Challenge Buffet

[Thomas Hoog]

AMSTERDAM (Belegger.nl) - Investor Warren Buffet is despite the price increase is still positive on equities and stock market expert stated still shares. Shares now offer a good value and are currently cheaper than other investments. This allows Buffett in an interview with CNBC. Buffett buys shares because he is at current price a good value in return. "Stocks are not as cheap as four years ago, but now you get more value for money compared to other asset classes. At this time we buy shares, not because we expect that the shares will increase in value, but because we feel that we get good value for the shares, "said Buffett.

An investment that investors are especially should make is buying government bonds "the dumbest investment is in my opinion a long term government bond.

[MediumTex]

Buffett also says to be greedy when others are fearful and fearful when others are greedy.

If people are fearful about government bonds, what does that suggest we should be doing using Buffett's own logic?

[AgAuMoney]

Buffett also says to be greedy when others are fearful and fearful when others are greedy.

If people are fearful about government bonds, what does that suggest we should be doing using Buffett's own logic?

He also says to buy good value with a large margin of safety.

[MediumTex]

Buffett also says to be greedy when others are fearful and fearful when others are greedy.

If people are fearful about government bonds, what does that suggest we should be doing using Buffett's own logic?

He also says to buy good value with a large margin of safety.

That would have made his own company a bad investment for the past 13 years or so, since stocks have little margin of safety during secular bear markets.

Buffett is just a sales guy.  He's always selling something, usually Berkshire Hathaway stock.

[MachineGhost]

Buffett continues to get on my nerves.  His folksy schtick is B.S..

[AgAuMoney]

Buffett continues to get on my nerves.  His folksy schtick is B.S..

Yup.

He also says that most investors should just buy index funds.

You cannot put his public pronouncements into any kind of coherent set...  You have to just assume he is talking to different audiences or thinking of a different context.

Lately I think he is losing his mind, but it might just be a new act...

[dualstow]

I wonder what Warren Buffett would think of the long bonds in the context of the pp, though. That is, I wonder what he thinks of the pp. I think he's ok with index funds for the average investor, and by average I really mean most of us.

I thought this thread was going to be about a TV show about competitive eating.

It would make a great follow-up to Iron Chef. Great concept, and the title is already written!

I have to add, Mr van Nes, your name produces an amazing amount of anagrams.
Do you know how many English words can be made from rearranging the letters in "GERARDVANNESS"?
Dozens upon dozens, including the word ARRANGED!

[Pointedstick]

I have to add, Mr van Nes, your name produces an amazing amount of anagrams.
Do you know how many English words can be made from rearranging the letters in "GERARDVANNESS"?
Dozens upon dozens, including the word ARRANGED!

"Darn Avengers!"

[dualstow]

I have to add, Mr van Nes, your name produces an amazing amount of anagrams.
Do you know how many English words can be made from rearranging the letters in "GERARDVANNESS"?
Dozens upon dozens, including the word ARRANGED!

"Darn Avengers!"

HAH! For this crowd, I had just written Rand Avengers on my list. :-)

[Thomas Hoog]

I wonder what Warren Buffett would think of the long bonds in the context of the pp, though. That is, I wonder what he thinks of the pp. I think he's ok with index funds for the average investor, and by average I really mean most of us.

I thought this thread was going to be about a TV show about competitive eating.

It would make a great follow-up to Iron Chef. Great concept, and the title is already written!

I have to add, Mr van Nes, your name produces an amazing amount of anagrams.
Do you know how many English words can be made from rearranging the letters in "GERARDVANNESS"?
Dozens upon dozens, including the word ARRANGED!

No, I have never thought about that. It is just a name.
I have only quoted Buffet, to show how useless reading financial news most of the time is.

[melveyr]

I guess I don't even really see my 30 year Treasury bonds as an "investment." I see them as an amazing hedge with respect to equities that happens to have a small expected return.

[6 Iron]

I have to add, Mr van Nes, your name produces an amazing amount of anagrams.
Do you know how many English words can be made from rearranging the letters in "GERARDVANNESS"?
Dozens upon dozens, including the word ARRANGED!

"Darn Avengers!"

Ooh, I want to play: "Danger Ravens"

[6 Iron]

I guess I don't even really see my 30 year Treasury bonds as an "investment." I see them as an amazing hedge with respect to equities that happens to have a small expected return.

They certainly take some of the fear out of buying stocks when the market is down for me.

[dualstow]

I guess I don't even really see my 30 year Treasury bonds as an "investment." I see them as an amazing hedge with respect to equities that happens to have a small expected return.

Even though they are probably only the 3rd most likely to hit the 35% band -- have they ever hit in the history of the pp? -- I still think of them as an investment. But, when my naysayer friends complain about yields and imminent interest rate hikes, I refer to them as protection.

P.S. GRANDER  NAVES

[melveyr]

I guess I don't even really see my 30 year Treasury bonds as an "investment." I see them as an amazing hedge with respect to equities that happens to have a small expected return.

Even though they are probably only the 3rd most likely to hit the 35% band -- have they ever hit in the history of the pp? -- I still think of them as an investment. But, when my naysayer friends complain about yields and imminent interest rate hikes, I refer to them as protection.

P.S. GRANDER  NAVES

A long time ago I looked at intra-year rebalancing using 15/35 bands for the recent crisis and here is the chart:


Although they didn't quite kiss the 35% band in this test, it all depends on your starting point. I imagine that lots of PPs would have had Treasuries reaching 35% during this period.

[gap]

My observations about  Buffett are as follows:
• He is a very good businessman and is able to judge the value of a business
• He is able to play the media well with his “folksy wisdom”?
• This and the fact that he usually has a lot of cash enables him to make some excellent deals with good companies that are temporarily in trouble- witness his deal with GE in 2009
• Still, his recent performance (BRK_A) since Jun 1996 is not extraordinary(I used this date to compare with the earliest data I had for  PRPFX)
o CAGR 10.1%
o Std Dev 20.9%
o MAX DD -44.5%
• The Stdev and MAXDD are more than twice that of PRPFX. I believe the pure HB portfolio does even better in terms of volatility and MAXDD. It would be hard to stomach a 44% decline in my portfolio.
• The main performance boost Buffett gets is in being extremely aggressive when the market is about to recover after it has tanked – witness results in 2009 and in 2011. Buffett appears to be a good judge of that.
• However, he is very poor at predicting when the market will tank. He does very poorly. Basically it is clear that no one can predict. It’s a fool’s game.
• Yes, he is greedy when others fear and is able to wait for a big margin of safety which is usually obtained after a market has tanked. This often makes up for his disasters.

[dualstow]

Thanks, Ryan. That's how I remembered it (but I didn't trust my memory of your post).
Even if I never get to rebalance, this sure is a smoother ride than when I was 90+% in equities. Well worth the sounder sleep.