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> From: Jose Pascual <jpascual@xxxxxxxxxxx>
> Buffet is one of those sophisticated investor. He would hedge his stock
> portfolio with any kind of derivatives that exist in this world be it
> metals, interest rates, etc...
>
> BUT, will those intermarket related products work when global recession is
> coming if ever? If it won't work, then risk is doubled???
>
>
> At 10:21 PM 9/2/98 -0500, Dark Hacker wrote:
> >You wrote:
> >> .....and the last one who tried it was Warren Buffet with his
> >> silver <g>
> >
> >Speaking of Mister "Hold on to everything forever", Warren Buffet
> >is getting beaten up right now on these market nose dives. Owns a
> >lot of Coca Cola I hear. Remember some time ago he proclaimed the
> >market as overvalued? He probably figured this would happen and yet
> >he *still* hung on. Amazing!
> >
> >- Hackster
First, I'd cry bunk at the notion that "He would hedge his stock
portfolio with any kind of derivatives that exist in this world be
it metals, interest rates, etc..."
I seriously doubt that he would chase down most kinds of derivitives
to hedge. If he doesn't understand them inside and out, he simply
would not do it, period.
Second, if it were a true hedge, the risk factor would not change, so
it certainly would not double.
Yes Warren has lost billions since the peak of
Berkshire stock price on June 22 (on paper; it isn't a loss till you
sell, right). Does that mean he's stupid to hold on to everything
regardless of short-term price action? I don't think so. He just
doesn't view investing as trading. He has a LOOONG term view of his
holdings. He waited for nearly 18 years to buy silver from when he
seriously started looking at it. He doesn't view equities from a
technical standpoint. He's purely a fundamental type guy.
That said, I'd like to point out my view on Warren and Berkshire:
Berkshire's performance over the last 3 months has been rather poor
based on stock price. Based on net revenues and net income, they're as
good as ever. Keep in mind that Berkshire, over the last 33 years
(not counting 1998) has beat the S&P by an average of 11.9%. That is
after-tax Berkshire compared to pre-tax S&P. In those 33 years,
Berkshire has NEVER had a negative return, S&P has had 7 negative
return years. Berkshire has only underperformed the S&P 3 years,
the last time was in 1980. The following table should put things in
perspective. It comes from Berkshire's 1997 annual report. This
table is Annual Percentage Change. In Berkshire's column, it's APC in
per-share book value. S&P's APC is Index including dividends. Third
column is Berkshire minus S&P.
BRK S&P BRK-S&P
1965 23.8 10.0 13.8
1966 20.3 -11.7 32.0
1967 11.0 30.9 -19.9
1968 19.0 11.0 8.0
1969 16.2 -8.4 24.6
1970 12.0 3.9 8.1
1971 16.4 14.6 1.8
1972 21.7 18.9 2.8
1973 4.7 -14.8 19.5
1974 5.5 -26.4 31.9
1975 21.9 37.2 -15.3
1976 59.3 23.6 35.7
1977 31.9 -7.4 39.3
1978 24.0 6.4 17.6
1979 35.7 18.2 17.5
1980 19.3 32.3 -13.0
1981 31.4 -5.0 36.4
1982 40.0 21.4 18.6
1983 32.3 22.4 9.9
1984 13.6 6.1 7.5
1985 48.2 31.6 16.6
1986 26.1 18.6 7.5
1987 19.5 5.1 14.4
1988 20.1 16.6 3.5
1989 44.4 31.7 12.7
1990 7.4 -3.1 10.5
1991 39.6 30.5 9.1
1992 20.3 7.6 12.7
1993 14.3 10.1 4.2
1994 13.9 1.3 12.6
1995 43.1 37.6 5.5
1996 31.8 23.0 8.8
1997 34.1 33.4 0.7
That is a total of 395.6% whipping Berkshire put over the S&P, and
remember the tax consequences only magnify these numbers.
Show me a mutual fund or any other stock that can put these numbers up
over a 33-year period and I'll put everything I've got liquid into
them.
*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*
"It's hard to make predictions, especially about the future."-Yogi Berra, Visionary, 19??
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"640 K ought to be enough for anybody."-Bill Gates, Microsoft Chairman, 1981
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market for itself"- Business Week, 1958
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ywood box every night."- 20th Century Fox's Daryl F. Zanuck, 1946
"Don't sweat petty things. Don't pet sweatty things."-Anonymous
Shawn Devlin
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