They are always good for a common-sensical overview of current conditions. I look forward to reading this next week.

I assume your chart is comparing Berkshire share price with the mutual funds. Obviously, Berkshire's market price is beyond Buffett's control. Might be more useful to compare the fund returns to the book value of Berkshire. Changes in book value would be more relevent to the success of management.craigr wrote:Couldn't agree more.nisiprius wrote:I do not feel that Warren Buffett is intellectually honest in his public statements; I put him in the "spinmeister" category.
BTW. The past decade he was trounced by Vanguard's Wellington and Welleseley funds. He barely beat Vanguard's short-term Treasury bond fund over this time:
<chart snipped for brevity>
I could not agree more. Honestly, I'm surprised by the comments. This is the same guy who has said that most investors would be better off putting their money in low cost index funds.lethean46 wrote:
I'm not knowledgeable enough to debate anyone on the merits or faults of Buffett. But I do believe that he is sincere. And I'll have to let it go at that.
ML
Strong second. I'll always enjoy his newsletter.Gauntlet wrote:I could not agree more. Honestly, I'm surprised by the comments. This is the same guy who has said that most investors would be better off putting there money in low cost index funds.lethean46 wrote:
I'm not knowledgeable enough to debate anyone on the merits or faults of Buffett. But I do believe that he is sincere. And I'll have to let it go at that.
ML
I think he makes a fair point about bonds given how he defines investing as "forgoing consumption now in order to have the ability to consume more at a later date [after taxes have been paid on nominal gains]."nisiprius wrote:I do not feel that Warren Buffett is intellectually honest in his public statements; I put him in the "spinmeister" category. So, no, I do not make a point of trying to absorb what he says. A good example would be his recent pronouncement about "bonds" being "among the most dangerous of assets" due to inflation risk. The point here is his complete failure to mention the existence of TIPS. Not even in passing, even to dismiss them.
Since I am sure that he knows that TIPS exists, there can only be one reason for talking about inflation risk and bonds and not mentioning TIPS at all, and that is that while it would be intellectually honest to mention them, it would make a simplistic story complicated. Buffett wants, for whatever reason, to present a simplistic story.
SImilarly, his presentation of the "safety" of stocks is not fairly presented. It, too, is a simplistic story. The "safety" of stocks was the whole premise behind the book Dow 36000, which said that :"A sensible target date for Dow 36000 is early 2005 but it could be reached much earlier." They said that for a specific reason. The reason was that Jeremy Siegel's work demonstrated that stocks were as safe as bonds, and now that the information was diffusing through the investment world, stocks would be bid up to the point where the risk premium was eliminated and were all but mathematically certain to reach Dow 36000 within that time frame. The fact that it did not happen shows that stocks are not as safe as bonds.
I believe Buffett's motive for presenting as he does is not to inform, but to exhort; not to present the clearest and most accurate picture of the truth as he knows it, but to convince the general public to invest in stocks--in the interest, perhaps, of a greater good. Virtuous propaganda, perhaps, but propaganda.
Jim Cramer has also said this..fareastwarriors wrote:I think Buffett said many times an individual is much better off buying a low cost index fund.
Maybe my comparison was too complicated for you, but it seems like a pretty simple concept:PizzaOnTheMind wrote: And I do not understand the comparison between Steve Jobs and Buffett. What does one have to do with the other?
Now, this is nice, upbeat propaganda - a form of communication that is aimed at influencing the attitude of a community toward some cause or position (definition stolen right from Wikipedia). But those exact words it could have been said by Reagan in the 1981, W. Bush right after 9/11, or Obama/Romney/whoever today - they're feel-good fluffery. And heck, maybe our best days are ahead (it's depressing to consider if they're not). And it's better advice than "Sell everything you own and buy guns and live in the woods and shoot at anyone who approaches".Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly
moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than
when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential
is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders
for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and
effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But
look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and
1941, America’s best days lie ahead.
