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Warren Buffet Winning 10-year $1M Bet
Old 06-28-2016, 08:32 AM   #1
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Warren Buffet Winning 10-year $1M Bet

S&P Index (Vanguard) fund vs. hedge funds

Why Warren Buffett Is Winning His $1 Million Bet Against Hedge Funds - Fortune
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Old 06-28-2016, 08:46 AM   #2
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Warren bet the Vanguard S&P 500 Index fund (fees of 0.05%) would outperform a group of "funds of funds" with fees of just over 3.0% per year. Even someone as number challenged as me can guess who will win this one...
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Old 06-28-2016, 11:12 AM   #3
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Warren bet the Vanguard S&P 500 Index fund (fees of 0.05%) would outperform a group of "funds of funds" with fees of just over 3.0% per year. Even someone as number challenged as me can guess who will win this one...
Post of the day!
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Old 06-28-2016, 11:12 AM   #4
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Even someone as number challenged as me I can guess who will win this one...
FIFY
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Old 06-28-2016, 11:19 AM   #5
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Well sure, but Buffet is an investing guru.
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Old 06-28-2016, 11:24 AM   #6
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FIFY
So you're some sort of grammando, declaring war? I'll be watching...
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Old 06-28-2016, 11:31 AM   #7
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The bet was not a million dollars, the total winning pool was a million dollars. Actual bet was a $320,000 each put into a zero coupon bond that would mature into a million dollars at the end of ten years for the charity. Through agreement, the betting participants then market timed the proceeds selling the zero coupon bond at a peak in bond prices and put all the money into a single stock BRK, resulting in the funds invested outperformed the hedge fund pools, the S&P 500 and BRK during this entire period. They did not invest the proceeds in an index fund, they were in 100% single zero coupon bond and then a single stock. Watching what people actually do with money rather than what they say you should do is much more profitable.
You will note with Warren that he always advocates index funds and never uses them.

I like what I read about Charlie Munger once when he was asked what he was stripped of all his money. I would work to get some money and invest in the best individual stocks I could find and get rich again, I don’t think it would be much of a problem for me.
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Old 06-28-2016, 11:47 AM   #8
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Warren advocates index funds for the majority of investors who don't have the time or acumen to research their own stocks. That's quite different than him needing them himself.
He said they would be better off owning a mix of 90% S&P500 Index Fund and 10% ST Govt Bonds.
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Old 06-28-2016, 11:57 AM   #9
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There's an NPR interview with the hedge fund guy

Episode 688: Brilliant vs. Boring : Planet Money : NPR

Quote:
KESTENBAUM: Are you bummed about probably having lost this bet?

SEIDES: A little bit. Sure.

KESTENBAUM: Yeah, you had a chance to beat Warren Buffett.

SEIDES: Yeah - with the odds in my favor. And it didn't play out the way I thought it would.

KESTENBAUM: You thought the odds were in your favor.
When I first heard the interview I thought the guy sounded reasonably smart but over confident. Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
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Old 06-28-2016, 11:58 AM   #10
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There is two years left so I wouldn't write off the hedge funds yet. That's the "beauty" of such an investment. If you can stomach the ride a true hedge fund can have incredible growth (or the opposite) in a very short period of time. That's why some smart people invest in them.
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Old 06-28-2016, 01:25 PM   #11
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There's an NPR interview with the hedge fund guy

Episode 688: Brilliant vs. Boring : Planet Money : NPR



When I first heard the interview I thought the guy sounded reasonably smart but over confident. Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
The million dollar “bet” was a tax deductible charitable donation of $360,000 for the hedge fund who were using the donation as an advertising ploy to obtain more customers for their hedge fund business. As you will note the bet is not Warren Buffet against an individual but Warren Buffet against an LLC.
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Old 06-28-2016, 01:34 PM   #12
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There is two years left so I wouldn't write off the hedge funds yet.
And I thought I was an optimist.
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Old 06-28-2016, 01:50 PM   #13
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Now on learning from the article that the hedge fund was a massive fund of fund bet, I think the guy is missing a few screws (or is numerically illiterate).
The odds aren't good. The goods are odd.

By how much is the fund lagging?

I'd guess about 20%?
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Old 06-28-2016, 02:42 PM   #14
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So you're some sort of grammando, declaring war? I'll be watching...
Yet more proof that no good deed goes unpunished.

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And I thought I was an optimist.
OK, you can join the advanced grammar group.
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Old 06-29-2016, 10:14 AM   #15
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The million dollar “bet” was a tax deductible charitable donation of $360,000 for the hedge fund who were using the donation as an advertising ploy to obtain more customers for their hedge fund business. As you will note the bet is not Warren Buffet against an individual but Warren Buffet against an LLC.
I have no issue with how the bet was funded or recorded as business transaction. My main issue is with specific strategy taken on the hedge fund side.

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The odds aren't good. The goods are odd.

By how much is the fund lagging?

I'd guess about 20%?
The last numbers I saw were +65% for Buffet and +22% for the hedge fund. So a lot of the difference is the 3% fee.

Warren Buffett slips but still winning epic hedge fund bet
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Old 06-29-2016, 04:55 PM   #16
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So you're some sort of grammando, declaring war? I'll be watching...
Uh Oh, redduck! You will have to be more careful (with your writing) than you normally are.

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Old 06-29-2016, 05:14 PM   #17
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Yet more proof that no good deed goes unpunished.



OK, you can join the advanced grammar group.

I had a typo but at least I didn't start a sentence with "and."

However, I still don't belong in the advanced grammar group. Maybe one day, if I work really hard, I can join the smart kids there!?
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Old 06-29-2016, 05:17 PM   #18
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I had a typo but at least I didn't start a sentence with "and."
You grammar cops are relentless.

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There is two years left...
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Old 06-30-2016, 06:21 AM   #19
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The last numbers I saw were +65% for Buffet and +22% for the hedge fund. So a lot of the difference is the 3% fee.
Thanks for that link.

1.03^(10) = 34%. So exactly on target for the 3% fee

Pray tell, where are the customers yachts ..
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