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you mentioned wearing a big bubble can you elaborate on that and how is this likely to play out when you print money on the scale what modern nations are printing it Japan the United States Europe Etc we're getting into new territory in terms of size there's never anything quite like what we're doing now and we do know from what's happened in other nations if you try and print too much money it eventually cause this terrible trouble and we are closer to terrible trouble than we've been in the past but it may still be a long way off I certainly hope so when volcker after the 70s took the prime rate to 20 percent and the government was paying 15 on this government bonds that was a horrible recession lasted a long time caught with a lot of agony I certainly hope we're not going there again I think the conditions that allowed Volker to do that without an interference from the politicians were very unusual and I think in 2020 hindsight it was a good thing that he did it I would not predict that our modern politicians will be as willing to permit a new Volker to get that tough with the economy and bring on that kind of a recession so I think the new troubles are likely to be different from the old troubles you may wish you had a vulgar style recession instead of what you're going to get the troubles that come to us could be worse than what vulgar was dealing with and harder to fix think of all Latin American countries that print too much money they get strong men and so forth that's what Plato said happened in the early Greek city-state democracies one person one vote a lot of equality and you get demagogues in the demographics lather of the population I'm pretty soon you don't have your democracy anymore I don't think that was a crazy idea on Plato's part I think that accurately described what happened in Greece way back then and it's happened again and again again in Latin America we don't want to go there at least I don't we've done something pretty extreme and we don't know how bad the troubles will be here whether we're going to be like Japan or something a lot worse and what makes life interesting is we don't know how it's going to work out I think we do know we're flirting with serious trouble I think we also know that some of our earlier fears were overblown Japan is still existing as a Civilized Nation in spite of unbelievable excess by all former standards in terms of money printing think of how seductive it is you have a bunch of interest-bearing debts and you pay them off with checking accounts which you're no longer paying interest think of how seducky that is for a bunch of legislators you get rid of the interest payments and you use the money supply go was up it seems like heaven and of course things get that seductive they're likely to be overused if you start to think about it my way in life was not predicting little short-term differences between the Russell index and the standard poorest index I don't have any opinion about which index is better at any given time I never even think about it I'm always just looking for something that's good enough to put hunger money in and I figure that I want to swim as well as I can against the tides I'm not trying to predict the tides if you're going to invest in stocks for the long term or real estate of course they're going to be periods when there's a lot of Agony in other periods when there's a boom and I think you just have to learn to live through them and the Kipling said treat those two imposters just the same you have to deal with daylight and night does that bother you very much no sometimes it's night and sometimes it's daylight sometimes it's a boom sometimes it's a bust I believe in doing as well as you can and keep going as long as they let you what impact does passive investing had on stock valuations oh huge that's another thing that's coming we have a new bunch of Emperors and they're the people who vote the shares and the index funds maybe we can make Larry Fink and the people of Vanguard pope all of a sudden we've had this enormous transfer of voting power to these passive index funds that is going to change the world and I don't know what the consequences are going to be but I predict it will not be good we have a hugely strong economy and a hugely strong technical civilization and that's not going away and the knowledge and so forth and you can't believe what a modern Factory looks like when you fill it with robots and that's coming more and more and more and it's coming to China too for that matter and so those Trends are inevitable and I think it does create adjustment problems if you ever find unionized job and they replace you with a robot you've got a difficult problem if you've got a company like Kodak and they invent something new that obsolets your product you have a problem too and you solve that by dying a lot of people don't like that solution because all those problems are real and because it's so tempting to get rid of your debt by just giving a guy a non-interest bearing checking account where you used to have to pay them interest every month not only do we have a serious problem but the solution to it that is the easiest for the politicians and for the Federal Reserve too for that matter is just to print more money and solve the temporary problems that way and that of course is going to have some long-term dangers and we know what happened in Germany when the Weimar Republic just kept printing money the whole