OK, if anyone is bored as fuck this weekend and wants to read a 100-page essay, rejoice! I’ve documented everything I’ve ever thought about Vayne players being total fucking assholes, in a large and thoroughly referenced Word document.
Alternatively, you could read this PDF. It’s a collection of writings from Buffett about inflation, in particular, including his famous 1977 essay on inflation. Why care? Well, inflation’s back and it’s not gone yet.
http://csinvesting.org/wp-content/uploads/2015/01/Buffett-inflation-file.pdf
The key TLDR takeaways are:
1 – companies that require high levels of capital reinvestment get fucked by inflation; all their profits are swallowed by rapidly increasing costs to simply replace depreciating assets.
Think: big factories with expensive equipment that needs replaced.
In the modern day, I guess this covers a lot of semi fab companies – Micron, Intel, etc.
But also the less obvious ‘crumbling factories’ of a consumable good, such as the telecoms sector’s expensive physical networks & super expensive licenses, for companies like AT&T and Verizon – (and particularly telecoms, since in many countries it’s not a regulated utility, where an inflationary uplift of income is enforced by the state).
2 – this paragraph, which gives me nightmares
“One friendly but sharp-eyed commentator on Berkshire has pointed out that our book value at the end of 1964 would have bought about one-half ounce of gold and, fifteen years later, after we have plowed back all earnings along with much blood, sweat and tears, the book value produced will buy about the same half ounce. A similar comparison could be drawn with Middle Eastern oil. The rub has been that government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil. “
ouch!
The greatest investor in the history of our species, failed to make a penny of profit on the company books (after tax), from 15 years of effort, measured relative to oils/metals.
I’ve thought about that paragraph quite a lot in the last 18 months or so.
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