As many know, Mr Buffett is not in general a big fan of fixed income. The reasons that Berkshire puts money into such things are mainly specific to Berkshire and not relevant to the average Joe, and even then not much money goes that way these days.

I'm definitely not a big bond fan either, in general. But, hey, there's a price for everything, right?

One straw in the wind:

GMO periodically puts out a forecast of seven year forward real returns for various asset classes. Sometimes they are spookily accurate, and sometimes not, but they are always pretty good predictions if (a very big if) the valuation level of the asset class in question is what one might call "historically normal" at the end date. I really appreciate that they have the nerve to predict real returns rather than nominal returns of dubious utility.

I'm not sure whether this link will work: gmo.com - Year asset class forecast

From the data at that link, they have two sets of forecasts these days.

For a "normal" interest rate environment, which probably includes the current situation:
US large caps real return: -7.3%/year
US small caps real return: -5.1
Bonds real return: +3.5
Inflation protected bonds real return: +3.5
(the bonds beat the equities by 9.7%/year)

And the same thing for a "low" interest rate environment:
US large caps real return: -4.3%/year
US small caps real return: -2.2
Bonds real return: +4.7%
Inflation protected bonds real return: +4.8%
(the bonds beat the equities by 8%/year)

Obviously the final result will be different, but the reasoning is not crazy and I think the general conclusion is worth pondering. The gap is really big. The US small and US large categories are the only two of the 13 asset classes with negative forecast returns over this time horizon.

Of course, that's a discussion about the broad US market, not any specific company. Many individual securities will do extremely well but nobody knows which.

For whatever it's worth I expect Berkshire to manage a real 5.7%/year in the next 7 years from today's price of $542.19 and CPI 336.298, measured in US dollars. (as always, I would prefer to see that prediction as the annualized rate between today and the average price 5-9 years out!) That's a reasonably conservative number, a figure I would more or less count on.

If the link doesn't work, FYI, the asset class with their highest forecast return is Japanese small value stocks.

Jim