scorpioncapital

To answer your question, yes. I'm buying everyday. Consider that Warren Buffet as far back as October 2008 was willing to shift from treasuries to stocks when the S&P was at the exact same spot as today. He said if stocks stay at these levels much longer I will be buying. Well, I think 1 year is at these levels for a while now. It is unbelievable (to me anyway) that people are saying there are no bargains to find when stocks are very likely to outperform cash and bonds over the next decade at least. What difference does it make if you buy now or on some 20% pull back which may or may not come? The question becomes when to pull the trigger, it seems now is as good a time as any.

" law of large numbers are beginning to work against him" If this is true why did the Russell 2000 index (presumably an index of 2000 small to mid cap cap stocks) underperform Berkshire B shares from 12/31/98 to 12/31/08, a ten year period by a factor of 2 according to Yahoo

Hmmm...2 years ago interest rates and inflation were much higher than 1 basis point and the market was significantly higher than today. I'm not sure your analysis of the end of equities is as clear as that.

I'm interested if you want to send me the info and date.

Who the heck is going to use the Yellow Pages with the Internet? I stopped using it a long time ago.

They are not adventurous enough for me, too conservative. Great for certain people, like those who are already rich :) The control issue could result in a perpetual discount at least that has been the evidence of the last few decades and unlikely to change unless the ownership structure changes.

But wasn't Buffet's argument that the investors came from the value investing camp? I don't think his argument was one of picking 7 successful managers from all managers which does suffer from survivorship bias. To prove his point all he has to do is pick a few from a very specific "sub-set". Now one could argue how many value investors he needs to sample and I'm sure future academics since that article have done studies on value performance vs all active managers.

Why is gold a better inflation hedge than a good business (stock)? Why hedge 5-10% against inflation with gold when you can hedge it with a good business - and potentially make even more money than breaking even after inflation?

My pragmatic philosophy is why find the next great allocator until the current ones are gone?

This article is really misleading. They talk about the MCO dump but that was probably due to individual business factors. Many of the preferred deals have a very substantial equity kicker on the back-end. From what I understand of Berkshire's financial reports, Buffet is almost fully invested, maybe there is still $10-$15 billion investable from his stated minimum of $10 billion in surplus. I would be more inclined to say Buffet is all in.

I submit the next candidate will be relatively unknown until he is famous - at that point it will be too late to get in on the ground floor.

Two comments: - Rule-based screens are not a comprehensive test for value, there are thousands of stocks in the world that are cheap that won't show up on any value screen one cares to construct. - In March, when the stock market was 40% below the current level, stocks were actually very expensive - if the world economy was going to go into the Greatest Depression and stay there for say 30 years. It is only in retrospect that we see they were cheap relative to a more benign Recession scenario. But what of current prices? How can we know that they are also not cheap relative to a 'Normal' economic scenario - or expensive for that matter? How do we know that the screens won't pick up more stocks next year if we were to use today's price - but there is a catch, next year's price may reflect that expectation and the stock won't be on the list. The point of this paragraph is to say that it has never been truer that an investor needs to skate where the puck is likely to be not where it is in investing. What looks pricey today could very well be expensive - but it could also be cheap, in hindsight. Only our talent and superior perception of a company's business value can provide a guiding light to the many variables at play.

"Buying a stock at $50 that will be worth $1000 twenty years from now, gives a return of 16% annualized. Buying the same stock at $8, gives a return of 27% annualized. That is an enormous difference" True, but not buying it at all is 0%, also a big difference, even bigger than the difference between 16% and 27% :) Anyway, I believe the market is still a good deal today for good returns. Early this year was an anomaly, most times the market won't be in a -50% to -60% scenario. I'm not entirely sure the market was that overvalued in 2007 but it may have been ahead of itself a few years. Already 2 years have passed, another 2-3 and we could be back there again.

