warren buffett

Area Granddad Shows Up On CNBC, Paraphrases Recent Letter He Wrote

As usual, we're gonna dwell on grandpa's amorphous market aphorisms for another couple of days.

Oh, for fuck’s sake.

As usual, we’re gonna dwell on grandpa’s amorphous market aphorisms for another couple of days.

Over the weekend, journalists, money managers, retail investors, and everyone in between spent Saturday parsing Warren Buffett’s thoughts on his massive naked put-writing operation and, more to the point, his nebulous musings on markets that, while ostensibly valuable for investors, could just as easily apply to crossing the street as they do to markets.

 

And look, that’s not an attempt to disparage Buffett. Rather, it’s just to say that at this point, who fucking cares what he says? Especially when he’s not saying anything that everyone doesn’t already know.

For instance, the much ballyhooed “bet” he made about an S&P index fund outperforming a group of hedge funds over 10 years didn’t represent some kind of groundbreaking theory he conjured up and indeed, he would tell you as much. The whole point of that bet was (basically) that common sense and history dictates that buying the S&P via a low cost vehicle is almost guaranteed to outperform active managers over the long-term. There is nothing new about that contention and again, that’s the whole point. Buffett was just trying to reiterate something anyone who has read “Investing For Dummies” already knows.

Additionally, he said this about bonds:

I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates. It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.

I mean, that’s intuitive at this juncture. Just look at where yields are. Now I guess, if you think about that as some kind of rewrite to what the textbooks will tell you, it’s some semblance of notable, but it’s hardly “groundbreaking”.

Still, given the vociferous debate about yields and inflation right now, it is timely and so here’s Buffett talking to Becky Quick for anyone who needs to actually watch him say it as opposed to simply reading it in the annual letter:

 

Also note how he says Berkshire has been a net buyer of stocks this year. So that’s interesting, but when pressed for a rationale, he just says the same thing he always says, which is basically this: “when grandpa sees an opportunity to buy a good company at a reasonable price, grandpa is a buyer.”

He’s not reinventing wheels here.

For all of the people out there who fawn over Warren, just know that the whole “awww shucks” demeanor (to the extent it’s genuine and that’s debatable) rests on the premise that what he’s telling you isn’t at all groundbreaking.

Meanwhile, Elon Musk is sending cars he built to the actual moon on rockets he also built and Jeff Bezos is taking over the planet.

 

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