Attempted Bloggery: Blog Post No. 1500: The Wisdom of Warren Buffett

Sunday, April 19, 2015

Blog Post No. 1500: The Wisdom of Warren Buffett

How We Think About Market Fluctuations

A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

--Warren Buffett

Berkshire Hathaway, Inc.

1997 Chairman's Letter

When I started this blog almost four years ago, it was my simple hope to share a few captivating images by some of my favorite artists. It was always my wish to try to generate in others the kind of enthusiasm I felt myself for amazing cartoons and illustrations. I was interested in the art auction market from the very first post, and over time I came to document not only many pieces of fine original cartoon art, but also the prices at which they were sold. Often we demonstrate a lot of coyness about money; it's something we're all curious about but often unwilling to discuss. Few people will ask how much a drawing or watercolor set its owner back, although most of us would like to know. Certainly I would like to know.

It was not my intention, when I started out, to document the strengths and weaknesses of the art market for New Yorker artists. Nevertheless, over the course of 1,500 blog posts I have, to some degree, done this. To my mind, New Yorker art is pretty much always worth a look, and it is the art rather than the sale price that motivates me. Nevertheless, sale prices are a very good indication of how much enthusiasm this art generates in the market. This past week, I presented four original works of art that served as splendid New Yorker covers. All of them sold ridiculously cheaply. That got me to thinking about Warren Buffet's 1997 Chairman's letter.

Low auction prices for New Yorker art can be disheartening to collectors of the genre, because these prices imply a lower value for the pieces already in one's collection. But, to make an analogy with the stock market, those who remain net buyers of cartoon art rather than dealers or near-term sellers should be delighted by lower prices. Works of art that might have been out of reach a few years ago could possibly be picked up now for a reasonable price. There may be opportunities out there to add wonderful pieces to one's collection economically.