Carl Spackler

Buffett Metric Doesn't Say It's Time to Buy

I am extremely tired of hearing that the market is a buy or sell because of what Warren Buffet is doing. He was wrong on this market and the economy, and I suspect he is extremely perplexed by his losses right now. Many of the deals that have propelled his stock were caused by the sheer weight and power that billions of dollars give you. He gets extremely good returns from hurting companies because he can throw them a lifeline of billions. Can an individual do that - no! He gets huge positions of convertible stock with high dividends - can an individual demand that - no! When he buys 4%+ stakes in companies, he can demand changes and they listen - can we do that?

What he does is by no means very applicable to you and I. If you are looking for an investment model for someone with $10 billion in the bank, he's your man. He has done a wonderful job in that regard, but if you are running your own $1mil portfolio you need to find a more comparable role model. Warren Buffet (and his investment methods) have as much in common with us as a tree frog has in common with a bird.