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Foreword

the “tons of quarry rock” is more challenging than it might first appear. While Warren Buffett has not written a text on the subject, his actions show his success — like Swensen’s — is in part due to his being offered opportunities not available to the individual investor. Specifically, he is offered the opportunity to take large positions in established companies at favorable prices. At such times, company information is made available to Mr. Buffett and his staff which is not routinely available to the public. Ultimately, however, it is his and his staff’s ability to evaluate such positions — to separate the gems from the quarry rock — that explains their long-run success. As in the case of Swensen’s outperformance, few individual investors have the time and skill to evaluate such opportunities, even if they were presented to them. As to market timing, I know of no one who has consistently outperformed the market by market timing. Since there are always countless “authorities” who say to buy, and countless others who say to sell, there will always be many instances in which someone called correctly the last turn of the market, and even the last two or three turns. As Hebner documents, it is a foolish hope to try to emulate such market timers. It is better to go with J.P. Morgan’s advice — that all one knows about the market is that it will fluctuate. J.P. Morgan’s observation has at least three implications. The obvious one is: Don’t try to time the market. You will make your broker rich, not yourself. Another implication is you should choose a portfolio you can live with despite market

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