4 ms·
His basic point is almost a tautology. Yes, it's great to own productive assets. The real trick is predicting which ones will really stay productive over the lo
by ef4 15y ago
His basic point is almost a tautology. Yes, it's great to own productive assets. The real trick is predicting which ones will really stay productive over the long term. Just buying a broad index is often not a winning strategy when you factor in the taxes, inflation, and survivor bias. Certainly Buffet hasn't just bought a broad index -- he makes highly targeted investments.
And he glosses over a basic point that I've seen many commenters miss. An asset like gold behaves differently under bubble conditions than an asset like a tech stock, tulip, or house. The production of those things is price elastic, and rising prices cause rising production that ultimately crashes the bubble.
But expanding the supply of gold available for trade by more than a couple percent a year simply isn't feasible. This is precisely why markets have repeatedly chosen it as a form of money.
Of course this means the market for gold is driven purely by demand sentiment, and of course demand could crash. But this is true of every currency -- it's only valuable because it's valuable.
- jtbigwoo 15y agoAn asset like gold behaves differently under bubble conditions than an asset like a tech stock, tulip, or house. The production of those things is price elastic, and rising prices cause rising production that ultimately crashes the bubble. The number of new home sales at the top of the bubble was about 1.4 million/year vs. existing housing stock of over 70 million. That's less than a 2% increase per year, not counting the thousands of home that are demolished each year. Vast new production isn't required for a bubble.
- dwc 15y agoThe real trick is predicting which ones will really stay productive over the long term. Just buying a broad index is often not a winning strategy when you factor in the taxes, inflation, and survivor bias. Certainly Buffet hasn't just bought a broad index -- he makes highly targeted investments. This depends on how high you set the bar. If you're trying to be Warren Buffet then buying a broad index obviously won't get you there. With the bar set somewhere in the neighborhood of "I'd like to protect and increase the buying power of my money" then buying something like SPY starts looking a lot better, even with taxes and inflation taken into account.