"Price is What You Pay, Value is What You Get". [1]
I could hypothetically buy an apple or an investment for $100 billion (if someone gave me the money). There could be any number of reasons for doing so, but those reasons don't change the fact that it's highly unlikely I will derive $100 billion or more in pleasure or return from that money.
On the other hand, if I can buy something cheap and I find it to be more enjoyable, or an investment returns more money, than expected, then the item was more valuable than what I had paid for it.
"'you have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.'"
Yes, the real estate people at the supermarket must have decided that the plot has a value of more than $1M. They might be wrong or even foolish to think so, but they must clearly think that is the case, otherwise they'd be fools to pay it.
This is why those kinds of plans are kept secret as long as possible, because the supermarket hopes to pick up the plot at much closer to $100K than $1M.
What Buffet means, quite sensibly, is that you should only buy an asset when (your assessment of) its value is a lot higher than its price, not when its price accurately reflects its value.
Comments
"Price is What You Pay, Value is What You Get". [1]
I could hypothetically buy an apple or an investment for $100 billion (if someone gave me the money). There could be any number of reasons for doing so, but those reasons don't change the fact that it's highly unlikely I will derive $100 billion or more in pleasure or return from that money.
On the other hand, if I can buy something cheap and I find it to be more enjoyable, or an investment returns more money, than expected, then the item was more valuable than what I had paid for it.
[1]: http://en.wikiquote.org/wiki/Warren_Buffett
"'you have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.'"
Michael Lewis in Boomerang
He is amongst the best at converting the craziness of Wall Street and Finance into plain English.
And now you both owe $100 Million in sales tax ;)
Yes, the real estate people at the supermarket must have decided that the plot has a value of more than $1M. They might be wrong or even foolish to think so, but they must clearly think that is the case, otherwise they'd be fools to pay it.
This is why those kinds of plans are kept secret as long as possible, because the supermarket hopes to pick up the plot at much closer to $100K than $1M.
What Buffet means, quite sensibly, is that you should only buy an asset when (your assessment of) its value is a lot higher than its price, not when its price accurately reflects its value.