Thursday 28 February 2013

Buffett at Sun Valley, 1999


Every time I read this speech it makes me blood boiling. It was delivered by Buffett in 1999 during the Sun Valley. Usually, for Buffett, this is a good time to have a family gathering. Of course golf, bridge and social activities. In 1999, when the Dow-Jones is at more than 10000 point, tripled in half a year, Buffett, who is known as an investor not interested in high tech companies at that time was thought as outdated.

 

In fact, Buffett had prepared for weeks on this speech. He took this speech quite serious. And this is the first time for him in the 30 years to predict the market. Buffett nearly bought no shares of internet companies at that time. Before reading the intelligent investor, I thought his attitude about internet companies must be a story full of conspiracies. But after having read the book, I have changed my opinion. Not to buy the shares of Dot Com companies should be a natural behaviour that is consistent with Graham’s thought. I listed the speech separately because these are the insights of investors rather than a more academic one.

 

And here is the speech

 

Finally, at the end of the speech, with several jokes made the silence was broken. But after a while, resentment has been spread in the house. Unlike most of the people in the hall, some body thought they were benefited from the speech. “Basic knowledge about stock market in one lesson.” Gates said.

 

As an investor, Buffett is very sensitive to bubbles. He used to divide asset into three types: fixed income asset (the risk is mainly caused by the inflation); asset that is not productive like gold; asset that can produce fortune and the best example is a farm (asset with less threaten of inflation is preferred. Companies like Coca Cola is preferred than the utilities in that they will not be greatly influenced during high inflation). In the general meeting of shareholders of 2011, Buffett expressed his concern about the bubble of gold. During the meeting, he was queried by some shareholders about why he didn’t buy some gold to hedge the risk during that time when it was of relatively high inflation. From his point of view, gold is not productive. And it is expensive. Asset with reasonable cause to hold at the first can became bubble if having been hyped excessively. Buying gold is like gambling, he said you can only hope somebody else to buy it rather than it manifests itself with producing value and wealth. Nearly rigid.

 

 


No comments:

Post a Comment