No. of Recommendations: 33
An issue I've raised for 15 years,
"
This is where the legend of Buffett’s genius rightly springs. What is less well known, however, and even less discussed, is that these first five decades account for more than 100% of Buffett’s career outperformance. While he beat the S&P by a factor of almost 500 in his first fifty years, he has underperformed it in the eighteen years since. As the chart below shows, a million dollars invested in the S&P from the end of 2007 through mid-December 2025 would today be worth $6.6 million, almost 25% more than the $5.3 million you would have earned in Berkshire’s stock."
Yes, though you don't usually indulge in such blatant cherry picking of start dates : )
Berkshire was extremely optimistically valued around December 2007. P/B was 1.828. Three months earlier it was at 1.59, and it was at 1.63 just a couple of weeks later.
It's generally true that Berkshire and the S&P 500 have had extremely similar market returns for about the last 24 years. If you don't cherry pick dates, it's a tie for most intervals. But as is well known, Berkshire has done that by seeing its shares getting more valuable, and a bit cheaper on trend. The broad market has done it by getting a lot more expensive, and not growing in value as fast. The S&P 500's multiple of smoothed real earnings has risen a rather remarkable 2.498%/year, compounded, since end 2007.*
So anybody who knew in advance that, for some inexplicable reason, the broad US market was about to become more and more and more expensive, good for them. For those who were merely along for the ride and got lucky (essentially everybody owning the S&P), I don't think there are any bragging rights to be had.
And even the lucky folks aren't that lucky if they don't sell before the next secular bear. A possible aphorism: any price rise beyond the rate of value growth will unwind.
Jim
* Would the following line of reasoning be outrageous: Given that the broad US market has become more expensive by 2.5%/year for 18 years, it seems theoretically possible that it could get 2.5%/year cheaper for 18 years?
