Is Buffett Really Losing His Touch?

Various people are wandering about saying that investor Warren Buffett has lost his touch. The gist of the argument: A combination of style drift (derivatives?!), ill-timed investments, and his "long term" refrain on declining positions demonstrate that he is, at the very least, having a hard time right now, if not outright floundering, at least a little.

Doug Kass argues this in a morning post over at RealMoney. As he would concede, this isn't the first time Warren has been deemed ready for pasture, what with similar arguments having been made in 1999, which turned out to be premature.

Is this time different? Kass argues "Yes", with the Buffett no longer having as long a long term as he once did, and with his style drift particularly worrisome in the face of some ill-timed investments.

I’ve been arguing for some time that Buffett is feeling more pain than most people realize, but I’m also not convinced he has lost his touch either. Maybe it's time to open this conversation up. Other thoughts?

Comments

[ValueInvestor:]

Doug Kass needs to get his head outta his #$!

Until Warren gets dementia (if he ever does) he'll always be the worlds best investor. Besides, with a portfolio that big, I don't think anyone else in the world could do better.

2008 Nov 12 11:46 AM

[Jackson Cash:]

So what is Peter Lynch doing?

2008 Nov 12 11:49 AM

[jvi:]

Obviously the dude knows what he's doing. It's funny to see people making judgements on his long investments after just a few weeks. The very fact that other people DON'T think it's a good buy is exactly what MAKES it a good buy. If others thought it was a good deal, they'd be buying it, and the price would be too high for it to actually be a good buy. Get it?

2008 Nov 12 11:51 AM

[Mike McGinley:]

He is buying in a bear market. Clearly, he has lost his touch.

Everybody is a trader nowadays. How can Buffett not be trading his account?

Everybody is going to buy at the right time, just before a rally. Who knows, maybe Buffett is waiting to buy 8 million shares of SSO at exactly the right time (like everybody else). I hear he is contemplating 3X.

2008 Nov 12 11:57 AM

[MarvinMBA:]

BUFFETT HAS TO REALIZEE THAT DEPRESSION is here. Why? No time past have we ever bailed out FM and FrM as well as AIG and a host of other institutions that were never suppose to fail. The average guy in this country is below water without any real help like job growth or rising RE values coming to help him, Recession this is not but DEPRESSION this is believe it or not...MarvinMBA

2008 Nov 12 12:02 PM

[hook:]

I think his blatant manipulation of BNI speaks volumes. selling huge amounts of puts right before berkshire reports their quarter is pretty novel but shows that he's desperate to avoid mark to market hits to his holdings for some reason.

2008 Nov 12 12:06 PM

[long_on_oil:]

Buffet has shed all his bonds in his personal portfolio, that alone should be a major sign to all investors. I have owned BRK for years and everytime I doubt him and sell some of it, I have paid the price. During the tech bubble they criticized him for not being in tech and we all know how that turned out. You are not buying earnings when you buy BRK, you are buying a portfolio.
Sell BRK at your own peril.
Buffet has paid the price of making investment mistakes and I trust him over myself with my money. I am to greedy and I never sell at the right time...LOL

2008 Nov 12 12:09 PM

[Consider_this:]

*LONG* *LONG* term, Buffet will be dead, and his investment *will* pan out. Heck, if you wait 100,000 years, unless humans all die out, some of his investments will pan out.

Balance that with, *LONG* *LONG* term, anyone will be dead.

There comes a point in investment where you do have to talk about timing, about needs, and about when you need to use the money.

Typical advise in stocks is to invest in it if you need the money 10-15 years or more. This is no longer working now. I'm not even that sure we'll have a working growing economy in 5 years, let alone 10.

For someone who're either trying to make income, or simply to do capital preservation, someone who's trying to USE his money in 10 years, this is one heck of a painful time -- there's no good thing to "do" right now.

Remember, Japan's stock market is now significantly below what it was *24* years ago!

Let that sink in for a while.

What do you tell someone who had a "long term vision" 24 years ago and invested in one of the most successful economic story of our time? Wait another 24 years?

Was a bubble, is a bubble, will be a bubble. With all the insider trading, govt dabbling, hiding of losses, lies, etc; Stock investment is no longer an investment. It's politics and gambling.

