In the past year of market undertainty and volatility, we've heard a lot from Warren Buffett, the investing legend, the guru of all gurus. I guess his wisdom is somehow comforting when we're all just standing in front of the markets like a herd of deer in the headlights.
So isn't it just a bit disturbing to find out that in the year of our frequent need, the Oracle of Omaha got crushed by the market?
Well, not "crushed" in the sense that he lost a lot of money, but Bloomberg News reports Monday that in 2009, Mr. Buffett's own investments underperformed the broader market by their widest margin in a decade. His holding company, Berkshire Hathaway Inc., posted a thin 2.7-per-cent gain for the year, while the S&P 500 rose 23 per cent.
Part of the problem was that while a lot of investors were going after the easy money, Mr. Buffett was actually spending his money on some long-term investments that are going to take considerably longer to pay off. He slapped down $26-billion (U.S.) to buy a railroad, of all things - Burlington Northern Santa Fe Corp. He also made deals for some high-yielding preferred shares of Goldman Sachs Group Inc. and General Electric Co. late in 2008.
Now, typically, Berkshire has a pretty good track record against the S&P 500 benchmark - Bloomberg points out that it has outperformed the index in 15 of the past 22 years. So maybe 2009 was just an anomaly.
And when was the last time an even more glaring anomaly occurred? It was in 1999 - when Berkshire's stock tumbled 20 per cent while the S&P 500 rose 20 per cent. That was at the peak of the dot-com bubble, when the world was giddy on fly-by-night tech stocks with dubious business models, and people were calling Mr. Buffett a dim-witted dinosaur for being unwilling to embrace the market's Internet revolution.
And who turned out to be right about that?