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Everything posted by FrenchTeacher

  1. You sure about this? The listing that Morningstar carries of his top 25 holdings (as of 12/31) did not include Bear Stearns. ...except that nobody bought it at $2 a share. While $2 was the announced price of the deal, the low price on Monday was $2.84, and the shares moved up rapidly from there. (Apparently there's a fair number of people who doubt that the deal will go through?) Not that there's anything wrong with a move of $2.84 to $5.91...still a pretty good week's work.
  2. Bear Stearns employees must have felt a similar sense of confidence, given that their company had shown long-term appreciation that had survived a depression, two world wars, a cold war and God knows what other national and world events. All that sure as hell changed this week, didn't it? Anyone who throws more than 10% of their retirement savings into any one company's stock is a damned fool. If Bear Stearns hasn't provided a good enough example, there's always Enron, WorldCom, Tyco, et al to look at. IBM's rise at 12% a year makes it a good investment for part, AND ONLY PART, of anyone's retirement savings.
  3. Buffett is on the record as saying that 100% of his wealth is invested in the stock of his company, Berkshire Hathaway. Insofar as Berkshire is a publicly listed company and that their holdings are readily available by reading their annual report, I think we can safely say that Buffett, indeed, is NOT a venture capitalist, even to the extent of a tiny percentage of his wealth. And you're absolutely right that he is a classic value investor.
  4. Looks like the link is dead. What did he say?
  5. Thanks, Tony. Here's my favorite excerpt:
  6. I guess this is what they call a "jump the shark" moment. Thanks for playing, Joel. It was fun listening to you back in the good old days, when you actually had a point.
  7. Oh, it's easy, Joel. Just repeat after me: "While I have disagreed with many of NYSUT's actions in the past, and have found their conduct reprehensible, it certainly appears to me that they are representing their members' best interests here." Really, it's not so painful to not hate EVERYTHING that they do. It's genuinely interesting to see you choose not to answer anything specific about what is said in this article that is so offensive to you. Apparently, the mere fact that NYSUT espouses something is sufficient for you to oppose it. Or do you not oppose it, and you're simply taking the opportunity to take the gratuitous s###### against them for past conduct again?
  8. Here's a link, but it isn't nearly as instructive as you'd probably like it to be. https://nea.securitybenefit.com/Com/NEAMB/R...?link=RetProgMF No word on costs or anything trivial like that, unless I'm just missing it. Then again, they don't go out of the way to advertise costs on their VA products either (though at least with those, there's a prospectus you can click to).
  9. Given that NYSUT doesn't make any money from the Teachers' Retirement System, how is this word of warning to retirees "self-serving"? Which part of this letter would you actively recommend to retirees: that they click on "phishing" e-mails designed to fraudulently obtain their personal information, or that they join the "free steak dinner" circuit in hopes of finding financial advice available to them at no cost from TRS?
  10. Not necessarily, DCA is a benefit to monthly contributions, but is not the only venue for it's usage. If you had a large chunk of money.. let's say 1 million, some people would be worried about dropping it into the market on day 1 - then seeing a market drop on day 2. DCA would help minimize the risk of seeing a downturn in the market shortly after a large purchase. The investor may choose to spread the buying across several days, months, years, etc. Some people are under the impression that DCA would help maximize returns on money invested. That isn't necessarily the case. It's main usage is to reduce risk. As you know, more risk = more potential rewards. Also, as long as the money isn't invested, the investor is losing out on opportunity costs of being in the market. Fair points, all. But I guess this brings us back to the inherent not knowing of what the market is going to do today, or this week, or this month. Invest it all now, and you're hoping it'll take off immediately (though if you can leave the money invested for 20 years, it matters a lot less what happens in week one). On the other hand, invest only part of it now, and you miss the market's gains (should they occur) for as long as some of your money remains on the sidelines. Either way, I think you make a good point: DCA isn't "always" a winning strategy.
  11. 12. Dollar Cost Averaging (DCA) strategies reduce returns in most instances. Unknowable future return profiles sometimes cause DCA to be the superior tactic, but not usually. All things being equal, invest resources as soon as they become available. (Greenhut) ********************** Odd. I thought the whole point of DCA strategies was that you didn't have a huge wad of cash available to dump in the market, hence the decision to take a little piece out of each paycheck and build wealth over time?
