Warren Buffett has gotten greedy too quickly while everyone else takes too long to become fearful, suggests the Wall Street Journal in today’s “Heard on the Street” column. Under the headline Even the Oracle Didn’t Time It Perfectly, Peter Eavis writes that while Buffett has won “plaudits for some canny deals,” there’s also an “unnerving pattern emerging.” “Mr. Buffett looks to be committing his capital too early. On some bets, waiting might have gotten him better terms or more attractive entry prices.” “Time for the Oracle to get a new crystal ball,” according to Eavis. He acknowledges that Buffett doesn’t try to time his investments too closely, and says he’s not launching a “cheap gibe” based on the S&P’s 7 percent decline since Buffett’s ‘I’m Buying U.S. Stocks’ op-ed piece in the New York Times on October 17. Instead, Eavis focuses on two bets Berkshire Hathaway has placed on derivatives. In one, Berkshire received large payments to provide default protection for “certain junk-rated corporations” in North America. The company has already booked hundreds of millions of dollars in mark-to-market losses on its exposure to these credit default swaps. “Berkshire more than doubled it notional exposure on these CDS to $8.8 billion between the end of 2006 and the middle of this year.” Eavis predicts, “Given the deterioration in the credit markets, the third quarter hit on them could be large.” (Mark-to-market means the contracts are valued at what they would sell for in the current marketplace, even though Berkshire isn’t selling them now. Those mark-to-market losses remain theoretical unless and until the contracts are actually sold or there’s a default, but they still must be reported as losses in Berkshire’s quarterly earnings reports.) Berkshire’s other growing derivatives bet involves very long-term options that will become profitable if four stock indexes around the world go higher over a period of years. Eavis notes that Berkshire added to its positions last year and into the first half of this year. Again, Buffett expects they’ll make a lot of money eventually, but right now they’re not much all that much. Eavis argues that the trades suggest Buffett “was relatively comfortable about the prospects for U.S. corporations and global stocks at a time when some were predicting a bust.” While there may indeed be long-term profits, Eavis writes that Buffett has tied up money that could be have used for trades that would generate larger profits more quickly. MORE DOUBTS ABOUT THE ORACLE While the Journal is a high-profile skeptic, there’s are other Buffett-doubters out there, especially when it comes to his public call to buy U.S. stocks now. A common theme is that as a billionaire, Buffett can afford to put his money down now and wait for the profits, which could be years away. The rest of us have more pressing problems. In the Times of London, Jennifer Hill argues that Buffett Is Wrong: The Market Madness Is Still Far From Over. In Canada, the National Post’s Diane Francis echoes the sentiment with Buffett Is Wrong: Avoid Stocks. On Seeking Alpha, Brian Keith Anderson lists 5 Reasons to Ignore Buffett and C.S. Jefferson asks “What If Warren Buffett Is Wrong About the Markets?” Omaha Oracle: Kass Wins There are also defenders, of course, including the often pessimistic Doug Kass, who made a profitable short-term bet against Berkshire Hathaway’s stock price this year. The key question, as it often is when talking about Warren Buffett and his famously long-term view of things, is whether an investor sees enough future pleasure to overcome pain in the present. Buffett’s investing record suggests we should be looking very carefully. Current Berkshire stock prices: Class A: [US;BRK.A 108699.99 -3200.01 (-2.86%)] Class B: [US;BRK.B 3617.0 -96.00 (-2.59%)]
this is what they said about him during dotcom bubble. Time has proven Warren Buffet makes the right call in a long term spam.
This is coming from a bunch of journalist shmucks who’ve never managed OPM or probably even worked in the industry. They are also on a continuous hack job on Obama every day…seriously. I like the WSJ and try and read it everyday, but there is a reason that The Economist is a far more credible pub IMHO. They probably should waited you know, like 6 mos-1 yr before jumping the gun on this one…
It does come across as silly. Buffett’s long term record is undeniable. If they could get more specific on his derivative bets they might redeem themselves.
