Day: March 5, 2013

Reuters: Bill Smead discusses Berkshire Hathaway (3/01/2013)

Buffett: Performance streak may end this year By Ben Berkowitz For more information go to The information contained in this article represents SCM’s opinions, and should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results. The

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Smooth Returns

Harry Markopolos was working for a hedge fund of funds and attempting to put a portfolio together that would “smooth” long-term returns. In the process of marketing what his company was doing, he ran into a client who already had a money manager doing that for him. The money manager the client used was Bernie Madoff. When Markopolous looked at the long-term track record of Madoff’s client, he instantly knew that it was mathematically impossible to have a return that high with as little year-to-year variance in the return. We at Smead Capital Management would like to ask a few questions. How do you legally “smooth” investment returns? What price do you pay to “smooth” returns? Why do we as long-duration common stock owners not care about “smooth” returns?

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