  12. So, again, my question: what part of what NYSUT says here do you disagree with?
  13. Is there some part of this that you disagree with? Or do you just reflexively extend your anti-union vitriol to literally anything NYSUT says or does? Just curious.
  14. A good article. Though not without its ironies: firstly, its publication on thestreet.com, a site hardly associated with the low-fee index approach that Bogle espouses here. (It's to their credit that they offer Bogle a chance to present an opposing opinion on their site.) And I had to laugh at the ads that appeared at the bottom of this stay-the-course, easy-does-it, low-fee index investing mantra. I've cut and pasted them here without further comment...thought you all might appreciate the irony as well:
  15. Thanks for the sentiment. Two things I'd say in response: first and most importantly, it's not my goal to do this along the lines of Buffett, which I think would be akin to picking up a bat and ball for the first time at age 40 and profess to want to play ball like Ted Williams. If I can do better than the averages, I'll consider it a success. The other thing is that I certainly don't want to applaud myself for a single decent year of investment returns...that, too, is something I have done in the past, clapping myself on the back for my magnificent and brilliant tech stock purchases in the late 90's. Man, did that hurt when THOSE chickens came home to roost. You're right that these purchases were staggered over a period of several months, so I can't say for certain how well I did. A glance at the numbers seems to indicate I met my goal of outperforming the indices, but by how much I just can't say. I'm not looking to build a "diversified" portfolio per se with my individual stock purchases. Right now, it seems clear that I'm concentrated in tech stocks and retailers. I went there simply because that's where the opportunities were. In fact, if I had any extra cash to put to work right now (or if I sold something), the company that looks most attractive to me is EBay, which would entrench me even more in tech stocks. And it's another purchase that's Buffett-like strictly looking at the numbers, and very un-Buffett-like insofar as he so rarely goes into tech stocks (and while it definitely qualifies as a "wide moat" company, it hasn't been around for enough years to interest Buffett, I imagine). I do hope that the next good opportunity presents itself in a stock that gives me a new sector, especially something like a REIT or perhaps a foreign index. We'll see.
  16. This is only true if you accept as fact that it's impossible (or not worth the effort) to actively manage a portfolio. Once it was demonstrated to me that it was possible to outperform the markets with discerning investments, I rejected the notion that it's "gaining" something to settle for market averages. Obviously, your mileage may vary. Not everyone is as interested in this as I am, and for those not so inclined, market averages are indeed better than trusting someone ELSE to actively manage your money. I think that your lessons of hard work, efficiency and achievement are well represented by what you write here. I guess I'm just reacting (overreacting, perhaps) to the "I don't know and I don't care," which rubs me the wrong way no matter the context in which I hear it.
  17. Wow. As educators, what do we say to students when we are trying to teach them valuable lessons about our subject matter or about life, and their response is "I don't know and I don't care, I'd rather just hang with my friends"? Because if you substitute "working in my garden" for "hanging with my friends," that seems to be what you're espousing here.
  18. To the extent that anyone's interested, here are the purchases I made last year in my stock portfolio. The logic behind each was roughly the same: the more conservative ones had illustrated an ability to grow earnings and return on invested capital by at least 15% a year over a ten-year period, while the more aggressive ones had demonstrated the same ability over a shorter time frame (but appeared promising in their ability to continue to do so going forward). Each one was a consensus among analysts to sustain growth going forward. Anyway, here's some of what I did: Oracle (ORCL): bought @ 15.23 Google (GOOG): bought @ 390.01 Berkshire Hathaway (BRKB): bought @ 3038.01 Coldwater Creek (CWTR): bought @ 27.19 Staples (SPLS): bought @ 23.25 Cognizant Technology (CTSH): bought @ 70.58 Claire's Stores (CLE): bought @ 27.40 Can't find my pre-July records, but this is a decent idea of what I have been up to. There are some successful picks there, some mediocre ones, and one outright dog (CWTR...trading around $20 right now). And to be sure, there are a few picks that Buffett wouldn't touch with a ten-foot pole, especially Google, which hasn't been around nearly long enough for conservative value investors. In general, Buffett doesn't touch tech stocks anyway.
