They're uncharted waters in that the US economic machine is quite likely going to take on an entirely different face and the assumptions of old may not hold valid down the line. Our exciting, new "service economy" means a lot of things, one of which (and probably the most profound) being the dramatic upward shift of wealth away from the rabble and towards the "owners" (see Buffetts comments on corporate profits). This is going to have massive social, political and economic impacts on everything from durable goods to perishables, presidents to senators, states to counties and on and on. No one or nothing will be left untouched.

What we're seeing today is akin to when we entered the industrial age from the days of cotton. We may not know precisely what lies ahead, but we can safely say that it is going to be different than the old paradigms and those who cite them in the context of the future are probably quite wrong.

for what its worth, i appreciate the article cat.

yeah- buffetts not the only one who knows interest rates affect market values - still a good article.

What's to debate? You are hung up on a clever title for this thread? I never made out that Buffett was an "augur", since I pointed out that his prediction hadn't come exactly true. And I never said these ideas were novel.

It's hard to have a "debate" with someone who ignores what was actually said, just like you did in the insider trading thread. In that case, you said anyone trading on material non public information was trading illegally. After I gave you numerous examples to the contrary your response was "yes, exactly my point". LOL.

So I post an interview with Buffett talking about overtrading being a problem and that investors expectations are frequently overly optimistic, and you suggest instead that I talk about overtrading being a problem and that investors expectations are frequently overly optimistic. I'm wondering if you even read the interview.

You also imply I shouldn't talk about over-trading or how simple it is to look at stock market valuations, because ordinary people have doctors and lawyers. I guess that means they shouldn't have to understand details like what a healthy diet is or what happens when you get caught speeding...

Lastly you claim in 99 everyone knew the market was due for a tough decade, which is clearly not true.

I think you should stick to posting your 'trades'. Your criticisms are non-sensical. You are essentially saying, I know this stuff (which based on the trades you post, you really don't), so no-one else should know it.

These are all good points and I don't know that Buffett would disagree with any of this. He's mostly focused on the trade deficit and tax fairness the last year IIRC. It's been a few weeks since I read his latest shareholder letter so I can't remember exactly what he said on these topics, but you can read it at BerkshireHathaway.com.

Keep it up DC. Fortune made the headline to the article, Buffett in fact said trying to forecast the market is futile. The concepts in this article are little practiced by the investing public, especially large investors who have poured money in to the 2 & 20 hedge funds, and by Wall Street who becomes most bullish at market tops and by professional investment managers who as a group woefully underperformed the market. Just like the guy who calls 10% of his stack PF with KJos, if it weren't for dissenting opinion there would be no opportunity. Anyone who sites a few winning trades instead of a 10 year track record (at least) should be taken with a grain of salt.

Actually it was my headline, I like to keep things interesting. One other interesting thing about this article was that Berkshire had peaked around $74k earlier that year and dropped to $57k at the end of that month, on it's way all the way down to $44k the following March. The next year or two was full of articles about Buffett losing it, being out of touch, no longer understanding the new market.

I actually sold my Berkshire B shares near that bottom in March, not because I doubted Buffett, but because I bought them on margin and freaked out I was gonna get a margin call Taught me a lot about margin, investing, and how to value stocks. Unfortunately I need a few more repeat lessons over the next two or three years before it really sunk in

The title of this thread is the man who predicted the last 9 years. Further in your original post you referred to Buffet singularly and said he was largely ridiculed and ignored. Thats a gross exaggeration.

I was actually implying that we need Wall St and doctors and lawyers because the layperson doesnt have the skill set necessary to do these things.

And nowhere did I claim everyone knew something. My only claim was that many though obviously not everyone nor even the majority shared Buffets opinion on future market returns, overtrading, correlations.

Not at all an exaggeration. Market fever was rampant in 1999. Most 'experts' recommended buying dot-coms, and otherwise smart people blindly followed them. The book "Dow 36,000" was a bestseller and received numerous accolades. People who disagreed were definitely ridiculed.

Please explain specifically which 'experts' you are referring to.

I have a feeling that you are referring to the banking whores, the sell side analysts that rose their price targets higher and higher while internally panning these stocks as garbage.

yowserrrs, maybe a bit off topic, but how old are you? (not in the rude sense) just i thought you were very early 20s and had made a huge amount in futures and options trading. just given i thought you were early 20s i cant understand how you'd know what market sentiment was 9 years ago (sorry if i got your age completely wrong).

also, shows the ignorance of index funds lovers when even buffett said the returns would be poor in the next 17 years yet still they'd be plowing their monthly take home money into them (all imo).

I give up. Were you even around in 1999? Your view is so narrow. I'll let others elaborate.

Why give up? You made a reference to experts. Who did you have in mind when you said that?

well it was from 8 years ago, and buffett actually made a case for index funds when he pointed out the transaction costs from buying and selling too frequently.

i think the article is very well written and buffett is explaining important things.
what i am missing though and what i d like to know is how interest rates are actually determined. they are not coming out of nowhere and if you are talking about interest rates the inflation rate is probably important too.
why should stocks perform worse if both inflation and interest rates are high? the real interest rate would be low, too.
the only reason i can imagine is, when inflation is low, the real interest rate cant be lower than inflation and people are not forced to invest by inflation which might stimulate stock demand and lower profit.

The problem with higher inflation is the unpredictability, or at least the fear of it. When inflation is kept consistently low for a number of years, there is an element of predictability that keeps both the nominal and real interest rates low.

We are all victims of our own biases, and mine during that period was that I was an avid reader of Forbes, and it was deep into tech mania. It seemed Rich Karlegard and George Gilder couldn't write a column without taking a shot at Buffett as being clueless and out of date. I also read lots of tech magazines and followed tech stocks, so there were lots of true believers who would fire off angry posts or letters if Buffett every implied that tech stocks couldn't grow to the moon.

It's possible the mainstream press was more even handed, but I think a lot of that tech hysteria was spread around.

The last time Forbes produced a tradeable idea Wilson was in office.

And its a well known trading precept that by the time the mainstream media is reporting on the issue, its fully valued in the stock market.

Frankly, this says a whole lot of nothing. "Things might change". Yes we know that. But this has always been the case, so I'm not sure what makes this investment environment so radically different from the past since the environment is always subject to change.

natedogg

Long term interest rates will be determined in the market place and are highly sensitive to future inflationary expectations. As inflationary expectations and long term interest rates rise investor's will also require a higher earnings yield on stocks (inverse of PE) resulting in lower valuations from current levels. Individual companies that can grow earnings faster than inflation and be purchased at reasonabvle valuations can still do well.

Yes, at any time, "things could change" however there are strong indicators that suggest fundamental, profound economic changes may be in store for the US; changes that are far above and beyond the nominal, procedural changes we've faced "at any given time" in history.

We're presently shifting from an extremely (almost offensively) prosperous manufacturing and industrial based economy to a debt ridden "service economy", where the actual creation of wealth (as opposed to simply shifting it) is so narrow in scope it's almost anecdotal. Our model is shifting into something that is absolutely incomparable to the way we've lived in the past and it's kind of a big deal, since the standard of living a nation enjoys is inextricably tied to their ability to create wealth- not just move it around.

To compare the nominal changes of the past to the change we're up against is like saying that a Lamborghini and a little red wagon are basically the same thing, since they both have four wheels.

The reason this profound change is totally incomprehensible to you is because you- like me- are an American who has lived in the land of milk and honey for so long that in your mind, changes are little blips on the radar that really aren't all that significant. What we're up against is more than a blip.

Watchmaker,

You're driving your little red wagon dangerously close to the precipice of moronic. Proceed with caution IMO.


Note: I will continue to support single mothers in the service industry as long as I have breath in me. Clearly service econ >>> manufacturing econ

What's your point? You claimed that no one was bashing Buffett, I described those who were, and you respond with some tangent about trading. You seem to have trouble sticking to topics and making coherent arguments.

Do you ever say anything of substance, or is every post you make a series of babbled sentence fragments and LOLisms?
Saying something as ******ed as a service economy is greater than a manufacturing economy would usually call for a bit more elaboration, especially considering the fact that almost all indicators point to the contrary.

Again I didnt say noone was bashing Buffett. Just the way you presented the situation is an exaggeration.

The connection is that you are saying Buffett was in the minority and youve cited particpants that were allegedly in the majority. I believe to include these participants in the investment community at all is foolish.

If you told me about an issue concerning stock market valuation or returns where Forbes, Fortune, USA Today, CNBC, and industry publications were on one side and a few well respected money managers were on the other side, without even knowing the issue, I would side with those money managers everytime.

I am not even touching this thread: