Buffett's psychology

Buffett is a genius because of the times he lives in. It just so happens that his ... buy low, hold forever .. just happens to coincide with the fact we've had a bull market without war, etc.
 
short term trading is one of the silliest activities.

shooting for zero sum while the positive sum is there for you to simply pick it up.

poker is zero sum, but there is no long term poker index that drifts upwards.
 
I dunno Eves, we had a few wars in there, and one of the nastiest drops in stock market history in 2008, and he seems to have done pretty well. Although, I think I subscribe to the theory that if you take any X number of investors, their performance will be all over the board, some high, some low, and he just happens to be on he high end. Maybe a smart investor, but some luck was probably on his side as well. But I really don't know ha.
 
Saltynuts said:
I dunno Eves, we had a few wars in there, and one of the nastiest drops in stock market history in 2008, and he seems to have done pretty well. Although, I think I subscribe to the theory that if you take any X number of investors, their performance will be all over the board, some high, some low, and he just happens to be on he high end. Maybe a smart investor, but some luck was probably on his side as well. But I really don't know ha.
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I hear you, but what I'm saying is that different strategies would work in different environments.

For example ... how well would Buffett's strategy work here ...

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That's a market that rewards people who can trade both sides of the market, not someone who does buy and hold. People in Japan are still waiting for the Nikkei to break new highs, and they'll probably be waiting a long time.

If you invested in Britain's fortunes at the height of their power you'd still be waiting for them to regain the prominence they once had.

At the top of a bull market the people who have been rewarded are the ones who have the most blind faith. And I'm not saying Buffett has blind faith, necessarily, but he has been quoted as saying many times that he sees nothing but upside in U.S. equities.

If we were at the bottom of a 20 year Depression Buffett wouldn't look nearly so smart.

If I made any assumption about the market and traded it no matter what, and I just happened to be at the right place at the right time, I'd look pretty smart too. If I went short, always, without question, and the world just happened to suffer a series of wars, droughts, pandemics, and a comet strike .. I'd look pretty smart too. It doesn't mean my strategy is smart, it just means my strategy was the right thing at the right time.

Edit .. TL;DR .. Buffett is an eternal optimist, and the market has been good to optimists during his lifetime. But if the world changes, maybe if there was a world war that saw the use of nuclear weapons (for example) .. then that time would have different geniuses, maybe this guy would be the smartest among us.

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I hear ya Eves! Wow, did realize the Nikkie had done so poorly for so darned long. After 20 years still about half of its prior high? Amazing. Nice Mad Max reference!
 
eves_banished_children said:
Did you back test that assumption ?
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yes I did.

also saw your other post about Japan.

- there are no guarantees in investing;
- have to go with the world leader. This is similar in arguing that the USD will not be printed into collapse while all the other fiats will.
- personal portfolio allocation should also depend on relative value. At the Japan peak the stock earning yield was probably lower than many other assets.

So, hopefully by filtering with the 'leading market in leading currency', with relative value, and a a little bit of luck, one can avoid buying Japan at its peak.
 
It's not just the market trend that has favored long-term buy and holders, the tax structure is also a big factor. If you buy and don't sell, you can accumulate and compound wealth with either no taxes (Roth IRA or simply buy and hold a stock that doesn't pay dividends) or much lower taxes than ordinary income (qualified dividends taxed at 15% or 20%) and then sell after retirement while in a lower tax bracket. The active traders pay full taxes as ordinary income. There are no breaks for them. Honestly, if Warren is really serious about reducing wealth inequality, he'd stop talking about higher taxes on income and instead go after the tax breaks for long-term capital gains. He'd advocate treating all capital gains as ordinary income regardless of holding period. I suspect he only promotes higher taxes on income so that he can avoid paying higher taxes on long-term capital gains.
 
ET180 said:
It's not just the market trend that has favored long-term buy and holders, the tax structure is also a big factor. If you buy and don't sell, you can accumulate and compound wealth with either no taxes (Roth IRA or simply buy and hold a stock that doesn't pay dividends) or much lower taxes than ordinary income (qualified dividends taxed at 15% or 20%) and then sell after retirement while in a lower tax bracket. The active traders pay full taxes as ordinary income. There are no breaks for them. Honestly, if Warren is really serious about reducing wealth inequality, he'd stop talking about higher taxes on income and instead go after the tax breaks for long-term capital gains. He'd advocate treating all capital gains as ordinary income regardless of holding period. I suspect he only promotes higher taxes on income so that he can avoid paying higher taxes on long-term capital gains.
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This is very true. Also no employment taxes paid.
 
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