  19. I think we might be talking about different things now. In the context of 403(b) plans, I understand why you might be tempted towards passive rather than active management. Good managers are hard to find; when you do find them, they tend towards the expensive side; and even so, buying their funds is not necessarily a guarantee that you'll have their services, insofar as they might leave the company the day after you buy the fund, and you're faced with trusting the new manager or paying some sort of contingent deferred sales charge. To me, that doesn't mean disregarding active management entirely, merely to tread carefully into those waters. When I first commented in this thread, though, it was in the context of why anybody would trust the so-called "efficient market" theory OUTSIDE of an investing format that required the use of funds (such as a 403(b)). And I stand by that. I don't think I ever said it was "easy" to duplicate Warren Buffett's record; that's silly. But you CAN use his methodology to create a series of individual investments that should handily beat the market indices if chosen carefully. Even if you can't rack up a 20% average annual gain the way Buffett does with Berkshire, doesn't it make some degree of sense (only for those with the time and the inclination to put the work in, of course) to use his methodology to attain superior results? Perhaps I am a bit naive, having used this strategy for little more than a year to obtain these results. But as I did so, it necessitated a fair amount of work, to be sure, but no day-to-day obsession about the markets, no requirement to watch the ticker, and in general, none of the nausea and sweating that accompanied my late-90's "instinctive" investments in dogs like WorldCom and such. Amazing what using a methodology that has been proven over time and through booms and busts, recessions and depressions, will accomplish! Anyway, it's in the context of individual investment in stocks that I say that it is possible to use Buffett's methodology, and in so doing, to generate superior investment results. I still believe that. Your questions seem to be asking me to show you what active mutual funds have turned the trick, which is not an argument that I ever made, I don't think. I did say that it's possible to find value managers who consistently outperform their benchmarks, even if they don't achieve Buffett-like returns; I would guess that the more closely they emulate the discipline that Buffett talks about in his writings, the more closely they would be able to emulate his results. I suppose one good place to start finding these guys, if they exist, is to look at a service like Morningstar and see what kinds of value funds they consider to be superior. Some of the names that pop up there are names that I have seen you write about in other posts: Dodge & Cox Stock, TRP Equity Income, Vanguard U.S. Value, Weitz Value among the large-caps; Janus Mid-Cap Value, Vanguard Selected Value and TRP Mid-Cap Value in the mid-caps; Royce Special Equity and Longleaf Partners Small-Cap in the small-caps. Still, I emphasize that I was talking about individuals using the Buffett methods to construct a stock portfolio of their own, not mutual funds.
  20. I'm tempted to respond by asking you to show me examples of people who have, are, and will continue to do ANYTHING consistently. Human beings are unpredictable creatures, and as I mentioned before, even Buffett himself trailed the market badly when tech stocks were going crazy. When you say "duplicate Buffett," do you mean duplicate his methodology, or his results? As I said previously, he's so clear with his methodology that duplicating it is really just a matter of having the time, the inclination, and the live internet connection to yahoo finance or msn money. Duplicating his results, of course, is a different question. But if you're suggesting that no one should dabble in value investing unless or until they can match Buffett's results, then I would disagree. Really, no theory is necessary to justify value investing. A scan of value funds of all caps, who have been in existence longer than ten years, will yield names of managers who have managed to outperform their index. And that's just mutual funds. Individual investors can (and, I suspect, do) achieve better results than the usual index-fund company line if they're so inclined. Everybody has an agenda. The financial services industry is predicated on making sure that investment sounds like such a complicated science, you NEED to trust (and pay fees, of course, to) the high-priced professionals. Whether those pros are annuity salesmen, actively-managed mutual fund sales professionals, or fee-only financial planners, it's clear to me that people who describe the problem out of one hand and propose to sell you the solution out of the other probably can't be entirely trusted. The only solution for investors is to educate themselves and run their own show. Those who can't or won't be bothered to do so will eventually pay the price...to someone.
