Monday, February 13, 2006
Weekly letters and BRKA buys another company
For those that haven't yet followed our links (to the right), here's an excellent excerpt from John Hussman's weekly letter, on how to take a long-term approach to investing:
One of the most difficult requirements of long-term investing is to keep an eye on a reliable “fixed point.” It's fairly easy to get caught up in the day-to-day earnings news and political developments, in a way that makes investors ignore reliable benchmarks of value and probable long-term returns. I've noted before that while valuations have relatively little to do with short-term investment returns, they are a very strong and reliable determinant of long-term returns. So valuations are that “fixed point” at the other end of the wire. Now, you can't ignore the short-term pressures that sway the wire one way or the other, but you'll lose balance if you focus only on those. In the end, the objective is to take account of both the “fixed point” – valuations – and the short-term sway of the wire – market action – and then align each step in a way that's consistent with the condition of those factors at each moment.And Berkshire Hathaway buys another company - Applied Underwriters.