During his recent CNBC interview with Becky Quick, Warren Buffett explained that the reason investors treat stocks differently to other investments is because they can make decisions every second with stocks. Here’s an excerpt from the interview:
In 1932 General Motors had 19,000 dealers. That’s more than all the auto dealers in the United States today. There was only 125 million people then but they had 19,000 dealers. They produced or sold… there was one month I think when they sold less than a tenth of a car, right at 1/10 of a car per dealer. That was a terrific time to buy General Motors.
Forget about the market, if you can predict the market you don’t need to read balance sheets, you don’t need to read anything. You certainly can’t predict the market by reading the daily newspaper that is for sure and you certainly can’t predict the market by listening to me, but you’re buying businesses.
If you plan to buy a local service station yesterday and it was closing today I don’t think you’d tear your hair out or anything like that. You’d have already at where it was located, the contract that it had with the suppliers, and made a decision on competition.
People, because they can make decisions every second in stocks, whereas they can’t with farms, they think an investment in stocks is different than an investment in a business or an investment in a farm or investment in an apartment house but it isn’t.
If you get your money’s worth in terms of future earning power over the next 10 or 20 or 30 years you’re gonna make a good investment and you can’t pick them from day to day. If you can do that well…. I haven’t met anybody yet that knows how to do it.
You can watch the entire interview here:
(Source: YouTube)
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