  21. Ira, the book I was trying to remember, as it turns out, wasn't about Graham, but actually by him. "The Intelligent Investor" is widely available, and (I thought) pretty readable. You might be especially interested in this comment from a new foreword written by a name everyone seems to trust, John Bogle: "While the activities of investors, the investments of choice, and the ownership of stocks today bear little resemblance to those that characterized the world of investing when Graham wrote this original edition in 1949, the basic principles of intelligent investing that he set forth here have remained virtually intact and unassailable." As for the other thing, I can put together a few trades from the last year to illustrate things, sure...I can also list a few current trades. If nothing else, it'll provide some comic relief, I'm sure! Hi Joe, I guess I don't look at Berkshire as "owning one company." You own Berkshire, it really means you own GEICO, Coca-Cola, Wells Fargo, Benjamin Moore, Fruit of the Loom, Mid-American Energy, Dairy Queen, and a few dozen other high-quality companies. It is, in and of itself, a diversified holding, much more like a mutual fund (except a better one than available just about anywhere else) than it is a company. I appreciate the sentiment about caution in buying stocks; I promise you that as I do so, I'm not "playing around" at all. The late 90's and early 2000's taught me a thing or two about following the crowd blindly.
  22. Well, the early returns are good...I've been at it a year, and it's been a very good year. Of course...a.) one year is an almost meaningless statistical sample, and b.) the year in question was a good year for stocks, so the other part of the test will come the next time the market turns down rapidly. So I'll neither gloat nor cower for the moment, but I'll keep in touch. Just guessing here, but for starters, a lot of managers don't follow the strict value style that Buffett espouses. For people chasing the stocks of the subprime lenders right now and hoping they're buying a $5 stock that will surely crawl back up to $20, they're likely to get burned, I suppose, much like many of us who bought WorldCom, Enron, etc., back in the day. But if you research value managers who have managed the same fund for five or ten years, you'll find a decent number of them who can and do outperform the benchmarks. In fact, I'd be surprised if there were a manager out there who a.) understood Buffett's philosophy, b.) followed it to the letter, and c.) nevertheless failed to produce decent results, even if not right up there with Sir Warren. But as I'm sure you know, not every so-called "value manager" is created equal. (Heck, even Buffett himself trailed the market badly in the bad old days when dot-coms roamed the earth.) Joe, I'm sorry you read my post as condescending, and also that you derived nothing but "amusement" from what I wrote. (For a guy who claims to know something about Buffett, it'd at least be nice to spell his last name correctly.) I have read Lowenstein's book on Buffett, as well as Robert Hagstrom's excellent book called "The Warren Buffett Way." I still find Buffett's own writings (in the form of his annual letter to Berkshire shareholders) to be the best way to learn about the man and his philosophy of investment, but both books are excellent, and I'm sure there are many others. You seem sarcastic in suggesting Berkshire's high-priced shares for purchase, but is it really that far-fetched an idea? Consider it an excellent mutual fund (the best ever, perhaps!) with a $3600 minimum purchase. In fact, that's what I did, and I do own a single share of the "B" stock. With a commission of $20 to purchase it, and no annual fees or ongoing expenses, how would such a purchase be a bad idea for anyone? The ING question is fair, and in fact, I'm re-evaluating my investment with them. When I began investing with them, I knew far less than I do now, and I relied greatly on the financial planning component of what my agent did for me. (Disclaimer: I'm well aware that not every agent is a planner, and that the general opinion of agents here is that they are little more than salespeople. I'm simply mentioning this because that was not my experience.) As I seem to need the financial planning less than I used to, the costs become more difficult to justify, and I do have lower-cost alternatives available to me. So while I continue to invest with ING, and I would continue to endorse the person I invested with, I'm not sure if that will be true for ever and ever. Answering the last questions first, I'm sure that Buffett has "access" that the rest of us only dream of, and that has to be an advantage. It's interesting to read his letters...he's no longer interested in "small" investments, because of the size of the cash hoard that Berkshire is sitting on, so he freely admits he passes on investments that could be very profitable simply because of the scale. In that sense, he says, small investors actually have an advantage over him (though it's certainly tough to think of it that way)! He is certainly more of a deal maker these days, as Berkshire's only purchases are of companies that a.) approach him first, and b.) can offer an 80% ownership stake. But his writings on stock selection remain quite relevant, I would say. As far as determining fair value (and therefore what constitutes a "bargain"), Buffett follows the rules laid out by Graham and Dodd. I tried to get through "Security Analysis," and I'm either not smart enough or just didn't have enough coffee in the house that week. Tough read, in my opinion! Fortunately, there are more accessible books that summarize Graham's approach to valuing stocks, and I'll see if I can post some here later. (Perhaps someone else has a title or two at their fingertips?)
  23. The proof is in the original post I wrote: Buffett himself has taken great pains to make certain that his methodology is no secret. As Mark correctly pointed out, even his own methodology isn't as ground-breaking as many people believe it to be, based on Graham and Dodd's value investing. It's simply not that complicated here in the information age to find companies with consistently good results, with a "wide moat" surrounding their businesses, whose stocks are currently not priced the way they "should" be. If, for any reason, people find Buffett's writing to be inaccessible to them, there are any number of books, speaking to any level of expertise, that detail Buffett's approach to stock selection. Of course, while Buffett's methodology can be duplicated, his results are a bit harder to come by. That should go without saying; the man is an all-star among all-stars. Nevertheless, his methodology isn't so esoteric that it can't be used to produce returns better than the benchmarks. That may not be worthy of Berkshire Hathaway stockholders, but it should be fine for small investors like us, no?
  24. PS...here's an interesting article about the Buffett approach that investors in both camps can take heart in! http://www.capmag.com/article.asp?ID=4706 Loving index funds? Then you'll love Buffett on index funds: "By periodically investing in an index fund," he says in inimitable Buffett style, "the know-nothing investor can actually outperform most investment professionals." And he very clearly espouses index funds over actively managed funds. On the other hand "...there is a third alternative -- a very different kind of active portfolio strategy that significantly increases the odds of beating the index. That alternative is focus investing." Reduced to its essence, focus investing means this: Choose a few stocks that are likely to produce above-average returns over the long haul, concentrate the bulk of your investments in those stocks, and have the fortitude to hold steady during any short-term market gyrations. The article details the Buffett approach to stock selection: in short, "companies with a long history of superior performance and a stable management, and that stability means they have a high probability of performing in the future as they have in the past." The article is worth a read. At the very least, read it before reloading your muskets and aiming them anew in my general direction.
  25. Well, I'm glad to have taken my traditional clubbing for having suggested anything but allegiance to the index funds! Happy to play my part. For anyone willing to do a bit of reading, Buffett's methodology isn't that complicated, and can indeed be duplicated. He identifies companies with a record of excellent performance: a return on invested capital of 15-20% annually, and what he refers to as a "wide moat" for the business. These parameters eliminate most businesses right away. The return on invested capital of any company over the last ten years can be looked up online at any number of free sites: yahoo finance, msn, etc. Because these companies represent such good performers, they are most likely to withstand a firestorm like the one we just went through over the last few weeks. And Buffett is adamant that the best time to sell a company, ideally, is "never." So it's hardly a methodology intent on pleasing traders and commission-driven salespeople. Scotty, you are right that Buffett doesn't really take "stakes" in companies any more; he solicits the owners of companies willing to sell him an 80% stake. That way, he controls the companies, but leaves the ownership intact to do the job that they obviously are already good at (else he wouldn't be interested in the company in the first place). That doesn't mean that duplicating his methodology requires the purchase of entire companies. The same traits that drive him to acquire 80% of a given company can clearly make it attractive enough for folks like us to purchase 100 shares, no? Joe, I had no idea what the market was going to do the last couple of weeks, so no, I didn't take advantage of its wild swings. But I hope that having made Buffett's methods a bit clearer, it's not his intent to trade every swing in the market. That would be folly, indeed. Steve, nowhere in my brief message did I say (or even hint) that managed funds or high fees are endorsed by Buffett. That's a straw man argument if ever I saw one. As for the ING question, I trust that that is well-plowed earth by now, and hardly needs any further explanation.
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