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Buffet - Long & Deep Recession
05-25-2008, 09:57 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,375
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Buffet - Long & Deep Recession
"The United States is already in a recession and it will be longer as well as deeper than many people expect" - story
Ok. Now I'm really feeling defensive. When Warren speaks I listen and heed.
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05-25-2008, 10:26 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Dec 2007
Posts: 4,764
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Quote:
Originally Posted by Danny
"The United States is already in a recession and it will be longer as well as deeper than many people expect" - story
Ok. Now I'm really feeling defensive. When Warren speaks I listen and heed.
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So how are you heeding the Oracle of Omaha? All cash. under the matress? Gold? Oil?
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05-25-2008, 10:37 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,375
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I've been moving out of individual stocks into mostly more conservative mutual funds. I'm in distribution phase now so I'm willing to settle into a return that pretty much guarantees a certain level of income while preserving principal
Current holdings:
VWINX DODGX DODIX HABDX PRPFX DRTAX SMTFX SXTIX PRTAX MWTRX as well as MMF at brokers.
I feel like I should be selling more stocks and maybe putting proceeds into VPDFX after hearing from the oracle of Omaha.
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05-25-2008, 10:42 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Dec 2007
Posts: 4,764
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Ya should be interesting. He isnt wrong too often.
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05-25-2008, 11:03 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by Notmuchlonger
Ya should be interesting. He isnt wrong too often.
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Notice that in this same interview (Der Spiegel), he also says that he is looking for good companies to buy. He said "If the world were falling apart, I would still be buying good companies."
I personally am fairly heavily invested, but not in any market tracking vehicles. Where you really get hurt is in a valuation collapse of companies that never should have been valued that highly anyway.
Over time, free cash flow wins, if an LBO or such doesn't steal it out from under you.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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05-25-2008, 11:16 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,375
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Quote:
Originally Posted by haha
Notice that in this same interview (Der Spiegel), he also says that he is looking for good companies to buy. He said "If the world were falling apart, I would still be buying good companies."
I personally am fairly heavily invested, but not in any market tracking vehicles. Where you really get hurt is in a valuation collapse of companies that never should have been valued that highly anyway.
Over time, free cash flow wins, if an LBO or such doesn't steal it out from under you.
Ha
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thats true its what makes him so capable an investor - picking up the bargains - looking at Sequoia Fund also - closely associated with Buffet and has 25% invested in Berkshire. Also looking at FAIRX
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05-25-2008, 12:25 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Aug 2006
Posts: 1,558
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Careful. You're assuming that a bad recession means stocks are a poor investment, but the valuations of many stocks have a recession priced in, IMO.
Notice that Buffett appears to be buying, not selling.
Take Lowe's and Home Depot. Their business is going to suck for at least another year or two, but they're priced for it. Ask yourself where they will be in five to ten years, not next year.
Note-- Buffett has a small position in Lowe's. So do I
Quote:
Originally Posted by Danny
I've been moving out of individual stocks into mostly more conservative mutual funds. I'm in distribution phase now so I'm willing to settle into a return that pretty much guarantees a certain level of income while preserving principal
Current holdings:
VWINX DODGX DODIX HABDX PRPFX DRTAX SMTFX SXTIX PRTAX MWTRX as well as MMF at brokers.
I feel like I should be selling more stocks and maybe putting proceeds into VPDFX after hearing from the oracle of Omaha.
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05-25-2008, 12:51 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 6,258
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There is an article in the current issue (June 08 ) of SmartMoney's Unconventional Wisdom column entitled Buffett Vs. Bernanke.
Buffett vs. Bernanke (Berkshire Hathaway) at SmartMoney.com
(A subscription is required, however) In it Roger Lowenstein asks, "Why would Buffett, an investor famously adverse to speculation, risk billions of Berkshire's dollars on market calls?" ["In the 2007 annual letter ... the Omaha investor revealed he had made a fascinating series of market bets. He disclosed that Berkshire had collected premiums of $4.5 billion for what are, in effect, insurance contracts on the S&P 500 and three foreign indexes."] He answers his own question with: "judging by his bet on the S&P, he doesn't think the U.S. market is extraordinarily overpriced now (or was in the recent past)."
Oh! If only this was easy... who ya gonna believe?
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05-25-2008, 02:18 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Dec 2007
Posts: 4,764
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I haven't changed my asset allocation in a long time. I just have been riding the ups and downs with a well balanced portfolio. Doing ok so far.
