Re: [obrolan-bandar] Is Buffett Insane?

[Elaine Sui]

*He's insanely wealthy.

Elaine**
*
On Sat, Dec 6, 2008 at 12:30 PM, calvin lie <[EMAIL PROTECTED]> wrote:

>   Is Buffett Insane?
>
> By Richard Gibbons
> November 28, 2008
>
> In the midst of economic chaos, Warren Buffett recently made a bold
> prediction. He said that now is the time to buy American stocks.
> Of course, this call seems utterly insane. Banks are failing, the credit
> markets are deadlocked, unemployment is skyrocketing, and there's likely to
> be terrible news for months.
> On the other hand, this is Warren Buffett, and he's made these sorts of
> predictions before.
> *1974: Stagflation*
> The years 1973 and 1974 were two very bad ones for the market. OPEC had
> started flexing its muscles, causing oil to quadruple. This resulted in a
> long recession, with inflation spiking to 12.3% in 1974, while real GDP
> growth fell by 0.5%. America experienced stagflation -- the ugly combination
> of a recession and high inflation rates -- and people were terrified. The
> situation was even worse in the United Kingdom, where the government was
> bailing out banks after real estate crashed. Over those two years, the S&P
> 500 plunged by 42%.
> It was then, on Nov. 1, 1974, at the height of the pessimism, that Buffett
> made his first well-publicized bullish market call. He noted that he was
> well aware that the world was in a mess, but that stocks were simply too
> cheap. "If you're only worried about corporate profits, panic or depression,
> these things don't bother me at these prices."
> To be totally clear, Buffett made one of the most direct predictions of his
> entire career: "Now is the time to invest and get rich." Buffett himself was
> buying shares of *The Washington Post* (NYSE: 
> WPO
> ) and advertising agency *Interpublic* (NYSE: 
> IPG
> ).
> It worked out pretty well for him. The market jumped 32% in 1975, and
> another 19% the next year. Even today, the Dow Jones Industrial Average's
> 38% gain in 1975 stands up as its biggest increase since 1955.
> *1979: An oil crisis*
> That excellent performance was followed by two poor years. Once again, we
> were experiencing double-digit inflation and falling GDP growth. Again, we
> were going through an oil crisis, this one coming in the wake of the Iranian
> Revolution. As a result, when Buffett made his next call on Aug. 6, 1979,
> the Dow Jones Average was actually trading lower than at it was at the end
> of 1975.
> This time, Buffett noted that stocks were far more attractive than bonds.
> He believed that pension managers, who were piling into bonds yielding 9.5%,
> were investing using the rearview mirror. They were avoiding the equities
> that had recently lost them money. But Buffett recognized that the
> underlying businesses were actually performing well. A combination of
> falling stock prices and improving business fundamentals made stocks an
> attractive investment.
> Buffett figured that stocks were probably offering long-term returns of 13%
> or better. He bought oil producer *Hess* (NYSE: 
> HES
> ), GEICO, and General Foods, which later became part of *Kraft* (NYSE: 
> KFT
> ).
> This time, Buffett's timing wasn't perfect -- the S&P 500 fell a bit more
> over the next few months. But his long-term prediction was spot-on. During
> the 1980s, the S&P 500 rose 13% annually before dividends.
> *1999: The Internet bubble*
> In November 1999, during the height of the Internet bubble, Buffett made
> his only bearish call. At the time, the market was in a speculative fervor,
> with Internet stocks showing huge price increases seemingly every day. In
> the five years between 1995 and 1999, the S&P 500 tripled, with compound
> annual returns of 26%. Many considered Buffett a relic for refusing to buy
> into the technology boom.
> Buffett, however, noted that, because of a combination of cheap initial
> valuations and falling interest rates, stocks had achieved unprecedented
> annual returns of 19% over a 17-year period. These results made investors
> unreasonably optimistic. New investors were expecting 10-year annual returns
> of 22.6%, while even experienced investors predicted 12.9%. But the huge
> boom was only supported by modest GDP growth, and therefore wasn't
> sustainable. So, Buffett expected about 4% real returns.
> He continued to hold *Coca-Cola* (NYSE: 
> KO
> ), *Wells Fargo* (NYSE: 
> WFC
> ), and *M&T Bank* (NYSE: 
> MTB
> ), though he noted in the 2004 annual report that he should have sold some
> of *Berkshire Hathaway*'s overvalued holdings.
> Buffett's bearish prediction proved optimist

[obrolan-bandar] Is Buffett Insane?

