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Author: stayput One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 210422  
Subject: Road Map To Peace Of Mind Date: 7/1/1999 11:00 AM
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Free advice to those (myself included) troubled by Berkshire Hathaway's awful reception in the marketplace over the last 15 months.

It's o.k. to be weary. Hold this puppy if you believe
past records are any precursor to future performance,
and don't expect more than half a CD yield as return
for the rest of '99 (about 2.5 percent). If the stock's price performs better than that, be pleasantly surprised.

With modest expectations you won't be disappointed.
And you'll be holding the stock (recommend only 10 percent of a portfolio, max) for future growth expectations, largely because of a willingness to pay for access to Buffett's mind.

If you're too weary to hold it with such conservative
expectations, sounds good, too. Try something else for
long-term growth. Or have some fun with a little "toy" money you can afford to lose. Being active is important now for those in Berkshire who are tired and worn out (again, myself included).

Buffett himself bought silver, probably even Allied, to keep his mind and hand active. He doesn't like sitting at the plate with his bat on his shoulder for weeks and months any more than you do, and is probably weary of this waiting too. He's very competitive.

In the meantime, as someone who respects Buffett's achievements enough to have invested a ton (in our little lives) with him, but who is NOT an idolator, I can still, clear-eyed, urge you newbies (and oldbies) not to beat up on the convenient target, Mr. Buffett.

Inexperienced people still revved from Lowenstein's book and fawning news coverage bid the stock up 80 percent in three-and-a-half months in '98. It clearly couldn't sustain this gain during the year, and onward into this year, when the realities of quarterly results set in, in part effected by the hits on his holdings, in part by the pricing duress in the insurance business, in part because of the tens of thousands of new shareholders who inherited the stock through GenRe, in part because of the cash Buffett piled up, in large part because of his discipline.

Don't be hard on somebody for not abandoning his discipline. It works for him, for our better or worse depending on our profiles and values as investors. You wouldn't abandon the way you lead your life, if it has worked for you, simply because what you do and believe doesn't always resonate with those around you all the time.

But as frustrated investors, be proud of your frustration. It's a good sign there's a pulse beating in your head and you expect something in return for your risk. I just suggest you use this flat period to examine how you're invested, why you have the plan you do, your time frame and risk tolerance, and make any
course adjustments necessary. If that means dumping Berk, so be it. It's essential to understand and really believe in what you own. If it means holding it, have a decent reason that gives the stock a chance to generate an average annualized return over a few years.

But don't waste your precious time and energy getting mad. That's emotion you could better spend picking a stock you believe in more. As Buffett has said several times recently, there's a law of natural selection among all shareholders of any stock, all the time, and it can take awhile for people to figure,
and refigure what they're doing. It's just human nature (reason and emotion duking it out).

Best regards.
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Author: orionmrd Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7346 of 210422
Subject: Re: Road Map To Peace Of Mind Date: 7/1/1999 11:42 AM
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Great post.

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Author: StrikeItLucky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7348 of 210422
Subject: Re: Road Map To Peace Of Mind Date: 7/1/1999 12:23 PM
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stayput,

I am sure you posted from the best of intentions, but I consider your post to be based mostly on questionable assumptions and full of very bad advice.

It's o.k. to be weary. Hold this puppy if you believe past records are any precursor to future performance, and don't expect more than half a CD yield as return for the rest of '99 (about 2.5 percent). If the stock's price performs better than that, be pleasantly surprised.

You honestly expect no more than a CD yield as a return for the rest of 99? What on earth is your basis for this ostensibly ridiculous assumption?

With modest expectations you won't be disappointed.
And you'll be holding the stock (recommend only 10 percent of a portfolio, max) for future growth expectations, largely because of a willingness to pay for access to Buffett's mind.


No, I'm holding the stock, because I am anticpating a blockbuster operating performance from the insurance behemoth that WEB has built. I am also sure that WEB will one day find a useful way to employ his $15 billion. Until that day, I am convinced that he will be achieveing a better rate of return with that cash than a CD available from my local bank.

If you're too weary to hold it with such conservative expectations, sounds good, too. Try something else for long-term growth.

