
Warren Buffett's encouraging words for America - mikeyanderson
https://medium.com/@mikeyanderson/warren-buffetts-encouraging-words-for-america-404815e323b8
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mikeyanderson
One word sums up our country’s achievements: miraculous. From a standing start
240 years ago – a span of time less than triple my days on earth – Americans
have combined human ingenuity, a market system, a tide of talented and
ambitious immigrants, and the rule of law to deliver abundance beyond any
dreams of our forefathers. You need not be an economist to understand how well
our system has worked. Just look around you. See the 75 million owner-occupied
homes, the bountiful farmland, the 260 million vehicles, the hyper-productive
factories, the great medical centers, the talent-filled universities, you name
it – they all represent a net gain for Americans from the barren lands,
primitive structures and meager output of 1776. Starting from scratch, America
has amassed wealth totaling $90 trillion. It’s true, of course, that American
owners of homes, autos and other assets have often borrowed heavily to finance
their purchases. If an owner defaults, however, his or her asset does not
disappear or lose its usefulness. Rather, ownership customarily passes to an
American lending institution that then disposes of it to an American buyer.
Our nation’s wealth remains intact. As Gertrude Stein put it, “Money is always
there, but the pockets change.” Above all, it’s our market system – an
economic traffic cop ably directing capital, brains and labor – that has
created America’s abundance. This system has also been the primary factor in
allocating rewards. Governmental redirection, through federal, state and local
taxation, has in addition determined the distribution of a significant portion
of the bounty. America has, for example, decided that those citizens in their
productive years should help both the old and the young. Such forms of aid –
sometimes enshrined as “entitlements” – are generally thought of as applying
to the aged. But don’t forget that four million American babies are born each
year with an entitlement to a public education. That societal commitment,
largely financed at the local level, costs about $150,000 per baby. The annual
cost totals more than $600 billion, which is about 31⁄2% of GDP. However our
wealth may be divided, the mind-boggling amounts you see around you belong
almost exclusively to Americans. Foreigners, of course, own or have claims on
a modest portion of our wealth. Those holdings, however, are of little
importance to our national balance sheet: Our citizens own assets abroad that
are roughly comparable in value. Early Americans, we should emphasize, were
neither smarter nor more hard working than those people who toiled century
after century before them. But those venturesome pioneers crafted a system
that unleashed human potential, and their successors built upon it. This
economic creation will deliver increasing wealth to our progeny far into the
future. Yes, the build-up of wealth will be interrupted for short periods from
time to time. It will not, however, be stopped. I’ll repeat what I’ve both
said in the past and expect to say in future years: Babies born in America
today are the luckiest crop in history. ____________America’s economic
achievements have led to staggering profits for stockholders. During the 20th
century the Dow-Jones Industrials advanced from 66 to 11,497, a 17,320%
capital gain that was materially boosted by steadily increasing dividends. The
trend continues: By yearend 2016, the index had advanced a further 72%, to
19,763. American business – and consequently a basket of stocks – is virtually
certain to be worth far more in the years ahead. Innovation, productivity
gains, entrepreneurial spirit and an abundance of capital will see to that.
Ever-present naysayers may prosper by marketing their gloomy forecasts. But
heaven help them if they act on the nonsense they peddle. Many companies, of
course, will fall behind, and some will fail. Winnowing of that sort is a
product of market dynamism. Moreover, the years ahead will occasionally
deliver major market declines – even panics – that will affect virtually all
stocks. No one can tell you when these traumas will occur – not me, not
Charlie, not economists, not the media. Meg McConnell of the New York Fed
aptly described the reality of panics: “We spend a lot of time looking for
systemic risk; in truth, however, it tends to find us.” During such scary
periods, you should never forget two things: First, widespread fear is your
friend as an investor, because it serves up bargain purchases. Second,
personal fear is your enemy. It will also be unwarranted. Investors who avoid
high and unnecessary costs and simply sit for an extended period with a
collection of large, conservatively-financed American businesses will almost
certainly do well. As for Berkshire, our size precludes a brilliant result:
Prospective returns fall as assets increase. Nonetheless, Berkshire’s
collection of good businesses, along with the company’s impregnable financial
strength and owner-oriented culture, should deliver decent results. We won’t
be satisfied with less.

