As always its the missing data that gets ya! I submit the key part of this surmise an excerpt from that piece;
"Montier concludes: "Here the fallacy of low rates being good for equities is clearly exposed. Your best chance of high real returns is buying when interest rates are high, not low. Indeed, buying when rates are low has on average resulted in a negative real return over the next decade!"
Let me repeat that: for the ten years following low interest rate environments such as we are in today, stock market returns are actually negative. Not surprisingly, the conclusion is that the best time to invest is when rates are high and the worst time is when rates are low. This is just one more reason to believe that we are in a long term secular bear market. "
Now accepting that the above statements are true as it relates to Mr Buffetts portfolio; you must ask yourself who is Mr Buffett and what is he trying to say?
Mr Buffett; is the premier investor perhaps in the world.
Mr Buffett invests as a manager or an arbitrageur in narrow segments of the economy which apply to the greatest number of users. In other words Mr Buffett is a miser, who hates periods of disruption.
Further Mr Buffett is disconnected from most all innovation by his preponderance to own scale. Mr Buffett does not buy innovation, nor does he take positions where fast change might in some way apply to his business interests.
He loves to count the spread and to accumulate pieces of transactions deferred. Hence his holdings in the insurance business where a premium is collected as a function of a deferred output that may or may not happen.
Thereby providing him with intermediacy for the purpose of collecting interest.
As someone who grew up in Omaha, I have many memories of the legend and how this man has succeeded.
This all leads to my surmise as follows;
1. Mr Buffett is dissatisfied at this time with his ability to find the kind of opportunities he generally finds, without the same degree of certainty he is used to.
2. Mr Buffett does not look at productivity or technology accept as antecedent gross effects, as they might relate to some parts of his interests. Accepting this as true; and the fact that he is endorsing the above copied premises, he is saying his Business'areas are now faced with overvaluation concerns.
3. Mr Buffetts dollar holdings are so huge, that he has to BUY foreign currencies as a hedge vis a vis his holdings.
4. Mr Buffetts shareholders are not expecting Mr Buffett to do less than his record or adapt to a world outside of his expertise, therefore, all outsiders whose reading of Mr Buffetts surmise, would be wrong to apply his context across areas which dont even apply to his areas of action.
5. Mr Buffett may in fact be saying, that within the context of his own business model, the acceptable risk as it relates to HIS business model has risen to a level where some changes may need to be made.
6. Mr Buffetts Company, is priced based on Scarcity of supply. Mr Buffett knows that scarcity is a fundamental part of his value. Mr Buffett is therefore ruminating on the fact that within his own complex of business, the crowd is getting larger and his share of the pool smaller....and competition for more square pegs to fit his square holes is getting tougher all the time.
7. Attempts by the outside world to frame Mr Buffetts business and therefore his opinions in ways not consistent to his methods, are widely applying his wisdom, as square pegs to round holes.......and that is the risk the rest of us need to pay attention to.
Context is a lovely thing. |