If you want to "invest" in the purest form, go buy a resource and build / develop it yourself. The old fashioned way, not the modern garbage and lies ridden "market".

2008 Nov 12 12:13 PM

[k9s-4-k8:]

I think too much expectation has been placed on Buffett. Clearly, he has never had quite as much influence as he is enjoying today. But with that, our ears are perked up to hear anything he says. When he stepped up and made the much ballyhooed investments in Goldman Sachs and General Electric, much was made about the most favorable terms he received. Nothing has changed regarding the terms except that his short term timing has somewhat tarnished his investments. Warren Buffett isn't a momentum trader, he's a value trader. His favorite holding period is till death. He has made plenty of value investments in the past that looked bleak before they reemerged to produce great gains. He hasn't lost his touch. People are just mixing up value investing with momenum or growth investing.

2008 Nov 12 12:36 PM

[DeltaHotel:]

Consider_this - You have hit the nail on the head sir! I could not agree more.
A little note to those buy-and-hold (and forgettabou'dem) merchants who naively and blindly follow the "wisdom" of the Shepherd Buffett : If you don't plan an entry and EXIT strategy then you ain't gonna make any money!
I know this from personal experience having advised my own father about taking profits on the stocks he has owned for over 20 years (like BG Group BG.L) which is up over 400% since 2003 alone.
Remember Warren Buffett has had the benefit of being able to buy stocks over 40 years ago and was "lucky" (yes lucky) that some of his good investments have risen exponentially over that time.
For many young/middleaged/retir... investors they will not have had Buffetts experience or luck and unfortunately have had their stock portfolios obliterated in the past year.
Timing is not just important, it is CRUCIAL to making money from the stock market.
Buy-and-hold merchants wake up and do some homework.

2008 Nov 12 12:48 PM

[winnersdon'...:]

Buffett has, and always will be, a value guy, period...
he's buys basic industries that may be out of favor today, but won't be in the future.
He bought GEICO, USG, etc etc etc when no one would,not for today, but for tomorrow. GEICO is now #4 in auto insurers in the country and the jury is still out on USG, but remember this...someday, the housing sector will revive itself and guess what??? the sheetrock business will return with a vengence + super profits due to current restructing and plant modernizations, and then the pundits will once again defer to Buffett for what he really is...... an investor who doesn't invest by his wristwatch or even his calendar, but by the basic needs of human civilization.

2008 Nov 12 12:50 PM

[Ken D:]

People said the same thing when he didn't come to the Tech Bubble in 1999. People said the same thing when he didn't let General Re participate in the CDS craze. People said the same thing when he didn't let his homebuilding division participate in subprime loans. People are short-sighted when they review Warren Buffet in the short term. Just watch how this turns out to prove he is thinking as well as ever.

2008 Nov 12 12:53 PM

[Larry G:]

Geez! How long are we going to be hearing this nonsense that Buffet has lost it. The guy has been investing successfully for 50 years.

He writes a piece in the new york times that if your a long term investor now is the time to buy. What's the reaction? Yawns and skepticism.

Ahh to be fearful when others are greedy and greedy when others are fearful is a very difficult strategy to implement.Why? Because your going against the crowd.Look at the reaction to the NYT piece, his Fortune piece in 1999 and his Forbes interview in 1973-1974. Always the same reaction, skepticism.

Why is he able to do it and other people can't? Because he takes the emotion out and most investors can't do that.Folks the market is cheap thats why were seeing companies selling for less than their cash in the bank. According to Jason Zweig 1 in 10 companies are selling for less than the cash they have in the bank. We haven't seen that in a long long time.

2008 Nov 12 01:06 PM

[Socialism c...:]

Buffett has lost it. We are no longer free-market capitalists -- who here will claim to know how to value a stock that the government has taken an interest in? We simply do not know how to evaluate that!! They have much different interests than generating profits. Socialism, in fact, is not profitable -- stocks are not the place to be until we end this socialist FARCE!!

