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Can anyone explain why the Market hasn't imploded like so many had predicted?
Warren Buffet
"Over the last couple of years, Warren Buffett’s holding company, Berkshire Hathaway, has been dumping its exposure to American stocks that rely on consumer spending."
Why would a company go under because a president got elected? Why would a computer go out of business right away when consumer spending drops a bit?
Stocks are shares of a company, I see no reason why the company is more likely to go under today vs yesterday. Sure, it might be a bit less "profitable", but it doesn't mean it will go out of business. And until it does, the stock will not be worth $0.
Central bank asset purchases still exceed net supply in Europe, Japan, and the US by approximately 500 billion dollars per year on a rolling 12-month sum.
Central bank asset purchases still exceed net supply in Europe, Japan, and the US by approximately 500 billion dollars per year on a rolling 12-month sum.
Why would a company go under because a president got elected? Why would a computer go out of business right away when consumer spending drops a bit?
The issue isn't what happens to companies, or to their profits; the issue is what happens to perception. Or more precisely, the issue is what happens to the perception of others' perception, of others' perception, of others'... in infinite regression.
Sure, fundamentals (revenue and profit, book value, return on invested capital, etc.) eventually are reflected in stock prices. But how long is "eventually"? Worthy companies can see their stock prices crushed. Fluff-businesses, without a business plan (let alone a profit) can see their stock prices skyrocket.
It is perfectly rational to suppose, that fantastical and counter-factual rumor could crush the stock market; and that solid, reliable news would be ignored; or vice versa.
Exhibit A is the British stock market, the FTSE. Why is it trading at half of the P/E of the S&P 500? Is this a screaming buying opportunity? Maybe, but if so, why haven't investors already pounced on it? Maybe there's some opaque and subtle rationale for this. Maybe not. I have zero cognizance of it, and instead just accept it as an enigma. And with that attitude, we have no scheme by which to reckon, whether the US stock market should have zoomed or collapsed, or done nothing at all, on account of the election.
I think from a business standpoint (which Wall Street represents), Trump as president stands for business first, and until he messes up in some big way the market after the initial over reaction stabilized with a wait and see attitude.
Trump is about infrastructure, about keeping business in this country. That would solidify the market, so it's a wait and see.
It suppresses interest rates for many types of bonds which is supportive of companies that issue debt to buy back their shares and push up the stock price correspondingly. It may also push money into stocks through reallocation to maintain a 60/40 balance.
Can anyone explain why the Market hasn't imploded like so many had predicted?
Warren Buffet is a friend of Hillary so he is of course liberal. He is also well know for telling people how he makes his money. He takes people's stocks when they are low, and give them back when they are high. So why would he say things that would get people emotional?
Quote:
Originally Posted by Balkins
"Over the last couple of years, Warren Buffet’s holding company, Berkshire Hathaway, has been dumping its exposure to American stocks that rely on consumer spending."
If you have actually recently watched the markets, you can see that American production companies are up, while foreign production companies are down. This took a sharp curve after Trump was elected. If you know of Bill Clinton's tie to NAFTA, than you can project why this happened. If Trump cuts NAFTA and raises or institutes tariffs like he said, consumer goods companies' profits would decrease sharply. This is because many of their goods are made on the cheap in foreign countries. The outcry is that consumer goods would decrease sharply, that is not true. In fact I believe the contrary, since more people will have jobs. Therefore, no Armageddon, sorry. Warren Buffet was betting on Hilary to win. I also made that mistake and lost a little.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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No idea.
I try to pick companies that are immune to such influences.
Currently hold 60% cash in primary trading accounts and about +14% YTD.
We are small account traders (<$250,000), retired, minimum income easily covered by SS, small pension, and rental.
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