Buffett: Bonds the Most Dangerous of Assets

[racy]

...I think his recommending index funds is just elaborate CYA. It would be hard to read his materials and think that his ideas point to index funds.

Ha

Warren Buffett backs index mutual funds over ETFs - ETF Focus - MarketWatch

"The best way in my view is to just buy a low-cost index fund and keep buying it regularly over time, because you'll be buying into a wonderful industry, which in effect is all of American industry," Buffett told CNBC anchor Liz Claman.

 

[haha]

Warren Buffett backs index mutual funds over ETFs - ETF Focus - MarketWatch

"The best way in my view is to just buy a low-cost index fund and keep buying it regularly over time, because you'll be buying into a wonderful industry, which in effect is all of American industry," Buffett told CNBC anchor Liz Claman.

And that is why Buffett himself invests in index funds

Anyway, as I hope I have made clear over many years, horses for courses, and whatever anyone wants to do in the privacy of their own portfolio, I am sure I don't care. But if pressed, I usually recommend worm farms.

And now, back to the regularly scheduled discussion of cats and annoying non-LBYMers.

 

[Onward]

Over the years Buffet has given very mixed signals on index funds. I remember him advising against them, and now he's recommending them.

IMO you have to keep in mind that, in his apparent ability to pick winning stocks, he is a bizarre, lone freak of nature. I think he realizes this.

I have never owned any gold, but I think people's fascination with it has gone on for so long (thousands of years at least) that there is probably something hard-wired in the human brain that will always make us crave it. I would own some gold as insurance if only I could get in at a reasonable price.

 

[racy]

...whatever anyone wants to do in the privacy of their own portfolio, I am sure I don't care. But if pressed, I usually recommend worm farms.

Worm farming can be lucrative, says Jack Brantley of Bear Creek Worm Farm … but it’s like any other live-animal feeding operation. It takes experience, skill and patience. He recommends starting small.

Ups and downs of worm growing keep Georgia farmer on his toes | Rodale Institute

 

[BigMoneyJim]

And that is why Buffett himself invests in index funds

Over the years Buffet has given very mixed signals on index funds. I remember him advising against them, and now he's recommending them.

From what I've read of him, in his case he prefers buying whole companies rather than stock or funds, because there is an economy in doing so at that scale.

He also likes an investment term of "forever", which would not seem to favor a fund with an expense fee.

Perhaps he sees that with the capital of a "normal" individual index funds are an attractive way to invest broadly and relatively cheaply.

 

[Midpack]

Over the years Buffet has given very mixed signals on index funds. I remember him advising against them, and now he's recommending them.

As mentioned earlier, the article is about how BRK is investing and not what individuals should necessarily do as I read it.

 

[rescueme]

Buffet only makes 100k a year and at his advanced age still isn't retired. Why would anyone take his advice? lol

He had his DW "chose" his GF after she left him (but still stayed married) in 1977 and they stayed "together" until her death in 2004. Heck, they even sent out holiday cards with three signatures (W, DW, DG).

He may be competent in investing, but overall I call him a nut case (yes, and that includes his reference to his personal secretary, in which he puts W2 income in the same area as investment income):

Warren Buffett - Wikipedia, the free encyclopedia

Also remember that he "made his bones" with OPM (other peoples money), following a buy/hold theory - of which I (and I assume many others) have followed for many years.

I know that in DW/my case it resulted in a quite comfortable retirement, for us. He didn't "invent" something new, as compared to John Bogle who found a company and pushed for the "low cost option" of index funds.

 

[Koolau]

I would own some gold as insurance if only I could get in at a reasonable price.

You'll be sure to let us know when that is, right?

I kind of figured gold was "reasonable" when it got below $300 back in the early 00's. YMMV

 

[Free To Canoe]

XOM has been very good to my family.

I have great respect for Warren Buffet. Nonetheless, he is much more concerned with business risk, while my concern is portfolio sustainability, so I find his view interesting but not useful. Just because equities may prove to hold value better than Treasuries does not make them good investments right now. Just because a turd doesn't smell so bad does not make it tastier or any more fit for consumption.

