Buffett On Investing In Metals As Inflation Protection

We would not necessarily view metals investing as protection against inflation. The best protection is your own earnings power, whether the currency is in seashells or paper money. A first-class surgeon or teacher will do alright in terms of commanding the earning power of other people. The second best protection is owning a wonderful business, not metals or raw materials or minerals.

The truth is, if you own Coca-Cola or Snickers bars or anything that people are going to want to give a portion of their current income to keep getting, and it has low capital-investment requirements, that’s the best investment you can possibly have in an inflationary world.

But an inflationary world is not a good thing. We try to own good businesses. I think Berkshire (BRK.A) wouldn’t do as well in real terms during periods of high rates of inflation vs. low rates, but we’d probably do better than most businesses.

Buffett On Commodities
We have no opinion on commodities. If we’re in an oil stock, it means we think it offers a lot of value at this price. If we think oil is going up, we could buy oil futures, which we did once.

We think the South Korean Posco (PKX) is one of the best steel companies in the world. When we bought it, it was at 4-5x earnings, had a debt-free balance sheet and was the low-cost producer.

You can find some businesses with minimal capital investment. See’s Candy does not require much capital investment. It’s a small business, but a wonderful business – a far better business, adjusted for size, than any steel or oil business. We do everything we can to make it bigger.

We do not have a favorable bias toward any commodity-related business. If we have any bias, it’s against.

PKX 1-yr chart: