A comment from Warren Buffett from a recent article:
“In terms of simple profitability, an average investor could have done just as well investing in the stock market if they bought during the panic period. You make your best buys when people are overwhelmingly fearful.
Without bailouts Buffett’s firm doesn’t survive.
From Berkshire’s Chairman’s Letter circa 1996:
“To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses “How to Value a Business” and “How to Think About Market Prices.”
Once you follow that bit of wisdom, you can start in on the derivatives racket too. Warren Buffett is one fantastic success story, but he is also a manipulative talking head with words flowing that don’t match his actions.
Hi Mike, Enjoyed the new podcast. Have a point to make regarding Dalio or, for that matter, any investor: Literally every single investor seeks to capture tranches of total return trends. And total return trends are, of course, a direct result of trends in price plus reinvested income. Accordingly, all investment approaches, whether “fundamental”, “technical” or ouija board-oriented in how they frame their participation, seek to arrive at participating in chunks or tranches of positive return trends – Nothing more, nothing less. Some people – such as Dalio, Buffett – are very good at discerning (i.e., have unique intuition relating to) causal and/or correlation between some non-return metrics/conditions and return trends – but the gig is, nevertheless, about return trend participation. Whether the intuition of Dalio or Buffett would/will be successful in environments other than those in which they’ve participated is quite an open question. I’d most certainly give them better odds in other environments than I would the average investor but they also certainly are not infallible and their are environments where their intuitions would prove less than sharp (and I think they’d likely both acknowledge at least that).
You don’t know exactly what Buffett/Dalio do. Of course, we know that Buffett works a ton of derivatives, hot lines to the President, etc. That is far past the value legend. On other hand we know what trend followers do. That was my point.
It was but a few years ago deep in the throws of economic crisis that a sweet old man with ice cream appeared on the scene to save us all. He lovingly bet on GS, GE and BAC with terms no mere mortal could ever obtain. He was held out then by a fawning press as a noble do-gooder. Those were the days…
Note: Not a Buffett fan. See chapter “Oracle of Omaha” p. 157 of Trend Commandments.
You want to see some high level propaganda? From Yahoo:
In his annual letter to Berkshire Hathaway shareholders, Buffett said he is sure housing will recover eventually and help bring down the nation’s unemployment rate. But he did not predict when that will happen.
Investors eagerly await the letter from Buffett, 81, the so-called Oracle of Omaha, who built a roughly $44 billion fortune by following a steadfast, no-nonsense investing strategy.
High end derivatives trading? Currency trading? Government bailouts for your core holdings?
Those are no-nonsense?
So who wrote that drivel? Josh Funk, AP Business Writer:
“I cover business and agriculture in Nebraska, including keeping tabs on major companies based here such as Warren Buffett’s Berkshire Hathaway, Union Pacific and TD Ameritrade. I also cover major manufacturing companies Deere & Co. and Caterpillar. Plus, I write about real estate and home sales in the Midwest.”
Funk apparently lives in Omaha and has a background with the Boy Scouts. He is not an objective reporter, but rather a guy with an opinion.
There is this guy who is always touting Warren Buffett to me in email. I would think after years of apparently following my work closely, and writing me regularly, he might have a clue as to what trend following is, but not exactly. Big time blind spot. This in today from him:
Informative but overwhelming. I’ve always wondered what do you do when there are just as many bearish arguments as there are bullish arguments?
Can anyone else help this poor chap?
My post on Warren Buffett’s clear hypocrisy toward the use of derivatives brought this feedback in from one of his true believers:
Buffett hates toxic derivatives. He writes the most plain vanilla derivatives there are. Not only that he spent hundreds of millions of dollars to close down toxic derivatives when he acquired General Re, the derivatives he writes are probably less dangerous than the insurance policies Berkshire writes.
They served Kool-Aid in Jonestown…did you know? I love the phrasing he uses:
“probably less dangerous”