Liberty

But what if you can't trust the financial statements, or that contracts will be enforced? That's another way in which corruption/weak institutions can screw you.

Thanks for posting the letter. "Given our concern about financial markets and the excellent returns we achieved on our long term investments, we reluctantly decided to sell our long term holdings of Wells Fargo (a gain of 125%), Johnson & Johnson (a gain of 47%) and U.S. Bancorp (a gain of 135%)." Wow. Didn't they say a couple years ago that these were core long-term holdings? Maybe I'm misremembering, I'll have to dig that up after I'm done. Still, I was surprised that they sold it all, especially Wells, a Buffett favorite. Not necessarily bad if they redeploy the capital in even better things, but it's still surprising to me.

http://www.bloomberg.com/news/2014-03-06/blackberry-ceo-briefs-white-house-to-cultivate-vip-obama.html

I haven't found the video of the whole segment either. You indeed have to fight their website to get to the content you want, which is probably a bad strategy for a content company...

Here you go: http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/03/03/2014-03-03%20Ask%20WarrenBuffett%20complete%20transcript.pdf

Vinod, I agree, that's why I pointed out Klarman's style. If I was investing like him, I'd probably build up huge cash positions too while waiting for big distressed debt events. His way obviously works, but I'm not sure if investors with different approaches are taking away the right things from his allocation (apples to oranges). But it doesn't mean that we can't look at his macro comments - even if he says he doesn't act on them - to see if they are convincing. I agree we're probably overdue for a correction, but some people seem to read into his comments (and cash) that we're in very bubbly territory, and I'm not sure it's the case for reason I pointed out above. But who knows? Maybe we're about to see a massive selloff and 30% drop...

Annual letter from Sequoia Fund: http://www.sec.gov/Archives/edgar/data/89043/000114420414013665/v367083_ncsr.htm (thanks Wellmont!)

First thing that comes to mind is that Berkshire isn't just its equity portfolio. It has to hold lots of bonds for its insurance companies, and over time it became more and more an operating business. You could also look at changes in valuation by the market during that period (ie. did multiple to book go down).

Thanks Pedro!

Thanks. Second question is about BlackBerry, for those interested (nothing terribly new is said, though).

Sometimes I think Bloomberg does it on purpose. Often I click on an articles on their site just to figure out what it's about by reading the intro because the title baffled me. A new kind of clickbait, maybe..

Does that mean the book doesn't work? ;)

Maybe the actual letter has more insights than the summary, I can't comment on it since I haven't seen it, but pointing out a bunch of business trading at very high valuations doesn't really draw a convincing parallel with, for example, the dot-com bubble, IMO. To be clear: I'm not saying these companies aren't overvalued and that you should invest in them. Just that the parallel he seems to be making isn't that obvious to me. Back in dot-com days, you had a whole index trading sky-high, and even old-economy companies were trading super high (Coca-Cola at 50x). But another important difference is that a lot of the dot-com companies were not real businesses. They had no customers and nobody had made money on the things they were doing before. They were truly tulip bulbs. A lot of the current high flyers have actual businesses and real customers. Maybe they are very overvalued, but if the price of Netflix or Tesla drops by 50% or 75%, the business will keep going, or others will take their place because what they're doing is meeting real needs and providing real value. Maybe they'd have to cut R&D and fire employees if they couldn't raise as much equity, but they can be profitable. Most of the dot-com companies had no other reason to exist than to IPO and extract money from delirious investors. Nobody had shown you could make money with what they were doing before, and after the crash, they almost all disappeared. Twitter might be very overvalued, I don't know, but it has real users and could make real money selling ads and sponsored content and such. If there's a big correction, it won't just disappear as if it had been just a mirage all this time. And if you aren't investing in these high-flyers, I'm not sure they have such a big impact on the rest of the economy that you should worry.. I guess if we invert, we could ask: Is there any period over the past 100 years when there wasn't a bunch of high-flying stocks? Probably a few, but I doubt the rest of the time it always meant we were on the edge of the precipice. A correction? Sure. A bubble bursting, leaving rubble in its wake? I don't really see it, IMO. There can always be big external shocks (a big war, whatever), but I don't think valuation alone is bubbly overall. Not that all this is worth much, but it's my 2 cents.

