Pat Dorsey, the director of equity research at Morningstar, and author of two books on investing:The Five Rules for Successful Stock Investing
andThe Little Book That Builds Wealth
, had an interesting conversation with John Rekenthaler about whether to buy bonds now. They talked about Warren Buffett
's recent statement that stocks are cheaper then equities. Dorsey said that first grade math would show that getting a fixed coupon so low versus a 7 or 8% coupons that will grow over time. While they did not say there was a bond bubble, they said it seems investors are always thinking about what did best, the past ten years thinking the next ten years will be the same.
Below is the beginning of the script, followed by the video.Pat Dorsey
: Hi. I'm Pat Dorsey, director of equity research at Morningstar.
Earlier this week, John Rekenthaler, who is joining me today, the vice president of research at Morningstar, e-mailed me an interesting little quote from an interview that Warren Buffett
did on CNBC, and that's sparked kind of fascinating e-mail chain that we had. Why don’t you tell me what the quote was, John?John Rekenthaler
: Well, Warren was speaking at Fortune's Most Powerful Women group or gathering.Dorsey
: Has Warren had an operation recently that I am not aware of?Rekenthaler
: Apparently, he is not one of the most powerful women, but he is definitely one of the most powerful men. He said that it's become quite clear to him that stocks are cheaper than bonds, which of course there was then a headline that tied in Warren to pronouncing on the bond bubble. I mean, there has been a lot of talk about a bond bubble.
Now, I didn't think he went that far when you look through there. He just said, he felt stocks were cheaper than bonds, and he couldn't see really any reason to add to a bond portfolio at this stage.http://www.valuewalk.com/http://twitter.com/#!/valuewalk
About the author:My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com
Visit Jacob Wolinsky's Website
The Strategy of Ben Graham – Warren Buffett’s Mentor
From 1923 to 1957 Warren Buffett’s mentor, Ben Graham, followed a strategy of investing in net-nets. He said: “It always seemed, and still seems ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the...net current assets alone…the results should be quite satisfactory. They were so in our experience, for more than 30 years.”
Today net-nets are rare. They are collected under GuruFocus’ Net-Net Screener. GuruFocus also publishes a monthly newsletter which recommends the safest net-nets. All of these are included in GuruFocus Premium Membership.
Click Here to Try It Free!