There are some interesting and ironic parts to this:
Although Buffett was right about inflation short term, he was wrong long term. Just shows how hard it is to predict macro trends.
He argues against himself really: "I am virtually certain that above average performance cannot be maintained with large sums of ... money". This is tough: on one hand this means that betting on jockey in any large fund is a losing proposition. On another hand, he did outperform with large sums of money. And not he alone.
He did not try to sell himself as a manager for WPO pension plan. I have to look up Snowball, but probably he was already disenchanted with running a "mutual fund" type money management by that time.
"unusual records ... have been achieved by those who have worked relatively neglected fields in which competition was light" - yet another place where Buffett's words contradict his actions. He actually made tons of money in places that cannot be called "neglected". WPO, AXP, KO, GenRe, BNSF, WFC - none of them were unknown or neglected when he bought the stocks. Although perhaps he means "trading" vs. "ownership investing" he talks about later.
He advises to buy stocks in good businesses at about 12.5% earnings yield (1.5M earnings for 12M investment). Can I go back to 1975 to get these opportunities? :) OTOH, 9% bond yields at that time was pretty attractive too - even though bond prices crashed as yields grew even higher - but if one held 9% 1975 30-year bonds to maturity they would have gotten pretty solid return. ( Berkshire 2010 letter: 9.4% S&P return in 1965-2010, so 9% in bonds is comparable if investor did not dump them when yields went to teens). But then Buffett expected higher inflation for longer.
"If purchases could not be made on such a bargain basis, we simply would wait until they could" - he does realize that waiting costs the return, yes? ;) Clearly he changed his thinking later, since he was almost never in cash. |
