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Old 11-30-2007, 11:57 AM   #41
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Okay then. Whats the market beater investment or product we should be buying right now that'll produce better results than the market over the next xx years? Who is the fund manager or investment manager or financial planner that will give us all the best returns?

We just had a period when active management should have really shined...from 1999-current, a smart money manager should have been able to jump out in '00 when prices were outrageous, then grab bargains in 02/03 when things were skimming bottom, got into home builders and finance companies in 02 before the building boom fired up, and out again before this years collapse.

Certainly the data was there. There was plenty of speculation and opinion.

So why havent a bunch of funds really stand out in that period that didnt totally reek for the 1994-2000 period? How come everything that was hot from 94-00 stank over the last 7 years? Out of the mutual fund universe, shouldnt at least 20, 30, 100 funds be around that had market beating returns for at least 10-12 of the last 14 years?

I mean, come on! The S&P 500 has a bunch of "bad" stocks in it that on their own, nobody would choose as a major holding. Being able to drop those "bad" stocks and just keeping the "good" ones should certainly assure success.

Ah, thats right...Bernstein showed that a lot of the "good" returns came from the "bad" stocks, principally because it was hard to tell which stocks would be "good" in advance, and because the "good" stocks didnt stay "good" for very long.
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Old 11-30-2007, 12:04 PM   #42
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So, this info is a lie??

http://www.berkshirehathaway.com/letters/2005ltr.pdf

Outlier or not, those numbers don't lie, and you CAN invest in his companies, through the "A" or "B" share class, so he IS a manager you can buy into, not like some high entry hedge fund guy.........
Is what a lie? That shows that Buffett doesn't beat the market every year, which is the benchmark CFB says he has to beat.

Even Fama & French say that you can consistently beat the market over time, but they want you to believe it's because of a higher risk premium.....
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Old 11-30-2007, 12:07 PM   #43
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Whats the market beater investment or product we should be buying right now that'll produce better results than the market over the next xx years?
Didn't you say your wife was in the hospice industry? Take an industry that is currently losing money because they underestimated risk (and will obviously fix). Add a dash of unstoppable demographic trends. I think we have a winner!
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Old 11-30-2007, 12:10 PM   #44
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Is what a lie? That shows that Buffett doesn't beat the market every year, which is the benchmark CFB says he has to beat.
I get it......you are saying that index funds are superior because they NEVER beat the market, because they are the market..........

One year returns are useless to me, I look at 3,5,10,20 years.

Hindsight is 20/20, we all look smart when we look back.

The smartest thing I did was go from 100% equities to 20% bonds in December 1999. The dumbest thing I did was not to go to 100% BONDS in December 1999, and then go to 100% equities on October 9th, 2002....................

If I had only known..........
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Old 11-30-2007, 12:14 PM   #45
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One year returns are useless to me, I look at 3,5,10,20 years.
I think we're agreeing. I said that the benchmark was bogus.

So, what's our benchmark? Risk-adjusted returns over a 20 year period?
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Old 11-30-2007, 12:20 PM   #46
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I think we're agreeing. I said that the benchmark was bogus.

So, what's our benchmark? Risk-adjusted returns over a 20 year period?
Try rolling periods of 5 or 10 yrs. And you have to beat the index in atleast half(more the better) the total number of rolling periods possible and also end up with a higher total value at the end. I think you might find a few in the 5yr rolling periods but the 10yr ones I don't think exist

-h
p.s: Just to make it clear,if the fund started on Jan 1994 - the 5yr rolling periods are 94-98, 95-99, 96-00, 97-01, 98-02 etc. Then you compare it with the risk adjusted Index (ie don't compare Intl with S&P 500 or SMall Value with S&P 500) for every period and then compare the total end value. Now check how many we end up with!
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Old 11-30-2007, 12:23 PM   #47
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Buffett says rolling periods of say 5 or 10 yrs. For a lot of funds that is really hard too. There aren't many that beat the benchmark over a rolling 5yr period and then managed to hang on with the Index after the big influx of performance chasing money.
Buffett is looking at longer periods of time, not year-to-year. His writings clearly indicate a preference to earn a "lumpy 15%" over time than a "smooth 12%."
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Old 11-30-2007, 12:30 PM   #48
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Try rolling periods of 5 or 10 yrs.
It looks like BRK underperformed the market for a 5-year period if you go back just before the bounce they got in August.

10 years is probably a reasonable period to look at since it generally includes a full business cycle, but I just don't have the data. It does look like my Vanguard Health Care fund, as well as BRK, would meet the 10-year test though.
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Old 11-30-2007, 12:33 PM   #49
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Didn't you say your wife was in the hospice industry? Take an industry that is currently losing money because they underestimated risk (and will obviously fix). Add a dash of unstoppable demographic trends. I think we have a winner!
And then healthcare gets socialized, the profits disappear, and the investments are worthless.

