BRK.B

Berkshire Hathaway Cl B

Trading Strategies

Get Rich Quick? No – Get Rich Slowly… and Stay That Way

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I'm always hearing stories of folks who hit it big overnight in the stock market.

They sound great, but the problem is most of them are… just stories. I've been in the markets for decades now. I spent more than 20 years as a broker, and I'm fortunate enough to have friends and associates that are among the very best traders and investors on the planet.

I've seen firsthand what happens to the people who swing for the fences every at-bat. Sure, they might hit occasionally, but when they do, it's not skill – or superior knowledge.

Most of the time… It's just luck. Even worse, most of the time that stroke of good luck is just a harbinger of really bad, bad things just around the corner.

Take this former client of mine who made a small but enviable fortune during the dot-com boom...

Trading Strategies

Boring Companies Like This Really Made Buffett Rich

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Having $100 billion in leftover cash is never a bad thing… unless you happen to be the richest investor in the history of the world.

At last weekend's Berkshire Hathaway shareholder meeting – or Warren Buffett cult gathering, as I consider it – the Oracle of Omaha revealed that, even after buying 75 million more shares of Apple, he still has over $100 billion left in cash.

That's about 20% of the total value of Berkshire, so it's a bit of a problem for him.

As he explained to CNBC on Monday, there's a lot of competition among private equity funds and other financial buyers for companies big enough to move the needle at Berkshire.

That's not easy to do.

At the same time, neither is buying; prices are just not that attractive right now, and when it comes to spending Berkshire's money, Buffett is notoriously selective.

He said, "I look at prices and I find it hard to buy things. And incidentally, professional investors aren't going to do better than the average amateur in almost all cases. But I don't find things easily. I mean, we were on and, in March of 2009, when the S&P was in the 660s or 670s, we talked about it then. I mean, this was the bargain counter. And it continued for a long time. Stocks have been very, very cheap." (Note the use of "have been very, very cheap," and not "are very, very cheap.")

While he agonizes over how to spend money, Buffett's often-repeated solution – his classic misdirection, really – for regular investors has always been that they should just buy "low-cost" index funds because, hey, "99% of the population shouldn't even try" to beat the market. 

Publicly, he comes across as a huge fan of indexing, saying, "the best single thing you could have done on March 11, 1942 – when I bought my first stock – was buy an index fund," because "$10,000 invested [there] in 1942 would be worth $51 million today."

Now, his math is right, of course, but there are so many things wrong with this idea I don't even know where to start.

Do you have 76-odd years to wait around for $51 million? Do you have a time machine that will allow you travel back in time and quite literally do as the man suggests?

Me neither.

Naturally, the horde of "Buffettologists" out there, who slavishly hang on his every word and attempt to imitate the man's every move, go out and try and buy time machines set for March 11, 1942.

And failing that, they go and load up on index funds (while BlackRock laughs all the way to the bank), because they think that's what Warren Buffett does.

Obviously, he does nothing of the sort.

So let's let the Buffettologists go shop for magic time machines and throw good money after bad on expensive index funds – maybe we'll check back in with them in 2094 and see how they did, though I doubt they'll be sitting on anywhere near $51 million.

Instead of trying (and failing at) what Warren Buffett and Charlie Munger do now that they are rich…

...we'll do what they did to get rich - and we'll succeed with flying colors, starting with this one "boring" company...

Trading Strategies

The Huge Difference Between Listening to Warren Buffett and Drinking the Kool-Aid

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The "Woodstock for capitalists," or the Berkshire Hathaway shareholder meeting, took place this past weekend, and our Tim Melvin is here to tell you why it's smart to listen to Warren Buffet and Charlie Munger, not worship them…

The "Woodstock for capitalists," or the Berkshire Hathaway shareholder meeting, took place this past weekend, and our Tim Melvin is here to tell you why it's smart to listen to Warren Buffet and Charlie Munger, not worship them...

ETFs

Here's How Wall Street's Selling Everyone Tickets on the Hindenburg

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Everybody loves exchange-traded funds (ETFs) these days.

There are a mind-boggling 2,000 ETFs, give or take, in the United States today. Roughly 70% of those are equity funds.

The three largest equity ETFs, packed with around 25% of all equity ETF assets, are S&P 500 index funds, like the SPDR S&P 500 ETF Trust.

Now, it's true that indexing gets most of the investment love at the moment, but there's a really brisk business in so-called "motif" or "thematic" passive strategies.

These let investors tap into just about any sector or idea that strikes their fancy.

Of course, you can passively invest in exciting sectors like robotics, defense cybersecurity, or biotechnology, but you can also buy ETFs that invest in faith-based or special-value principles, like veganism (I'm serious) and animal welfare, or social justice.

Essentially, here in the weird year 2018, if an investor can fathom it, there is an ETF that can be created to allow for one-click investing in the idea.

But ultimately, most of the money is flowing into the large-cap indexes.

After all, indexing is the new pet rock/Rubik's Cube/Beanie Baby, and, as such, is the answer to all our investing prayers.

Wall Street is embracing the idea that the unmanaged indexes will usually outperform the highly paid active managers.

Faced with the prospect of collecting low fees, or worse, no fees, even the old-school brokerage and investment management firms are pushing the idea of low-cost index funds to their clients.

It is the ultimate solution (to a problem nobody really has). Like party drugs, nobody can get enough of these things.

Well, when (not if) the market turns and the sun comes up on the carnage, it's going to be much worse than anyone ever realized...