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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Brendan O'Connor who wrote (2520)	6/13/2000 1:14:00 PM
From: Freedom Fighter	Respond to of 4690

Thanks Brendan, I think you brought up all the issues I toss around in my own head. The equation changes a bit inside IRAs, Keoghs, etc. (tax deferred) Especially with the much lower transaction costs that exist these days at online brokers. I'm not sure what to do. I'm being more aggressive in my retirement accounts as far as trading goes. It's working so far, but that doesn't mean I'm doing the right thing. It really depends on the timing of Mr. Market. Wayne

To: Brendan O'Connor who wrote (2520)	6/13/2000 1:27:00 PM
From: cfimx	Read Replies (1) \| Respond to of 4690

actually, tweedy takes the widely diversified approach, ala Mutual Series.

To: Brendan O'Connor who wrote (2520)	6/14/2000 12:32:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 4690

Buffett I (aka "Graham"): Buy things trading at a large discount to intrinsic value. I don't care whether the intrinsic value is growing or not. Buffett II (aka "Buffett", though he would say this roots in Graham too): Buy a growing intrinsic value at a discount. My first point is to note that doing either takes a lot of skill and either is far superior to buying the latest hot idea. Second, it should be obvious that Buffett II is superior if the odds (i.e. the margin of safety) is the same, and if you are taxable. If you are investing in an IRA, you've got a big advantage which you should use. Third, in my experience, the odds are rarely even. If I told you I could buy a "Graham" idea for a 50% discount to intrinsic value or a "Buffett" idea for a 25% discount, it gets tougher, doesn't it. I kind of come out where Buffett does. Why choose one or the other? You're looking to maximize after-tax return over time. Know whether you're looking at the a list or the b list, and set your buy price accordingly. For example, I'd buy Berkshire at a 25% margin of safety, but I look for 50% on a cigar butt. I generally sell a "Buffett" stock reluctantly, while I sell a "Graham" cigar butt on the first 50% pop. I find both, when done right, do quite well. My best returns have been in the traditional Graham ideas. Maybe because so few people are competing with me in that game, allowing $20 bills to lie on the sidewalk for me to find. The Buffett ideas are usually, but not always, being watched by many analysts more knowledgable than I, and I rarely find what I would call a "no-brainer" in that realm. As I said, I would not distinguish between the two any more than I just did. What I get out of reading virtually all of Graham's texts is just what Buffett got out of his relationship with Ben Graham. BUY THINGS FOR LESS THAN THEY'RE WORTH. There are a lot of different "things" to invest in, and there is a lot of room to apply Graham's central ideas to things Graham never would have looked at, as Buffett has. Buffett is playing his game with money taxable at nearly 40%, whether the gain is short or long-term. I'm playing my game with 3/4 of my account in tax-deferred instruments. (IRA, 401-K) That makes a BIG difference. If you looked at my taxable account, you'd see BRK, ABK, CR, CMH, GIS, RAL... If you looked at my IRA, you'd see the net-nets there. I do very little trading in my taxable account, and I take profits quickly in my IRA. If Berkshire's gains were tax-deferred for 35 years, I think Buffett's strategy might be different. Something to think about?