Every year about this time, the market is treated to the homespun wisdom of perhaps the greatest investor ever.
That’s right, it’s time again for the Berkshire Hathaway (BRK-B) annual letter to shareholders. Perhaps better known as “thoughts from the great Warren Buffett.”
This year, Buffett reserved much of that famous homespun wisdom to give the U.S. economy the kind of praise I think it deserves … but that’s not usually given.
Here, in my view, is the money quote from Mr. Buffett’s latest shareholder correspondence:
One word sums up our country’s achievements: miraculous. From a standing start 240 years ago — a span of time less than triple my days on earth — Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.
Boom! You gotta love that.
|Image Source: Wikimedia|
Yet Buffett didn’t stop there with his praise of America’s greatness.
Check out what the man known as the Oracle of Omaha wrote in the next paragraph:
You need not be an economist to understand how well our system has worked. Just look around you. See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it — they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion.
The acknowledgment here of the near-unbelievable success of our nation economically is something that many of us forget. Especially if we listen to politicians intent on peddling fear in order to thrive.
Not that one shouldn’t be cautious about the next calamity …
Of course, you should. And of course, we all need to prepare for the next downturn in the markets and the economy. As most of us know, especially here at the decade anniversary of the financial crisis starting, not being prepared can really sting.
Buffett acknowledged as much in the letter, writing:
During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted.
I am certainly of the opinion that fear can be an opportunity for investors. But I also know that fear and opportunity can take on many different faces.
You can use fear to your advantage the way we do in our Crisis Options Trader service. There, we exploit the areas that are either out of favor or that are in favor due to some exogenous factors (e.g., politics).
And, you can use fear to focus on owning stocks with metrics that really matter, the way we do in our Cash Flow Kings newsletter.
Then you can take advantage of the momentum and trends the way we do in our 10-Minute ETF Trader and Global Trend Trader services.
Whatever way (or all these ways) you choose to approach it, these services all offer a steady stream of ideas that can help you turn fear into your friend.
Warren Buffett knows that … and so do we.
What do you think about Warren Buffett’s latest homespun wisdom? Do you agree with his assessment of America? What about his views on fear and opportunity? Tell me what you think by leaving me a comment on our website or by sending me an e-mail.
It’s Fat Tuesday, or Mardi Gras, or the last day of Carnival, or the day before Lent begins. It’s even a state holiday in Louisiana.
But the mood wasn’t festive on Wall Street. Stocks, oil and gold spent the day in the red, while the Volatility Index gained 6.5%.
The Dow even snapped its dozen-day streak of record closing highs, with the Industrials ending the day 0.1% lower in front of tonight’s presidential address to Congress at 9 p.m. Eastern.
Some fun facts and news to digest in the meantime …
• New Orleans sells more than half a million king cakes each Carnival season. You can get the oval dough rings stuffed with cream cheese or fruit. But here in the UWD offices, we’re big fans of the traditional cinnamon filling. Each cake contains a small plastic baby, and whoever gets the baby must buy the next cake or host the next party. (New Orleans CVB)
• If you do eat some cake, be sure to track it in your Weight Watchers (WTW) app: And if you own the stock, you are no doubt enjoying today’s 10% pre-earnings gain and its nearly 20% after-market gain … calorie-free!
• Mardi Gras beads are now subject to taxation: Traders will be watching tonight’s address for clues about corporate tax cuts. But if you’re buying purple, gold and green beads to wear at today’s celebrations, you’re out of luck. Last spring, Louisiana boosted its state sales tax from 4% to 5%. It also voted to extend the tax to several formerly exempt items like, yes, the beads that revelers are wearing today. (Kiplinger’s)
• An out of this world adventure: Elon Musk’s SpaceX plans to send a crewed mission around the moon in 2018, with two lucky “space tourists” on board. They have already paid a deposit for their trip and will start training for their mission in the coming months. Shares of Musk’s Tesla (TSLA) were a rare bright spot in today’s trade, rising 1.5%.
• Big day for Apple (AAPL): Not the stock, which only gained 6 cents. But it revealed at today’s shareholder meeting that new products are on the horizon and that it’s invested a “fair amount” into R&D.
• As for its 10-year anniversary of its ubiquitous smartphone, one of the iPhone 8 models coming later this year reportedly will have a flexible display. And Samsung is said to be making the initial batch of curved screens.
• More broker price cuts: Fidelity slashed its standard commission to $4.95 per online stock or ETF trade. Hours later, Schwab (SCHW) said it would also drop its online trading commission to $4.95. (Schwab had dropped that fee to $6.95 on Feb. 3.) Brokerage stock prices also fell, with SCHW down 3.2%. Competitors Interactive Brokers (IBKR) shed 2.6% and TD Ameritrade (AMTD) dropped 10.4%.
Good luck and happy investing,
Uncommon Wisdom Daily