I missed the focus point about inflation-I can't see how we have anything else to look forward to but paying the piper for years ahead, a devalued dollar , and possibly rampant inflation- A necessary risk they say to pull us out of the morass we are presently in.
On a trading note:
In the last few days, there has been a lot of PR about Doug Kass- Bear proclaiming in an interview that BRKA is underestimating it's toxic holdings and is going to see significant ly greater downside and redemptions.
Kass was one of the bears that early on correctly spoke about the impending crash of the markets due to the financials being overleveraged, and took short positions against BRKA.
In a follow up article, Kass believes things are dire for BRKA
www.cnbc.com/id/28877530 This excerpt from Buffett's 1994 letter to shareholders is germaneto his longer term approach to the markets:
"We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. But, surprise - none of these blockbuster events made the slightest dent in Ben Graham's investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist. A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results… Stock prices will continue to fluctuate – sometimes sharply – and the economy will have its ups and down. Over time, however, we believe it is highly probable that the sort of businesses we own will continue to increase in value at a satisfactory rate."
I saw an interview this week where Buffet cited that his company's stock has 3x seen declines of 50% ; But his belief is firm in his company's approach that as prices go lower, buying opportunities become better values. I believe he also said he keeps 10 billion in cash as a reserve. His approach has not wavered. Will his approach withstand the test of time going foreward? I expect they should , since he invests in solid businesses- but I couldn't stand to sit through a 50% decline and wait years to see my equity come back to break-even.
I also wonder that with the advent of trading programs and the like, that the market in years ahead will be focused on investments, or more inclined to be the vehicle of relatively shorter market swings. I'm inclined to think this will be the case-That a long term trend in a market cycle will be 2 years +/-. with perhaps some exceptions.
Look at a 20 year chart of MSFT- Had a great 10 year run -10 years ago. and then dead money ever since- It's still a profitable company- but it hasn't any growth.
Then look at AAPL - in the same time frame, it was relatively flat for 10 years , and then went on to out perform while MSft underperformed.
There's not that many MSFT's or AAPL's to find - most are lesser time frame runs- A decades approach would find both of these stocks only performed 50% of the time- What about a GE?
How is it possible that a huge multi directional company like GE can reward investors with a great return for one decade, and give it all up in the next?
LOOK at IBM - At least it only lost 50% of it's value in the last 10 years or so.
I can only assume that the old buy-and hold approach is even more short-term today. Look at the market boom and bust cycles in commodities in the last few years-
I'll continue to try to trade the market swings-
This was not the intent of this thread, but Buffet is indeed the Icon for long term investing, and so the viability of his approach and shorter term trading approaches is worth comparing - Is it possible that a shorter term trader can out perform the BRKA over the long term? Don't know that answer. SD
