Gone into hiding, just like all the smart men who were calling for an imminent Dollar collapse.
Global Macro Trading Journal
- Thread starter Daal
- Start date
Buffett's annual letter this year is one of his best, and I've read most all of them.
http://www.berkshirehathaway.com/letters/2011ltr.pdf
"We should wish for IBM's stock to languish throughout the (next) 5 years."
Incredibly powerful concept here that flies in the face of everything the human brain is programmed for. If you own a real, profitable company that pays dividends (which you reinvest) and/or buys back shares, you should wake up every day hoping the stock price goes down. It allows your divvies to buy more shares and allows the company to pick up more shares on the cheap.
Now this obviously doesn't apply to every stock - many of which are dependent for survival on a rising share price to be able to raise capital and pay employees (NFLX is a fine example), but it certainly applies to the kind of firms Berkshire buys and companies like WMT, MSFT, BP, XOM, COP and half a dozen others I own. It's nice to see them rise in price along with the rest of the market since this summer (after all it proves my charm, intelligence, and overall good looks). The reality though, is my net worth in 10-15 years will be far higher if the stocks do absolutely nothing during that time. Powerful stuff.
http://www.berkshirehathaway.com/letters/2011ltr.pdf
"We should wish for IBM's stock to languish throughout the (next) 5 years."
Incredibly powerful concept here that flies in the face of everything the human brain is programmed for. If you own a real, profitable company that pays dividends (which you reinvest) and/or buys back shares, you should wake up every day hoping the stock price goes down. It allows your divvies to buy more shares and allows the company to pick up more shares on the cheap.
Now this obviously doesn't apply to every stock - many of which are dependent for survival on a rising share price to be able to raise capital and pay employees (NFLX is a fine example), but it certainly applies to the kind of firms Berkshire buys and companies like WMT, MSFT, BP, XOM, COP and half a dozen others I own. It's nice to see them rise in price along with the rest of the market since this summer (after all it proves my charm, intelligence, and overall good looks). The reality though, is my net worth in 10-15 years will be far higher if the stocks do absolutely nothing during that time. Powerful stuff.
Historically, half of equities' total returns came from dividends. Take your avg. blue chip dividend rate, multiply it by a factor of two and you have a pretty good estimate for your total return over the next 10-15 years, before inflation and taxes.
This fails to take into account price, which, uh, is somewhat important. Microsoft was a profit machine in 2000, but it sold at 50X earnings; it was a profit machine in 2011, but sold at 10X earnings. Returns from 2011 on are essentially mathematically guaranteed to be far greater from 2011-2022 than they were from 2000-2011.
You're analysis doesn't factor in buybacks either. I would say a doubling of dividend rates for companies like MSFT, WMT, COP, JNJ sets a FLOOR on anual returns over the next decade. It's nearly a mathematical impossibility that these companies don't return compounded double digit rates over the next 10-15 years.
You're analysis doesn't factor in buybacks either. I would say a doubling of dividend rates for companies like MSFT, WMT, COP, JNJ sets a FLOOR on anual returns over the next decade. It's nearly a mathematical impossibility that these companies don't return compounded double digit rates over the next 10-15 years.
Buffett's buy of CTB. Pretty fair investment ...
http://brontecapital.blogspot.com/2012/02/when-you-think-you-made-great-purchase.html
http://brontecapital.blogspot.com/2012/02/when-you-think-you-made-great-purchase.html
Real, inflation adjusted price returns on large cap US equities were just a tad over 1% over the last 100+ years. So you can pretty much forget about price as a real return driver unless we're about to embark on a historical multiple expansion a la 1950 or 1982. Which we're probably not (yet).
