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Warren Buffett on investing: It's just so simple!

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Jemal Countess/Getty Images for Time Inc.

Berkshire Hathaway CEO Warren Buffett attends the Fortune Most Powerful Women summit at Mandarin Oriental Hotel on October 5, 2010 in Washington, DC.

Thanks to Henry Blodget at Business Insider for directing to this Fortune except from Warren Buffett's annual letter to Berkshire Hathaway shareholders. In it, Warren Buffett lays out the commonsense case for avoiding investments in currency (for example, government debt like U.S. Treasuries) and gold (driven by fear) and sticking with stocks. Here's a taste:

My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

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Reportings: Gold collapses; Zynga's IPO; Issa picks Mitt

More market madness as inflation retreats, the dollar rallies, and gold collapses. "'Liquidation selling in gold and silver seems to be outweighing its safe-haven buying," said James Moore, research analyst at Fastmarkets.com, 'but we would expect that to return before too long.'" (The Street)

 

Zynga's dismal second-quarter earnings raise questions about going public: "Zynga's IPO is more likely to be affected by the roiling stock market, analysts said. The company in June declared its intent to publicly sell shares to the public, but has yet to pull the trigger on a date to begin trading." (LAT)

 

Rep. Darrell Issa throws his weight behind Mitt Romney. Also insists the the current Chief Executive lives in an economic fantasy land: "'President Obama never worked in the real economy — we can’t afford to have another president who has spent his career outside the real economy,' Mr. Issa said in a statement."

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