Even after a massive down year SPY does well over the long term. No gimmicks.
It simple and efficient that most people find it boring.
It is resilient, adaptable and has a long track record.
4 Likes
You call -16% massively down?
2 Likes
If he thinks -16% is “massively down” wait till he finds out what happened to his Tesla position…and his Upstart, and his SNOW…
3 Likes
Be positive and optimistic. Negativity will make you miserable.
In last 40 years, S&P has been down only twice more than 16%.
S&P 500 index has outperformed over the long term and will continue to outperform BRK
2 Likes
I haven’t checked the numbers. But 2000/2001, 2008/2009, 2019/2020 should have witnessed more than 16% down. So three times at least.
1 Like
What about simply the last 12 months, down from 4800 last Dec to 3500 in Oct, a leisurely 27%? Does that count as No.4? Maybe Divi has his own definition of “down more than 16%”. Then of course we can’t win 
3 Likes
There’s a saying about a pot and a kettle.
2 Likes
No doubt Divi means “In last 40 years, S&P has been down only twice more than 16%…over a calendar year”.
2000 -9.1%
2001 -11.9%
2002 -22.1%
2008 -37%
2000-2002 was a brutal stretch.
4 Likes
He is talking about calendar year.
2 Likes
That’s what Monsieur said:
last 40 years, S&P has been down only twice more than 16%.
Very clear words. I knew it would become a matter of a “suitable” definition.
Anyway. When somebody claims XYZ is super-safe longterm and tries to support that by saying “It was nearly never down a lot” then somebody who bought last December surely is very relieved when told that now is a different calender year and his loss therefore does not count. 
2 Likes
Correct. Also note that this is total return, so it includes dividends. It not adjust for inflation.
CAGR ~13% including this year
Its challenging to use historical data to make statements about what is more likely to be worth more than the other. Both have done well over long periods of time. But S&P500 has achieved a lot of it by getting relatively more expensive on a fundamental basis while BRKB has gotten there by getting cheaper relative to performance. Its not a question however that the rate of underlying business performance for BRK has been better than for the S&P500. So what is your expectation for how valuation multiples will shift going forward? Based on the data Divi presented, it seems logical that someone who wanted an easy, no stress process that is highly efficient could just as easily invest in BRK rather than the S&P500 without concern. But if BRK is starting at a lower valuation point, it seems that the better bet (since nothing is guaranteed) would be to choose BRK instead of the index. But as Divi says, you should do your own diligence. No need to listen to his constant negative view on BRK. Choose for yourself. The S&P isn’t nearly as overvalued on a relative basis to BRK as it was a year ago. So your chances of doing better going forward are probably higher, but the logic would still seem to suggest BRK has the edge.
9 Likes
If Buffett could not outperform S&P, why would his successor be able to?
2 Likes
If the S&P could not outperform BRK, why would you assume it would do so going forward when starting off at an enriched valuation?
Maybe it could, but you haven’t said anything that suggests it would. WB is a unique resource to be sure. I think BRK deserves a premium valuation because he is there. But in all honesty, I have been perplexed by the lack of evidence that the market sees it that way. If anything, BRK valuation multiples have often trended lower and lower for a very long time. Maybe because people think he is not likely to be around any longer. In which case, maybe the valuation is already reflecting your sentiment that the valuation should be lower because WB is not going to be there to create outsized returns.
Like I said, we all have to come to our own point of view about that, but there isn’t any analysis or evidence that suggests that S&P 500 will beat BRK. Just your faith, which you are welcome to. I just wish you would stop telling everyone that you have truth on your side.
5 Likes
but S&P has outperformed BRK
2 Likes
Remember, with Berkshire there is a single stock risk and you have a jockey risk. By jockey risk I mean, you have to assume his successors are not going to be able to produce Buffett kind of returns. Any valuation you are assuming or seeing has to bake in that.
3 Likes
Are you referring to the 5% edge that it had after 20 years? The -14% deficit it had at 10 years? the 5% edge it had after 5 years?
I don’t know. The chart you posted suggests its pretty much a dead heat with who is ahead at any given time purely based on start and end points that could switch at any given time.
1 Like
More importantly, both have shown resilience and neither seems at large risk of collapsing. If you think the single entity risk of BRK is dangerous, then picking S&P 500 seems reasonable. But if you think there is greater risk of valuation multiple compression in the S&P500, then BRK seems like a better forward bet. So pick your poison.
I personally think there is more risk in further market multiple compression than entity risk in a business as diversified as BRK. But that might be because I don’t put all of my money in BRK. I have other things in my portfolio that give me diversity as a whole. BRK is the last company in my portfolio where I worry about single company risk. But I also don’t do what some others have done by putting 50% or more of my portfolio into just that one stock.
5 Likes
BRK was a “loaded spring” 20 years ago and S&P “valuation” was high. Every year, it has been the same narrative. Today, BRK PBV is 1.45.
1 Like
Hey it finally came true this year! 18% relative performance advantage for BRK.
Going forward, I bet less on BRK being a loaded spring and more on S&P500 being already sprung and maybe needing some more time to reload. I don’t know if BRK is that undervalued but it certainly isn’t overvalued. S&P500 still feels overvalued. Maybe you don’t feel that way because valuation isn’t your thing. But even a story investor has to care about valuation at some point. Look at Saul’s board for that lesson. I got caught up in the FOMO last year from that board too and it certainly was a good reminder that valuations at the extremes matter for successful entry and exit, even with businesses that are performing well.
6 Likes