This plays well with his love for almost trivially easy businesses, like Coca Cola. The simpler it is the easier it is to predict. "You want a business than can be run by an idiot, because one eventually will".
Buffett has a good understanding of trade relationships between the countries, he wrote a good piece on the US trade imbalance many years ago. He probably has an excellent understanding of the bond market. But he can't predict where will this go, so he doesn't use it as a basis for his investment decisions.
Any links for that? Would like to read it.
Note that this was before the 2008 crisis which did affect the picture. Although it seems US is in a comparable or even worse state, yet again.
Seems like awfully low hanging fruit to be known as “the second Borel-Cantelli lemma”.
I guess there were some benefits to laying out the groundwork of probability theory in the early 1900s.
A wild statement, considering the US has one of the largest nuclear arsenals in the world, and has recently pursued an even more aggressive policy of nuclear armament and renewal of an arms race with Russia, including withdrawal from the Intermediate-Range Nuclear Forces Treaty under Trump. Buffet wrote this prior to Trump's election, but the story would to be familiar to him, recalling Regan's dangerous games of nuclear posturing against Russia in the 80s. The current nuclear threat (which incidentally, extends beyond US corporate interests) is as real as ever, and the known record of close calls is a sobering read[1]. That's just to mention the close calls that we know about. In this sense the US goverment has been and remains an aggressor against its own people and the rest of the world, by continuing to pursue its hubristic and irresponsible policies.
> There is no way for American corporations or their investors to shed this risk.
Options to mitigate the nuclear risk abound for US corporations: for a start, they could use their enormous wealth and political influence to lobby their government to engage in diplomacy with other nuclear armed states, rather than continuing to pursue their current suicidal path. More broadly, US corporations could remove support for Republican candidates, whose party in power has continued to amplify the danger through various policies and actions. Another major avenue is financial: divestment from the military industrial complex, which is instrumental to the threat of nuclear war in obvious ways.
[1] https://en.wikipedia.org/wiki/List_of_nuclear_close_calls
But Buffet is clearly not talking about a 10% loss, in the event of a major nuclear engagement -- that would be a wildly optimistic read. We're clearly talking somewhere between 50% - 95% - total shutdown of equity markets.
Not saying anyone is using words wrong, just funny how language drifts.
http://www.berkshirehathaway.com/letters/2015ltr.pdf
>There is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a “successful” (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States. That is a risk Berkshire shares with all of American business.
>The probability of such mass destruction in any given year is likely very small. It’s been more than 70 years since I delivered a Washington Post newspaper headlining the fact that the United States had dropped the first atomic bomb. Subsequently, we’ve had a few close calls but avoided catastrophic destruction. We can thank our government – and luck! – for this result.
>Nevertheless, what’s a small probability in a short period approaches certainty in the longer run. (If there is only one chance in thirty of an event occurring in a given year, the likelihood of it occurring at least once in a century is 96.6%.) The added bad news is that there will forever be people and organizations and perhaps even nations that would like to inflict maximum damage on our country. Their means of doing so have increased exponentially during my lifetime. “Innovation” has its dark side.
>There is no way for American corporations or their investors to shed this risk. If an event occurs in the U.S.that leads to mass devastation, the value of all equity investments will almost certainly be decimated.
>No one knows what “the day after” will look like. I think, however, that Einstein’s 1949 appraisal remain sapt: “I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.”