What You would be eating Alpo if HIS portfolio dropped 50%


Just having a bit of fun....

Reminds me of Light Sweet Crude

 

[kevink]

Here's an interesting take on the Buffet article that shows you'd have been a whole lot better off with LT bonds than Berkshire Hathaway stock since '99:

http://crawlingroad.com/blog/2012/02/14/warren-buffet-hates-bonds-and-loves-stocks/

 

[Koolau]

Here's an interesting take on the Buffet article that shows you'd have been a whole lot better off with LT bonds than Berkshire Hathaway stock since '99:

A goodly portion of other stocks as well, heh, heh.

 

[haha]

If you guys are making longterm investments with that rearward look I wish you much luck.

 

[kevink]

Making long-term investments with a rearward look is what leads to mistakes like going 100% equities because of their high historic returns. Buffet is flat-out wrong about bonds and Berkshire's performance is lousy compared to such conservative vehicles as Wellesley and Wellington, and is in fact only marginally better than 5 year Treasuries, with far more volatility:

http://crawlingroad.com/blog/2012/02/15/warren-buffets-berkshire-horribly-beaten-by-vanguards-funds/

 

[Midpack]

Making long-term investments with a rearward look is what leads to mistakes like going 100% equities because of their high historic returns. Buffet is flat-out wrong about bonds and Berkshire's performance is lousy compared to such conservative vehicles as Wellesley and Wellington, and is in fact only marginally better than 5 year Treasuries, with far more volatility:

http://crawlingroad.com/blog/2012/02/15/warren-buffets-berkshire-horribly-beaten-by-vanguards-funds/

Isn't that interesting, thanks for the link!

 

[Gatordoc50]

Making long-term investments with a rearward look is what leads to mistakes like going 100% equities because of their high historic returns. Buffet is flat-out wrong about bonds and Berkshire's performance is lousy compared to such conservative vehicles as Wellesley and Wellington, and is in fact only marginally better than 5 year Treasuries, with far more volatility:

http://crawlingroad.com/blog/2012/02/15/warren-buffets-berkshire-horribly-beaten-by-vanguards-funds/

Buffet is a poser. Heck, Zuckerberg is nipping at his heals at only 27. He will be worth a trillion dollars when he is WBs age. Lol

 

[sheehs1]

While I have a lot of respect for Buffet and what he accomplished, a lot of it since WWII when our country was going great guns, he doesn't have a crystal ball for the future either. What he does have is enough ammunition ($$) such that he and BRK should be fine.
A good position to be in.

 

[wildcat]

Making long-term investments with a rearward look is what leads to mistakes like going 100% equities because of their high historic returns. Buffet is flat-out wrong about bonds and Berkshire's performance is lousy compared to such conservative vehicles as Wellesley and Wellington, and is in fact only marginally better than 5 year Treasuries, with far more volatility:

http://crawlingroad.com/blog/2012/02/15/warren-buffets-berkshire-horribly-beaten-by-vanguards-funds/

A comparison using the last 10 yr period eh? Well, that settles it! Buffet is a lousy allocator of capital.

 

[kevink]

A comparison using the last 10 yr period eh? Well, that settles it! Buffet is a lousy allocator of capital.

The numbers speak for themselves, and not just for 10 years. You can have the over-rated Mr. Buffet - I'll take Wellesley's performance over any time period you choose.

 

[ERD50]

Making long-term investments with a rearward look is what leads to mistakes like going 100% equities because of their high historic returns. Buffet is flat-out wrong about bonds and Berkshire's performance is lousy compared to such conservative vehicles as Wellesley and Wellington, and is in fact only marginally better than 5 year Treasuries, with far more volatility:

http://crawlingroad.com/blog/2012/02/15/warren-buffets-berkshire-horribly-beaten-by-vanguards-funds/

Thanks for posting that - in addition to the blog, he links to a site that provides stock/fund comparisons that include dividends! I have not found that for free, or w/o signing up for some kind of Microsoft account or something.

