<<Berkshire's hey day was in the 70s when a calm, mathematically inclined 'margin of safety" man could find amazing bargains by looking at the fundamentals and ignoring the horrible news about the highest interest rates since the civil war and the oil embargo, etc.
But now the news is that of a "new era" of long term growth with minimal inflation.>>
I promised never to respond to anything jhg wrote again, and something tells me he just posted this to tempt me. And he did. While I could go on and on about this post, I will stick to this one part.
jhg, I would ask you what you would have been thinking if you were investing in the 70s. Would you have invested based on what everybody else believed, as you do today? That was an extreme, and everybody believed it would continue indefinitely. Inflation is going to be 15% and accelerating - sell everything and buy gold at $700 an ounce. (and if you read your history that is precisely what those who extrapolate from recent history were doing in the late 70s - and they got murdered.) That is WHY Buffett was able to buy some great companies at half what they're worth.
Now we are at another extreme based on historical data, this time on the opposite end, and you have bought into it 150%. This is going to continue as far as the eye can see, right? Mr. Buffett is holding $15 billion in cash. You think you're a better investor this old has-been who has created $30 billion of wealth over his lifetime by compounding at 20% a year? I would just ask you to think about that for a few days. This is not a flame - I could have made it one if I wanted to - believe me it would not have been hard.
JJC |