[calvin lie]

Is Buffett Insane?
By Richard Gibbons 
November 28, 2008






 
In the midst of economic chaos, Warren Buffett recently made a bold prediction. 
He said that now is the time to buy American stocks.
Of course, this call seems utterly insane. Banks are failing, the credit 
markets are deadlocked, unemployment is skyrocketing, and there's likely to be 
terrible news for months.
On the other hand, this is Warren Buffett, and he's made these sorts of 
predictions before.
1974: Stagflation 
The years 1973 and 1974 were two very bad ones for the market. OPEC had started 
flexing its muscles, causing oil to quadruple. This resulted in a long 
recession, with inflation spiking to 12.3% in 1974, while real GDP growth fell 
by 0.5%. America experienced stagflation -- the ugly combination of a recession 
and high inflation rates -- and people were terrified. The situation was even 
worse in the United Kingdom, where the government was bailing out banks after 
real estate crashed. Over those two years, the S&P 500 plunged by 42%.
It was then, on Nov. 1, 1974, at the height of the pessimism, that Buffett made 
his first well-publicized bullish market call. He noted that he was well aware 
that the world was in a mess, but that stocks were simply too cheap. "If you're 
only worried about corporate profits, panic or depression, these things don't 
bother me at these prices."
To be totally clear, Buffett made one of the most direct predictions of his 
entire career: "Now is the time to invest and get rich." Buffett himself was 
buying shares of The Washington Post (NYSE: WPO) and advertising agency 
Interpublic (NYSE: IPG).
It worked out pretty well for him. The market jumped 32% in 1975, and another 
19% the next year. Even today, the Dow Jones Industrial Average's 38% gain in 
1975 stands up as its biggest increase since 1955.
1979: An oil crisis 
That excellent performance was followed by two poor years. Once again, we were 
experiencing double-digit inflation and falling GDP growth. Again, we were 
going through an oil crisis, this one coming in the wake of the Iranian 
Revolution. As a result, when Buffett made his next call on Aug. 6, 1979, the 
Dow Jones Average was actually trading lower than at it was at the end of 1975.
This time, Buffett noted that stocks were far more attractive than bonds. He 
believed that pension managers, who were piling into bonds yielding 9.5%, were 
investing using the rearview mirror. They were avoiding the equities that had 
recently lost them money. But Buffett recognized that the underlying businesses 
were actually performing well. A combination of falling stock prices and 
improving business fundamentals made stocks an attractive investment.
Buffett figured that stocks were probably offering long-term returns of 13% or 
better. He bought oil producer Hess (NYSE: HES), GEICO, and General Foods, 
which later became part of Kraft (NYSE: KFT).
This time, Buffett's timing wasn't perfect -- the S&P 500 fell a bit more over 
the next few months. But his long-term prediction was spot-on. During the 
1980s, the S&P 500 rose 13% annually before dividends.
1999: The Internet bubble 
In November 1999, during the height of the Internet bubble, Buffett made his 
only bearish call. At the time, the market was in a speculative fervor, with 
Internet stocks showing huge price increases seemingly every day. In the five 
years between 1995 and 1999, the S&P 500 tripled, with compound annual returns 
of 26%. Many considered Buffett a relic for refusing to buy into the technology 
boom.
Buffett, however, noted that, because of a combination of cheap initial 
valuations and falling interest rates, stocks had achieved unprecedented annual 
returns of 19% over a 17-year period. These results made investors unreasonably 
optimistic. New investors were expecting 10-year annual returns of 22.6%, while 
even experienced investors predicted 12.9%. But the huge boom was only 
supported by modest GDP growth, and therefore wasn't sustainable. So, Buffett 
expected about 4% real returns.
He continued to hold Coca-Cola (NYSE: KO), Wells Fargo (NYSE: WFC), and M&T 
Bank (NYSE: MTB), though he noted in the 2004 annual report that he should have 
sold some of Berkshire Hathaway's overvalued holdings.
Buffett's bearish prediction proved optimistic. The market continued to rise 
for a few months, with the S&P 500 topping out 9% above where it was when 
Buffett made the call. But that was followed by a crash. Since his call, the 
S&P 500 has dropped by 39%, for average annual losses of about 5%, well below 
Buffett's estimates.
The Foolish bottom line 
The common theme of all these predictions is that Buffett didn't care about 
short-term fears. He wasn't worried about stagflation in the 1970s, and he 
didn't buy into the unrealistic optimism of the late 1990s. Instead, he 
rationally valued stocks, and made the right long-term calls. His biggest 
mistake was the 4% number he threw out in 1999 -- long-term returns hav