Even Warren Buffet is Down 20% This Year
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Do you know anybody who has a stock portfolio that is showing positive returns this year? If you do, and they are not holding all cash (that doesn’t count) then please let me know. Even super-investor Warren Buffet is down 20%, and that must mean that the markets are really, really bad. In an article on ChicagoTribune.com, the journalist explains,
The falloff exceeds the drop of the Standard & Poor’s 500 index and marks the worst first half for the Omaha-based investment and holding company since 1990. Price competition has driven down revenue at Berkshire’s insurance units, which account for about half of its income.
As I see it, there are two facets to this article. The first is that the insurance industry is in the dumps and that is causing difficulties for the actual business operations of Berkshire Hathaway. The second facet is that the stock price of BRK has dropped approximately 22% since December 2007. The markets are down and all stocks, including the famed Berkshire Hathaway is down as well. What the article does not talk about is what the value of his other holdings have done. Coca-Cola for example is down 16% on the year. Procter and Gamble is down 14.3%. These are large drops. I suspect that the drop on BRK stock is down because of these factors as well as the decline in the insurance industry.
Financial journalists love to write about Warren Buffet, especially in articles like these that talk about a rough period of time. It sells papers. What is most important about this article is what is not said.
Markets will go down and even super-stocks like BRK will have down periods. All stocks cannot go up all the time. As dividend investors, we need to be cognizant that our portfolios are going to decline in value periodically. It is what we do during these times that really matters. The worst tact we can take is to sell everything and start over. The better strategy is to stick to our investment plans and continue to think long term. If your strategy is well researched and your asset allocation is diversified, then over the long term your should do just fine. However, just as Warren Buffet knows, the market does not go up every day.
Disclosure: The Dividend Guy owns KO and PG
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7 Comments on this post
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Peter Schiff said:
Hi, The reason is the US Dollar is losing value and the US consumer is broke. Stay out of the DOW until its 1:1 with GOLD.
July 14th, 2008 at 8:19 am -
Ben Moreno said:
Or you can just hold your good dividend payers and reinvest the dividends to buy more shares at the lower price.
July 14th, 2008 at 11:27 am -
Dude said:
How much of your dividend portfolio is invested in these toxic banks that almost assuredly will go bankrupt? Isn’t it better to get out now with something than face bankrupt and worthless bank(s)?
I agree PG might be a good keeper but what about all the rest?
July 14th, 2008 at 1:00 pm -
Dividend Growth Investor said:
Completely agree with TDG. If you keep receiving and reinvesting your dividends you’d be better off just sitting on your chair and do nothing. If you could also find more money, then buying more shares of quality dividend payers will definitely pay off in the future.
What one could learn from this crisis is that one shouldn’t be overexposed to any particular sector.July 15th, 2008 at 6:56 am
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