Everybody's got a different circle of competence. The important thing is not how big the circle is. The important thing is staying inside the circle.

At age 19, I read a book [The Intelligent Investor] and what I'm doing today, at age 76, is running things through the same thought process I learned from the book I read at 19.

It irritates the hell out of me but you can't buy love.

Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won't change, moreover, because the deck is stacked against investors when it comes to the CEO's pay. The upshot is that a mediocre-or-worse CEO - aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo - all too often receives gobs of money from an ill-designed compensation arrangement.

The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.

That's been lost. It's a huge problem. What you have is you have the major institutions of the world all wanting to deleverage. They want to take down their assets and liabilities. What seemed so easy to borrow against a year ago now looks like rat poison to them. So they're trying to deleverage. There is only one institution in the world that can leverage up in a way that's all a countervailing force to that, and that's the United States Treasury.

A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth.