Archive for February, 2012

Warren Buffett on Stocks, Bonds and Gold

February 23, 2012


In a column in Fortune magazine (see Warren Buffett: Why stocks beat gold and bonds), Warren Buffett explained why he prefers stocks over cash, bonds and gold. It is true that cash does not fluctuate in nominal value but its returns are close to zero after one accounts for inflation and taxes. At today’s low yields, he quips that bonds are “priced to deliver return-free risk”. Buffett also pointed out that despite its stellar recent returns, gold has limited uses and does not produce an income stream. Therefore, he says, he prefers stocks to bonds and gold:

My own preference — and you knew this was coming — is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See’s Candy meet that double-barreled test. Certain other companies — think of our regulated utilities, for example — fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

It is interesting to contract Buffett’s enthusiasm for stocks in 2012 with another Fortune column he co-authored in 1999 (see Mr. Buffett on the Stock Market) in which he took a decidedly downbeat tone on stocks. He explained that stocks were so richly priced at that time that investors would be lucky to earn 4% in real terms, which would leave them disappointed with stocks. With so many investors fleeing the stock market these days, those words are now sounding very prophetic.

This and That: Buffett on Stocks, Retirement Articles and More…

February 12, 2012


Buffett prefers stocks over bonds & gold: Warren Buffett doesn’t often express an opinion on the general level of stock prices. But when he does, he is usually worth listening to. In a recent article in Fortune magazine, Buffett explains why stocks look like a much better bet than bonds or gold over the long term.

Stocks aren’t so cheap: This column, which also appeared in Fortune magazine, offered a counterpoint to Buffett’s argument that stocks are cheap. It says that according to many measures stocks (profits as share of GDP, computing p/e with reported, not operating earnings, Shiller P/E etc.) are not so cheap. Maybe so but compared to alternatives, stock appear to be reasonably valued at these levels.

Help with Retirement Planning: The Society of Actuaries has published a series of 11 articles to help people plan for their retirement. It tackles questions such as when to retire, how to deal with unplanned early retirement, retirement income planning etc. Though the articles are targetted at Americans, many of the concepts discussed also apply to those of us living north of the border.

Avoiding Baggage Fees: During a recent trip, we got dinged with extra fees because the weights exceeded the maximum allowed these days. This column in The New York Times describes the lengths (stuffing the carry on luggage, wearing trenchcoats) travellers go these days to skirt those annoying baggage restrictions.

Around the Blogs

Canadian Couch Potato finds that active funds are trailing index funds even after adjusting for the cost of advice and trading expenses.

Canadian Personal Finance Stuff shows that it is much better for regular commuters to buy a monthly bus pass than paying for each bus ride.

Money Smarts Blog wonders why more Canadians are not taking advantage of the RESP Canada Learning Bond.

Million Dollar Journey explains why he doesn’t use a dividend ETF for his leveraged investments.

Michael James weighs in on whether you should pay your bills as they come in or wait until the last minute.

Jim Yih breaks down the new rules around CPP in his Retire Happy blog.

My Own Advisor says that for those who are able to stay on budget, credit cards offer many unique advantages over cash.

Thicken My Wallet puts on his lawyer hat and answers some frequently asked questions on severance.

The Blunt Bean Counter offers useful tips for mitigating exposure to 5 popular CRA audit target areas.

Can you smell the fear in the mortgage industry? Where Does All My Money Go? scoops the news that many lenders are quietly tightening mortgage rules.

With the RRSP deadline fast approaching, Larry MacDonald has seven suggestions for investing your contributions.

H&R Block At Home 2011 Tax Software Giveaway

February 9, 2012


If you use H&R Block At Home to file your taxes, this giveaway is for you. Thanks to H&R Block, I’m giving away five (5) coupons that are good for downloading one copy each of H&R Block At Home desktop software (valued at $29.99 plus tax). Please note that the downloaded software will only work on PCs. A Mac version of the software is not available.

Entering the giveaway is real simple. Just leave a comment in this post and don’t forget to include a valid e-mail address. If you are reading this through your favourite RSS Reader or via-email, you have to click on the headline, get through to the website and scroll down to the bottom of the page and type in your comment.

Some quick rules:
(1) No purchase necessary. A skill-testing question may be required.
(2) Deadline for entries is 8 p.m. EST on Thursday, February 16, 2012.
(3) One entry per person please.
(4) I treat your privacy very seriously. Your email will be used for the sole purpose of contacting you if you happen to win.
(5) I’ll pick five (5) entries at random and announce the winner after the deadline. Thank you for entering and good luck!

PS: My weekly links post will be published over the weekend.

PPS: The winners in the TurboTax giveaway are Henria O., Chris and Andrew F. Thank you to everyone who entered.