I always thought that both Jim Rogers and Warren Buffett were horrendous role models for individual investors in the 1990s.
From 1994 onwards, Rogers was always preaching about bubbles here and bubbles there. If investors had listened to him, they would have missed out on the second half of one of the greatest bull markets we will ever see in our lifetimes. I always thought that Rogers was a terrible investor during good economic times because he always wanted a massive crash before investing. Rogers always wanted prices at the absolute rock bottom - when companies and nations were bankrupt – before he would make a move.
Similarly, during the late 1990s, Warren Buffett sat on his Coca-Cola and Gillette investments despite the fact that they were hopelessly overvalued. Retail investors flocked into these shares because Warren Buffett held them. Despite the fact that both were trading at over 60x earnings in 1998, I never heard Buffett say once that investors shouldn't follow him into these stocks. He just always pointed out that these were businesses he could understand. The man talked his book endlessly.
But despite their shortcomings, both are still rich and both turned out to be right about a lot more than they were wrong. I listen to both of them. Neither is infallible and neither is going to be around to tell you when to sell something they have bought. But this week, both Buffett and Rogers are worth listening to.
I vividly remember Buffett talking about valuations being at nosebleed levels in the late 1990s. He also said he wasn’t investing in technology because he didn’t understand it. Lastly, he said the S&P was priced to yield 1% annually when it was near its peak. Those are bearish statements. Imo, Buffett neither talks up nor talks down his book to any significant degree. He’s an even-keeled long-term investor. It’s best to judge him by his actions. He certainly wasn’t adding to his Coca-Cola positions in the late 1990s. He until very recently was sitting on $40B in cash, saying he had no ideas. Lately he’s been deploying large quantities of it.
Jim Rogers, on the other hand, loves to talk his book. He’s been a solid investor over the long haul but is also a trader. As such he’s going to be wrong a lot more often, as all good traders are.
Good points. My only beef with Buffett is that while repeatedly saying the markets were overvalued, he never said “I wouldn’t buy KO at 60x earnings – that’s not value investing”. His default position was always “I invest in what I understand” leaving most individual investors with the impression that his biggest positions were actually stocks he would be buying. I know because individual investors would laugh at me when I told them KO was ridiculously overvalued and they should sell it. They would always respond “but Buffett owns it.” Of course, Buffett would never sell it because his basis was so ridiculously low and his cash on cash dividend was probably 100% by 1998.
And I always loved Rogers on CNBC Squawk Box. Every Friday, Rogers would co-host and Mark Haines would just about pop an artery when Rogers told him that the US markets were overvalued even though the S&P was going up 20% a year. I thought some Friday mornings Haines would just take that bow-tie and choke Rogers with it, like some bad vaudeville show.
That’s true about Buffett. I think his investing advice to laymen leaves a lot to be desired. He’s talked about buying index funds for a long time, but only recently has he mentioned dollar cost averaging into them.
Everyone “knows” him as advocating buy and hold, but he’s sold plenty of times. His strategy and tactics, imo, are fantastic. He grasps the big picture and knows how to value (it’s more than just numbers). But what he does requires a lot of patience and far more skill. His folksy attitude I think convinces people he’s less intelligent than he is, and he’s one of the sharpest investment guys who’s ever lived. He must be secretly laughing now. He needed precisely this setup to deploy his cash.
From my experience, people don’t handle volatility nearly as well as they think they can. They love the risk when things are most risky and hate it when risk has gone down. I think the average investor would be better off with a much larger allocation to fixed income than most advisors suggest. Once again people are freaking out and going to cash where they’ll likely stay for a long time, meanwhile there are huge opportunities opening up. The high yields are back trading over 14%. I’m hoping they hit 20%. For some reason people forgot they were risky. They still are, but it’s a lot less risker buying them when they’re yielding 15% as opposed to half of that.
You were dead on about KO being overvalued in the 1990s. To me that stock, far more than Cisco or Microsoft or Sun, epitomized the times. Why oh why should a syrup producer (Buffett’s description) sell at 60X? Because stupidity made it so.
