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"Let’s put numbers to that claim: If my $114.75 had been invested in a no-fee S&P 500 index fund, and all
dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1. Meanwhile, a $1 million investment by a tax-free institution of that time – say, a pension fund or college endowment – would have grown to about $5.3 billion.
Let me add one additional calculation that I believe will shock you: If that hypothetical institution had paid
only 1% of assets annually to various “helpers,” such as investment managers and consultants, its gain would have been cut in half, to $2.65 billion. That’s what happens over 77 years when the 11.8% annual return actually achieved by the S&P 500 is recalculated at a 10.8% rate.
Those who regularly preach doom because of government budget deficits (as I regularly did myself for many
years) might note that our country’s national debt has increased roughly 400-fold during the last of my 77-year periods. That’s 40,000%! Suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency. To “protect” yourself, you might have eschewed stocks and opted instead to buy 31⁄4 ounces of gold with your $114.75.
And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American business. The magical metal was no match for the American mettle."
Buffett is a great man and the greatest investor ever. He may have lost a bit off his fastball however --- he got trapped with Kraft Heinz and the changing food buying patterns of John Q Public. BRK-B is trading at $202 currently. But the numbers speak for themselves. By the way, the last number on the sheet, the total return of the market with reinvested dividends, is wrong.
Notice that Buffett's letter gave details on cumulative gains over the past 77 years, but glossed over the prior two 77-year periods of American history with only qualitative paeans. He speaks of the American Tailwind, and philosphically this makes excellent sense. And yet, what would have been Mr. Buffett's cumulative results, hand he chosen the prior 77 year period, from 1865 to 1942? Culturally, socially and philosphically, the American Tailwind was still there. But what of its impact on his numbers?
Mr. Buffett's tenure as an investor perfectly coincides with an epochal convergence of technological innovation going mainstream, lifting quality of life, and with it, consumer activity an potential for profit. He has witnessed billions of people shaking off monarchy, dictatorship, tyranny and economic isolation, joining the global market, again improving consumer choice and potential for profit. Can there be a second such epochal improvement? What if instead, this global convergence starts running in reverse?
Mr. Buffett is not immortal. Somebody else will have to take over Berkshire, and later, somebody else yet again. I wonder, when writing in 2096, after the fourth 77-year period of American history, how would look the then-cumulative run of the market.
Personally I think Buffet is way overrated. I know he is popular around this forum, but he came around at a time when a monkey could throw a dart and at a dartboard and then buy and hold that stock and become a millionaire. Sure he has made some good calls, but so has every other major investor.
Buffet hasn't impressed me on any of his recent calls, nor leading up to any of the financial crises we have had over the years. I get his point in this newsletter for the average investor, but I also find it interesting he didn't mention we have $22 trillion in rapidly growing national debt and a deficit that is getting closer to $1 trillion. Add to that interest rates will be rising on the long-end (regardless of what the Fed says now). That is not a recipe for fiscal stability. Maybe Buffet has been forced to eat too much Kraft mac and Heinz ketchup combo to prop up that sinking ship......
Notice that Buffett's letter gave details on cumulative gains over the past 77 years, but glossed over the prior two 77-year periods of American history with only qualitative paeans. He speaks of the American Tailwind, and philosphically this makes excellent sense. And yet, what would have been Mr. Buffett's cumulative results, hand he chosen the prior 77 year period, from 1865 to 1942? Culturally, socially and philosphically, the American Tailwind was still there. But what of its impact on his numbers?
Mr. Buffett's tenure as an investor perfectly coincides with an epochal convergence of technological innovation going mainstream, lifting quality of life, and with it, consumer activity an potential for profit. He has witnessed billions of people shaking off monarchy, dictatorship, tyranny and economic isolation, joining the global market, again improving consumer choice and potential for profit. Can there be a second such epochal improvement? What if instead, this global convergence starts running in reverse?
Mr. Buffett is not immortal. Somebody else will have to take over Berkshire, and later, somebody else yet again. I wonder, when writing in 2096, after the fourth 77-year period of American history, how would look the then-cumulative run of the market.
You can't realistically go back to 1865. The economy was different. Coming into the 1900s, the vast majority of Americans were their own boss, corporate America really didn't exist.
You can't realistically go back to 1865. The economy was different. Coming into the 1900s, the vast majority of Americans were their own boss, corporate America really didn't exist.
Yes, it didn't really exist so much that Teddy Roosevelt et al had to break them up
Personally I think Buffet is way overrated. I know he is popular around this forum, but he came around at a time when a monkey could throw a dart and at a dartboard and then buy and hold that stock and become a millionaire. Sure he has made some good calls, but so has every other major investor.
Buffet hasn't impressed me on any of his recent calls, nor leading up to any of the financial crises we have had over the years. I get his point in this newsletter for the average investor, but I also find it interesting he didn't mention we have $22 trillion in rapidly growing national debt and a deficit that is getting closer to $1 trillion. Add to that interest rates will be rising on the long-end (regardless of what the Fed says now). That is not a recipe for fiscal stability. Maybe Buffet has been forced to eat too much Kraft mac and Heinz ketchup combo to prop up that sinking ship......
I'm not quite as sour on Buffett as you, but I also feel he's a bit overrated. I also worry a lot about the deficit and no one in either party really seems to care. They just want to spend money on different things, but anyone with their eyes open knows a serious reckoning is going to happen across the board.
Add to that interest rates will be rising on the long-end (regardless of what the Fed says now).
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