Keep in mind that most all stocks in the US are still 50% off their 2007 high. Therefore, all those who think the current market is speculative, I ask compared to what? Stocks are still quite reasonably priced. I don't think we have anything speculative about the current prices. The US "Mega-Bear" is in its 10th or 11th year now on an inflation adjusted basis. Japan and the Great Depression have been at it for 20 years after the top. To recover a 50% loss at 10% per year from *current prices* would take about 7-8 years, that would put the US "mega-bear" at 17-18 years in length. And frankly I suspect it will happen much faster, 5 years tops. So I would argue the current prices are not as speculative as people think, in fact they are still an out-right bargains given the likely outcome. Think long-term not to make your investment statement beautiful for the end of the year. Are today's prices likely to look cheap over the next decade? If so, I would be buying on the dips as much as possible. Buffet bought BYD at $8 or so per share and is now contemplating buying more at $50/share less than a year later - if the company allows Mid-American that is. That is how investing is done, anchoring is a big mistake. Who is to say the stock is expensive at $50 even if you bought it at $8 if in 10 or 20 years it is worth $1000?

I know, too cheap!

"It's a country of net saver and creditor, it's a country where older people are respected and dominated policy" I'm wondering if an analysis has been done how many people had a significant amount of wealth in the stock market in Japan at the peak in 1989. Maybe as you mention, the citizens did not participate in that bubble that much compared to the US market, so they would not have a big incentive to want all that inflation. Of course, there was also a real estate bubble as well.

But why wouldn't these things lead to inflation instead of deflation? Wouldn't the currency become worthless as the government undertook more debt and asset prices would inflate in yen terms?

On an inflation-adjusted basis, Japan's stock market 20 years after the 'bubble' is down even more than 20 years after the Great Depression, with dividends, maybe even more. It is interesting to understand what happened to that country's stock market to product such a disastrous result but I have no idea.

Bank reserves and money supply have very little inverse connection. Look at the charts of the two over several years, bank reserves have gone up and so has money supply.

Sure there are just as many great ideas today as in March. Whether you buy a stock at $20/share or $40/share is not a big deal over long periods of time. I'm buying the same shares today at 2-3x the price of March and I have absolutely no problem with that whatsoever.

I'm reading this book by Normal Mailer, the Executioner's song and this guy in the book who was an ex-con got some sort of machinery job and was paid $3.50/hr in 1976 but half was subsidized by a prison program but I imagined it was minimum.

I read in a book that some guy made $3.50 in 1976, and that was minimum wage I presume. And today's minimum wage is certainly not double that. What happened to the ravages of inflation over 30+ years? Did productivity gains have such a dramatic impact on the effect of inflation on wages? If so, the future may not be quite as dark as people think.

"An investor who earns 16% annually over a decade, for example, will end up with more money than an investor who earns 20% for 9 years and then loses 15% in the 10th year." I think you guys are missing the point of the idea that lumpiness means nothing. 16% per year does NOT mean 16% per year. It could mean for example, -10% year 1, then +30% year 2, then 5% year 3, then 22% year 4, etc.. for an average of 16. The only person who got 16% per year exactly was Madoff.

"Multiple successes multiplied by zero is still zero" True, but we are not talking about zeroes, rather stocks that decline 50-60-70% temporarily, without major bankruptcy risk, no big deal. I do agree that one's needs should dictate whether to invest or not, however, there are many well selected stocks that did very well over the last decade, that had a reasonable positive outcome above and beyond the index. Your argument speaks FOR smart investment (or not investing at all), not against buy and hold. I agree that choosing a poor manager is as bad as choosing no manager and holding cash. Alternatively that person could just buy some bonds and get 3-4% or something like that.

"Well that works most of the time, but anyone who stuck to just that last year got burned" I don't think its a good idea to use a single year as meaningful of anything. I couldn't care less that my portfolio was down in a single year, especially when everyone else's portfolio did the same thing. A good long-term track record can suffer a couple of years of business depression-like results as long as you beat par and know how to do it. For example, I read somewhere that something like 8 out of 10 years the S&P has had a positive return and 2/10 it has had a negative (sometimes very negative) return. The best thing to do is to go through it and forget about timing yourself in and out of cash. Volatility is no big deal, it is highly welcome, otherwise how to get the great deals?