Buffet Speaks
Q: Do you think oil is fairly priced given emerging market growth?A: It's fairly priced given today's information. In 2004 when oil was at $35/barrel, the 2012 future was at $27. Today the forward curve is flat, the market thinks these prices are here to stay. There are currently 500,000 oil producing wells in the U.S., there isn't any more domestic oil left undiscovered. It takes about one hour of pumping out of a U.S. well to produce enough crude to make enough gasoline to fill the typical 20-gallon gas tank, which takes about a minute to fill up.
Q: What do you think about all the money flowing into private equity and hedge funds? And do you see the future of buying businesses changing based on the considerable increase in private equity activity?
A: I'll tell you what I think of hedge funds. Hedge funds are a huge fad. You can pick any ten hedge funds and I'll bet that on average they will underperform the S&P over the next ten years. You can't create more money out of American business than the business itself creates; so most of these hedge funds will not be able to justify their outlandish fees over the long-term and they will disappear. On Wall Street, there are innovators, imitators, and total incompetents. I'm afraid that the majority of hedge funds around the globe now are run by the latter two categories of people.
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