Millions of people were recently reminded, Warren Buffett, CEO of the company Berkshire HathawayDo not always call them properly. Two years ago, he expected that Hillary Clinton would nominate the presidency and win, and did not lose any confidence in this possibility until the election night.
On this day two weeks later, however, this is the time to consider the forecast of the stock market on a large scale and that Pavite made 17 years ago, in 1999, and this is reaching the point of the peripheral. Here, Buffett was definitely on the right side of the bet.
Pavite’s prediction is to increase the size of the total returns – the estimation of the servants in addition to the reintegorly profit distributions – investors in the United States will receive in the 17 years that began in 1999 at the end. Buffett originally predicted in July of that year in a speech at the Allen & Co. Conference. Repeat it in several speeches during the next few months; And I worked with this writer to convert speeches to a luck condition, “Mr. Buffett in the stock market,” Run on November 22, 1999. You will notice that today after 17 years, exactly.
Why is this 17 -year time? Buffett’s attention was caught because in 1999, the securities market in 1999 just ended two different periods-17 years old, which Buffett realized could be a tire for a discourse. He also wanted to build on the frame, adding a 17 -year -old predictor that started in 1999 to move.
The initial period of 17 years lasted in its reference framework from 1964 to 1981, when the securities market returns were strictly bad: Dao The industrial average Jones ended in 1964 in 874 and 1981 in 875. “Now is known as a long -term investor and a sick man,” Pavit said in wealth An article, “But this is not my idea of a big step.”
The simplified interpretation of this anomalous investment disaster was a significant increase in interest rates during the period: long -term government bond rates increased from 4 % at the end of 1964 to more than 15 % in 1981. luckThe high interest rates exert clouds on stock prices. During this 17 -year -old period, clouds were strong enough to overcome the country’s GDP costs, an economic indicator that was usually accompanied by roar gains for the stock market.
Then he arrived there from the second period of 17 years, starting at the end of 1981 and extending until 1998. In those years, Federal Reserve Chairman Paul Volker declined to the bottom of interest rates and inflation rates. In response, stocks rose strongly. Thus, in time, I did the profits of companies-“not steadily”, however, the Pavite rose, “but with a real power.” Dao rose, during the 17 -year -old, more than ten times, from 875 to 9,181.
By that time, which is not surprising, most investors were not thinking about extremist values. They were certain that they were wonderful to choose the stocks and had the right to the wealth they were accumulating. The Paine Webber and Gallup Survey in July 1999, when Dow 2000 added another point that the least experienced investors – those who invested for less than five years – have expected annual returns over the next ten years of 22.6 %. Those who invested for more than 20 years expect 12.9 %.
Well, Buffett pointed out that he summarized his opinions in the second half of 1999, this size will not happen. Instead, (without using these words) expect a kind of returning to the middle, where the world of investment is closed, and moved forward, in the fate of ordinary suspects, interest rates and company profits.
Here he saw an average result. He said that the net trading and management costs borne by investors-according to what these costs said could strip investors from a percentage in their return-expect that they may achieve annual returns in the 17-year period from late 1999 to late 2016, which will be 6 %.
Today, with the passage of 17 years, what is the answer?
First of all, it is reminded that the stock market – as is provided by DOW and Standard & Poor, for example – do not deal with “clear” returns. What you watch on computer screens is total returns, before deducting any trading and management costs.
But the record shows that the overall periods of the period are anemia enough to confirm the general Pavite accuracy. From mid -November, 1999, until last Friday, the total annual return of investors from Dow Industries 5.9 %.
After proved his ability to deal with the works of the crystal football, Pavite, 86, was asked by this writer-his 87-year-old friend-whether he was interested in predicting the total revenue over 17 years starting from now and ends in late 2033. He refused to name a return rate, “I must be careful what I say because I will undoubtedly get the report that must be To write after that. “
Puffett did, however, he presented three ideas about those coming 17 years.
First, it is believed that an investor in the low-cost S&P index that re -ves all profits is better-it is very likely to be much better-who is the investor who buys 17-year-old government bonds and leads to investing all his coupon in the same instrument.
Second, it doubts that amateurs, “nothing” investors after the indicators fund itself will In the total It ends up with superior results on those that investors who choose to employ specialists in imposing high fees.
Third, it predicts that many professionals who fail their investors by making index funds will become very rich in the process of doing so.
A chief retired Editor-Carl Lomes is an old friend of Varne Buffett. It was also a contributor to Berkchire Hathaway for many years.
This story was originally shown on Fortune.com
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