Warren and John and me
. . . plus a Condemnation
How Price Beats Value--The Vast Importance of Timing
7.2 years June 21, 2002--August 28, 2009
Worldwide ETFs Portfolio--Hypothetical
Weekly
See Comments below
A green curve has been added to the chart. It tracks the weekly price of Mr. Buffett's Berkshire Hathaway common stock (BRKA). And Mr. Bogle's, of course, is the brown line, the SP500--which he practically invented as a legitimate and the preferred, equities investment vehicle.
But looking at this whole chart serves to remind me of the grave disservice, because of its brevity, the media do the public with headlines like this from this morning's (September 9th) Wall Street Journal, page 1 (save the mark !).
Harvard, Yale Are Big Losers
In 'The Game' of Investing
What remotely possible use does that serve the reader, the public, or anyone? None, I submit, except a certain, possible schadenfreude among those who did not go to Harvard or Yale. The
schools' longer-term records show memorable, praiseworthy outcomes. Harvard: 14 to 17% per annum over the past 30 years, and Yale,
19.1% per year for the past five fiscal years.
I, too, do a disservice, venial as it is, to Messrs. Buffett and Bogle by demonstrating their outcomes within the short span of time of this page. That is not my purpose, but to provide broad-market benchmarks for the comparisons it is important for me to make. Nearly every other similar page on this website shows likewise short durations--because that's all I have since the historical beginnings of the ETFs portfolios I use.
There are entrenched similarities and dissimilarities between the investment philosophies and styles of the two men. Both are exemplars of what they believe in, held passionately, over a lifetime.
Both seek value. Mr. Buffett trusts himself, and himself alone, to find value, judge it, and act on it. Mr. Bogle trusts no one to seek value, no single or few people, nor any institution to find, judge, and act on what they find and perceive. He believes that the judgements of all value seekers, analysts, and actors in the markets en masse are reflected in the momentary price, any price of any security at all moments in time.
Both have long, long records to prove the worth of their disparate philosophies and ways of capturing value. Mr. Buffett, since 1965, has compounded returns in
Berkshire
at the rate of 20.3% per year vs. 8.9% per year for the S&P 500 total return. He has suffered only two loss years, both within the current decade. (Is that an omen?)
Mr. Buffett is a timer. Mr. Bogle is not. Mr. Buffett waits for the price to come to his judgement of value. That's timing. What it is not is technical timing, i.e., paying attention exclusively to prices and nothing else. Mr. Bogle advocates for the average investor to buy today since you cannot 'time the market'.
Mr. 'Copernicus' advocates exclusively and patently the philosophies of both men. He lets the market judge the value by the relative strength of the prices. He times the market directly by observing the patterns of its prices.
He believes that both these men, as well as the other 26 signatories to The Aspen Institute document, and countless others, here and everywhere across the globe, temporarily (and unknowingly) suffer from an acute, extended case of pathological dysconfidence.
Further, he therefore begs to differ with that document and its signatories, an elite group of selected, well meaning and concerned, thinkers and doers from government, business, finance, law, and the academy. He believes that the malady of temporary, ultra-widespread dysconfidence is the bottom half of a real, physical, universal, long-term confidence cycle.
Accordingly, he offers his own statement, counter to The Aspen Promulgation, to wit,
THE 'COPERNICAN' STATEMENT
Regarding the Origin and Nature
of Financial Panics and Crashes
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Human events, with respect to wars, panics, crashes, and crises, have as their mediating cause--or at the least, their inexorable conditioner--the real, contextual, physical effects of planetary synodic periods, especially that of Saturn-Neptune, on the human fabric, both physical and non-physical. The effect is the regular alternation of extremes of confidence and non-confidence (dysconfidence) in the individual and mass human psyche. It appears to be exaggerated in every other sequential synodic period, as now, the last being 72 years ago.
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Though contrary to my usual confession of inability to forecast, I predict the day when this knowledge--the relationship between brute mechanics and soft pyschology--becomes scientifically validated, acknowledged, and universally accepted.
The trope comes to mind that the best thinkers and doers of the age of Galileo Galilei denounced him to the Roman Inquisition (1615), later getting him indicted (1632) and condemned for his 'error' and suspectedly heretical thesis that the earth moved around the sun based Keplerian orbital physics (c.1605) after the historical Copernicus hypothesis (1543). It was they, the best thinkers and doers, who were in error, not he.
Today, the Aspen Signatories' beliefs, and those espoused by The Aspen Institute, are to those beliefs of the astro-revolutionists of 1543-1632 as today's soft disciplines of Economics, Finance, Politics, and Sociology are to the hard discipline of orbital and synodic mechanics, especially those of Saturn and Neptune.
CODA
Occasionally these biweekly articles stray to a place where the author had no idea they would end at the outset. This is one of those occasions.
I hope Mr. Buffett and Mr. Bogle do not mind the ride, for which I thank them as unknowing, surprise passengers. I have for them the highest respect, as I do for their co-signatories and The Aspen Institute itself, my native skepticism and suspicion of all institutions notwithstanding.
Still, I was frankly shocked and somewhat disheartened, if I were subject to disheartenment, at the extremism and absolutist self-assurance with which apparently some view the cause(s) of the current crisis. See press release and read the first paragraph! Then I recalled my own thesis of dysconfidence and was restored immediately to serenity.
Monday morning (a favorite refrain of mine in these pages). What has all this to do with Monday morning at the opening? Everything. The matters discussed in this article affect every market participant whether they know it or not, buying, selling, or doing nothing--every day, hour, minute, and second of the week--continually.
The context of planetary synodicity is ever present. Its shadings of effect are so nuanced and hidden we do not perceive nor advert to them. They are present nonetheless. See here.
Written
September 9-13, 2009
Posted
September 13, 2009 5:37 p.m. EDT
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