March 29, 2019
Ever hear the phrase, “It’s a stock picker’s market” or “Now it’s time for active management to outperform”? These comments may be worth listening to but how we react to them is even more important. In this article , Ben Carlson gives credit to where it is due with some insights into how ‘stock-pickers’ are truly fighting the odds with little success. (You can also search - Ben Carlson how often is it a stock picker’s market – and end up at this post dated 3-24-2019.)
Warren Buffett penned his 2018 annual shareholders letter on Feb 23, 2019 and can also simply go to the company’s website (www.berkshirehathaway.com) and click on the link for his letters. There are a few nuggets worth sharing. When discussing his interest to make an “elephant-sized acquisition” of a company in the future, he adds, “My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities. Our thinking, rather, is focused on calculating whether a portion of an attractive business is worth more than its market price.” There he is saying it all over again – he doesn’t try to time the market.
- Buffett finishes his letter with reference to the start of his investing career in 1942 when he was 11 years-old. He said, “I had become a capitalist, and it felt good.” He talks further about the severe difficulties the US has faced since the start in 1788 (US Constitution ratification) with a Civil War that killed 4% of all American males and a punishing period of massive unemployment in the Great Depression. Since 1942, there have been 7 Republican presidents, 7 Democratic presidents, long periods of inflation, a 21% prime rate, costly wars, a collapse in home values, a paralyzing financial panic and many scary headlines. These are all now history. Yet, since Buffett’s original investment as a child in 1942, the S&P 500 Index has grown by an 11.8% annualized return. The Federal Reserve estimates US wealth at $108 trillion – a number unheard of back in 1788. Buffett and Munger talk of The American Tailwind leading the global economies into the future, and how they feel lucky – gloriously lucky – to be living in such a period.