This is pretty much the way all company statements should be read - with a healthy dose of skepticism and the realization and acceptance that they are statements made mainly to be favorable to the company. Some, such as Buffett's, are done better than others (must be that "folksy wisdom") and that's why I like to read his - that and the fact that this IS, after all, the legendary Warren Buffett. As for Jobs, yes, it was the presentations and the presentations by the legendary Jobs himself that were fun to watch. To get the real info on his products, you'd want to read a good tech columnist.FafnerMorell wrote:While I find Buffet's letters entertaining, there's a lot of spin/propaganda in them - in fact, they're probably more useful as "How to spin your message using folksy wisdom and carefully limited transparency" than as any sort of accurate insight into the real state of his business or the economy. They're definitely a notch above any other letters to shareholders I've come across, but it's not like I can think of any that serve as beacons of truth & insight.
But hey, Steve Job's presentations were similar in that they serve better as an example of "Here's how you do a masterful presentation" than about the products themselves (not that I like iPhone & iPad & Nano any less). When you're a CEO, you need to communicate your companies message - and while it's better to be honest (or at least, not to lie so blatantly everyone notices), there's a lot of grey area (when Steve Jobs talked about magic, everyone knew he didn't really mean Harry Potter-type 'magic' - right?)....
The stuff of general interest to investors is on page 17 under the heading The Basic Choices for Investors and the One We Strongly PreferRRP wrote:Letter: http://www.berkshirehathaway.com/letters/2011ltr.pdf
So Buffet doesn't believe that volatility in prices is risk, but instead risk is the probability of losing purchasing power; in other words trailing inflation, i.e. the probability if realizing a negative real return.The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability – the reasoned probability – of that investment causing its owner a loss of purchasing-power over his contemplated holding period.
this was not in the annual letterFafnerMorell wrote:As for examples of propoganda, there's some on every page. Heck, let's look at the very first page:Now, this is nice, upbeat propaganda - a form of communication that is aimed at influencing the attitude of a community toward some cause or position (definition stolen right from Wikipedia). But those exact words it could have been said by Reagan in the 1981, W. Bush right after 9/11, or Obama/Romney/whoever today - they're feel-good fluffery. And heck, maybe our best days are ahead (it's depressing to consider if they're not). And it's better advice than "Sell everything you own and buy guns and live in the woods and shoot at anyone who approaches".Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly
moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than
when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential
is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders
for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and
effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But
look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and
1941, America’s best days lie ahead.
Yes, ownership of equities is a bet that, over your time horizon, the "world risk" (individual stock risk, sector risk, and country risk can be diversified away) won't show up. When you're working, you can hedge this risk by investing new money on a regular basis. As your human capital dwindles, you'd hedge with fixed income, of course.PreserveCapital wrote:Buffet is explicit in his optimism over the long term of the growth, in real terms, of the American economy. He views equity ownership as owning pieces of the underlying businesses.
I think all of us pretty much agree with this general proposition or else there would be no point in investing in risky assets such as equities, at all. We would all have Zvi Bodie all-TIPS portfolios, wouldn't we?
Over a longer period of time...craigr wrote:Couldn't agree more.nisiprius wrote:I do not feel that Warren Buffett is intellectually honest in his public statements; I put him in the "spinmeister" category.
BTW. The past decade he was trounced by Vanguard's Wellington and Welleseley funds. He barely beat Vanguard's short-term Treasury bond fund over this time:
Actually all the difference in the returns shown in the first chart has occurred since the 08/09 crisis. It would be interesting to see how much of the outperformance of the funds w/r/t Berkshire since that time could be attributed to the artificially low interest rates of the QE's. If it's very substantial then one would have to speculate that the lines might re-cross at some point in the future under a different interest rate/economic regime.Beagler wrote:Over a longer period of time...craigr wrote:Couldn't agree more.nisiprius wrote:I do not feel that Warren Buffett is intellectually honest in his public statements; I put him in the "spinmeister" category.
