Warren Buffett always merits attention – but especially when we agree with him
Victor Haghani
Founder & CIO of Elm Wealth | Originator of Dynamic Index Investing? | Salomon Brothers | LTCM
First, on expected returns in US equity markets –
Berkshire has continued to trim long-held positions in both Apple and Bank of America, amassing a considerable cash stockpile in the process. While only Buffett can know the true impetus behind the moves, we agree with his caution: U.S. equities are offering meager expected returns relative to safe assets. At Elm, we see long-term real returns of the US equities at about 3.25%, a paltry 1.25% premium over 10-year TIPS and 0.35% lower than it was at the end of September (see our?Elm Capital Market Assumptions here)
Second, on taxes –
To us, Buffett's recent observation on taxes rings particularly true:
Almost everybody I know pays a lot more attention to not paying taxes than I think they should. We don't mind paying taxes at Berkshire... That rate was 35% not that long ago, it's been 52% in the past... and with present fiscal policies, I think higher taxes are quite likely.
We agree — investors shouldn't let the "tax tail" wag the "investing dog." While some firms are pushing complex tax-loss harvesting strategies (including leveraged long-short approaches), we don’t think the?juice is worth the squeeze. For most investors, it's better to choose your exposure, implement it with low-cost ETFs, and handle tax-loss harvesting without paying premium fees or creating unnecessary complexity.
Happy investing,
Victor, James, & Jerry
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New Horizons
3 个月I heard someone say that Buffett has to have a certain amount of cash for his insurance businesses and he needs cash for capital gains taxes. So is it a sign that he is bearish or maybe there are other reasons.