implicit call and David Tepper's explicit call that the "risk trade is on"... The holdings that I do have in equities represent relatively small positions in companies I intend to hold forever as they possess the rare combination of great management teams, great business models, and sustainable competitive advantages. Only small positions because at best these companies are fairly valued and many are clearly overvalued based on what is knowable today. Over the very long term, I'll do OK with these positions from current price levels. In a market downturn, I'll get hurt but perform much better than the market. I have a few speculative positions, OSTK being one. And cash provides tremendous option value -- dry powder to capitalize on any steep sell off in a great company (which is inevitable). I like dry powder because I know the fat pitches will come.

truth is that institutions moved in because yields were so much lower elsewhere. I told you that over two months ago, and said it was a certainty that capital would eventually move in looking for higher yields...you disagreed vehemently...guess what? At some point in the near future, you will see a natural correction in equities. Further down the road, we may see a large scale correction. Just to be clear -- I acknowledged at the time that stock prices could well rise for the reason you cite...but this would be trading based on the greater fool theory. And -- "The truth is that institutions moved in because yields were so much lower elsewhere." This would be somewhat analogous to a Fed induced Ponzi scheme -- no? Now let's see if you are honest -- you are basically asserting that if two assets are overvalued, one greater than the other -- buy the lower valued asset regardless of absolute value...no? This has nothing to do with Buffett style value investing -- period. Also -- let's get this on the record...are you claiming the ability to accurately predict with certainty the timing and direction of macro capital flows based on relative asset yields? Your assertion that "I told you that over two months ago, and said it was a certainty that capital would eventually move in looking for higher yields" would suggest you carry this delusional belief in your ability. And also recognize, this assertion that you are pounding your chest about has nothing to do with value investing and everything to do with speculation/luck.

Prem You were wrong about asserting that he twisted the math to support his assertion. However, you are correct that the impact would have been $113B instead of $11.3. As with Hussman, I didn't ajust for the 10% appreciation vs. 1% used as the basis for the estimated 0.042% and 0.035% impact. Further -- the point of the analysis was that net impact on GDP would be insignificant. Now I don't have an opinion on whether a 1% rise in the stock market equates to a GDP impact of 0.042% and 0.35%. And I also don't have an opinion on whether this neccessarily implies a 10% rise will have an impact exactly equal to 10x the impact of 1% -- seems like a stretch to assume the all variables hold at every level... But assuming all of this is correct, the conclusion is accurate -- QE2 would have a neglible long term impact on GDP...whether it is an $11.3B impact or a $113B is a rounding error -- the guy wasn't so "single-minded that they are stretching to find data to support their theses, and make up new math techniques along the way."

I'm not a buyer of gold and other metals either -- fool's game at this point but Parsad writes... I'm ok with the rest of the world owning gold and giving up on equities. To which I respond -- come again? The world has given up on equities -- huh? Have you lived in a cave for the past two months -- I believe the Nasdaq is up close to 18% in two months simply because of speculation/mania around QE2. Did you not see the WSJ yesterday, which showed that investor bullishness on equities has gone parabolic? This will all end terribly for equity investors in general -- guaranteed..just a question of when not if... Reading Hussman's letter, he makes an excellent point -- one that Buffett has made numerous times over the years...I'll paraphrase... Stocks are simply a claim on the future cash flows of a business. QE2 does not increase the cash flows of most business (in fact, as a result of the consequent commodity inflation, QE2 will likely reduce future cash flows -- see KMB and Dean Foods). QE2 has simply pulled forward/accelerated the price appreciation that would have come from the realization of future cash flows at best, resulting in far lower stock returns in the future. More likely, the price appreciation resulting from Q2 is the result of speculation/mania that QE2 "will benefit stocks" and "cash is trash" so "get the risk trade on" as well as short covering. I should add -- don't take that "living in a cave comment" personal...just a figure of speech...nothing personal.

However, I don't like when people like this are so single-minded that they are stretching to find data to support their theses, and make up new math techniques along the way. I agree -- ALTHOUGH YOU ARE THE ONE DOING THE STRETCHING PREM. Next time don't be so eager to criticize. Husman simply and accurately calculated -- (0.042%*14.7T) + (0.035%*14.7T) = $11.3B Basic stuff... He didn't do -- (0.042%+0.035%)*10%*10*14700 = 11.3...which you obviously completely made up as a result of your inability to follow his reasoning. And your assertion that (0.042%+0.035%)*10*14700 = 113 is completely irrelevant to the analysis and reasoning. Personally not familiar with Hussman but couldn't let such a basic and somewhat arrogant error slip by on the board. Best.

I don't think this is inconsistent. Generally, higher interest rates lead to lower equity values and lower interest rates lead to higher equity values. But there is an exception: a financial crisis pushes equity values to depression-like valuations and a central bank rushes to increase liquidity as a result. In that rare situation, you will have both very low interest rates and very low equity valuations. 2008 was one of those rare situations. I generally agree with this statement. But now Buffett simplistically states "buy equities" almost every time asked in public. Will be interesting to see how this plays out... In the Michigan Q&A, Munger dodged the question of whether stocks are a good long term investment at current levels by stating stocks should do better than long term government bonds -- that is not such a great outlook and I would expect all on this board hope to do better than current long term government bond yields over time. I believe lots of money can still be made but you need to find really cheap stocks with durable competitive advantages (and ideally some real and strong growth) because as Buffett notes rising interest rates are likely to sap any gains from modest earnings growth, regardless of the quality of the company.

They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. In the past, Buffett has always emphasized the importance of holding cash to capitalize on opportunities that present -- waiting for the fat pitch. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts. This has been true since the day the federal reserve was created. I see no substantial inconsistency, while I agree that the potential for poor stock returns is real due to the likelihood of rising interest rates. Where did this quote come from? Personally I see a very different Buffett today than in the past (at least in terms of public statements) -- although I have no idea why. I lean towards goldfinger's assertion -- if Buffett truly spoke his mind, he would risk collapsing the system. Seems Buffett is more interested in using his influence for social engineering during the twilight of his life than in the capitalistic principles/dynamics that allowed him to reach his current status -- each time he speaks, I am more convinced.