BTW. The past decade he was trounced by Vanguard's Wellington and Welleseley funds. He barely beat Vanguard's short-term Treasury bond fund over this time:
Yeah, it was. The 2010 annual letter (not the one that came out today, because I posted the day before).ilmartello wrote:this was not in the annual letterFafnerMorell wrote:As for examples of propoganda, there's some on every page. Heck, let's look at the very first page:Now, this is nice, upbeat propaganda - a form of communication that is aimed at influencing the attitude of a community toward some cause or position (definition stolen right from Wikipedia). But those exact words it could have been said by Reagan in the 1981, W. Bush right after 9/11, or Obama/Romney/whoever today - they're feel-good fluffery. And heck, maybe our best days are ahead (it's depressing to consider if they're not). And it's better advice than "Sell everything you own and buy guns and live in the woods and shoot at anyone who approaches".Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly
moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than
when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential
is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders
for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and
effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But
look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and
1941, America’s best days lie ahead.
Yes and for me it was a page-turner. As I recall, the author put a journalism career on hold for five years to research and write the book, spending much time with Buffett. From that biography and Buffett's own writings, I am persuaded that Buffett has little interest in day-to-day or even year-to-year stock prices. He has said repeatedly that he and his partner Charlie Munger view themselves as owners or part owners of companies, not just owners of stock, and do not buy a stock they would fear holding if the stock market closed for two years. It is telling that virtually his entire personal fortune consists of his ownership interest in Berkshire and he relishes his role as steward of the fortunes of his family and friends. As he says, he and Charlie eat their own cooking. I would not choose his career even if I could, but I admire his personal success and the financial independence he has helped his family, friends, and many others attain.abuss368 wrote:Has anyone read his book, The Snowball?
Current TIPS yields guarantee you an after-tax negative real return.nisiprius wrote:I do not feel that Warren Buffett is intellectually honest in his public statements; I put him in the "spinmeister" category. So, no, I do not make a point of trying to absorb what he says. A good example would be his recent pronouncement about "bonds" being "among the most dangerous of assets" due to inflation risk. The point here is his complete failure to mention the existence of TIPS. Not even in passing, even to dismiss them.
Since I am sure that he knows that TIPS exists, there can only be one reason for talking about inflation risk and bonds and not mentioning TIPS at all, and that is that while it would be intellectually honest to mention them, it would make a simplistic story complicated. Buffett wants, for whatever reason, to present a simplistic story.
SImilarly, his presentation of the "safety" of stocks is not fairly presented. It, too, is a simplistic story. The "safety" of stocks was the whole premise behind the book Dow 36000, which said that :"A sensible target date for Dow 36000 is early 2005 but it could be reached much earlier." They said that for a specific reason. The reason was that Jeremy Siegel's work demonstrated that stocks were as safe as bonds, and now that the information was diffusing through the investment world, stocks would be bid up to the point where the risk premium was eliminated and were all but mathematically certain to reach Dow 36000 within that time frame. The fact that it did not happen shows that stocks are not as safe as bonds.
I believe Buffett's motive for presenting as he does is not to inform, but to exhort; not to present the clearest and most accurate picture of the truth as he knows it, but to convince the general public to invest in stocks--in the interest, perhaps, of a greater good. Virtuous propaganda, perhaps, but propaganda.
Don't read too much into his great returns. People that are well connected like him have information we don't and it makes it unfair. I wouldn't buy his Berkshire shares just on principle. Eventually though, the game will end for him, and I wouldn't want to be holding those shares when it does.charlesmorgan wrote:Do any bogleheads look forward to Warren's annual letter to shareholders? I really enjoyed reading the compilation of his essays titled "Lesson's for Corporate America" and many of his annual letters were featured in this book.
They are always good for a common-sensical overview of current conditions. I look forward to reading this next week.
Think a bit about your post. Can't the same, in fact less, be said of the dollar?abuss368 wrote:I don't like gold and am of the opinion that Mr. Bogle is correct. Mr. Swensen has also stated as much. The metal has no intrinsic value, no earning power.
The gold you were holding 100 years ago is the same gold you are holding today with no differences.
That being said, I can respect the various opinions of the many different investors on the forum.