Two glasses of champagne, and I’m out for six days. Happy New Year!
Investment advisor Roy Hamrick: ‘My favorite Wall Street Journal cartoon is the one where the wolf is sitting hungrily in the brokerage house office, and the rep behind the desk is saying: ‘Well, we don’t actually keep the pork bellies here.”
☞ Reminder: If you speculate in commodities, the odds are extremely high you will lose your money. Computer Scrabble is free, more engaging, and perhaps better for the brain and gastric system.
LAST I CHECKED, HE HAD $300 MILLION . . . But that was more than 15 years ago. He must have nigh on a billion by now.
‘I haven’t played the market at all since I retired in ’86,’ writes a friend of mine who had made $300 million in the rarest of ways – trading stocks for three decades. Who does that? Warren Buffett did it (and then some) and I know a few others whose success has convinced me the market is more than a simple ‘random walk.’
If you are really really smart and really really do your homework and, on top of that, have the right temperament, I think you can outperform the market on a fairly regular basis. But this makes you a very, very rare bird. Even my friend recognizes the difficulty of it.
After he retired (as he puts it – he did not manage money for others or have a job in the conventional sense), he handed his money over to other, younger managers to run. But I couldn’t imagine he didn’t at least continue to dabble. Don’t championship golfers still play golf after they go off the tour? Doesn’t Barbra Streisand sing in the shower? So I wanted to know what stocks he particularly liked – or was short – these days. Maybe he’d toss me a tip I could pass on to you.
No, he said, he didn’t have any stock picks. ‘I’ve taken at most five positions in all those years. My money managers have done better than I ever would have. I just burnt out. Keep in mind that, if you can’t outperform an index fund, you’re counterproductive. In most occupations one can be productive at a slower rate as one ages. But the market is like tennis: you win or you’re nobody.’
I’m not sure what this says about the future of Berkshire Hathaway – something tells me Warren Buffett and Charlie Munger will be winning financial tennis championships well into their nineties, regardless of my friend’s experience. But it says quite a lot, nonetheless, I think, about how hard it is to beat the performance of the simple index fund.
Anyway . . . here’s wishing you a terrific 2004, even if it doesn’t bring you $300 million. We’re crawling around Mars – how cool is that? Not a bad start.
Quote of the Day
In 1800, 75% of [an American's] working man's expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%.~The Wall Street Journal, September 20, 1996
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