jump to navigation

Buffett: Focus on the micro and ignore the macro October 25, 2008

Posted by shaferfinancial in Uncategorized.
Tags: , , , , ,
trackback

According to Warren Buffett, the big things-the larger trends that are EXTERNAL to the business do not matter, it is the little things that are business specific that do matter.  He goes on to say that this mistake is the most common and critical mistake investors make.  Political events, economic indicators like housing starts, market trends, weather forecasts etc. and the general factors that ECONOMIST look at are short term in nature, therefore irrelevant to his long term approach.  Notice this does not mean ignore trends that directly effect the business you are analyzing.  For example, when buying a REIT, I looked at specific markets that REITs are in and found the health care market the most likely to give long term growth because of our aging society and the baby boomers approaching need for health care as they age.  This is business specific information that should be part of your analysis.

Truth be told, Buffett knows that economist make terrible investors because they think they can predict so much more than they actually can!  I mean if Alan Greenspan’s performance in front of the house committee yesterday doesn’t convince you how little economist know, then nothing will!

Buffett has catalogued the various events that he has lived through in his investment life; events like political assassinations, terrorist bombings,  wars,  oil shocks, the Soviet Union breaking up, wage and price controls by a conservative president, prime rate approaching 20%, etc. All those events were unpredictable, traumatic and ultimately made little difference in his investments.

Warren Buffett has done investors a real public service by eliminating a whole lot of noise for us.  Fundamental analysis, waiting for a cheap entry point, and the “hold em long” strategy is proven and now we don’t have to worry about all those things the talking heads talk about on those TV channels!  So, my advice is don’t listen to them, don’t take them seriously, just don’t.  Do your independent fundamental analysis.  Devise an entry strategy and when it hits pull the trigger and dive on in.

 

Advertisements

Comments»

1. investmentblogger - October 28, 2008

Hey Dave. Great series!
I find it very interesting that in times like this when Buffet’s advice should be listened to, there are so many we;; respected newspaper/journalists that write articles in their papers doubting him and even outright calling hm “wrong”. Perhaps you can write a follow-up article on this. Here is a CNBC article that also contains links to other news articles:
http://www.cnbc.com/id/27400058/
Its definitely interesting to read!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: