Warren Buffett: Time to adjust your expectations
Warren Buffett is well known for a couple of things - his love of hamburgers and Cokes, his folksy whitticisms, and being one of the world’s best investors. That last one is why, when he says something, I listen. I read about Berkshire’s latest annual meeting recently and, as always, it was enlightening. And, like a bucket of cold water, sobering.
Buffett and his partner Charlie Munger said flat-out that the days of Berkshire returning far superior returns are over.
“We would be very happy if we earned 10%, pre-tax” on the additions to Berkshire’s equity portfolio, said Buffett. “Anyone that expects us to come close to replicating the past should sell their stock; it isn’t going to happen. We’ll get decent results over time, but not indecent results.” Added Munger: “You can take what Warren said to the bank. We are very happy at making money at a rate in the future that’s much less than the past… and I suggest that you adopt the same attitude.”
This follows in line with some other things I’ve been reading from well-respected writers like Peter Bernstein and Kevin Phillips (whose new book, “Bad Money” I’ll shortly be reviewing). These people, not known for gloom-and-doom perma-bear sentiment are saying things will be middling to bad for a good while.
Bernstein believes the economy won’t turn around until after 2009 (!) and when it does, it will be a long, slow recovery. I tend to believe him.
Kevin Phillips lays out an equally dim view of the situation going forward. He is even more pessimistic than Buffett and Bernstein. Ditto for bond king Bill Gross of PIMCO.
When heavy hitters like these guys tell you to adjust your expectations down, you’d better do it. I know I am.
This article published only at Advanced Personal Finance.
