The Oracle of Oma-Hype?
I was discussing the financial collapse with Clint Goodrich.
I've written about Goodrichbefore, he's even written a couple of guest blogs. Goodrich went from horse racing to futures trading—both occupations require focus and brutal tenacity. He now lives in Aspen and trades for some high net worth clients. His investments have averaged 22 percent gains a year over the last five years, and while he took a beating in the fourth quarter last year (who didn't?), this year he's up nearly 32 percent.
So, like I said, we were discussing the financial collapse. I told him that Warren Buffett said, "When the tide goes out, you see who's been swimming naked." Goodrich rolled his eyes. Turns out, he thinks Buffett isn't much of an oracle.
What?? Isn't that like saying Tiger Woods isn't much of a golfer??
Well, Goodrich feels so strongly about this that he's willing to risk public ridicule and explain his opinion. So here is what one trader has to say about the greatest investor of all:
"Warren Buffett: World's Greatest Investor?" by Clint Goodrich
Hmmm, I'm not so sure about that. Actually, I think Warren Buffett is overrated. My thinking is a collective of many years of watching and listening to everyone in the media lionize this guy. As a trader and manager of money, I follow the money, literally. Clearly he's not some stooge. He's been successful, is shrewd and lived in the same Omaha house since 1955. However, a few simple insights into his track record leave me a little cold and not so convinced about his title "World's Greatest Investor".
Berkshire Hathaway "A" (BRK.A - ) 52 week high: $147,000.00 Berkshire Hathaway "A" (BRK.A) 52 week low: $70,050.00. That's a decline of 52.34 percent from top to bottom during the recent market/financial meltdown of 2008-09. Share price in (BRK.A) has rebounded to $98,400.00 (the close on 9/9/09) a bounce of +40.47 percent off the bottom. An excellent rebound but still down by -33.06 percent off the best levels.
If you bought one share in BRK.A at the "open" on Sept 10, 1999 you spent $62,500. On Sept 9, 2009 that same share was worth $97,900 on the "open", an increase over 10 years of $35,400 (+56.64 percent appreciation), or an average simple return of +5.66 percent per year. To me, this is historically just a reasonable rate of return on a 30-year U.S. Treasury Bond, and certainly a less than spectacular rate of appreciation for someone titled "The World's Greatest Investor". Oh, and by the way, a 30-year U.S. Treasury is guaranteed.
The other thing that peeves me about Mr. Buffett is that he demonizes traders and calls derivatives "weapons of financial mass destruction", when he himself holds some of the largest derivative positions in the world! It's OK for him to hold derivatives but not others? He missed the tech run, he lost billions in his US dollar position, and he apparently had no inkling of the financial crash that swept the markets in the fall of '08 through the spring of '09. In general, he's a buy and hold forever guy with a seemingly blind eye to taking profits and looking for the next opportunity. What is up with not letting go of a position, taking the profit and moving on?
My view of Mr. Buffett is that when you are well capitalized it's easier to just hold, no explanations required, and you don't expose yourself to second guessing, etc. This basically amounts to dollar-cost averaging. Historically, buy and hold has been OK, not great, but OK if you measure over decades. If you are making enough money at a chosen profession and use dollar cost averaging as an investment philosophy, great. But he's "Warren Buffett" supposedly a wise old sage, smarter than everyone else, has the tortoise persona compared to the hare and all. But is a 5 percent return per year for the last 10 years grounds for annointment? An index fund would give you a similar return as BRK.A.
Hence, my view on Warren Buffett being overrated. I have nothing against the guy. I agree with a few of his points of view, but mostly I think he's arrived at this larger-than-life place where no one is really willing to challenge him, and if you do, you're a heretic!
Of course my view of Mr. Buffett would not be too popular on the business channels, and the weak point in my argument would be, that so far.....he has more money than I do. But hey, that's what makes a market! ... Clint Goodrich, Aspen, CO
Questions? Comments? Funny Stories? Email firstname.lastname@example.org