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05-25-2008, 05:10 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Which Buffet would applaud. He is a big fan of buy and hold a diversified portfolio of low cost index funds for those of us who are merely mortal
DD
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05-25-2008, 05:27 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Nov 2005
Location: North of Montana
Posts: 2,769
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Quote:
Originally Posted by Danny
"The United States is already in a recession and it will be longer as well as deeper than many people expect" - story
Ok. Now I'm really feeling defensive. When Warren speaks I listen and heed.
|
Quote:
Originally Posted by Danny
I've been moving out of individual stocks into mostly more conservative mutual funds. I'm in distribution phase now so I'm willing to settle into a return that pretty much guarantees a certain level of income while preserving principal
Current holdings:
VWINX DODGX DODIX HABDX PRPFX DRTAX SMTFX SXTIX PRTAX MWTRX as well as MMF at brokers.
I feel like I should be selling more stocks and maybe putting proceeds into VPDFX after hearing from the oracle of Omaha.
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Quote:
Originally Posted by Danny
thats true its what makes him so capable an investor - picking up the bargains - looking at Sequoia Fund also - closely associated with Buffet and has 25% invested in Berkshire. Also looking at FAIRX
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Are you saying:
- You can pick stocks better than a mutual fund manager in good times but not in bad?
- Stock MF's preserve capital in a down market?
- No-one can pick stocks in a bad market but if you have MF's, it's not your fault?
- Something else?
I'd understand moving to cash or bonds but I'm not sure how MF's fit in. If MER's are an enemy when they decrease positive returns, how can they be your friend when they increase negative ones?
__________________
There are two kinds of people in the world: those who can extrapolate conclusions from insufficient data and ..
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05-25-2008, 05:38 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,375
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Quote:
Originally Posted by kumquat
Are you saying:
- You can pick stocks better than a mutual fund manager in good times but not in bad?
- Stock MF's preserve capital in a down market?
- No-one can pick stocks in a bad market but if you have MF's, it's not your fault?
- Something else?
I'd understand moving to cash or bonds but I'm not sure how MF's fit in. If MER's are an enemy when they decrease positive returns, how can they be your friend when they increase negative ones?
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What's an MER...
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05-25-2008, 05:48 PM
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#13
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Recycles dryer sheets
Join Date: Oct 2007
Posts: 332
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Why doesn't the old buck take his teeth out, put them in a glass and go to bed. He talks too much.
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05-25-2008, 10:51 PM
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#14
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Recycles dryer sheets
Join Date: Sep 2007
Posts: 464
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Barron's this week has an interesting article about P/E titled "What's the real P/E Ratio" written by Chairman and President of Comstock. According to them, the current P/E is not what it appears to be.
Please follow the link below.
Barron's Online
Makes me want to go to all cash.
mP
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05-25-2008, 10:54 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by Disappointed
Barron's this week has an interesting article about P/E titled "What's the real P/E Ratio" written by Chairman and President of Comstock. According to them, the current P/E is not what it appears to be.
Please follow the link below.
Barron's Online
Makes me want to go to all cash.
mP
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This guy is a perma-bear. Which does not prove that he is wrong, but he sure hasn't made much money in a long while. (Other than by selling bearish sentiment.)
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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05-26-2008, 02:16 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
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Barron's has been so negative for so long it is funny.
__________________
I have outlived most of the people I don't like and I am working on the rest.
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05-26-2008, 11:44 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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Quote:
Originally Posted by Danny
"The United States is already in a recession and it will be longer as well as deeper than many people expect" .
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Other than a great headline just what does this statement mean? Longer than what? deeper than what? I mean I could say its going to be shorter than many believe and shallow and it could be deeper and longer than Warren's take for all I know.
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“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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05-26-2008, 11:51 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
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Budweiser(BUD) - beer does well in recessions. I think he also bought Kraft(? for the non drinkers) - food is defensive also.
heh heh heh -
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05-26-2008, 11:52 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,183
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Quote:
Originally Posted by Bikerdude
Other than a great headline just what does this statement mean? Longer than what? deeper than what?
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Agreed. When I think of going into a deep recession, I vision dropping another 20% or more from where we are now. But I think Warren is thinking we're already there are perhaps future drops will be minor relative to our current position.
I do believe it will be a long, long time before we have a big time rally however. Hope I'm wrong.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-26-2008, 12:04 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Aug 2006
Posts: 1,558
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Remember, cash is losing you money right now. Money markets are earning about 3%, and you pay taxes on that, so it is more like 2%.
Inflation is running at at least 4% (you can decide for yourself if the government has a secret plot to understate it ).
Treasury bonds don't pay enough to get a real return.
Commodity prices are through the roof and feel like they are in a bubble. I may be wrong about this, but I'm not going to get caught chasing prices up.
That pretty much leaves stocks, real estate, and junk bonds as investment options.
Stocks and real estate have the advantage of being able to increase prices and rents to cope with inflation. They seem like the only safe choices in today's environment.
Quote:
Originally Posted by Disappointed
Barron's this week has an interesting article about P/E titled "What's the real P/E Ratio" written by Chairman and President of Comstock. According to them, the current P/E is not what it appears to be.
Please follow the link below.
Barron's Online
Makes me want to go to all cash.
mP
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