Gyroscopic Investing

This Warren Buffett link was posted over on the MMM forum and I though folks here would find it interesting if they haven't seen it before.

http://archive.fortune.com/magazines/fo ... /index.htm

In this piece he's essentially outlining what he sees as the potential returns for stocks over the following 17(ish) years... or roughly up to where we are now.

warren buffett wrote:Let me summarize what I've been saying about the stock market: I think it's very hard to come up with a persuasive case that equities will over the next 17 years perform anything like--anything like--they've performed in the past 17.

Well, the S&P from 2000 to 2010 was pretty flat. Things really perked up after that, though.
And for those who kept rebalancing in...

Thank you for the interesting read. I liked this part:

Let me come back to what I said earlier: that there are three things that might allow investors to realize significant profits in the market going forward. The first was that interest rates might fall,

dualstow wrote:

warren buffett wrote:Let me summarize what I've been saying about the stock market: I think it's very hard to come up with a persuasive case that equities will over the next 17 years perform anything like--anything like--they've performed in the past 17.

Well, the S&P from 2000 to 2010 was pretty flat. Things really perked up after that, though.
And for those who kept rebalancing in...

Thank you for the interesting read. I liked this part:

Let me come back to what I said earlier: that there are three things that might allow investors to realize significant profits in the market going forward. The first was that interest rates might fall,

Real annualized return on the S&P since its early 2000 high is just 1.69%. Nominal is 3.85% but everything was still negative until 2013 (a banner year for stocks).

See here:

http://www.advisorperspectives.com/dsho ... 2000-Highs

Hmm, maybe I need to grab a few more quotes from the article to generate a bit more interest. With interest rates having dropped so far already, profits need to really accelerate to drive up stock prices much more.

Real annualized return on the S&P since its early 2000 high is just 1.69%.

Yes, the real jump would have been from buying in '08 or '09, but of course no one can know in advance where the bottom is.

dualstow wrote:Yes, the real jump would have been from buying in '08 or '09, but of course no one can know in advance where the bottom is.

You don't need to know in advance, only when it is. Quite a few people called the bottom in late 2008/early 2009, but none were the idiots you see on CNBC.

MachineGhost wrote:

dualstow wrote:Yes, the real jump would have been from buying in '08 or '09, but of course no one can know in advance where the bottom is.

You don't need to know in advance, only when it is.

I don't understand all of your wisdom, Yoda. No seriously, what does that mean?

dualstow wrote:

MachineGhost wrote:

dualstow wrote:Yes, the real jump would have been from buying in '08 or '09, but of course no one can know in advance where the bottom is.

You don't need to know in advance, only when it is.

I don't understand all of your wisdom, Yoda. No seriously, what does that mean?

It's a common fallacy that you have to predict or forecast a bottom to buy a bottom. It's good enough to know concurrently or shortly thereafter.

MachineGhost wrote:It's a common fallacy that you have to predict or forecast a bottom to buy a bottom. It's good enough to know concurrently or shortly thereafter.

I mean, one always hears that you don't need to know in advance when the top is, you just need to be invested.
What do you do with the knowledge shortly thereafter?

dualstow wrote:

MachineGhost wrote:It's a common fallacy that you have to predict or forecast a bottom to buy a bottom. It's good enough to know concurrently or shortly thereafter.

I mean, one always hears that you don't need to know in advance when the top is, you just need to be invested.
What do you do with the knowledge shortly thereafter?

I'm not sure what you mean? If you're going to be invested through tops, that implies you're a) dollar cost averaging to lower your cost basis on downtrends and b) you have a seriously long time frame of at least 12 years minimum before you need the money and c) you buy low, sell high via rebalancing.

It implies that you keep an allocation at all times.

dualstow wrote:It implies that you keep an allocation at all times.

Well, bottoms are a lot easier to identify than tops. I guess because pessimism has a finite limit but optimism goes easily into infinite lunacy.