Buffett 2005 letter out

[Delawaredave]

Buffett letter out:
http://www.berkshirehathaway.com/letters/letters.html

He's still bearish on the dollar, but converting some of his foreign currency position into foreign equities

Interesting question demonstrating the power of compounding:
"Between December 31, 1899 and December 31, 1999, to give a really long-term example, the Dow rose from 66 to 11,497. (Guess what annual growth rate is required to produce this result; the surprising
answer is at the end of this section.)"

The answer is 5.8 percent - suprisingly low - of course 100 years is a lot of time.

[saluki9]

Quote:

Originally Posted by Delawaredave Buffett letter out: The answer is 5.8 percent - suprisingly low - of course 100 years is a lot of time.

What he fails to mention (ok, he gives a minor mention) is that for a good chunk of that 100 years the dividend yield on the dow was close to that 5.6% so add that in too.

[cute fuzzy bunny]

But isnt it also true that when the dividend was higher, annual rates of price appreciation were a bit lower?

And dont those growth rates include a number of long deflationary periods, which we are probably not going to happen in the future?

Just a sampler of why history, especially very long term history, may not be a very good indicator of whats going to happen. Even if you can wrap your brain around all the things that are different, how those will collectively affect investing is hard to determine.

Hell, we cant even predict the weather and there are fewer influences, better measurements, and good science on that.

Wasnt Buffet bearish on the dollar last year too, yet the dollar has done well? I'm not questioning the guy, he's usually right...it just occasionally takes some time for his rightness to show up.

[Martha]

Quote:

Originally Posted by Cute n' Fuzzy Bunny Hell, we cant even predict the weather and there are fewer influences, better measurements, and good science on that.

Not to be argumentative but I have read that there have been tremendous strides since the 1980s in predicting near term weather (1 to 7 day forecasts).

[HFWR]

Jimmy Buffett sent a letter??

[Nords]

Quote:

Originally Posted by Martha Not to be argumentative but I have read that there have been tremendous strides since the 1980s in predicting near term weather (1 to 7 day forecasts).

My spouse the meteorologist confirms that (especially typhoon/hurricane forecasting) but she also says that "persistence" is still beating the heck out of all the other forecasters and their software.

"Persistence" simply forecasts that tomorrow's weather will be the same as today's weather.

The rest of the debate is pretty much like "active vs passive mutual fund management", SWRs, paying off the mortgage or not, and "tastes great, less filling".

[cute fuzzy bunny]

Our local forecaster, who my wife refers to as "Mark 'I dont know what I'm talking about' Finan" gets it right about half the time...and california weather in our region is pretty predictable.

From my time in new england...good luck ever forecasting that region. "If you dont like the wetha, just wait a while..."

We're all going to find out what happens. If you guessed right, you were just lucky.

Tastes great/less filling is easy. It tastes like rat urine. Isnt filling at all because its undrinkable.

[HFWR]

Tastes filling, less great...

[ERD50]

Quote:

Originally Posted by Delawaredave The answer is 5.8 percent - suprisingly low - of course 100 years is a lot of time.

Typo? When I plugged 1.058^100 the math didn't work.

The letter actually says 5.3%. That makes sense (within rounding errors).

It is not clear (to me) if he adjusted the Dow values 66 to 11,497 to include dividends or not. I'm guessing he did not. If not adjusted, you would have got 5.3% PLUS the dividends. Seems reasonable?

-ERD50

[AltaRed]

Hardly makes any difference. The Dow is not very representative of the market. And no one mentions the switches that have gone on in the Dow over all that time too.