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WARREN BUFFETT: INVESTING LONG-TERM
EXECUTIVE SUMMARY
Warren Buffett shares how he views the global and American economy in recovery.
When the United States came to a closure and financial meltdown in 2008-2009, the people panicked even more than the Great Depression, because it came so fast and unexpected.
On the other hand, during the meltdown, Buffett made some huge investments such as General Electrics and Goldman Sachs. He felt it was an opportunity to buy a business that was going to be around for 100-200 years that’s interwoven with the American economy.
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Warren Buffett shares how he views the global and American economy in recovery.
When the United States came to a closure and financial meltdown in 2008-2009, the people panicked even more than the Great Depression, because it came so fast and unexpected. The whole country wanted to deal everything! Buffett sensed that coming. However, in the end, everything came together for things that were vital to the country, because Washington had the right people.
During the meltdown, Buffett made some huge investments such as General Electrics and Goldman Sachs. He felt it was an opportunity to buy a business that was going to be around for 100-200 years that’s interwoven with the American economy. When the economy in America prospers, the business prospers.
Aside from GE, Berkshire also struck 26-billion-dollar deals by all of Burlington Northern Santa Fe Railroad, the largest acquisition in company history. He called the deal an all-in wager on the American economy. Mid-2008 to mid-2009 was an amazing year, indeed.
Railroads are the most efficient way to move goods in the country – not only efficient, but also the most environmental friendly. The railroads are important in many aspects. A train replaces 200 trucks on the road. It omits less damage, because it’s cleaner and faster. To a greater extent, people and businesses will use more goods over time, and they will certainly need the fastest delivery medium. Buffett is sure that railroads will still be essential to the United States as it is now.
America is a regulated industry and a capital intensive industry. Businessmen spend money in the business regularly – repairing, adding stocks, replacing, etc. It is regulated and capital intensive, and will continue to be. With regards to the railroad businesses again, it will be here as long as the company gets a reasonable return on the added capital investment.
Reasonably returns are good enough in a railroad business. 50 years is what Berkshire is looking for spectacular returns, but he can’t get them. Buffett does not expect a spectacular return, because people need the services. They don’t have any choice at all.
Anyone who tries to reproduce Burlington Northern Santa Fe will spend a hundred billion dollars or so, and they’d have to be a real sport, Buffett said. The railroads are enormously modernized today — moving far more than miles. Less in the way of people and less In the way of fuel. Railroads are far more efficient over the years.
Buffett’s famous quote goes, “Get out of cash and get into assets, because we don’t know what’s going to happen to the dollar.” Cash is always a bad investment as it does not produce anything. More than that, it will surely go out in value overtime. Cash will always be enough and just around. Buffett is unhappy anytime Berkshire has surplus cash around, because he’d rather have good businesses than cash. Berkshire had about 40 billion of cash, and they tuned it down to 20 billion by buying good businesses that have cash.
All assets are hedging the dollar, and the dollar is going to worth less years from now. “Worth less” not “worthless”. It depreciates in value over time, so cash is really not the place to stay. Surely, more cash will be printed as the amount of goods are moving, but cash is cash. Cash is paper. The United States, and the whole world, will be a lot better if they would invest in things that will denominate in dollars.
