I get annoyed when an academic shits on a practitioner's performance. Buffet's genius was buying insurance companies for the price of the float. He was paying $1000 for a bank account with $1000 in it that was generating cashflow on top of that.
In all fairness, paper gives his due and respect in many places. "However, it cannot be emphasized enough that explaining Buffett’s performance with the benefit of hindsight does not diminish his outstanding accomplishment. He decided to invest based on these principles half a century ago. He found a way to apply leverage. Finally, he managed to stick to his principles and continue operating at high risk even after experiencing some ups and downs that have caused many other investors to rethink and retreat from their original strategies." All he is doing to find out replicate his performance in today's world. Even in today's world getting cheap leverage is pretty difficult.
I see. I didn't read the paper. It looks like they strived to determine the risk factors to make his returns "statistically insignificant." It's really hard to get "natural" leverage.
That's a good point. When you buy the S&P 500, you are saying U.S. large cap stocks is the way to go. I also believe the S&P is weighted, so that is also an expression of opinion. Indexes provide cost-efficient diversification, but they still express a point of view (my index is better than your index, ha ha ha).
Also, I believe the S&P 500 performance over the years includes investing the dividends back into the fund/index. The average dividend in the S&P is 2%, so if the S&P is claiming 9% per year over 10 years, it's really 7% stock appreciation + 2% dividend being re-invested. I'm not sure about this, but it's good to know the details of this.
BRK loads mostly on Value and Quality factors. S&P futures has a pure exposure to market beta. Levering up using margin, combination of QUAL etf and VV etf comes close to matching his strategy or one can buy BRK.A itself. As it was mentioned upthread, it is difficult to beat his natural leverage comes from insurance float.
%% Good points, so difficult in fact ,he warned he does not expect to ever do as well as he has in the past. I tend to agree with him NOT a prediction......