Practicing the Art of Patience 151situations. As we end 2008 with many security prices approaching
1973 valuations, the population of those hiding in cash is as great
as ever. This is evidenced by investors ’ willingness to accept a yield
of .05 percent on 3 - month Treasury bills and 2.4 percent on 10 - year
Treasury notes. In comparison, some of the strongest and most prof-
itable U.S. companies are serving dividend yields north of 4 percent
and selling at very attractive valuations. With the pool of invest-
ment bargains greater than it ’ s been in decades, the vast majority
of “ market investors ” prefer cash. Contrast this with the euphoria of
the Internet boom, when cash was viewed as the dumb man ’ s asset
against equities trading at 40 times earnings.
As the saying goes, the more things change, the more they stay
the same.The Benefits of Waiting for a Good Pitch
Warren Buffett has often compared investing to baseball. Like a
batter, investors are simply waiting for Mr. Market to serve up a fat
pitch to knock it out of the park. But investors have one very dis-
tinct advantage over baseball batters: There are no called strikes.
Investors have the luxury of waiting as long as they want before
making a swing. Waiting can be of immense value to investors if
they are disciplined and patient enough to use it to their advantage. It ’ s
far more profi table to wait for the fat pitch and then invest big.
Investors can wait and wait until Mr. Market throws them the per-
fect pitch before they decide to invest big.
Unfortunately, many investors invest as if they truly were under
the three strikes and you ’ re out rule. This leads investors to feel
the need to be buying and selling something all the time. No mat-
ter how you examine it, more activity in the stock market generally
leads to poorer results. If it ’ s not the investments that do you in, the
increased frictional costs — namely brokerage fees and increased
administrative costs — will add up.CH008.indd 151CH008.indd 151 9/2/09 11:48:53 AM9/2/09 11:48:53 AM