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Buffett versus Momentum Traders and Economist October 6, 2011

Posted by shaferfinancial in Uncategorized.

Many economist are saying there are virtually certain we are going into another recession.
Chartist’s and momentum traders are insisting we will see a 20-50% drop in the S & P 500 in less than a year.
Truth is, I have no faith in my personal ability to know whether this will happen or not?
That is why over 10 years ago I starting selling my mutual funds and moved to a strategy where I don’t have to make market timing decisions. Or at least I wouldn’t have to watch the extreme variations in my retirement oriented accounts. Regular readers know that I now pursue three different strategies. I own a large EIUL which doesn’t go negative. I own several dividend producing stocks that pay me an increasing dividend year in and year out and when the stock price goes down my dividend reinvestment program is able to leverage dividends into even greater returns by buying the stock cheaper. And I own shares of Berkshire Hathaway a conglomerate that owns over 70 businesses and has produced superior returns since I started accumulating them. All of these strategies are long term oriented and designed so a bear market never hurts me no matter how long it lasts. And further you don’t have to have nerves of steel or sleepless nights to maintain your strategy. This has worked for me and dramatically improved my retirement planning.
Most regular readers also know I listen to Warren Buffet when he speaks about the market.

So it may be of interest to my readers Warren’s latest interview by Charlie Rose. In it he states that most of the businesses he owns are having banner years [exceptions are the home building, real estate businesses]. He sees no signs of falling demand for many of his major holdings. As to Berkshire Hathaway, he believes it is a screaming “buy” well below intrinsic value and has instituted the process to buy back shares at up to 10% above book value. Watching the market over the last few days I would guess he is buying back some shares. He has over $20B in cash that he can use to do this! He also states he has bought over $8B in additional equities this year, $4B in the last quarter. So who is right? Are stocks a screaming value now or are they on the precipice of a major drop? Could be both are right. But if you think long term and not short term, you are probably best served by listening to the greatest investor of our generation and not talking head economist on the TV IMHO.

Here is the link to the interview: Buffett

You tell me who you believe?



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