- Chris Sprow
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The idea, one that finance and investing guru Warren Buffett makes more clear then ever, is to maintain a diverse portfolio in these times of struggle. When you're filling out your NCAA Tournament brackets, he has a point, but a very limited one.
Buffet explained yesterday what he sees with the current economy. He says, "Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen." From what he's seeing with his own companies, he said jewelry companies are struggling, while GEICO is doing well as people look to cut their insurance costs. He believes there is a scar on people's psyche about investing and that it will change the public's saving and investing habits for a long time.
From listening to Buffett, you get an idea of how the economy really works, at least in terms of investments. And his thoughts mirror a wise bracket strategy. See, just because GEICO offers a cheap alternative to the glamour companies, it doesn't mean it's not still a massive juggernaut of a company on TV more than North Carolina or Duke. It's a safer bet than ever for that very reason.
There are those that have the impression the NCAA Tournament is the truest of meritocracies, when in fact it's moved further than ever from that idea. For one, even if you add the NIT, fewer teams compete in any kind of postseason basketball than even football, where we complain that a true playoff doesn't exist. And adding to that, the "true playoff" that is the NCAA Tournament now keeps the better teams closer to home, so they can guarantee sold out arenas. In 2005, Illinois made it all the way to the title game, but they never even had to get on a plane. The top pair of seeds in each bracket of this tourney will be within driving distance of their home fans in most cases. And in the last ten years, while Cinderella is so heavily associated with this tourney, she still scrubs the floor. Syracuse winning as a No. 4 seed with the emerging Carmelo Anthony leading the way in 2003 was as close to a true outsider that got into play. The champion will—and this is kicking Memphis to the curb, we know—come from the Big 12, SEC, ACC, Big 10, Pac 10 or the Big East, and to bet against it would be almost absurd.
At least in a market sense.
Because as Buffett would make clear, taking a flyer on a team like Michigan State might seem like a risk, what with North Carolina and UConn looking so strong, but it's not like you're taking Middle Tennessee. It's more like buying American Express at ten bucks a share. It's a risk, but in brackets according to Buffett, the idea is like having both Jared Jewelers and GEICO. You know the pool from which will arise the winner. If tourney play was really like investing, the strategy would always be the same: Just use more than one bracket.
It's so easy, even a caveman could do it.
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