Tuesday, September 02, 2008

All of Wall Street Wants to Be Like Buffett Without The Work

I was struck by a recent article over at MSN which highlights many of the keys to Warren Buffett's success - buy for the long-term, invest small, do your research, etc.

Today's move in the market is a perfect encapsulation of the major money managers on Wall Street. Gustav turns out to be a bust so oil collapses (oops, maybe I should have stayed short oil) and stocks rally almost 2%. But like every bear market rally before it, there was no conviction in this rally and it's faded very quickly. Most money managers are acting like day traders, trying to squeeze a 1/4% out of the market every day so they can still get paid at the end of the year.

Daytrading was a suckers bet for the common man in 1999 and it's an equally disastrous methodology for mutual funds and hedge funds in 2008. True investing should be done without consideration for the market. If you can buy stock XYZ for 10x earnings in a growth industry and get a decent dividend - do it. Forget about when you'll get liquidity, the stock will reward you by making a smart investment in a good company. Most "investors" today seem fixated on only their liquidity event. When can I sell and how much will I make? Buffett once said that he thought you should be comfortable with your portfolio if they stopped trading stocks for 5 years. Can you imagine the panic that would cause if you told the average RIMM or APPL shareholder there wouldn't be a quote on their stock for 5 years?

Chase the market at your own peril.

Outlook - I added some market short positions this am in the rally and I'll look for additional rallies as entry points on the short side. Earnings this quarter should be fairly weak again.