No. of Recommendations: 4
Here's the similar message chatgpt gave me:
Warren Buffett has not explicitly admitted that selling airline stocks during the COVID pandemic was an error. However, in his 2020 letter to shareholders of Berkshire Hathaway, he did acknowledge that the decision to sell the airline stocks was a mistake in terms of timing. He stated that Berkshire's position in the airlines industry was a "mistake" and that the pandemic had made it clear that he had been "too optimistic"
This gets it precisely backwards - we are talking about whether selling the shares was a mistake, not whether buying them was a mistake. Admitting that the stock purchase was a mistake, when you have just announced that you have sold them, is a very different thing from (probably later) admitting that the sale was also a mistake.
In retrospect, looking up the stock charts of the 4 airlines (UAL, DAL, AAL, LUV), the mistake is not nearly as bad as I thought it was. Despite hugely increased air travel and very high prices, the share prices are not up that much since the end of March, roughly when the sales were made (I thinkk we only know they were made during the first quarter.) Looking at March 31st, 2020 as a starting point, the 4 stocks are up in the last 4 and a bit years, but only by 87%, 48%, 38% and -2%, respectively, or an average of about 43%, or ... 11.75% annualized, whereas the S&P total return (^SP500TR) is up 74% (19.6% annualized) in the same period. And the tax loss from the sale in 2020 was worth something, too.
Side note: BTW, thanks GPT, you screwed up the first question, but on the second (if the total return is 43% over 38 months, what is the annualized return?), you did a much better job of calculating this than google, and explaining how you (correctly) did the calculation!)
chatgpt:
To calculate the annualized return given a total return of 43% over a period of 38 months, we can use the following formula:
Annualized return = ((1 + total return)^(1/time period in years)) - 1
First, we need to convert the 38-month period to years by dividing by 12:
38 months / 12 months/year = 3.17 years
Next, we can plug in the values and solve for the annualized return:
Annualized return = ((1 + 0.43)^(1/3.17)) - 1 = 0.1175 or 11.75%
Therefore, the annualized return for a total return of 43% over 38 months is approximately 11.75%.
I'm beginning to see where this thing can be useful: it is often much easier to see that a conclusion or a calculation is correctly done if you can see the thinking behind it. In this case, it is easy to see the faulty reasoning in response to the first question, and the correct reasoning in response to the second question. It doesn't have to always be perfect to be useful.
dtb
