No. of Recommendations: 2
I agree that given the high valuation of the S&P 500, BRKB/T-Bills is a better portfolio than S&P 500/T-Bills, although I don't think that BRKB will return 7% real, even though it has done so recently. Maybe 5% real over the long term. Over the next 5-10 years, though, I expect BRKB to return less than that, as the S&P corrects and BRKB falls with it. Over the next 5-10 years my guess would be something like 0%-5% nominal return for the S&P and slightly higher for BRKB.
7% real was Jim’s estimate. There are some here who believe Berkshire won’t fall in tandem with the market. I expect it will, but will recover fairly quickly.
My thought on asset allocation is to have enough in cash and tbills to ride out a long drawdown, say 10 years worth. Doesn’t make sense to have xx% of portfolio in cash/bonds.
