Warren Buffett: Why stocks beat gold and bonds

[zarley]

Fortune has a preview of the BRK annual letter.  Buffett argues in favor of productive assets (like quality businesses) as the best bet for maintaining purchasing power in the face of inflation.

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.

From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability -- the reasoned probability -- of that investment causing its owner a loss of purchasing power over his contemplated holding period. Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period. And as we will see, a nonfluctuating asset can be laden with risk.

Investment possibilities are both many and varied. There are three major categories, however, and it's important to understand the characteristics of each. So let's survey the field.

[jberkshire01]

Buffett was also on a new show (actually the revival of an old show) last night with Charlie Rose and Lara Logan: http://www.cbsnews.com/8301-505383_162-57373393/person-to-person-warren-buffett/?tag=storyMediaBox;postSpecialReport

[elltel]

I dont know what it is... but no matter what I read, and it is a fair amount whenever I know that it is Buffett writing I read it slower and find it more interesting than everything else.

[longinvestor]

Brilliantly simple and lucid. Advice from the Oracle does not get better than this. Once again, Warren points out that it is not Gold, Bonds or Stocks alone but your own mental makeup as an investor. For someone who is now 100% in equities, I have found myself second guessing myself. What I took from this is that the last few years have been the single opportunity in our lifetimes for "Buying stock in long term businesses and holding them forever". Atleast for someone in their middle ages.

[valueInv]

Great article, as always. What I like most about Buffet is his clarity in thinking.

[MartinWhitman]

Does anyone have an idea when this years Berkshire shareholder letter will be released?