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My Market Prediction System

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March 03, 2007 – Comments (1)

Market Prediction Sytems.

There have been many.

If the American League wins the World Series.

If Washingtoin wins the super bowl.

If the Republicans win the House.

But what about Mr Warren Buffet?

Can Mr Buffet predict the market?

Or is Mr Buffet going to slip?

I have just finished reading Roger Lowensteins' biography of Warren Buffet.

And the most recent letter to his shareholders, which includes a chart of BH performance vs the S&P500.

This chart shows that Mr Buffet has on average more than doubled the returns of the S&P500 beating the 10% S&P gains by 11% more.

Throughout his investing career Mr Buffet has found times when due to his opinion of valuation he could find no stocks worth buying.

So he stopped buying, and would be almost equaled or beaten buy a rising S&P500 that was destined to correct itself.

The first time this happened was in 1967.

He was beaten by19.9%.

Two years later In 1969 the S&P dropped 8.4%.

In 1971 and 1972 it was close.

He beat the market by only 1.8% and 2.8%.

!n 1973 the S&P dropped 14.8&

In 1974 it dropped 26.4% more.

He was beaten in 1975 by15.3%

In 1977 the S&P fell 7.4%

In 1980 he was beaten by 13.0%

One year later the S&P fell 5%.

In 1988 he squeeked out a 3.5% victory

In 1990 the S&P fell 3.1%

In 1999 the S&p clobbered Mr Buffet by 20.5%

In 2000, 2001, and 2002 the S&P fell 9.1%, 11.1% and then the big fall 22.1%

Now has something changed? Is Mr Buffet losing it?

In 2003 he was beaten by 7.7%

In 2004 he was beaten by .4%

Two years later where is the big S&P crash?

It did not come.

In 2005 the S&P rose 4.9% and Mr Buffet barely beat it by only 1.5%.

In 2006 the S&P rose 15.8% and Mr Buffet beat it by only 2.6%.

So over the last 4 years the S&P is ahead of Mr Buffet by 9.8%.

So in order to restore Mr Buffets 11.2 average advantage, we need a 21% victory by Mr Buffet.

Will this happen because Berkshire stock goes up 40%, while the S&P goes up 20%?

Or will the S&P crash 20% while Mr Buffet breaks even? Or will balance be restored in 2 years not one?

Or should I bet against Mr Buffet?

Not me.

BRK-A and B will outperform the market.

1 Comments – Post Your Own

#1) On March 28, 2007 at 3:27 PM, des52 (< 20) wrote:

Buffets right.  Its hard to find good deals right now.  I feel like I have to search for small unknown stocks to find anything for a decent price anymore.

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