This time it was globalization. Everyone was raving to me about emerging markets two years ago. Same about real estate. I’d say it’ll be awhile before the next bubble, but I’d probably be wrong.
Everyone is missing the point.
Buffet has been an investor over 40 or possibly 50 years. He was not on the radar screen in the 70’s/80’s as he has been in the mid 90’s to present.
What Buffet does NOBODY does. Period. He never buys tech or commodity stocks….he may buy related commodity stocks….but never tech as he says he cannot understand them.
Buffet is a very shrewd and smart man. Most people do not know that he left Benjamin Graham thinking in the 60’s when he realized Graham would buy low P/e stocks and sell at 50% appreciation ( Graham learnt that trick from GAnn or Pugh) and Buffet found out a lot of cheap stocks went NOWHERE and some went up 500% or more…but Graham had sold.
Munger may have influenced him to change his mind..probably not…but I conclude that 2 things define Buffet….Moat and Competitive advantage. That’s it. NOt p/E or any other stuff you learn in MBA or other BS high falutent school…Why is Wall Street and America a mess…too Many educated people running it and not enough “roll them sleeves and be loyal” people running companies.
BAck to Buffet….the man basically buys at troughs and waits….as he said himself a long time ago…” If I was in Peru on Malawi….( joking…but you get my point) I could never have attained any succes because the SYSTEM DID NOT ALLOW ME SO…..
SYSTEM. So all he does is buy in troughs and wait. He knows the US gov’t or the FED reserve are not going to relinquish their control on the money or power. If he ever thinks so….he will sell.
Buffett is a terrible trader…Zanger/VT/Soros/Paulson/Tradergod/Robeguy/Shimon are much better traders……but Buffet does not do this.
Funny….he grew up when traders were the big deal…Gann/Pugh and possibly a multitude more…there were no BUY and HOLd investors…then when he grew up….1940’s…..remember….Wall Street had crashed and was in a sideways channel….
If I ever get a chance to talk to Buffet…I will ask him…how come he did not emulate all these GURUS at the time???
NOnetheless…I trade and buy and hold….mostly trade. You can make great money trading and all you need is the 50% rule. That’s it.
Daily chart and 50% rule…..works in every market. Funny how the MBA, hedge funds et al lose billions upon billions…..trying to impress their clients and they no shit…………
If you ever impart your money to someone…do NOT DO IT BECAUSE THEY HAVE MBA’S, CTA’S, CPA’S OR CFA’S OR ANY degree…..
Ask they if they have ever traded a futures contract…and if they haven’t RUN FOR THE HILLS WITH YOUR MONEY.
Finally….doom and gloom are all over. But, the US is going to lead all…
As a trader…I’m NOT going to tell all…there are too many fund managers stealing our ideas as they know shit….but command and manage millions or billions because they went to Harvard or Stanford…..etc.
All I know it in the next 5 years there are Billions to be made. I know where the stock market ( ES, YM, TF, NQ) is going and where commodities are going.
Yes, I do confirm my ideas with some great real sources…not on TV…real traders….and all I can say is Boom.
If any Sovereign Fund, Pension Fund, Hedge fund, anywhere in the world wants to save their bacon and money….send me an email.
Send it to [email protected]. I don’t want your money….TRUST is most important in dealings….
I will reply to you with what I think will happen…and tell you how you can profit.
Let me leave you with these last few thoughts on Gobalization and MOney…You figure it out.
Until 1989/1990..we had the Cold war…US vs Russia and also China…but it was not on the investing publics radar…..hmm.
So Berlin Wall comes down in 1989 and Gorbachev sells Russia out for 1 billion US and Vodka for life…..joking….and what happens.
FREE TRADE…NAFTA and Mexico was suppose to benefit…but then we get China…..because now its Globalization…China and India….INDIA…MUmbai..
I thought China was an enemy…Communist…Why would the US government help trade and boost its economy to the detriment of its own people…same thing with INdia.
When you find the answer to that question…..however in the mean time you are being hosed …big time.
America…the land of the free. Best nation in the world…..why are the people so stupid.
Its not mista B on the last post …but Moses
Oct 6 post is mine…MOses…
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