If there’s one person investors should listen to during a market correction, it’s Warren Buffett. At age 89, Buffett has lived through quite a few downturns. And he’s made out pretty well: His net worth is in the ballpark of $85 billion.
Through the years, the Oracle of Omaha has given a lot of great advice in his annual letters to Berkshire Hathaway shareholders. He has even written about a specific approach for how investors should handle a “super-contagious” disease.
It’s not what you think
Warren Buffett has been interviewed in recent days about his thoughts about what investors should do in response to the global coronavirus outbreak. His take was that it wasn’t a good idea to buy or sell stocks based on daily headlines. But that’s not the advice I’m referring to.
In early 1987, Buffett wrote to Berkshire Hathaway shareholders about what to do in the face of an epidemic. This was, of course, way before the outbreak of the novel coronavirus that’s causing worldwide concerns today. It was even before the avian flu, Ebola, SARS, or MERS made the news.
But more than 30 years ago, Buffett addressed two “super-contagious diseases.” He told readers that there are “occasional outbreaks” of these diseases and that they will “forever occur.” Buffett admitted, though, that “the timing of these epidemics will be unpredictable,” cautioning to “never try to anticipate the arrival or departure of either disease.”
What were these two diseases? Fear and greed among investors. Buffett stated that his goal to deal with these “epidemics” was “to be fearful when others are greedy and to be greedy only when others are fearful.”
Time to be greedy
There’s no question that plenty of investors are fearful right now. The so-called fear index — the CBOE Volatility Index (VIX) — has skyrocketed over the past couple of weeks. When the VIX goes up a lot, it’s a clear sign that many investors are scared. If you think that Warren Buffett was right in 1987, though, that means it’s time to be greedy….CLICK for complete article
Dr. James Thorne, a regular on MoneyTalks was kind enough to send us this report on the seriousness of the COVID 19 crisis and its emotional affects on the market. ~Ed. Over the past week, global stock markets experienced the most severe 5-day market correction in history. As news of the global spread of Covid-19 intensified, fears of a global pandemic increased. The three major US market indices, the Dow Jones Industrial Average, The NASDAQ composite, and the S&P 500 fell more than 10% from the record peaks achieved a few weeks ago. In 5 short days, the markets went from the euphoria of record highs to extreme fear. In our 2020 market outlook presentation we examine the most recent work by Dr. Robert F. Shiller, “Narrative Economics: How Stories go Viral and Drive Major Economic Events”. Click here for full article
Our friends over at Hawkeye Wealth sent us this fascinating article on the events that lead Vancouver’s real estate market to become the “growth machine” that it is. ~Ed.
For years in British Columbia, the elected powers looked at rising home prices and saw that it was good. It’s “a challenge that virtually every other jurisdiction would like to have,” said former BC Liberal finance minister Mike de Jong in 2016. Such is the gospel of growth.
In 1976, sociologist Harvey Molotch wrote of the alliance between government and the development industry to intensify land use. Molotch called it the “growth machine,” where…click here for full article.
Because most people employed in real estate today have only ever worked in a globalised world, it can be hard to imagine how it could be any other way. But the prevailing mood around the world is increasingly opposed to globalisation, with political and economic nationalism and protectionism on the rise. From Brexit, to President Donald Trump’s trade tariffs and America-first policies, to an increasingly…Click here for full article.
As we head into the next decade, this complete set of articles delves into the fallacies of always owning stocks for the long run (aka “buy and hold” and passive strategies). Given that market’s cycle over time, it is important to understand how markets, and investing actually work, the impact on your wealth, and what you can do about it.
This series of articles will cover the following key points:
- “Buy and Hold,” and other passive strategies are fine, just not all of the time
- Markets go through long periods where investors are losing money or simply getting back to even
- The sequence of returns is far more important than the average of returns
- “Time horizons” are vastly under-appreciated.
- Portfolio duration, investor duration, and risk tolerance should be aligned.
- The “value of compounding” only works when large losses are not incurred.
- There are periods when risk-free Treasury bonds offer expected returns on par, or better than equities with significantly less risk.
- Investor psychology plays an enormous role in investors’ returns
- Solving the puzzle: Solutions to achieving long-term returns and the achievement of financial goals.
- Spot what’s missing: A compendium of investing wisdom from the world’s greatest investors.
CLICK for articles
As we head into the next decade, this complete set of articles delves into the fallacies of always owning stocks for the long run (aka “buy and hold” and passive strategies). Given that market’s cycle over time, it is important to understand how markets, and investing actually work, the impact on your wealth, and what you can do about it. CLICK for complete article