Photograph by Martin Schoeller
Warren Buffett is bullish on America and you should be too.
When it comes to betting on American ingenuity, no one has done it better than Warren Buffett. His confident, common sense approach to capitalism has yielded Berkshire Hathaways 20%-plus annualized returns since 1965 and its powerhouse $450 billion stock market status. When Forbes Magazine celebrated its first century on Tuesday evening, Buffett was on hand to remind the world theres no stopping this entrepreneurial spirit, which powers his portfolio and has filled Forbes pages for 100 years.
"Whenever I hear people talk pessimistically about this country, I think they’re out of their mind," Buffett told a rapt audience of business leaders. He graces the cover of our centennial issue holding Forbes’ first-ever magazine issue. Inside our magazine is an unprecedented collection of stories from the worlds 100 greatest living business minds; many were on hand Tuesday to celebrate. To this audience, Buffett offered a quick lesson in the simple math that underpins his relentless optimism.
Standing beside entrepreneurs such as Vanguard founder Jack Bogle, hotelier Steve Wynn, philanthropist Jacqueline Novogratz, Motown creator Berry Gordy, investor Henry Kravis, musician Sean Combs, and Dallas Cowboys owner Jerry Jones, Buffett pointed out that the Dow Jones Industrial Average traded for about $81 when Forbes was first published in September 1917. The index has risen over 275-fold in the ensuing century (an average of about 5.8% annually, or 10% when including dividends), thus "being short America has been a loser’s game, said Buffett. I predict to you it will continue to be a loser’s game, he added, offering a forecast that the Dow will trade to 1,000,000 in the next hundred years.
Before Buffett ceded the stage to Stevie Wonder, who performed My Cherie Amour, You Are the Sunshine of My Life, and Superstition, the Oracle made clear his prediction was equal parts a bold hundred-year stock market call and a sleight of hand. After all, the Dow would need to compound at less than 4% annually to hit Buffetts 1,000,000 target. Double the forecast if the Dow gains 4.6% annually; increase it to 10,000,000 if it returns 6.4%.
Later in the evening, Buffett returned to the stage to sing The Glory of Love alongside Stevie Wonder in a duet. Stevie Wonder capped off our party with a rendition of Higher Ground. But maybe just buy Berkshire Hathaway?
With Buffett’s Dow math in mind consider the following: Even if Berkshire only returns 10% annually (half its historic return over 51 years) during the next century, an owner of a single share today will easily join the billionaire ranks. The conglomerates Class A shares, worth $275,630 at Wednesdays close, would rise to $3.9 billion. A 20% annual return would turn shareholders into ‘trillionaires.’
Thats the force of free market capitalism and Buffetts own obsession with the power of compound returns over time. No wonder he thinks the pessimists are out of their mind.
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