2008 Nov 12 01:31 PM

[sickofthehype:]

Pretty ironic hearing the sheople badmouth Buffett of all investors. 2008 hasn't been a good year, but then again, when the inflationary campaign rears its head, which it will, commodities, equities, real estate, and everything in between will be propped up once again by a bludgeoned dollar.

Come back one year from today and say Buffett's lost his touch. What you'll most likely realize over the next 12 months is that his losses were made up for and then some. In a mere 12 months. Money supply up 40%+ in a few months. This WILL break the seams at some point and the idiots curled up in the fetal position right now will regretfully feel their stupidity.

2008 Nov 12 01:46 PM

[Illusional ...:]

Frankly, he has way more cash to hold out this crisis than anyone else in the world, so unless USA defaults, which will essentially bring down a good part of the world economy (if not all), he has the stomach to take the dive. So either way, there is no gauge to say whether he made the wrong choice in the market.

Oh, on the comment about his lifespan, I doubt that's even going to matter much to whether he makes the right moves or not. What I would say is that he isn't going to lose sleep or any quality of living just because he lost half his money.

2008 Nov 12 06:15 PM

[Roger Knights:]

Here's a link to Kass's article:
www.thestreet.com/stor...

Kass states: "As I have previously written, I have worshiped at the altar of Warren Buffett since the late 1970s.... In fact, my writings over the past seven years have often been punctuated with Buffett-isms. I have repeatedly objected to, scoffed at and refuted criticisms of Buffett's strategy on this site and elsewhere."

2008 Nov 12 07:23 PM

[Erich Riese...:]

The valid question which should be asked of Buffett is whether he was being dishonest or plain wrong when he supported the original bailout plan and Paulson. Has Buffett morphed into a crony capitalist?

2008 Nov 13 07:00 AM

[y3115y:]

Nothing would last for ever, even the universe. Look what he eats, some worst kinds of Quick foods. He is what he eats. When he bought Goodman with $115.00, I followed, but I got out when it dropped to $95.00. He held the bag till now with 50% loss. He timed in, but did not know to time out. He is old, no new tricks? I could advise Obama better than him?

2008 Nov 13 09:20 AM

[notsosmart:]

the world has changed.i think its tough for mr. b to change.in the meantime our leader"im the decider" is deciding who to put on his pardon my cronies list.nobody can fix this.phony AAA rated paper is worthless & so it will be.we are now a kind of socialist country & can no longer tell europe they cant back private business.they must be laughing except for their greed that made them buy our s--t.

2008 Nov 13 10:26 AM

[east texas 4:]

buffet's greatness in the past can be measured on his by and hold of coca cola--today Berkshire is a different animal--it is an insurance company and this is not a good time to be in the insurance business--his left flank is virtually gone-AIG and his right flank is wounded-Goldman Sachs--he has to make decisions that are much harder than buy and hold KO--but that is what he needs to get back too--Mr. Buffet you might consider Nike again, Genuine Parts and Marathon

2008 Nov 13 10:47 AM

[DegreeNodal:]

Buffet was among the best during a period when if you decided to be a cork instead of a stone, you rose with the tide. During the 1982-2000 secular bull a monkey throwing darts could have made good money. In fact, many did. Buffet did well in the prior era, 1960-1982, but the legend was born in the bull market. No doubt he could analyze a company, assess markets, and sense trends, but it is doubtful that he or anyone has what Buffett himself claims to have: "An innate gift for capital allocation". This is a true quote. He said "Some people are born with special talents, I was born with a gift for capital allocation" I didn't know the gene pool included such a gift. Maybe it's the human equivalent of storing chestnuts.

2008 Nov 13 11:12 AM

[granger:]

Add time and all will be amazed.

Even if Buffett is not here 15 years from now (hope he is). His holdings and purchases of the last few years will look brilliant.

Just my opinion.

2008 Nov 13 11:46 AM

[veryold:]

The ultimate clue: When his style changes so much that He pays dividends.

2008 Nov 13 02:33 PM

[Buffett Jr:]

I agree my son.


On Nov 13 11:46 AM granger wrote:

> Add time and all will be amazed.
>
> Even if Buffett is not here 15 years from now (hope he is). His
> holdings and purchases of the last few years will look brilliant.
>
>
> Just my opinion.

2008 Nov 23 01:23 PM