Transcription
Hi Warren and Charlie. My name is Catherine Voorhood. I'm from Los Angeles, California. I invest primarily in commodities and commodity equities.
I started out back in 2007 buying oil. In the summer of 2008, we reached the peak of the oil bubble. That's when I reversed my holdings and started shorting oil. I made a nice profit. In 2009, I started buying oil again and oil equities, and I've been doing pretty well.
But given the status of the world today and the price of oil, I'm questioning my investments. Is this another oil bubble? Has oil reached its peak? Should I keep my holdings? Should I short oil? Should I exit oil altogether and move into other commodities or other investments?
So my question to you is, what are your sentiments regarding oil?
Well, I would say you've done a whole lot better than we have. So I think the crowd would rather hear from you. We actually did take a position in oil, I don't know how many years ago. A long time ago. A long time ago. It was ten dollars a barrel. And it wasn't that long ago, though. Incidentally, that was in the 1990s. Uh, although we, uh, we've seen oil a lot cheaper than that. And East Texas oil sold for a dime a barrel in 1932.
The, uh, we really don't know. I mean, uh, [Music] obviously you're dealing with a finite resource. I don't know whether the world's up to 88 million barrels or was not around 85 million barrels, but there's got to be some comeback. So I wouldn't be surprised. The current figure's getting pretty close to 88 million barrels a day. That's a lot of oil to take out of the ground every day. And and of course, uh, their new frontiers have been found, but you are, you've stuck a lot of straws into the earth, and there it is, a finite number. So the one thing I can promise you, as I almost promise you, is that oil will settle for a lot more someday.
Interestingly enough, you know how many producing oil wells do you think there are in the United States? The answer is something like 500,000. Now, you know, there's these stripper wells, there's wells out in near Charlie that have been going for 100 years. Yeah. But we have looked in a lot of places now. Uh, and what's happening, of course, from the standpoint of the United States companies is that the smaller countries where oil is being found now are quite a bit smarter about how they grant their concessions than people were 50 or 75 or 100 years ago. So that they drive much more intelligent deals than it was originally the case when we went exploring around the world.
But I have no idea. You know, we traditionally BNSF had hedged a certain amount of oil and and, uh, because they obviously use huge quantities of diesel. Uh, and I suggested to them, although how they run the BNSF is up to them, but I just, I really didn't think we could guess the price of oil. And I thought if we could guess the price of oil, we didn't need to run the railroad. I mean, it was a, took a lot of effort, time to run that railroad. And if, if we know how to make money just sitting in a room, uh, trading oil, why not do that instead? So I don't really, we don't hedge well. In terms of Berkshire's parent company policies, we don't hedge anything in the way of commodities. Some of our subsidiaries do, and that's fine. They, they, they're responsible for their businesses. But there are very, very few commodities that I've ever thought I was going to would know the direction of their movement, uh, in the next six months or a year.
The one thing I'm quite convinced of, as we talked about this morning, is the fact the dollar will become less valuable over time. So that the dollar price of most things, uh, will go up, and maybe go up very substantially. Whether they go up enough so that you have the same amount of purchasing power after you pay tax on your nominal gains is another, there's another question. I really think that that an intelligent person, uh, can make more money over time thinking about assets that productive assets rather than than than, uh, speculating in commodities or, when, for that matter, fixed dollar investments. But that's maybe my own bias.
Charlie? Well, if we'd done nothing but oil from the very beginning, I am confident that we would not have done nearly as well as we have. To me, that's perfectly obvious. So I think what we've done is much easier than what you're trying to do, and we like easy. Yeah. We're not trying to make it any more difficult than we have to. I really don't know any way to have an edge in that sort of activity if you are going to try and figure out when to be longer short oil or natural gas or copper or cotton or whatever. I, I don't know. I don't know if people who I feel would have an edge in trying to do that over the next 10 years, but I do know people where I think they'd have a very significant edge in investing in in common stocks and maybe distressed bonds for that matter, too. Yeah. Trading oil worked best of all for the people who bribed Nigeria. That's not our milieu.