Warren Buffett on Leverage

Think of a home as an interesting opportunity, then follow Warren Buffett's quote

Designer-builder John Abrams of the South Mountain Company describes three factors that are driving the popularity of large size homes:

“First, with less of a sense of community and public life in our culture, the home becomes a fortress which needs to contain everything we need, including multiple forms of entertainment, rather than basic shelter;

second, the building industry has been selling ‘big is better’ and the message has been heard; and

third, diminishing craft and design generosity has resulted in sterile homes — people mistakenly think that what’s missing is grandeur: more space.”

We will reject interesting opportunities rather than over leverage our balance sheet says Warren Buffett. It should be noted that Warren Buffet does not refer to the financial balance sheet, I reckon he means the life’s balance sheet of which the financial balance sheet is a small part.  Warren Buffett is reported to have defined leverage as a fancy term for debt by Wall Street.

I hear media reports where financial advisors talk about about good debt and bad debt.  I think there is no good financial debt, whether its origin is your local pay check cashing business or a Wall Steet firm.  If debt was good, Microsoft Corporation and Cisco Systems would not have billions of dollars of cash on their balance sheet.  If debt was good, Warren Buffett would be borrowing money from Goldman Sachs and Harley Davidson and not investing in them.

Debt always comes with strings attached and the borrower becomes one of the puppets in the show whether the borrower is an individual or corporation.  Debt is anti-personal freedom and therefore is not a value of Americaneers.  An exception, an example of a good debt is that intangible obligation that one owes to one’s parents or to your teachers or to one’s country.

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