Buy a cross section of American industry, and if a cross section of American industry doesn't work, certainly trying to pick the little beauties here and there isn't going to work either.
The most common cause of low prices is pessimism - sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces.
When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a break requires - now or down the line - that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can however, determine who pays for lunch.
I will do anything that is basically covered by the law to reduce Berkshire's tax rate. For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.
In our view, though, investment students need only two well-taught courses-How to Value a Business, and How to Think about Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business who's earnings are virtually certain to be materially higher five, ten and twenty years from now.
Charlie and I decided long ago that in an investment lifetime, it's too hard to make hundreds of smart decisions. That judgment became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart and not too smart at that, only a very few times. Indeed, we now settle for one good idea a year.
I am not in the business of predicting general stock market of business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.
Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.
If you're extremely rich, and you have got children, my theory was, you give them enough so they can do anything, but not enough so they can do nothing.