Here is an interesting article worthy of discussion I think. My thoughts are as follows:
1. This is fine and dandy that stocks are risky and Buffett might be overstating the rewards. But where in this article is an alternative suggested? As some say about Democracy, investing in stocks can be bad, but is less bad, long term (we hope) than the alternatives.
2. OK, so the inflation adjusted returns are way worse than the commonly presented chart, showing an almost guaranteed upward and onward march to higher highs. But where would the investor be, inflation adjusted, if he DIDN'T invest in stocks?
http://www.forbes.com/sites/johntobey/2 ... ts-advice/
"About that long-term graph – it’s flawed. It lacks the two key adjustments needed to provide an accurate, historical picture. Without it, returns are overstated and risks, understated. Once done, the adjustments show a more complicated picture, one that raises doubts not only about Buffett’s advice, but also about any long-term strategy involving the stock market."
Forbes Article Disagreeing with Buffett
Forbes Article Disagreeing with Buffett
Last edited by Leesbro63 on Mon Mar 10, 2014 8:38 am, edited 1 time in total.
Re: Forbes Article Disagreeing with Buffett
If you read his bio, you'll find out why he wants to make it all sound so complicated and scary. You "need" a professional like him to manage your money because it is all so much riskier than it sounds. It can't be as simple as buy and hold a diversified portfolio, can it?
Here is a piece of his bio:
During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now manage personal accounts and write about my analysis and decisions. ... From my 50-year personal/professional investment experience, I developed the skills I use to find opportunities and avoid risks. Because markets are ever changing, I choose the strategies (safety, income, value and growth) that conditions warrant. ... My one regular activity is to seek developments and trends being ignored or misinterpreted by investors. These are the situations that consistently produce higher return opportunities (or higher risk levels). ...
Here is a piece of his bio:
During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now manage personal accounts and write about my analysis and decisions. ... From my 50-year personal/professional investment experience, I developed the skills I use to find opportunities and avoid risks. Because markets are ever changing, I choose the strategies (safety, income, value and growth) that conditions warrant. ... My one regular activity is to seek developments and trends being ignored or misinterpreted by investors. These are the situations that consistently produce higher return opportunities (or higher risk levels). ...
"Confusion has its cost" - Crosby, Stills and Nash
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Re: Forbes Article Disagreeing with Buffett
I think the responses above pretty much cover it.
From the bio, I particularly enjoy, "These are the situations that consistently produce higher return opportunities (or higher risk levels). ..." The implication seems to be, 'If you are savvy (like me and those who invest with me), then a development produces a higher return opportunity. If you are not savvy, then the same development produces a higher risk level.'
It suggests that the writer's primary intent is advertising, not educating.
From the bio, I particularly enjoy, "These are the situations that consistently produce higher return opportunities (or higher risk levels). ..." The implication seems to be, 'If you are savvy (like me and those who invest with me), then a development produces a higher return opportunity. If you are not savvy, then the same development produces a higher risk level.'
It suggests that the writer's primary intent is advertising, not educating.
Re: Forbes Article Disagreeing with Buffett
How can one adjust for inflation and not dividends? Obviously easy enough to do, and he acknowledges the necessity near the end. But of course that would only dilute the message. Come to think of it, what exactly was the message?
Re: Forbes Article Disagreeing with Buffett
John Tobey is right about two things. You can't get a realistic of market performance without adjusting for inflation. And non-logarithmic charts of long-term market performance wash out all but the most recent price movements.
My main complaint is that Tobey's chart ignores dividends. Since 1930, dividends were responsible for 42% of US market returns. Dividends also typically fall less than stock prices during bear markets. So including dividends would have smoothed the big dips in his chart to at least some extent.
Obviously, if we assume that the market returned 42% less than it did, its performance will look worse than it was.
My main complaint is that Tobey's chart ignores dividends. Since 1930, dividends were responsible for 42% of US market returns. Dividends also typically fall less than stock prices during bear markets. So including dividends would have smoothed the big dips in his chart to at least some extent.
Obviously, if we assume that the market returned 42% less than it did, its performance will look worse than it was.
Re: Forbes Article Disagreeing with Buffett
Thanks for the link. I don't need detailed graphs when I consider stock risk. I simply know that the market can drop 50% or more, and can stay "dropped" for years or decades.
Re: Forbes Article Disagreeing with Buffett
This sounds exactly like what every other active fund manager says.goblue100 wrote:If you read his bio, you'll find out why he wants to make it all sound so complicated and scary. You "need" a professional like him to manage your money because it is all so much riskier than it sounds. It can't be as simple as buy and hold a diversified portfolio, can it?
Here is a piece of his bio:
During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now manage personal accounts and write about my analysis and decisions. ... From my 50-year personal/professional investment experience, I developed the skills I use to find opportunities and avoid risks. Because markets are ever changing, I choose the strategies (safety, income, value and growth) that conditions warrant. ... My one regular activity is to seek developments and trends being ignored or misinterpreted by investors. These are the situations that consistently produce higher return opportunities (or higher risk levels). ...
- I buy good stocks, and don't buy bad ones.
- Value stocks are good, and so are growth stocks, so I buy both, but only good ones.
- I can see bad markets coming, and will protect your investment.
- I'll find good deals that everyone else has missed.
Just like drivers: Everyone says "I'm the best driver. Everyone else is lousy."
Therefore everyone is simultaneously the best driver and a lousy driver.
Re: Forbes Article Disagreeing with Buffett
Dividends are a huge part of historical return data. The editors of Forbes should never have allowed this garbage to be published.swaption wrote:How can one adjust for inflation and not dividends? Obviously easy enough to do, and he acknowledges the necessity near the end. But of course that would only dilute the message. Come to think of it, what exactly was the message?
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speak less than thou knowest" -- The Fool in King Lear