Warren Buffett was on CNBC for 3 hours on Monday, 3/3/14
Here is the 48 page transcript:
http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/03/03/2014-03-03%20Ask%20WarrenBuffett%20complete%20transcript.pdfBecky Quick from CNBC was discussing Buffett's Will with him:
".......because I laid out what I thought
the average person who is not an expert on stocks should do.
And my widow will not be an expert on stocks. ………And since all my Berkshire shares are going-- to philanthropy-- the question becomes what does she do with the cash that's left to her? ………. part of it goes outright, part of it goes to a trustee. But I've told the trustee to put 90% of it in an S&P 500 index fund and 10% in short-term governments. And the reason for the 10% in short-term governments is that if there's a terrible period in the market and she's withdrawing 3% or 4% a year you take it out of that instead of selling stocks at the wrong time. She'll do fine with that.
And anybody will do fine with that. It's low-cost, it's in a bunch of wonderful businesses and it takes care of itself."
Is Warren Buffett suggesting an asset allocation of 90% stocks and 10% bonds for the average person, including retirees?
Certified financial planners and registered investment advisers would be horrified at this stock heavy allocation, especially for retirees.
Any comments on this asset allocation?
Comments
Why people think what Billionaires do would be revant to anybody else is beyond me.
The Warren of recent has become activist. It is easy to make money when you can push the President to action. Railroads anyone? Easy for him to tell us we should all pay more taxes especially the rich, when he has ongoing issues with the IRS himself.
Ever since he drank the koolaid with Bill and Melissa, he has not been the sage of Omaha. I'm sure to draw the ire of the faithful here but so be it. His wife will have no worries. Critical mass was achieved a long time ago.
give it a rest, Wayne man, he says nothing of the sort, and I bet you know that.
as for pushing the prez to action, if only!
'Gates koolaid' is unworthy of their efforts and, I suspect, unworthy of you too, although the word 'faithful' does make it sound like you like to fight.
I don't mind a strongly worded opinion. And I know where you are coming from with regard to Buffett's recent persona. To my eye, this all started with the introduction of the B class shares and then, unbelievably, options trading. Once that was done the Wall Street Game was in full swing.
Mark
Thanks. I agree that most small investors would not be able to handle a drawdown like the 45% you mentioned, especially if there is no visibility. Perhaps this is why investors are fleeing EM's. Uncertainty is the worst thing any investor can face.
While I have listened to Buffett in the past I also enjoy what investors like Charles Schwab, Sheldon Adelson, and Marc Faber have to say among others. Differing perspectives help one figure out their own style and commitment.
"Buffett of today is not the same Warren Buffett we all knew about years ago. There was a time when you heard about Warren Buffett on the news once a year during his annual hoedown in Omaha. The news would dedicate 30 seconds showing him eating his traditional ice cream cone. Now he gets 3 hours on CNBC.
The Warren of recent has become activist. It is easy to make money when you can push the President to action. Railroads anyone? Easy for him to tell us we should all pay more taxes especially the rich, when he has ongoing issues with the IRS himself.
Ever since he drank the koolaid with Bill and Melissa, he has not been the sage of Omaha. I'm sure to draw the ire of the faithful here but so be it. His wife will have no worries. Critical mass was achieved a long time ago."
Regards,
Ted
I'll still say the best Buffett CNBC moment ever was this interview on the trading floor with Sorkin.
http://www.cnbc.com/id/44730157/
"HOBBS: So Andrew, has he invited you to the dinner tonight?
ANDREW: I have not been invited. Warren has not invited me. Am I invited to the dinner tonight?
BUFFETT: No. (my note: this was not a "joking" no.)
ANDREW: I don't know how much that plate costs, though. That's a pricey plate.
BUFFETT: Let's— get out your wallet.
ANDREW: Yeah, I've got to get my wallet out, so. Anyway, back to you guys. (my note: at this point, Sorkin looks like he's about to crap himself.)
BUFFETT: We're very selective. (my note: what a statement from folksy "man of the people" Uncle Warren.)
HOBBS: Wow.
TAMRAZ: Oh.
BUFFETT: All you have to have is $1,000 or...(unintelligible)."
________
Later:
"You Own Some Investments?" "We Own Some Investments."
=
"ANDREW: You own some German bonds?
BUFFETT: We own German bonds.
ANDREW: German bonds.
BUFFETT: Yeah."
Even Bogle suggested that folks could use their expected SS benefits as a proxy for a bond fund.
I'm not saying that Mr. Buffett's is the only way to go but IMHO it is probably a better option than what 'most' of them are doing now.
Regards,
Ted
Walk On Water:
But, how about a 50-50 of VTI and AGG?
---March 2004-March 2014 = avg. combined of 7.9% annualized.
'Course from Oct of 2007 through March of 2009 would have required most investors to have no sense of sight or smell; as likely numerous occassions of "projectile vomiting" would litter the floors of one's home as VTI cruised downward -54% during this time frame.
Now, if the average investor has a $5,000,000 portfolio, such an event could cause one to become a bit pissed; but not force this person into "food stamps". On the other side of the fence for the $257,000 portfolio clawed and scratched from one's annual wage for a lot of years and retirement is just 4 or 5 years away.........one may suspect a reaction a bit different for the "average investor".
Likely that the human emotions side of life would not persist with a 90/10 equity and bond portfolio if and when another market melt comes to an average investor's door.
Catch, there's a difference between 'most' investors and the 'average' investor but of course you know that. I still have this feeling that unless an investor understands, even at a minimal level, what VTI & AGG are they wouldn't buy them unless they were being touted on the front page of a magazine, web page or news report.
John and Ted: if Mr. Buffett leaned the other way politically speaking would you change your opinion? I don't care at all but I don't see what that stance has to do with his investment advice. His investors (or followers if you prefer) are overwhelmingly pleased and the vast majority of his accumulated wealth is destined to be given away. Beats the snot out of the Koch brothers and their ilk.
Regards,
Ted
Dunno - You're probably right - but the operational term here is "most Investors." And I have no idea how you would define such a term. I'd say that the wife and I both about 15 years into retirement and in the early distribution phase would NOT qualify as "most investors." (Our pensions & SS carried us for the first decade.) Anybody on the board wish to volunteer as a typical example of what "most investors" would be like?
Regards,
Ted
http://brighthouse.com/corporate/shop/internet
Voting based on political ideology screws up the country. Investing based on political ideology screws up your portfolio.
Politics has become the new religion, it seems.
Who are most investors? It's interesting to see such puzzlement now, when Buffett has been saying for many years that low cost index funds are better than individual equities for most investors. (Can't seem to find the exact quote I want, but these will do.) I don't recall people asking then who "most" were.
2007: ""A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,"
2003: "Those index funds that are very low-cost (such as Vanguard's) are investor-friendly by definition and are the best selection for most of those who wish to own equities."
Is his thinking distorted by focusing on sizeable accounts? I don't see it that way. He stated that this works well for the retire who is drawing 3%-4%/year. Percentages are independent of dollar amounts.
Some have suggested that if you're rich enough, you don't have to worry about the draw down. Certainly if one has enough money, even a 90% loss isn't going to put a crimp in your style. On the other hand, in a weird way, it is the average retiree who is better insulated from market setbacks, because that person is relying on SS for a much bigger percentage of expenses, and that isn't going to be (dare I say buffetted?) by market conditions.
The short-term bond portfolio is serving as cash. I might be more conservative, and suggest 15% rather than 10%; this would support 5 years of 3% withdrawals; in the worst economic conditions, that might not be quite long enough for markets to recover, but it would be close enough.
As to how people might react in seeing most of their assets drop 45%, I think he was clear - if people put 90% in an equity index fund, and in the case of a market plunge relied on the short term bonds to tide them over, they will do fine with that. He was talking about the strategy. If people bail, then they are likely to fail, but it wouldn't be the strategy that failed.
Aside from the way people react emotionally (bailing), the main reason for my doubts about this working for many people is that I am concerned that most retirees do not have enough saved to live on 3-4% of investments (with the "typical" asset allocation recommended). Ironically, this means that for them to succeed, they need to increase their risk even more.
As for asset allocations I prefer Professor Wm. Sharpe's view that a 60/40 or even 64/36 stocks and bonds allocation is a better choice as it gives the best possible return at the least risk. This is explained in his Investors and Markets book.
Enjoyed your rejoinder. I'll dare take a couple exceptions:
Point 1: I cannot agree that previous Buffet recommendations that "most investors" use or rely on low cost index funds amount to the same thing as a specific allocation model which has been designed for a specific individual and which allocates 90% to a specific index - in this case the U.S. dominated large cap S&P 500. While he's probably "right on" using low cost funds and quite possibly correct in his optimistic forecast for U.S. equities, I think it's the assett allocation here that's raised a few eyebrows - especially for someone presumably in retirement and having little investing experience.
Point 2: Buffett by this model also becomes one of the rare modern day advisors to exclude completely from the plan all international investments. Here we're talking about international equities, bonds, currencies and real estate. (I doubt he runs Berkshire in the same constricted manner.) Albeit, there is some limited exposure to international markets through S&P companies with foreign operations.
There are many unknowns here. (I haven't read the full 48 page transcript). First, perhaps there's so much money involved that growing the principal for future generations is the paramount goal. If the time frame is to be measured in generations rather than years the plan is likely a good one. On the other hand, perhaps Buffett designed the plan to be: (A) exceedingly simple for (B) someone with a relatively short life expectancy (C) in the belief that relatively soon someone else will reallocate the funds into a more diversified plan.
Each will draw his/her own conclusions. And much can be learned from the proposed model whether you agree with it or not. However, from the standpoint of one many years into retirement and also also quite risk-averse, such plan in all its simplicity does not sufficiently buffer my hard-gained wealth from the inevitable investment tempests that buffet the equity markets. Regards