You think you've had a bad two years? Poor Warren Buffett has seen more than $25 billion evaporate from his net worth as Berkshire Hathaway bled with the rest of the economy.  

So the bargain hunter in him kicked into gear. One year ago, Buffett penned an op-edin  The  New York Timessaying he was buying U.S. stocks for his personal portfolio. Shortly after, stocks fell off a cliff, and the economy has been nothing short of disastrous.

And while stocks have since reboundedoff their lows, it wasn't before Buffett received an onslaught of criticism that caused some to wonder: Has the Oracle of Omaha lost his touch?                                                                    

You cannot be serious
Simon Maierhofer was one of those criticizers. In fact, he took issue with Buffett's claim that stocks will outperform cash in the coming years:

How did [Buffett's] "cash is trash" philosophy fare over the past 10 years? $10,000 invested in the S&P 500 exactly 10 years ago would be worth $7,500 today. The safest cash equivalent, [Treasury bills] ... would have returned about 30%, putting you at $13,000. We don't encourage investing by looking in the rear view mirror but a look at the numbers shows that the only bull market right now is in cash.

Let's leave aside for a moment the question of inflation, which ensures that the $10,000 of 10 years ago is not, in fact, the equivalent of $10,000 today. What does the market's performance over the past 10 years suggest for the future?  

Up, up, and away  
Any 10-year retrospective has to contend with the fact that 10 years ago was smack in the middle of the dot-com boom -- when tech companies like Oracle (Nasdaq: ORCL) and Cisco (Nasdaq: CSCO), and even boring businesses like  Home Depot (NYSE: HD) and  Tyco International (NYSE: TYC) -- traded like perpetual sunshine was carved in stone. Since then we've seen not one, but two bubbles burst. The fact that trailing 10-year returns look terrible is hardly news.                                                                  

But if we look at 10-year returns for the Dow Jones Industrial Average over the past 100 years, a pattern emerges:

10-Year  
Period

Dow Jones Industrial  
Average Return

1998-2008

(9%)

1988-1998

331%

1978-1988

165%

1968-1978

(19%)

1958-1968

77%

1948-1958

226%

1938-1948

14%

1928-1938

(49%) Continued...