Not seeing how this would clearly be a ten year market beater.

Honestly, not even sure that without the socialization that its a big profit generator. The hospices have been stuffing their beds to bring in more money, then people are living an unexpectedly long time. And the hospice has to pay medicare back for the overage. To offset the outflow, the hospics are yanking in more people...who will outlive their costs and end up living on the hospices dime.

Sure sounds like a winner... :

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It looks like BRK underperformed the market for a 5-year period if you go back just before the bounce they got in August.

10 years is probably a reasonable period to look at since it generally includes a full business cycle, but I just don't have the data. It does look like my Vanguard Health Care fund, as well as BRK, would meet the 10-year test though.

Great. Now what happens if Warren has a heart attack and dies next year, and the new president implements socialized medicine.
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Old 11-30-2007, 12:34 PM   #50
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It looks like BRK underperformed the market for a 5-year period if you go back just before the bounce they got in August.
BRK also underperformed badly in 1998 and 1999. I remember a lot of frustrated people (who probably shouldn't have owned Berkshire) asking aloud why Buffett wasn't buying tech, and why he wasn't buying (mostly high-P/E) stocks with all that cash "weighing him down". As the market reached bubblicious proportions, Berkshire was falling. I remember loading up on the B shares at around 1400 a pop near the bottom.

Soon the bubble popped and people realized why Buffett wasn't buying the high-flying tech or the overvalued stocks of other companies which, no matter how good the companies, were overvalued as stocks.
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Old 11-30-2007, 12:41 PM   #51
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Not seeing how this would clearly be a ten year market beater.
So you're saying we can't see 10 years into the future? Erhm, hard to argue with that I guess.

We'll have to revisit this thread in 10 years, and then we'll have "proof," right?

Like I said, "the market" isn't bad. You're pretty much guaranteed to capture GDP growth once the speculative component goes away. But it doesn't seem that hard to find growth > GDP. And there's always the Fama & French approach....
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Old 11-30-2007, 12:42 PM   #52
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Buffett is looking at longer periods of time, not year-to-year. His writings clearly indicate a preference to earn a "lumpy 15%" over time than a "smooth 12%."
From the owner's manual:
http://www.berkshirehathaway.com/ownman.pdf

9. We feel noble intentions should be checked periodically against results. We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained. To date, this test has been met. We will continue to apply it on a five-year rolling basis. As our net worth grows, it is more difficult to use retained earnings wisely.

We continue to pass the test, but the challenges of doing so have grown more difficult. If we reach the point that we can’t create extra value by retaining earnings, we will pay them out and let our shareholders deploy the funds.


Ziggy, I think we are saying the same thing. I understand that Buffett is the extreme case of lumpy returns and it does not faze him a tiny bit and I love him for that. (Btw I own BRK in my 5% "play money" stock account.) All I am trying to say is that for any Mutual fund to beat the rolling period outperformace is almost impossible and so you either buy Index funds or go with Buffett.

Btw twaddle, I just need the fund to beat benchmark in more than 50% of all possible rolling periods. Failing to beat it once or twice is not a big deal. Btw for the health care fund - S&P is not a good benchmark though convenient, but we could go with that. All that this proves is that finding a great MF is really difficult.

-h
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Old 11-30-2007, 12:49 PM   #53
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Btw for the health care fund - S&P is not a good benchmark though convenient, but we could go with that. All that this proves is that finding a great MF is really difficult.
Well, I chose that fund because it was one of two I've held for 20+ years. (The other one has a large chunk of Japan and sucked badly).

In theory, a fund simply needs to beat the market one year, and then switch to buying the market, and it will have beaten the market over 10 years. In other words, I don't get what all the fuss is about.

It seems the real enemy is fund bloat. Even Buffett has too much cash due to his success. For small investors like us, it might be much easier to beat the market. Just ask Ha.
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Old 11-30-2007, 01:21 PM   #54
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Well, I chose that fund because it was one of two I've held for 20+ years. (The other one has a large chunk of Japan and sucked badly).

In theory, a fund simply needs to beat the market one year, and then switch to buying the market, and it will have beaten the market over 10 years. In other words, I don't get what all the fuss is about.

It seems the real enemy is fund bloat. Even Buffett has too much cash due to his success. For small investors like us, it might be much easier to beat the market. Just ask Ha.

I'll agree with that. Two of my significant fund holdings are ABALX and AIVSX. They have NOT beaten the market every year, but the beta is WAY under 1.00, and I have made enough money in the past 15 years to keep them both...........
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