PerfCharts - StockCharts.com - Free Charts

The numbers speak for themselves, and not just for 10 years. You can have the over-rated Mr. Buffet - I'll take Wellesley's performance over any time period you choose.

Well, those charts only go back ~ 13 years. When I go back to 1/12/1990 on yahoo, and use their 'adjusted prices' on the history page, I would have wanted to be with BRK-A over Wellesly. Going forward, who knows? My guess is the next ten years will be more like the past ten years than to the decade of the 90's. But that guess is worth nothin' to nobody, JMO.

-ERD50

 

[Texas Proud]

Heck, my boss had talked about this site and I just did not look at it that closely...

As for what to pick, heck, Exxon has beat Berkshire over the last 9 years (or 3302 days)... I do not see how to get 13 years...

 

[ERD50]

over the last 9 years (or 3302 days)... I do not see how to get 13 years...

I wondered the same thing - Those must be trading days? Look at the dates, it goes back to JAN 1999. So, roughly 5 days x 50 weeks/year (after ~ 10 holidays) = 250 days/year, 3302/250 ~ 13.2 years.

-ERD50

 

[Texas Proud]

I wondered the same thing - Those must be trading days? Look at the dates, it goes back to JAN 1999. So, roughly 5 days x 50 weeks/year (after ~ 10 holidays) = 250 days/year, 3302/250 ~ 13.2 years.

-ERD50

Yep, that makes sense... thanks.

 

[wildcat]

First, I don't really think its an apples-apples comparison using a stock vs a stock/bond mutual fund but if you're fine with it so be it.

BRK had some fantastic returns in the 70s/80s so excluding those decades is really selling it short. Performance has lagged a bit as the market has become more expensive and as BRK become a bigger company w/a bigger float to manage. Buffet has to make very good HUGE deals. Given that I'd expect BRK to behave more like the S&P with a modest chance of outperforming it.

I don't have time to check the yearly returns of BRK & calculations but from a site that maintained an annual tally of BRK's ROR it showed 22.39% from end of yr '67 through end of yr '09. If you are happy with Wellesely and the like that's fine as all of those are good funds but I don't know many people who would say they would pass on BRK ownership over the same time period which is essentially saying you're okay with less money. Personally, I like more money & I don't know many who would say otherwise.

 

[Texas Proud]

First, I don't really think its an apples-apples comparison using a stock vs a stock/bond mutual fund but if you're fine with it so be it.

BRK had some fantastic returns in the 70s/80s so excluding those decades is really selling it short. Performance has lagged a bit as the market has become more expensive and as BRK become a bigger company w/a bigger float to manage. Buffet has to make very good HUGE deals. Given that I'd expect BRK to behave more like the S&P with a modest chance of outperforming it.

I don't have time to check the yearly returns of BRK & calculations but from a site that maintained an annual tally of BRK's ROR it showed 22.39% from end of yr '67 through end of yr '09. If you are happy with Wellesely and the like that's fine as all of those are good funds but I don't know many people who would say they would pass on BRK ownership over the same time period which is essentially saying you're okay with less money. Personally, I like more money & I don't know many who would say otherwise.

The problem, just like any investing, is that past performance does not assure future performance....

Looking at the few stocks I did, BRK did not perform nearly as well over the last 10 or so years as other stocks... so someone who invested 10 years ago would have been better investing somewhere else (XOM as an example)...

And, BRK has gotten big... big means it is hard to beat the market... so why not just buy the market... IOW, as a new investor buying today, where do you want to put your money In BRK or somewhere else...

 

[Hamlet]

That's the fundamental issue here. A mostly stock investment under-performed bonds during one of the greatest bull markets in bonds in history?

Shocking.

First, I don't really think its an apples-apples comparison using a stock vs a stock/bond mutual fund but if you're fine with it so be it.