[DesertCat]

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Buffet - who stayed out of the internet bubble - did not, to my knowledge, figure out a way to profit from it.

BTW, according to Buffet's recent newsletter, he's beat the market in all but 6 of the past 40 years. That's a pretty frikken good record. According to my - possibly entirely inaccurate calculations - the chances of doing that well or better is only about 1 in 25,000.

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Buffett doesn't believe in shorting, so he couldn't take much advantage of the Internet bubble. But there was a huge over correction afterwards, and he made some large profits from junk bonds and specifically from providing very high yield debt to Level 3 Communications.

He also was able to make substantial profits during the 1987 crash caused by irrational portfolio insurance, and during the 1970s bear market. It's not all bubbles, irrationality works both ways.

And 1 in 25k radically understimates the likelyhood of Buffetts results being from pure chance for several reasons. First, if you include the Buffett Partnership, he's actually something like 44 out of the last 50 years. And he didn't beat the market by a slim percentage, he's whipped it. A guy who's averaging 1% better than the market is much more likely to be lucky than a guy who's doubled the market's returns.

For example, assume you find an investor who trails the market two out of every three years. But overall, his cumulative results beat the market by about 20% a year because his good years he crushes the market, and his bad years he only trails by a little. If he does this for twenty five years he's clearly a skillful investor. Of course an EMT guy would agree, but say it doesn't matter because it's too late, the guy is either close to retirement, or managing too much money now to be able to outperform.

Beating the market x years out of y isn't a good measure. Cumulative performance is the best way to look at an investors results.