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I've been looking at historical charts on the S&P 500. Starting in 1950 to 1980 there is a slow and steady rise. Then the 401k is introduced and the there is a major spike to 2000. Then we have the dot com bust, back down to 1995 prices. Then a major spike to 2007 where we get back to the 2000 highs. Then the housing bubble bursts and were back down to 1995 prices. Now over the last 4 years we have steadily climbed back to the 2000/2007 prices.

If anyone with a modicum of knowledge started buying for the long term in 1950, even with the voliatility of the last 15 years, you would still have made a bucket of money. When looking at the chart it doesn't look like what Buffet accomplished with Berkshire is a surprise. That time period was perfect for the buy and hold strategy.

I don't think we'll have that kind of market for many many years. I think we'll see more of the volatility that we've seen recently. Which will make it much harder for buy and hold types to make money...unless of course you have perfect timing for buying and selling. ;)

ts
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Which will make it much harder for buy and hold types to make money...unless of course you have perfect timing for buying and selling. ;)

OK, although I don't think anyone would accuse me of being a "buy and hold type" I'll bite anyway.

Your statement seems a bit contradictory. On the one hand you state in order for a buy and hold type to have success they will need perfect timing buying and selling.

And on the other hand?

Well presumably you will need perfect timing on buying and selling.

Unless, it is your assertion that a buy and hold guy needs to be perfect and you don't which I suspect is a bit delusional.

Buy and hold isn't about time in as much as it is giving your ideas the time to work, or in some cases keep working.

Although fast money can be fun as well, as I was reminded today. :<)

http://investing.money.msn.com/investments/stock-price?Symbo...


B

PS Despite today's lottery winner, my biggest winners are the ones that have been in my ports the longest. Although admittedly, not Warren Buffet long.
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According to his biography 'Snowball..'
WB made a conscious choice to pursue INCOME... in the form of insurance companies, that provide a steady in flux of cash which can be invested, and give those investments time to 'mature'.

He chose/created GenRe because it provided a steady influx that exceeded the 'out go'.

http://www.amazon.com/Snowball-Warren-Buffett-Business-Life/...

fwiw
ralph
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If it was that easy,lot's of people would have done it.
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"...unless of course you have perfect timing for buying and selling. ;)"

That last sentence was phrased that way on purpose, to emphasize that we are at the end of buy and hold. I am not a great investor. I don't have a ton of money to work with. I am looking at the current investing landscape and it seems rather difficult to imagine the kind of growth we've seen from 1950 to now over the next 60 years. Certainly there will be emerging technologies, but those are difficult to find, understand and invest in. Even Buffet avoids tech stocks for that very reason.

Do people really think they could invest in Johnson & Johnson, Coke and McDonalds and see the kinds of returns that Buffet saw? I am not trying to knock Buffet, and there were many people who invested in the market over the same time period that did very well. I'm really trying to figure out if times are different. I admit that when we look back from 2070 todays prices may seem like bargains, but I think the world is changing. Global markets, market saturation, resource shortages, labor pricing. Maybe AAPL will have a 4 trillion dollar market cap, maybe they'll be joined at that level with GOOG and several other companies yet to emerge, perhaps even McDonalds will be there.

I dont know. This post is not so much to espouse a point of view, rather to generate discussion of a New Paradigm, if it even exists.

ts
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First of all, not all investors have the same needs, same capital and same risk tolerance. Your first step is to discover these factors and then to adopt a investing style that fits.

Buy and hold works just fine with some stocks and some investment styles as does trading for other stocks and other styles. When you say "market saturation, resource shortages, labor pricing" you imply this is something new. Wasn't Thomas Robert Malthus (1766–1834) complaining about "resource shortages" back then? Economics "is" about limited resources.

The most dangerous word ever spoken are "This time is different" when applied to the wrong "this." Some things never change, other change constantly.

For a long term outlook I would propose that there are many more poor people than rich people and that many of these poor people are moving up into the middle class. Find the companies that serve these markets and you should do all right.

Denny Schlesinger
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Looking back we know that Thomas was wrong. I would say things are differnt because there are nearly 7 billion people living in a world where every inch of the globe is mapped by Google and you can be in any corner of this planet in 24 hours. In Thomas's day it took months. That is what is different. There really is, or will be in the not too distant future, a real shortage of resources. There is only so much iron in the ground, there is a limited amount of aearable land and fresh water.

ts
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I think people are looking at the recent Buffet moves and extrapolating it over his entire career. Go back and look at exactly what Buffet invested in his partnership days and early on. Its a very different investment philosophy than today.

An insurance business is great if you can invest better than the market or if you can manage risk better than the others.

I have a ton of respect for Uncle Warren but I don't invest like him today.
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This post is not so much to espouse a point of view, rather to generate discussion of a New Paradigm, if it even exists.

My views are pretty simple on the subject.

Betting on the end of the world is a sure thing and yet it is a bet I will never make.

Thinking this time is different will cause you to lose a lot more often than it will ever help you to win.

Do things change and are they changing faster, you bet, but some things never change as well. (We all need to eat)

"Global markets, market saturation, resource shortages, labor pricing" are all real but at best will change how we value certain items and for every loser there will likely be a winner. For example if you're convinced there will be resource shortages investing in those resources should be a pretty good bet.

I don't know, maybe it's that I'm a product of the 60's where we were all convinced how different we were from our parents, and how we would change (Fix) the face of the world.(Some job we did ,huh?) Well maybe we did in some manner, but after the passing of 40ish years the guy I see in the mirror looks and acts an awful lot like my dad did.

It's always been that way if you think about it and I suspect it always will be.

B

PS If you go and check exactly how much Coke, Coke sells, you will see they didn't grow strictly because of the times but because they adapted to the changing times.

Selling bottles of water, who the fark came up with that idea? They would have got laughed out of the room in most places 50 years ago.

B
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There really is, or will be in the not too distant future, a real shortage of resources. There is only so much iron in the ground, there is a limited amount of aearable land and fresh water.

Two different subjects, your first comments involved making money investing, now you are talking about shortages.

If you don't think shortages might lead to someone profiting I'd recommend you abstain from investing as you are likely not suited to the task.

Maybe subsistence farming? :<)

B
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I do know how to grow some bad ass brocolli. :)

I'm really not talking about an end of the world. I do buy and hold and examine and hold and examine and sell if things have changed. But going forward it just feels different. The just world feels more like a mature company that is expected to have slower growth. MSFT as opposed to AMZN.

I went back to the S&P charts and broke up the last 60 years into 15 year chunks starting back in 1950. My thinking was perhaps any 15 year period would look as volatile as the last 15, but no. Volume over that period is markedly up as well. Internet? Investing awareness? 401k? Highspeed electronic trading? Probably some of all of those.


ts
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