CASH UP: Roller Coaster Market Drop COMING!
I love Warren Buffett’s market wisdom. Having read many of the books written about him but also having read his annual shareholder letters and having listened to hours on end of interviews he has given over the years, I have a unique perspective into his world of thought. Apart from that, I have listened to many of his speeches and TV appearances, which help to understand his tone of voice and give further perspective into his philosophy.
Buffett is a believer in the market system, which I am a proponent of as well. The idea behind it being that the best way to incentivize society to do better as a whole is by rewarding specialized skills, delivering value to others.
This exact system is what allowed Warren himself to become the 3rd richest person in the world.
All of the billionaires on this list have seen the value of their net worth plummet by 50% or MORE in a matter of 24 months at some point during their careers.
Warren Buffett, for instance, has gone through several bear markets where his net worth has halved in a few short months.
The way he handles these situations is the key to understanding his success because it is obvious that he hasn’t found a way to AVOID these cycles, but rather to CAPITALIZE on them.
As an investor, what Warren does is to hold 25% of his net worth in cash when the market is expensive.
In other words, when other people are excited to be buying stocks, he raises his cash levels and watches from afar.
Then, as the market spirals down out of control, Buffett goes on the hunt.
In other words, when the entire investment world is glued to TV screens and trying to make sense of things and heading for the hills, due to panic, Buffett carefully accumulates stocks on the cheap.
He believes in the COMEBACK.
Here’s how this looks long-term:
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
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So far, no society has found a better way to drive up the wealth of its citizenry than to allow them to compete with each other.
This competitive nature, though, breeds and nurtures fear and greed within people’s minds.
At the end of bull markets, it causes CEOs to take on more debt obligations than they can handle, and it causes investors to overpay for stocks, when they should be patient, instead.
I urge you to be more disciplined than that and far more restrained.
The “easy money” is gone. Back in 2009, everything was cheap, so every stock was a bargain. This is not the case at the moment.
Warren Buffett has earned $9B last year. This amounts to just over $1M per hour. Take his guidance when he tells you: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” He knows what he is talking about.
Right now, we’re starting to see lots of greed, so you should be mindful and selective.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.