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Meanwhile, let’s focus on the main point: as inflation has increased, the return on equity capital has not.
To raise that return on equity, corporations would need at least one of the following: (1) an increase in turnover, i.e., in the ratio between sales and total assets employed in the business; (2) cheaper leverage; (3) more leverage; (4) lower income taxes; (5) wider operating margins on sales.
Out with Ben Franklin (“a penny saved is a penny earned”) and in with Milton Friedman (“a man might as well consume his capital as invest it”).
The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures.
High capital-accumulation rates have enabled those countries to achieve gains in living standards at rates far exceeding ours, even though we have enjoyed much the superior position in energy.
“The market, like the Lord,” Buffett writes, “helps those who help themselves. But, unlike the Lord, the market does not forgive those who know not what they do.”
“The only reason for a company to repurchase its stock,” Buffett has often said, “is because it is selling for less than it’s worth.”
“We feel that if we can buy small pieces of businesses with satisfactory underlying economics at a fraction of the per-share value of the entire business, something good is likely to happen to us.”
“Things aren’t right just because they are unpopular,” Buffett says with a chuckle, “but it is a good pond in which to fish. You pay a lot on Wall Street for a cheery consensus.”
To him the perfect amount to leave children is “enough money so they would feel they could do anything, but not so much that they could do nothing.”
“We do not need more people gambling in nonessential instruments identified with the stock market in this country, nor brokers who encourage them to do so.”
“With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.”
“In my whole life nobody has ever accused me of being humble. Although humility is a trait I much admire, I don’t think I quite got my full share.”
The size of the investor’s brain is less important than his ability to detach the brain from the emotions. “Rationality is essential when others are making decisions based on short-term greed or fear,” says Buffett. “That is when the money is made.”
Time is the friend of the wonderful business, the enemy of the mediocre.
After ending our corporate marriage to Hochschild Kohn, I had memories like those of the husband in the country song “My Wife Ran Away With My Best Friend and I Still Miss Him a Lot.”
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Overall, however, we’ve done better by avoiding dragons than by slaying them.
“This is the cornerstone of our investment philosophy: Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”
“You should invest in a business that even a fool can run, because someday a fool will.”
They say success is getting what you want and happiness is wanting what you get.
“You only need to get rich once.”
“You never know who’s swimming naked until the tide goes out.”
the money that had been made since the dawn of aviation by all of this country’s airline companies was zero. Absolutely zero.
The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
When stocks go down and you can get more for your money, people don’t like them anymore.
close attention to his jocular wish: “All I want to know is where I’m going to die, so I’ll never go there.”
Ben instructed me some there too. He said, ‘You’re neither right nor wrong because others agree with you. You’re right because your facts and reasoning are right.’
For investors as a whole, returns decrease as motion increases.
“You don’t really have a competency if you don’t know the edge of it.”
“One thing that can be very nice in a dysfunctional management is that it’s very hard to measure people,”
“The goal,” he said, “should be electing the very best possible director, regardless of whether that’s a man or a woman.”