CFA_Halifax Wrote: ------------------------------------------------------- > They probably should waited you know, like 6 > mos-1 yr before jumping the gun on this one… They should have waited 10 years, because that’s Buffetts approximate time horizon when making these decisions. They fail to understand that Buffett simply does not care whether his positions are profitable six months from now or not.
The author of that article is such a hater. Can’t take people like that seriously.
Buffet’s editorial in the NYT said that he has no idea where stocks will be in 1 week, one month, or one year from then, so the fact that stocks are down in no way says anything about whether his call is good or not. He entered because he felt stocks had a favorable long term valuation, and so maybe he could get a better one now, but we won’t know if he is right for at least 5 and probably 10 years.
(… and he sold puts last year)
> Eavis writes that Buffett has tied up money that could be have used for trades that would >generate larger profits more quickly. Hey dip$#!T, BRK still has several billion in cash on the balance sheet. I guess it wouldn’t get as many looks if it said, “Warren Buffet is rich and smart, you should do what he does.” Welcome to Rupert’s journal.
the writers of “heard on the street” section of the WSJ are complete tools. they always write condescending and sarcastic things as if they were investing gods.
I think Buffett’s column was bad advice for the average retail investor. First of all, we would all be buying if we could get the kinds of terms he got (10% divdends on preferreds, warrants, etc). But those terms aren’t available to the rest of us, and it changes the calculus considerably. Also, as pointed out above, he might make money on this in 5, 10, or 20 years, but the rest of us are not billionares. When many people are being affected by this recession, the last thing the lumpen investor should be doing is investing in risky assets that may not appreciate for a long time. What’s right for Buffet is not necessarily right for joe the plumber (or joe the analyst, for that matter).
Buffetts column on “buying now” related solely to his personal wealth, and not that of BRK. So his preferred purchases are not relevant to the conversation. His advice was good for anyone with a 5 year plus time horizon, and if your time horizon is shorter than that I imagine Buffett would tell you to stay out of the stock market.
I admit that Buffet is sometimes popmpous…but this article is much worse…
CFA_Halifax Wrote: ------------------------------------------------------- > I admit that Buffet is sometimes popmpous…but > this article is much worse… When you’ve spent 50 years walking the walk, you’re allowed to talk the talk. Doubling your money on a lucky pick, then talking the talk… that’s pompous.
I don’t usually get angry, but this article is a waste of time. It’s about on par with the trash that Jason Zweig sometimes spews on WSJ. I don’t really get WSJ sometimes… http://www.gannononinvesting.com/2008/07/on_ben_graham_and_bank_stocks.html
PtrainerNY Wrote: ------------------------------------------------------- > In Canada, the National Post’s Diane Francis > echoes the sentiment with Buffett Is Wrong: Avoid > Stocks. Wow…Diane Francis, another obnoxious hack who was probably writing non-stop last summer/fall early this year about how the markets would go up forever if some of her past writing when I did read the Post is any indication…that’s the reason I read the Globe…as bad as they are at times as well
CFA_Halifax Wrote: ------------------------------------------------------- > PtrainerNY Wrote: > -------------------------------------------------- > ----- > > In Canada, the National Post’s Diane Francis > > echoes the sentiment with Buffett Is Wrong: > Avoid > > Stocks. > > Wow…Diane Francis, another obnoxious hack who > was probably writing non-stop last summer/fall > early this year about how the markets would go up > forever if some of her past writing when I did > read the Post is any indication…that’s the > reason I read the Globe…as bad as they are at > times as well I couldn’t agree with you more.
And she is ironically one of the better writers there LOL!
It will be years before we know whether he was right or wrong. And seriously, the writer backs up his assertions with quotes from Diane Francis or Jennifer Hill? Do they have a 60 year track record of abnormal returns?
If everyone invested like WB everyone would make money. I think people get irritated by how he easily beats the market with a simple value-based investing philosophy.