No, no, no. It is precisely such mid-term policy switches (for no reason other than boredom with the stock price) which will eventually destroy your long-term investment record. Impatience is your foe, not your friend. If you are not prepared to wait out periods of underperformance all you do is ensure that you pay more commission costs in switching to a new investment. Which alternative investments do you recommend ahead of Berkshire Hathaway?

Or have some fun with a little "toy" money you can afford to lose.

Having fun with a little toy money is one of the single biggest wealth destroyers there is. The effect of reducing your overall returns by 2 or 3 % a year is huge after a period of years. I don't have any toy money; I had to work for mine and I'm damned if I am throwing any of it away - I want it all working for me as hard as it can.

Being active is important now for those in Berkshire who are tired and worn out (again, myself included).

No, being active for the sake of being active is almost criminal folly in investing terms. It is the psychological discipline of being able to wait that guarantees good results; it is impetuous activity to alleviate boredom or as a result of impatience which guarantees underperformance.

Buffett himself bought silver, probably even Allied, to keep his mind and hand active. He doesn't like sitting at the plate with his bat on his shoulder for weeks and months any more than you do, and is probably weary of this waiting too.

Really? Where on earth did you get this idea from? Personally I am convinced that Buffett bought silver and Allied because he thought they were good investments.

Inexperienced people still revved from Lowenstein's book and fawning news coverage bid the stock up 80 percent in three-and-a-half months in '98.

Where did you get this information from? I personally have no idea who was buying stock at this time or why. How do you?

But as frustrated investors, be proud of your frustration. It's a good sign there's a pulse beating in your head and you expect something in return for your risk. I just suggest you use this flat period to examine how you're invested, why you have the plan you do, your time frame and risk tolerance, and make any
course adjustments necessary.


Again, no, no, no. Now is the last time to change a plan. There has been no change in the underlying business of Berkshire Hathaway. Any change in plan would be merely the result of a psychological caving in to pressure. Now is precisely the time to stand firm against such a siren call.

If that means dumping Berk, so be it.
If you dump Berkshire now, in my opinion, you do not have the right psychological make up to ever make a long term success out of investing. If you are a beginning investor, it might be a good idea to dump BRK in the hope of learning a valuable lesson about how not to invest.

But don't waste your precious time and energy getting mad.
I agree with that bit at least :)

That's emotion you could better spend picking a stock you believe in more.
Don't pick stocks with emotion, and don't sell them with emotion either.

As Buffett has said several times recently, there's a law of natural selection among all shareholders of any stock, all the time, and it can take awhile for people to figure, and refigure what they're doing. It's just human nature (reason and emotion duking it out).

Yep, and your advice guarantees that your emotion will beat your reason and you will be naturally deselected!

Yrs,
StrikeItLucky

PS Please don't take offense at the way I have disagereed with what you say. I have made my case strongly because I think it is really important for people to at least hear the case that what you are suggesting is very very silly.

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Author: JoeWinkler One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7361 of 210422
Subject: Re: Road Map To Peace Of Mind Date: 7/1/1999 3:27 PM
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I began watching BRK at 4K, went nuts up and thru 15K, finally bought at 16.5K (1 share). Having been in the market for 20 years, what is important is to figure out one's own philosophy. I owned AAPL for years until I realized that this is not the kind of stock to hold forever- and that is what I personally want to do-hold forever. Nothing wrong with getting in and out, but not even WEB can time (or care about) Mr. Markets moods.

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Author: KennyMc Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7389 of 210422
Subject: Re: Road Map To Peace Of Mind Date: 7/2/1999 6:36 PM
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Nice Post.

Just before the annual meeting began, WEB was interviewed on CNBC (or one of those cable news/business programs)which was being show on big screen TV's all over the Arksaben. He was being grilled about the lackluster performance of Coke. As I remember, he said something to the effect: "In 10 years we will be very happy with the price of our 200 Million shares-now I need to go entertain these 15000 people here!"

There are some very attractive investments out there right now - some that have brought me a much greater return in the last 12 months than Berkshire. But, I submit that in 10 years you will be very happy with the price of your Berkshire holdings.

A "B" holder BTW.

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