captmike

5 Reasons to Ignore Buffett

When Buffet talks, you might do well to listen.

One of the previous posters said Buffet had a terrible track record since 2001. Well he called the Chinese market correctly (following Buffet in and out of PTR made me a tidy sum), he called the Euro correctly (not following him in and out was a missed opportunity for me), people claiming having cash in 3 month treasuries cost him 50% should be discounted immediately, and he nailed it on derivatives (which is the BIG one).

Here's what he said in a letter to BRK shareholders:

"...Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one another. The troubles of one could quickly infect the others. On top of that, these dealers are owed huge amounts by nondealer counterparties. Some of these counterparties, as I've mentioned, are linked in ways that could cause them to contemporaneously run into a problem because of a single event (such as the implosion of the telecom industry or the precipitous decline in the value of merchant power projects). Linkage, when it suddenly surfaces, can trigger serious systemic problems."

Mind you, he said this in 2003, not a couple of months ago. He received countless grief for this, and was even accused of being a hypocrite because he had used derivatives to his advantage previously. Well he's still fabulously wealthy and for many who were also wealthy at the time, but didn't heed his warning, they are no longer wealthy.

If Buffet says now is the time to start investing in certain US equities, you might want to pay attention. His record speaks for itself. He didn't amase in is lifetime an amount of wealth comparable to a "second tier economy" because he's misguided, a BS artist, or just plain lucky, so I'd suggest you leave the Buffet bashing to the less informed.