Best investment adviser Richard Losch's blog

Secular Bear Market

In 1966 the market entered a secular correction phase that may or may not prove similar to today’s market. The market did not move straight down to its eventual low and recover steadily from that low. From 1966 to 1982 the Dow was stuck in a trading range between 577 and 1000. This may not sound so bad but for those of us that were participating, it was a series of dull, slow, bull markets that always petered out at around one thousand on the Dow. These bull markets were separated by grinding gut-wrenching bear markets.

Which Index Fund?

There are hundreds (maybe thousands) of index funds and they are all basically sector funds. Some of these indexes will return something close to the returns of the S&P 500 during the twentieth Century, some will do better, some will do worse, but if you know which is which, you are a lot smarter than I am.

A Different Drummer

John Bogle says that during the greatest bull market in history the average equity fund investor has received just 2.7% per year return. In other words after taxes and inflation the average John that had his money in mutual funds for the last eighteen years is probably in the hole. This is indeed something to ponder. At first it does not seem possible, but mindless pursuit of performance gets the crowd to always buy last years winners and we all know how that turns out.

Costco's Float

For instance, the Costco's companies total reported earnings for the period was $481.5 million; this is about the same as the net increase in cash as shown on the Balance Sheet ($483.9 million). Total cash on hand at the end of the period was $1.289 billion or about the same as the companies total debt level.
Market Comment. The second Quarter has ended on a positive note with the composite of all Losch Investment Management Company's accounts up 12.21% for the first half, vs. a gain of 10.7% for the S&P. For the last three years our composite has shown a positive return of 15.82% per year, compared to a negative 12.50% per year for the S&P.

The Power of Float

If the present trend continues Berkshire Hathaway’s after tax income this year would equal $6.9 billion up from $407 million in 1992. This means for the last 11 years Berkshire Hathaway’s after tax earnings have grown at an average annual rate of 29%.

Berkshire Hathaway Annual Meeting 2003

Saturday May 3, 2003 the Annual General Meeting of Berkshire Hathaway.

Charlie Munger. The Psychology of Human Misjudgment.

From a Charlie Munger speech at Harvard Law School. "Although I am very interested in the subject of human misjudgment - and lord knows I've created a good bit of it – I don't think I've created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with. When I saw this patterned irrationality, which was so extreme, and I had no theory or anything to deal with it, but I could see that it was extreme, and I could see that it was patterned, I just started to create my own system of psychology, partly by casual reading, but largely from personal experience, and I used that pattern to help me get through life."

Sitting on the Sidelines

Sitting on the sidelines may be no fun, but it is hardly an accurate description of what has been going on at 1440 Kiewit Plaza for the last year. I, as investment manager, have revised my table of recent acquisition activity to include figures for junk bond purchases and activity in the equity market (see below). If activity is the definition of fun, then Warren Buffett has been having a ball. Reading the first couple of pages of the chairman's letter I get the impression he is tap-dancing like crazy. Certainly 72 years has not dulled his sense of humor.

Berkshire Hathaway Growth in intrinsic Value

Warren Buffett's $45,000 offer in 2000 was an important marker for intrinsic value, because we know that his figure must have represented a substantial discount to the intrinsic value of the stock at the time it was made. This is an attempt to adjust that price for the growth of the last three years.

2002 Investment year results

A summary of the composite results for Losch Investment Management Company for the year 2002. Also includes tables for relative performance over five, ten, and fifteen years.
"I would consider a year in which we declined 15% and the Average 30% to be much superior to a year when both we and the Average advanced 20%." – Warren Buffett.


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