Jonathan Satovsky provides commentary and key insights from Warren Buffet and Charlie Munger’s Annual Berkshire Hathaway conference, including the importance of taking a lifelong approach to investing.
Good afternoon, this is Jonathan Satovsky of Satovsky Asset Management.
We’re at the beginning of May 2021, and I want to give a little highlight about Warren Buffet and Charlie Munger’s Berkshire Hathaway conference as well as sort of the state of the world with what is happening at the moment.
So, we’ll start with the wisdom and wit of Munger and Buffet recognizing and trying to remind people that investing is a life long process, and what you’re buying by making investments is a promise of future cash flows in a business.
Interest rates, which are zero and negative in many parts of the world, make it extraordinarily seducing to own future profit streams of much higher prices and valuations than would otherwise be the case. If you can buy a 10 year treasury at 10%, then the valuations of businesses might be materially less, but that’s not the case.
So everything is priced off of the risk free rate; that’s something people should be aware of.
However, you should note that they continue to hold $140 billion dollars in cash to cover future liabilities, and this is no different than financial planning for people. We generally advise people to hold cash based on their liquidity and the cash flow needs; sometimes for 1 year, sometimes 5 years, sometimes 10 years based on their circumstances in order to protect themselves from ever being a forced seller.
And lastly is the idea about gambling, whether it’s in assets that don’t have any cash flow or in the shorter time frames that people are flipping things for short-term maniacal gain. And it makes sense, you can’t stop people from gambling. People are gonna gamble forever.
But there’s certainly a lot of tax policy and tax incentives to be able to invest for a longer period of time. Being more patient, more disciplined and having an internal constitution of a philosophy, a process and a path is going to help you succeed over multiple generations.
And that requires discipline to be indifferent from those around you.
So, there’s three inner roots of conflict that people have to confront each and every day in their investing process: seduction, envy and greed.
So, [as we say] stay in your lane on your own path to wisdom, wealth and wellness.
Have a great day.
Watch the full 2021 Annual Berkshire Hathaway conference here.