A Quote by Warren Buffett
Market price, while used exclusively to value our investments in minority positions, is not a relevant factor when applied to our controlling interests.
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Asset values and earning power are the dominant factors affecting the valuation of a controlling interest in a business. Market price, which governs valuation of minority interest positions, is of little or no importance in valuing a controlling interest.
Our marketable equities tell us by their operating results - not by their daily, or even yearly, price quotations - whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it.
The U. S. trade deficit with China shows that while we value the potential of their market, they value the reality of our market. It is in this area that we should use our leverage.
Value in relation to price, not price alone, must determine your investment decisions. If you look to Mr Market as a creator of investment opportunities (where price departs from underlying value), you have the makings of a value investor. If you insist on looking to Mr Market for investment guidance however, you are probably best advised to hire someone else to manage your money.
There is abundant proof that the opening of our ports always tends to raise the price of foreign corn to the price in the English market, and not to sink the price of British corn to the price in the continental market.
The rigor and discipline we use in running our business is key to consistently executing our growth strategy. And we systematically applied the same discipline to our investments, including acquisitions.
To a value investor, investments come in three varieties: undervalued at one price, fairly valued at another price, and overvalued at still some higher price. The goal is to buy the first, avoid the second, and sell the third.
If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content.
If we somehow put a value on species extinction and factor that into our costs that bottom line would look very different. IF we put any resource depletion into costs our bottom line would change. So what we have is a dishonest market that does not take into account all the costs when it establishes its prices. We need an honest marketplace before we can let the market work for sustainability rather than against it as it works today.
One thing I want to emphasize is that, like any human being, we can discuss our view of the economy and the market. Fortunately for our clients, we don't tend to operate based on the view. Our investment strategy is to invest bottom up, one stock at a time, based on price compared to value. And while we may have a macro view that things aren't very good right now - which in fact we feel very strongly we will put money to work regardless of that macro view if we find bargains. So tomorrow, if we found half a dozen bargains, we would invest all our cash.
Every quarter, we need to see the portfolio and follow the accounting practice of mark-to-market that values investments according to the prevailing market prices and at the price at which they are made.
We received our initial inspiration from our family, as from childhood we exhibited an inclination towards art. While Johns randomly drew pictures, I used to present dramas for my siblings. But when we grew up, we both got addicted to our interests and it was fueled by political activism.
The latest trade of a security creates a dangerous illusion that its market price approximates its true value. This mirage is especially dangerous during periods of market exuberance. The concept of "private market value" as an anchor to the proper valuation of a business can also be greatly skewed during ebullient times and should always be considered with a healthy degree of skepticism.
Market prices for stocks fluctuate at great amplitudes around intrinsic value but, over the long term, intrinsic value is virtually always reflected at some point in market price.
Our electoral process has created perverse incentives that have warped our democracy and empowered special interests and a vocal minority.
What is most disturbing today is that we use rational methods to cultivate the tastes and values of the young in all kinds of educational, religious, and cultural institutions that are predicated on corporate practices and goals. Everything we do to, with, and for our children is influenced by capitalist market conditions and the hegemonic interests of ruling corporate elites. In simple terms, we calculate what is best for our children by regarding them as investments and turning them into commodities.
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