Yeah, and people like Klarman and Howard Marks invest differently than most here. They buy lots of distressed debt when things blow up. I think it's probably easier to find undervalued good businesses on any random day of any random year than it is to find truly irrationally priced debt (but that's just my sense -- I'm no debt expert). As for Dalio, well, he seems in a class of his own for that macro stuff.

But cash is not an end in itself, right? If gold is a kind of cash, it's a kind of cash that you plan to use. So their thinking must be something like: "If we come to a situation where gold does really really well, we sell it and buy productive assets with the proceeds". Otherwise, the high volatility and unpredictability of gold as cash doesn't make it work as a regular source of liquidity for normal investing needs, so it almost has to be held for these special situations. That makes some sense on its own, but in practice, situations where gold would do really really well seem pretty rare. As I said, stocks have done better over time in very high inflation periods, so you would need something pretty dramatic for gold to have been better adjusted for the whole opportunity cost of holding it. That doesn't seem to happen ever quarter of a century, maybe every half-century, I don't know. What if instead of holding gold mostly tracking inflation for 50 years you held a good business growing IV at 10-15%?

I don't know the position sizing of Klarman and Dalio in this. I know that Paulson definitely saw it as an investment. But even as cash.. Ok, maybe my cash (of which I never have much, as I tend to be closer to fully invested) will lose a bit of value over time, but gold is so volatile that I absolutely can't predict that it won't lose more value than cash over any period of a few years, and on top of that, I don't really see a good way to value gold to know if it's overvalued or not, so it's very hard to know when it has a good chance of doing well. Maybe if I was going to hold gold for decades I could be fairly certain that it would go up in price vs the dollar with inflation, but why would I hold a non-productive asset for decades when I could own a business? The same people who were right about the bull market in gold over the past decade were wrong about the recent slump, so I doubt anyone has a reliable formula.

I haven't run into that too much, but it's annoying when it happens. I guess it always takes a while for all web designers to figure out new formats (there's an adoption period). The good ones have already done so, but the less good ones will need a bit more time -- either for better mobile sites that optimize things differently for tablets and phones, or by serving mobile only to phones and not to bigger tablets.

The last nail in the coffin of gold and commodities as insurance against catastrophe XYZ for me was when I saw a study that showed that common stocks did better during periods of very high inflation. I don't remember exactly the article, but I remember that I posted it on the board.. Anyway, so what's the point then? Better to own a wonderful business with pricing power if things are going to go real bad. What's left then is trying to time where you are in the gold/commodity cycle to catch it at the bottom and sell it at the top, but that's not a game I want to play. I'll leave that to Rick Rule...

Definitely cool to have the option! On my iPad, I prefer the regular site, though -- for those who do too, there's a button at the bottom of the page that allows you to see it on a mobile device.

Found this on Netflix and it's pretty decent. Basically Hank Paulson sitting in a chair and being interviewed, mostly about his time as Treasury Secretary during the crisis, for an hour and a half. Not the best thing ever, but I know some people here would enjoy hearing straight from a primary source like this.

For those interested in this topic: http://www.res.org.uk/view/art1Oct13Features.html

Not that it matters that much, but here's Brooklyn Investor on the 500 pages per day or week: Part of a longer post about the interview: http://brooklyninvestor.blogspot.ca/2014/03/buffett-on-cnbc-with-3ts.html

http://brooklyninvestor.blogspot.ca/2014/03/berkshire-hathaway-annual-report-2013.html

Yeah, a recent Economist issue also had something about this. Seems to make complete sense over the mid-term; the best way to reduce Russia's influence is to create a more liquid and more responsive global market for oil and especially natural gas. (the responsive part is about how it takes so much more drilling with shale, so you can more easily modulate the number of wells you're drilling to respond to supply shocks).

Thanks jm25! :) I will dig into it when I have a chance, but I think it's worth creating a thread about it. It'll make it easier for find any information that is added to it over time than if it's scattered everywhere.