Warren Buffet famously said during the 1990s dot-com bubble that he did not invest in technology because he did not understand it. Although he subsequently took a meaningful stake in IBM (which may prove his point), we suspect his technological blind spot was in reality his awareness that no matter how much a business might change the world, ridiculous valuations ensure negative returns-on-investment. There is another issue we would bet Buffett understood deeply that kept him away: one cannot make a decent ROI over time by staking a depreciating asset.
In High Cotton we asked will there come a time when we are forced to recognize that borrowing to form capital in the form of deflationary, technologically-led productivity is the macroeconomic equivalent of borrowing to buy a depreciating asset, like a car? We get what we want now, but it is counterproductive if we cannot reinvest our savings at a higher return. This is a big, conceptual topic but one that deserves critical thought and attention from investors.
No comments:
Post a Comment