The Bet Between Buffett And Protégé Partners

Discussion in 'Share Investing Strategies, Theories & Education' started by Redwing, 22nd May, 2016.

Join Australia's most dynamic and respected property investment community
  1. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,710
    Location:
    Homeless
    I used ycharts for historical revenue.

    YCharts: The Modern Financial Data Research Platform - Stock Screener, Excel Addin, Stock Charts and More

    I came across a link that gave access without signing up. Unfortunately I didn't keep the link as I didn't realise it was a paid subscription.

    Just used google finance to chart BRK and S&P500 - Google finance has BRK up 77.06% and S&P500 up 59.81% since 1/1/2008

    I am always shocked by variance in data between different sources o_O
     
    Redwing and Perthguy like this.
  2. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,769
    Location:
    WA
    Two investing pros do their own version of Warren Buffett’s famous $1 million bet

    The U.S. stock market “looks very expensive,” and that means the S&P 500’s SPX, -0.68% returns over the next decade “are not going to be great,” said Kaissar, while co-starring in WisdomTree’s latest “Behind The Markets” podcast.

    And so he has bet that hedge funds will outperform the S&P over the next 10 years, with Ritholtz Wealth Management’s Ben Carlson taking the other side of the wager and discussing it in the podcast.

    It’s basically a redo of Warren Buffett’s famous $1 million bet that an index fund would beat a selection of hedge funds over a decade. The Berkshire BRK.A, -1.18% boss already has been doing a victory lap, as he enjoys a big lead with less than a year to go.

    Except only a beer is at stake this time — and passive-funds fan Carlson is conceding that the bet won’t be a blowout like Buffett’s.
     
    trinity168 likes this.
  3. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,385
    Location:
    NSW
    Ynot and Nodrog like this.
  4. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    7,380
    Location:
    .
    Buffet has just been lucky in beating the hedge funds. I reckon if they did another 10 year bet at the end of it Buffet would likely lose:).
     
    Ynot likes this.
  5. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,385
    Location:
    NSW
    Certainly been the beneficiary of a tremendous bull run in US equities.
     
  6. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    7,380
    Location:
    .
    No I was joking. I was reading the other day Buffet saying that he would be quite happy to enter into another ten year bet with anyone else and expected the same outcome with index fund winning. Only problem is at 87 he’s not confident of being here to see it to the end:D.
     
    Ynot and Perthguy like this.
  7. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,385
    Location:
    NSW
    I reckon bet is 50/50 in coming decade, just based on current valuations.
     
  8. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    7,380
    Location:
    .
    Oh yee who has little faith. That sort of talk will get you banned from Bogleheads:eek:.
     
    Ynot likes this.
  9. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,385
    Location:
    NSW
    No the point is it’s a bet on a single stock market. I’d take a multi asset indexed portfolio though against fund of funds.
     
    Nodrog likes this.
  10. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,063
    Location:
    Sydney
    So typical of the hedge fund managers that say they would probably win if the bet started again today.

    They represent everything wrong with the world.
     
  11. dunno

    dunno Well-Known Member

    Joined:
    31st Aug, 2017
    Posts:
    527
    Location:
    Just North of Juvenile, slightly South of Senile
    To make passive fool proof you need four elements. Broad, low cost bought consistently over a long period of time.

    Buffett is saying he’s too old to collect on another bet but Berkshire is perpetual, so take that with a grain of salt.

    Buffett is an active investor, an extremely good one. However with the bet he wanted to show the power of passive investing and the difficulties of picking consistent active managers.

    Most people he is aiming this message at wouldn’t be aware of the difficulties of ensuring the passive outcome would win when you have a single lump sum, a single market, a single start and single finish date to deal with. He couldn’t afford to lose because had he got the timing wrong he would miss the opportunity to influence the debate.

    Buffett had to outsmart other active investors – so his start point valuation was critical, given the elements of consistent buying was absent, 10 years is not really a long time for passive to prove its math and the S&P is not that broad in the context of all global investable assets. .

    No way he would have taken the bet without some active valuation perspective to back the timing up, I suspect the real reason for not renewing the bet is that the right active valuation perspective is not in place to renew the bet without the other critical passive elements in place.

    Passive won't do too bad and is certainly not bad advice to the masses - but betting passively on the S&P500 starting now might not win over the next 10 years given the current valuations - so why take the chance and undermine his current leverage in the debate.

    It takes a unique active manager with a clear understanding of valuation on mid term returns to make a muppet of the other active managers whilst promoting passive investing.

    Next lesson Buffett hopefully uses his platform for should be to ecourage sticking the course. Nothing kills like changing course in the hard times and passive will have its hard times. If you want to be passive - implement the four elements and stay the course for life.
     
    Ynot, Anne11, BKRinvesting and 5 others like this.
  12. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,385
    Location:
    NSW
    Need a thumbs up emoticon.
     
    Ynot likes this.
  13. oracle

    oracle Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    731
    Location:
    Canberra
    Hence, why DRP even though a pain when it comes to selling can take care of the buying consistently and staying the course part. Studies have shown even during the lost decade (2001-2010) for S&P500 people who bought consistently did quite OK during that period.

    Cheers,
    Oracle.
     
    Anne11 and Snowball like this.
  14. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,769
    Location:
    WA
    Article here from Ted Siedes

    Why I Lost My Bet With Warren Buffett

    Interesting, in March 2015, SPIVA reported that 568 U.S. stock market mutual funds were amongst the top 25 percent of performers.

    By March 2017, SPIVA determined how many of those funds remained among the top quartile... Just 1.94 percent maintained their winning ways.
     
    RPI likes this.
  15. Ross Forrester

    Ross Forrester Well-Known Member Business Member

    Joined:
    30th Oct, 2016
    Posts:
    1,669
    Location:
    Perth, Western Australia
    I
    I just listened to that.

    I have never heard Bogle actually talk - I just read his works.

    It was a nice funny overview.
     
    Ynot and trinity168 like this.
  16. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,063
    Location:
    Sydney
    It shouldn't be hard to compare passive versus each active manager for each historical period of time to gain insight into the performance comparison.
     
  17. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,769
    Location:
    WA
    Only a snapshot in time and a big difference to the long term comparison of both but i found it interesting none the less...

    January 2015 to now
     

    Attached Files:

    Silverson likes this.
  18. oracle

    oracle Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    731
    Location:
    Canberra
    Agree it's short term so not very meaningful but something else to keep in mind is one (SPY) pays 2% dividend while the other (BRK.A) pays none. The above chart doesn't capture it.

    Cheers
    Oracle.
     
    sharon and Redwing like this.
  19. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,769
    Location:
    WA
  20. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    7,380
    Location:
    .
    Froxy and Ynot like this.