"While investors and managers must place their feet in the future, their memories and nervous systems often remain plugged into the past," Buffett wrote in 1981.
"If you (a) forego 10 hamburgers to purchase an investment; (b) receive dividends which, after tax, buy two hamburgers; and (c) receive, upon sale of your holdings, after-tax proceeds that will buy eight hamburgers, then (d) you have had no real income from your investment, no matter how much it appreciated in Dollars. You may feel richer, but you won't eat richer."
"One friendly but sharp-eyed commentator on Berkshire has pointed out that our book value at the end of 1964 would have bought about one-half ounce of gold and, 15 years later, after we have plowed back all earnings along with much blood, sweat and tears, the book value produced will buy about the same half ounce. A similar comparison could be drawn with Middle Eastern oil. The rub has been that government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil."
"Thus," Buffett writes, "with interest rates on passive investments at late 1981 levels, a typical American business is no longer worth 100 cents on the Dollar to owners who are individuals."
"Inflationary experience and expectations will be major (but not the only) factors affecting the height of the crossbar in future years. If the causes of long-term inflation can be tempered, passive returns are likely to fall and the intrinsic position of American equity capital should significantly improve. Many businesses that now must be classified as economically 'bad' would be restored to the 'good' category under such circumstances."
"Ice is a loss of pricing power and a world where prices are as likely to go down as up. Ice is an erosion of profits. Ice is excess capacity. Ice is developing countries with low-cost factories and huge new labor forces. Ice is creative price destruction from technology...Ice is also about competitive devaluations, as countries try to export their unemployment and lack of growth."