US Stocks and Warren Buffett
I’m curious on the communities thoughts on Warren Buffett’s US stock market comments. I’ve linked the article below, but here’s a summary. A metric Buffett communicated in 2001 to re-enter US stocks is when the market value is 70% – 80% of US GNP. It was recently around 75%, so the article is about right now fitting his metric.
What problems do you see with using this metric in the near/middle/long-term investing horizons? The US market has rebounded out of recession many times. And as CM says in the CC, be concerned when people tell you "this time is different." Well, couldn’t certain people say that same thing about the CC community? Essentially what we are saying is that when it comes to "market rebound options," such as monetary stimulus, interest rates, etc., that this time is different. We are saying the usual market-propping levers are all used up and any rebound is simply a temporary phenomenon, or is going to be countered by devaluation making gains a mirage, among other variables.
Interested in your thoughts.
The stock market is like taking money to vegas and investing in slot machines in my opinion.
Yes, you can make money. You can make a lot of money. But, you might lose it all too.
Personally, I’d rather invest in tangibles. I know real-estate is considered a poor option, but I think land is a good option.
Last I heard, they’re not making any more of it.
I’m not as savvy as some of the others, but I’d say don’t invest more than you can afford to lose, diversify your holdings and plan accordingly.
Insofar as the "this time it’s different" thing goes… my Grandad always says "Live each day like it’s your last, and one day you’ll be right."
Investing isn’t all that different.
I agree with Aaron. Warren Buffett was the right guy at the right time, 60-70 years ago. He is a capitalist. He seems to think things will return to BAU, and perhpas they will for a few more rocky years. But I see no way for the growth model to keep reinflating the stock market in a sustainable way.
Invest in tangible things like land, paying off debt. AT least you have some peace of mind, and if some stock you were thinking about buying does go up 300%, well hind sight is 20/20, it could have just as easily done down that much.
Stu, I agree with those above to some degree, but being a trader myself of commodities and currencies, I see things a bit differently.
I do believe Mr. Buffet is an incredible investor who has years of wisdom far beyond my own, but his time may have come. I will not be surprised if the DOW JONES hits 5000 this year, the NASDAQ hitting 900 and the S&P hitting 500. These falls mark another 29% drop in current prices.
This is the prediction for this year alone; this does not include 2010.
What would I do? Not invest into stocks. I would hold, as Aaron said, tangible assets. If you don’t want to still trade the markets, then buy inverse ETFs. We could go on and on about options, but make sure your holdings are liquid enough that you can get to them within a week or less.
I have made hundreds of thousands on the market’s collapse because of inverse ETFs and being bullish the USD. Will I remain bullish? Heavens NO!!!! We all know the USD and its demise is coming. But I am a swing trader (in and out of the market within days).
Another good option is purchasing gold ETFs and some currency ETFs, as well as holding physical gold.
my questions about ol warren are……………..i wonder if he is stocking up on freeze dried food and water, how many guns he has, has he got solar panels, is he growing a garden, is he into permaculture, i already assume he has plenty of gold and silver. is he starting a transition town? what he plans on doing if the health care system fails, and what about homeschooling?
i wonder what he thinks really happened on 9/11. i wonder when he thinks we will see the end of deflation and enter an inflationary phase and maybe even hyper inflationary.
and finally i would like to know just when he thinks the swhtf , of course i really would like to know what he recommends for a haven
oh yeah and if he has seen the money masters?