thing blew up and that was a contributor to the rise of Hitler so all this stuff is dangerous and serious and we don't want to have a bunch of politicians just doing whatever is easy on the theory that didn't hurt us last time so we can double it and do it one more time and then we double the again and so forth we know what happens on that Everlasting doubling doubling doubling you will have a very different government if you keep doing that enough you're flirting with danger somewhere unless there's some discipline in the process but I don't regard Japan as in some terrible danger having they gave the only huge amount of this and gotten by with it I don't think we'll be as good at handling our problems as Japan is if taxes were not an issue what are your thoughts on going to cash today and waiting for better opportunities to deploy that cash over the next 12 months is it a sensible idea in your mind my whole adult life I've never hoarded cash waiting for better conditions I've just invested in the best thing I could find and I don't think I'm going to change now and the daily journals used up its cash now vercher has excess cash quite a bit of excess cash but it's not doing that because he thinks it knows how to Time Investments he just can't find anything he can stand by so we don't have a solution to your problem we're just coping with it as I've described given the valuation and Market correction in early 2020 why is Berkshire not picking up or adding any new companies to its profile of course kudos to the team and picking up Apple shares a couple of years back that's paying off for sure the reason we're buying this we can't buy anything the prices we're willing to pay it's just that simple other people are bidding the price up and a lot of the buying is not by people who really plan to own them a lot of it is feed ribbon buying private Equity buys things so they can have more fees by having more things under management of course it's a lot easier to buy something you use somebody else's money we're using our own money at least that's the way we think of it I've always believed that nothing was worth an infinite price even an admirable place like Costco could get to a price where you would say that's too high but I would argue that if I were investing money for some Sovereign wealth fund or some pension fund and a 30 40 50 year time Horizon I would buy Costco at the current price I think it's that strong in Enterprise and that admirable place by the way it's not a tragedy that Berkshire has some Surplus money they're not investing we look more responsible with the extra wealth and we are more responsible with the extra will the shareholders who are worried about the future because it looks complicated and difficult and they're Hazard I want to say to them what my old torch professor said to me Charlie he'd say Charlie tell me what your problem is and I'll try and make it more difficult for you and he did me a favor by treating me that way I'm just repeating his favor to you when you're thinking the thoughts you're doing at least you're thinking in the right direction you're worried about the right things all you people that are worried about the inflation and the future of the Republic and so forth inflation is a very serious subject you can argue it's the way democracies die and democracy dies in Latin America inflation is a big part of it so it's a huge danger once you've got a populist that learns it can vote itself money if you overdo it too much you ruin your civilization a lot of course it's a big long-range danger if you look at the Roman Republic even after they went to a Empire with an absolute ruler they inflated the currency steadily for hundreds of years and eventually the whole damn Roman Empire collapsed so it's the biggest long runs danger we have probably apart from nuclear war I think the safe consumption for an investor is that over the next 100 years the currency is going to zero that's my working hypothesis a very dangerous environment what brought in Hitler was the combination of the Weimar inflation where they utterly destroyed the savings of the middle class in Germany followed by the Great Depression it was a one-two punch and Hitler came in Crazy demagogue with 40 of the votes and pretty soon we had a dictator hell bent for World War so the history is not pleasant and Germany was a very Advanced and Civilized Nation the Germany that Hitler took over I always say that the interesting thing about that was little Albert Einstein the little Jewish boy got his entire primary education with the insistence of the Catholic church in Germany now that is a very Civilized Nation so if you would let your nation deteriorate too much what you get as a Hitler we proved it of course in a modern democracy in the age of Keynes you're going to get big government reaction the reaction this time was bigger than it's ever been before and The History of the United States they just threw money at the problem and they were probably right to fear what was going to happen and to be quite liberal throwing money at it but they probably overdid it a little they threw so much money so fast that it's hard for the restaurants to get people to do the work but I don't criticize it it's hard to make these decisions Under Pressure well you have to be optimistic about the competency of our technical civilization But there again it's an interesting thing if you take the last 100 years most of modernity came in in that hundred years and in a previous hundred years that got another big chunk of modernity and before that things were pretty much the same for the previous thousands of years life was pretty brutal and short and limited and what have you no printing press no air conditioning no modern medicine no I don't think we're going to get things that were in what I call the real human needs think of what it meant to get say first you got the steam engine the steamship the railroad and a little bit of improving farming and a little bit of improvement in Plumbing that's what you got the hundred years it ended in 1922 the next hundred years gave us widely distributed electricity modern medicine the automobile the airplane the records the movies the air conditioning in the South and I think what a blessing it was if you wanted three children you had to have six because three died in infancy that was our ancestors think of the agony of watching half your children die it's amazing how much achievement there's been in civilization in these last 200 years and most of it in the last hundred years now the trouble with it is is that the basic needs are pretty well filled in the United States the principal problem of the poor people is they're too fat that is a very different place from what happened in the past they were on the edge of starving and what happens is it's really interesting is with all this enormous increase in living standards and freedom and diminishment or racial inequities and all the huge progress that has come people are less happy about the State of Affairs than they were when things were way tougher and that has a very simple explanation the world is not driven by greed it's driven by Envy and the fact that everybody's five times better off than they used to be they make it for granted all they think about is somebody else has had more now and it's not fairly easy to have it and they don't that's the reason that God came down and told Moses that he couldn't then be your neighbor's wife or even his donkey I mean even the the old Jews were having trouble with envy and so it's built into the nature of things it's weird for somebody my age because I was in the middle of the Great Depression with the hardship was unbelievable I was safer walking around Omaha in the evening than I have in my own neighborhood in Los Angeles after all this great wealth and so forth so and I have no way of doing anything about it I can't change the fact that a lot of people are very unhappy and feel very abused after everything's improved by about 600 percent because there's still somebody else who has more think of the pretentious expenditures of the rich who in the hell needs a real Rolex watch so you can get mugged for it you know I mean yet everybody wants to have a pretentious expenditure and that helps Drive demand in our modern capitalist Society my advice to the young people is don't go there the hell with the pretentious expenditure I don't think there's much happiness in it but it does Drive the civilization we have actually have it drives a dissatisfaction how will this all play out and what's the best advice you have for individual investors to optimally deal with the negative impact of inflation other than owning quality equities well it may be that you have to choose the least bad of a bunch of options that frequently happens in human decision making and mongers have butcher stock Costco stock Chinese stocks a little bit of Daily Journal stock and a bunch of apartment houses do I think that's perfect no do I think it's okay yes I think the great lesson from the mongers is you don't need all this damn diversification that's plenty of you're lucky if you've got four good assets adding the finance professors and the Selway idea that perfect diversification is professional investment if you're trying to do better than average you're lucky if you have four things to buy and to ask for 20 is really asking for egg in your beer it's very few people have enough brains to get 20 good Investments it's going to be way harder for the group that's graduated from college now for them to get rich and stay rich and so forth going to be way harder for them than it was for my generation think what it costs to own a house in a desirable neighborhood in a city like Los Angeles I think we'll probably end up with higher income taxes too and so on no I I think the investment world is plenty hard and I don't think the in my lifetime 98 years it was the ideal time to own a diversified portfolio Common Stocks the updated a little by adding the new ones that came in like the apples and the alphabets and so forth and I'd say the people well got maybe 10 or 11 percent if you did that very intelligently before inflation and maybe nine percent after it that was a marvelous return no other generation in the history of the world ever got returns like that and I don't think the future is going to give the guy graduating from college this year nearly that easy in an investment opportunity I think it's going to be way harder some people are gifted enough that they can invest in hard to Value difficult things other people I think would be very wise to have more modest Ambitions in terms of what they chose to deal with so I think you have to figure out your level of skill or the level of skill your advisor has and that should enter the equation but to everyone who finds the current investment climate hard and difficult and somehow confusing I would say welcome to adult life thank you
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