In the Court of the Wise Old Owl of Finance

In The West Australian ‘Agenda’ section today David Alder writes about Warren Buffett’s key messages from the 2016 Berkshire Hathaway annual meeting.  David’s full article can be read here – In the Court of the Wise Old Owl of Finance

He remains upbeat on the US economy. ‘If the country’s population kept growing at 8 per cent per year, the economy would enjoy a 34.4 per cent gain in real GDP per capita in a single generation of 25 years …. For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”

Avoid envy. Investors shouldn’t envy someone who profited by buying shares in a company’s initial public offering or claimed a lottery jackpot. Try to find investments that make sense to you and think of stocks as a slice of individual businesses that you’d be comfortable to own for the long term.

Derivatives remain dangerous and the problem is largely in the counter-party risk. A major terror attack or some such “discontinuity” will lead to a lot of problems. When markets reopen after such an event, he believes some of the counterparties will no longer be standing. In addition, the derivatives big banks hold on their books can make them hard to evaluate. For the record, in 2015 he did say he was interested in buying into Australian banks over the next five years because he was “comfortable” with them. He also set aside a $2 billion war chest for investment here each and every year.

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The full broadcast of the Berkshire Hathaway AGM can be viewed here for the next three weeks.